Banking groups are racing to expand their nonbanking business portfolio to prepare for the likelihood that their interest margins may no longer sustain growth.
The results for the first half of this year once again showed that those with a wider spread of businesses turned out victorious in the market.
Late last month, Shinhan Financial Group said that it recorded a net profit of 1.3 trillion won ($1.1 billion) in the January-June period this year, up 13 percent from the same period last year.
It not only became the only Korean financial company to surpass the 1 trillion won mark, but also won back its title from runner-up rival KB Financial Group, which had temporarily bagged the top slot in profits in the first quarter.
Shinhan’s relatively steady defense is largely attributable to its wide range of nonbanking business, especially amid low banking interest rates.
In the second quarter, its nonbanking profit ratio was 43 percent, the highest among banks. The figure was also a steady rise from 35 percent in the same period last year and from 39.6 percent in the first quarter this year.
Rival KB Financial Group, on the other hand, is still struggling to boost its nonbanking business.
In the second quarter, the group saw 36.6 percent of its profits coming from the nonbanking sector. Although still lower than that of Shinhan Financial, this was an increase compared to the 20 percent range in the past, a change largely attributable to the launch of KB Insurance in June.
The group is now reportedly eyeing KDB Daewoo Securities, which will be put up for sale in September. The company is currently the nation’s second-largest stock company with 30 trillion won in assets and No. 1 in profits as of the first quarter this year.
Should KB Financial win the bid, its nonbanking business ratio will at once soar to the 40 percent range, closing in on Shinhan Financial.
The group has not yet confirmed its interest but chairman Yoon Jong-kyoo has repeatedly said that KB’s top two goals for this year are to win back its former title as the nation’s leading bank and to expand its nonbanking businesses.
In contrast, another frontrunner Woori Bank, which sold off its brokerage houses and downsized itself from a financial holding company to a single bank, has seen a visible fall in profits.
Its operating profits in the first half was 517 billion won, down 57 percent from the same period last year.
By Bae Hyun-jung (
tellme@heraldcorp.com)
