Banks’ profit growth slows despite record earnings at financial groups

ATMs from various banks are installed at a building in Seoul, March 8. Yonhap

Profit growth at major Korean banks has stalled even as their parent financial groups posted record first-quarter earnings, industry data showed Monday.

The combined net profit of the country’s five largest financial groups — KB Financial Group, Shinhan Financial Group, Hana Financial Group, Woori Financial Group and NH Financial Group — reached about 6.2 trillion won ($4.2 billion) in the January-March period, up 9.8 percent from 5.6 trillion won a year earlier.

It marks the first time their combined quarterly net profit has exceeded 6 trillion won.

The growth was largely driven by nonbank units, particularly securities arms, which benefited from a stock market rally.

Banking units saw weaker earnings, with several lenders posting declines.

Woori Bank reported a net profit of 522 billion won in the first quarter, down 17.8 percent from a year earlier. NH NongHyup Bank posted a net profit of 557.7 billion won, up just 0.6 percent year-on-year, largely flat.

State-run policy lender Industrial Bank of Korea also saw its net profit fall 12.4 percent to 666.3 billion won.

Woori attributed its weaker performance to administrative costs, including early retirement expenses. A roughly 130 billion won provision related to its Indonesian subsidiary, Woori Saudara Bank, as well as currency impacts, also weighed on earnings.

“Net profit came in below market expectations due to provisions at overseas units and the impact of exchange rates and interest rates,” a Woori official said.

Critics say these results underscore the vulnerability of banks’ earnings structures, which remain heavily reliant on interest margins.

“It will be difficult for banks to sustain earnings through interest margins alone for the time being,” a banking industry official said, adding that diversifying revenue sources by improving branch efficiency and strengthening wealth management services will be critical.