Downturn bites into banks’ profit targets

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Downturn bites into banks’ profit targets

Korean banks are lowering their growth and profit goals for next year due to concern about an economic downturn and a decline in noninterest profit, market watchers said yesterday.

Woori Bank, the flagship unit of top banking group Woori Finance Holdings Co., has set its 2012 net profit goal at around 1.5 trillion won ($1.3 billion), compared with 1.8 trillion won for this year, they said.

No. 3 financial group Shinhan Financial Group Co. is also mulling lowering its profit goal for next year to below 2 trillion won.

Others, such as top lender Kookmin Bank and policy lender Industrial Bank of Korea, are also planning to focus on beefing up their financial health.

Their conservative outlook comes amid fear of an economic slowdown and persistent inflationary pressure. A number of think tanks are moving to lower their growth estimates on worries that the Korean economy, Asia’s fourth largest, will likely grow at a reduced pace next year.

Think tanks forecast that the Korean economy’s nominal growth rate will reach 6.8 percent to 7.5 percent next year, while inflation will move up between 3.1 percent and 3.5 percent.

Meanwhile, market watchers said a reduction in commission income was also factored into the conservative plan.

In the July-September period, Kookmin Bank and six other players earned a pretax profit of 3.2 trillion won by selling their stakes in Hyundai Engineering & Construction Co., the country’s top lender.

Last month, a slew of banks scaled back their service charges to counter a growing backlash against the finance industry’s “excessive” corporate greed, a move which is expected to weigh on their noninterest profit next year.

“Although local lenders reaped high profits in the first half after seeing one-off revenue streams, they are still in the recovery stage compared to where they were before the financial crisis,” said an industry official.


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