Korea’s four major financial holding companies are about to post their worst annual earnings for 2012, with their stock prices likely to take a hit going forward.
Four holding companies ― Shinhan, KB, Woori and Hana ― are expected to post a combined net profit of 7.87 trillion won in 2012, down almost 1 trillion won, from a year earlier, according to FNGuide, an online securities information provider.
This fall could reach 2 trillion won in total should Hana Financial leave out negative goodwill worth some 1 trillion won of intangible assets on its balance sheet from its acquisition of Korea Exchange Bank.
This sharp decline comes as the low interest rate has been undermining their core profitability measured by net interest margin, and as lenders had to set aside expenses for bad loans or corporate defaults amid the economic slowdown, analysts said.
Shinhan Financial is expected to post net profit of 2.3 trillion won last year, down more than 703.2 billion won from a year ago, contrary to its solid performance for four consecutive years between 2008 and 2011.
Woori Financial is likely to lose some 484 billion won, dropping to 1.6 trillion won in 2012.
KB Financial is also likely to see a sharp decline by 460 billion won to 1.9 trillion won in 2012.
Hana Financial would see an increase in net profit by 714 billion won to 1.9 trillion won, but if counting off negative goodwill from its balance sheet, its net profit would lose by 330 billion won.
Analysts said that their profitability may further dwindle as the financial regulator is moving to strengthen its monitoring of lenders for soundness.
Also, the incoming government of President-elect Park Geun-hye plans to downsize and chronic household debt. This will affect lenders and credit card issuers, and therefore the financial holding companies.
Despite a decline in their net profit, Korean banks have been rated “stable” by Moody’s Investors Service in the Asia Pacific Banking Outlook 2013.
“Asian banks have to date proven quite resilient to the recession in the euro area and persistent weak economic conditions in that region do not constitute a major risk to our stable outlook,” Moody’s said in its report.
“A more serious issue could arise if renewed concerns about the future of the euro area lead to another round of global financial instability. In such an instance, banks that depend more on international wholesale funding ― notably those in Korea, Australia and New Zealand ― would represent the most at risk.”
By Park Hyong-ki (
hkp@heraldcorp.com)
