The banking industry is expected to see a continued decrease in net profits in the second quarter, dashing hopes for a recovery in its earnings, a financial report said Monday.
Researchers said that low interest rates would likely continue for the meantime, ultimately yielding less profit.
Large firms’ underperformance, represented by STX Group and Ssangyong E&C, also accounted for the banks’ earning shock in the second quarter, they said.
Financial companies, too, have admitted that the second quarter may yield less profit.
“With all irregular factors discounted, we do best in the first quarter when we get our dividends, and worst in the second quarter when we have the largest costs to cover,” said an IBK Financial Group spokesperson.
Financial research and consulting firm FnGuide reported that, on average, the second quarterly net profit of the country’s four big financial groups and seven smaller financial firms would be down about 11 percent compared to that of the first quarter.
The four largest financial groups are KB, Shinhan, Hana and Woori. Smaller lenders are BS, DGB, IBK and four others.
According to the report, the banking industry’s net profit for the second quarter is expected to reach about 1.7 trillion won, down from 1.9 trillion won in the first quarter.
The research sent shockwaves throughout the financial sector, as the first quarter was bad enough, barely amounting to half the profits of a year ago. After the nightmarish first quarter, analysts had suggested that the second quarter could not hit any lower.
But as the second quarter went on, banks a reportedly mulled closing branches and cutting salaries, citing the dwindling profit.
The state regulator Financial Supervisory Service said on Monday that as of March, a total of 30 branches and offices of local banks were closed.
Hana Bank is considering closing 22 unprofitable branches and Woori Bank plans to get rid of 5 branches in the second half this year.
The slim-down also applies to foreign banks, such as U.S.-headquartered Citibank, which is considering closing 8 branches in the same period and 15 more in 2014.
As branches closed and profit shrank, financial firm executives voluntarily or involuntarily underwent pay cuts to reflect the dark time.
By Chung Joo-won (
joowonc@heraldcorp.com)
