The Korea Herald


Four financial groups may see 10 trillion won in profit

By 김연세

Published : May 9, 2011 - 18:48

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Four major financial groups are expected to reap more than 10 trillion won ($9.3 billion) in combined net profit this year, mainly buoyed by revised accounting standards.

The market is focusing on the growing feasibility of their all-time high earnings as they reported remarkable earnings during the first quarter.

Profits posted by the four groups ― KB, Woori, Shinhan and Hana ― reached 2.6 trillion won in the first quarter, a jump of about 680 percent from 330 billion won in the fourth quarter.

Shinhan Financial topped the list with 924.3 billion won, followed by KB Financial with 757.6 billion won, Woori Financial with 540.7 billion won and Hana Financial with 389.5 billion won.

Research analysts ascribe the handsome first-quarter performance to their reduced cost-burden ― caused by accumulation of potential loan losses ― thanks to recently changed accounting standards.

From this year, all the nation’s listed companies are required to switch from a domestically accepted accounting norm to the locally adjusted version of the International Financial Reporting Standards, also called K-IFRS.

The standards permit financial firms to set aside smaller loan-loss reserves than in previous years.

Other favorable factors include the trend of rising interest rates. The Bank of Korea is widely forecast to hike the benchmark interest rate, ending its formerly accommodating monetary policy.

Upward movement in the cost of borrowing has been pushing up financial companies’ interest income since the fourth quarter of last year.

KB Financial saw its net interest margin climb to 3.06 percent, up 0.17 percentage point from a quarter before, reporting an improvement in asset soundness.

Woori Financial is expected to pocket about 700 billion won from the bank unit’s sale of a stake in Hyundai Engineering & Construction.

Shinhan Financial, which took the lead in earnings, could be successful in overcoming its internal management crisis in 2010.

Analysts also said a successful acquisition of Korea Exchange Bank by Hana Financial ― which has been under regulatory review ― could also be a prerequisite for the four groups to achieve the record-high profits.

By Kim Yon-se (