SEOUL: South Korea’s four major banking groups are likely to see their second-quarter net profit plunge more than 33 per cent due mainly to a drop in interest income stemming from a low rate trend, a report showed Thursday.
According to South Korea’s Yonhap news agency, the combined net profit of Shinhan Financial Group Co, KB Financial Group Inc, Hana Financial Group Inc and Woori Bank is expected to reach 1.2 trillion won (US$1.06 billion) for the April-July period, compared to 1.9 trillion won the previous quarter, a report released by Hyundai Securities Co said.
The figure also marks a 45.3 per cent on-year drop from 2.3 trillion won tallied a year ago, it added.
Analysts said banks have been struggling to seek new profit sources as the record-low interest rate hurts their conventional business which relies on the interest rate spread.
The country’s key policy rate stood at 1.5 per cent as of July as the central bank slashed the rate a couple times to lend support to the government-led economy stimulus plan.
Shinhan Financial is predicted to regain the top position with 549 billion won in net profit in the second quarter, down 6.8 per cent from a quarter ago, relegating the former No. 1 KB Financial to the second place.
Shinhan Financial’s interest income is projected to have fallen 0.8 per cent on-quarter to 1.7 trillion won over the three-month period. It is also expected to earn 451 billion won in non-interest earnings, up 3.6 per cent from a quarter earlier, according to the report.
KB Financial is forecast to have posted 150 billion won in net income, diving from 476 billion won the previous quarter as it spent 330 billion won on implementing its massive voluntary retirement program.
Its interest income will likely drop 1.5 per cent on-quarter to 1.5 trillion won, while its non-interest incomes rose 8.5 per cent to 293 trillion won.
Hana Financial is expected to post 335 billion won in net income, down 10.4 per cent from three months earlier, while Woori Bank will see its net sink 33 per cent on-quarter to 203 billion won, according to Hyundai Securities.
