In the second quarter of this year, the suspension of private equity repurchases and the aftermath of financial support for Corona 19 affected companies have reversed the financial group’s profit-based order.

In the case of Shinhan, Korea, and Hana Financial Group, the profit was greatly reduced in the acquisition of a lot of related expenses, taking into account future refunds and losses, because they sold a lot of problems such as DLS (German Heritage Derivative Bonds) and Lyme Asset Management Funds. On the other hand, KB Agricultural Cooperative Financial Group, which has been relatively skewed by the fund crisis, has performed better than expected.

Chairman of the 5th Financial Group (From left to right: Kim Kwang-so, Chairman of Agricultural Cooperative Finance, Kim Chong-tae, Chairman of Hana Financial, Son Tae-seung Woori Financial Chairman, Yoon Jong-kyu, Chairman of KB Financial, AndYon Financial Chairman, 2020.1.2 [연합뉴스 자료사진]

◇ Shinhan, we, DLS, lime, etc. One is that brokerage profits are ‘offsetting’

According to the financial sector on 28 July, the net profit for the second quarter of this year of the four financial holdings announced so far is 981.8 billion won for KB Financial , 873.2 billion won for Shinhan Financial , 687.6 billion won for Hana Financial, and 142.3 billion won for Woori Financial.

Industry and securities experts predict that the second quarter net profit is likely to exceed the first quarter (KRW 338.7 billion) in the first quarter.

Compared to last year’s annual net profit was Shinhan (KRW 3.435 billion), KB (KRW 3.3118 billion), Hana (KRW 2.484 billion), Us (KRW 1.941 billion), and Agricultural Cooperation (KRW 1.7796 billion), Shinhan and we sit in second and fifth place, and KB and Agricultural Cooperation are ranked first and fourth.

Above all, it was the suspension of the repurchase of private equity funds that cut the performance ratio between these financial holdings.

First of all, Shinhan Financial Investments (Shinhan Kumtu) accumulated KRW 124.8 billion in the second quarter with provisions related to DLS funds sold for approximately KRW 380 billion. Also, 76.9 billion won, which is one-third of the sales of the Lime Fund sold by Shinhan Gold Tu, was also reflected in non-operating expenses. A total net profit of KRW 21.7 billion was reduced due to fund-related provisions and expenses.

In addition, Shinhan Financial also accumulated 185 billion won in provisions related to future insolvency riskrelated to loans of the corona 19 financial aid nature.

In comparison, in the case of KB Financial, which was rarely involved in the DLS and Lyme fund situation, only 260 billion won of provision was removed from the profit in case of poor soundness due to the effects of Corona 19 in the future.

The background of the reversal between the Two Koreas and the Agricultural Cooperation is similar. In the second quarter, Woori Financial accumulated 335.6 billion won in provisions, including 160 billion won for private equity-related expenses such as DLS and Lyme, and 237.5 billion won in “future prospects” related to corona 19 loans.

However, as with KB, it is believed that the decrease in profits due to the fund-related provisions in the second quarter is not significant, as it is independent of the DLS and Lyme situations.

Furthermore, the deterioration in our financial performance affected not only private equity funds, but also “weakness” in the structure of the financial group without affiliated securities companies.

In the second quarter, the company’s profits increased significantly as the stock market boomed, along with the “Donghak Ant Movement” in the second quarter.

For example, Hana Financial also earned a provision of KRW 432.2 billion in the second quarter, including 118.5 billion won in private equity reserves, but the profit of non-bank affiliates such as Hana Financial Investment surged, setting a record profit (1.3446 billion) in the first half of 2012.

In particular, Hana Financial Investments achieved the largest ever performance with a net profit of KRW 172.5 billion, up 12.9% from the same period last year.

NH Investment & Securities of Agricultural Cooperative Financial Group also reported a net profit of KRW 230.5 billion in the second quarter. That’s more than double the second quarter of last year.

A rok finance official said, “Like other financial groups, there is a disappointment that the profits of the affiliated securities companies have not been able to offset the loss of provisions.”

DLS · Protests call for dlf survey results to be released [연합뉴스 자료사진]

◇ Net interest margin of the four major financial holdings… The aftermath of ultra-low interest rates, policy loans, etc.

As such, financial holdings received different second quarter net income reports, but they did not avoid a decline in net interest margin (NIM), a common profitability indicator.

NIM is a representative indicator of the ability of financial companies to profit by subtracting the cost of procurement from the asset situ of financial companies such as banks and then dividing them by the total amount of operating assets.

Domestic financial institutions and banks’ NIM have risen significantly in recent years due to rising interest rates and increased demand for loans, but have gradually declined since the second half of last year.

It is analyzed that the aftermath of the base rate cut is in full swing, and that the handling of reassuring convertible loans is also having an impact.

Looking at the NIM of each financial holding in the second quarter ▲ KB Financial 1.74% ▲ Shinhan Financial 1.84% ▲ Hana Financial 1.62% ▲ Our Financial 1.58%. Each 10bp (1bp = 0.10% point), 2bp, 0bp, 5bp fell than the previous quarter.

By bank, Kookmin Bank recorded 1.50% (down 6bp from the previous quarter), Shinhan Bank down 1.39% (down 2bp), Hana Bank fell 1.37% (2bp), and Bank of Korea fell 1.34% (down 4bp).

Kim Ki-hwan, vice president of financial affairs at KB Financial, explained that after the earnings announcement on 21 June, “The nim decline was the biggest impact of the interest rate cut,” explaining that “as the base rate fell by 75bp and market interest rates fell (as a result), NIM also fell by 3.2bp.”

At the same time, policy loans, fund appearances, large corporate credit, the decline in spreads (added interest rates) due to loans centered on superior credit, and increased proportion of foreign currency asset management were also cited as factors that contributed to the nim decline.

Furthermore, for the time being, the nim downward trend in the financial sector is expected to continue.

“The annual NIM forecast is expected to be the lowest in the third quarter and a rebound from q4,” Kim said, “considering the base rate, reassuring loans, and market conditions, nim will be 1.50% per year.”

“NIM has a low point in the second half (the fourth quarter of this year) and will gradually improve next year,” said Hana Financial Managing Director Seung Hana.

[표] Major Financial Holdings NIM Trend (Unit:%)

* Materials: Provided by each company,

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