KEB posts weaker-than-expected earnings in Q3

Korea Exchange Bank, Korea’s No. 5 lender, unveiled smaller-than-expected earnings for the third quarter, affected by falling profit margins and higher loan-loss reserves.

Net profit amounted to 125.5 billion won ($113.7 million) in the July-September period, up 7.22 percent from a year earlier, said the bank, which is controlled by Hana Financial Group. Earnings declined 20.5 percent from the second quarter.

KEB’s third-quarter bottom line was lower than a market consensus of 174.1 billion won polled by Yonhap Infomax, the financial news arm of Yonhap News Agency.

Korean banks’ third-quarter earnings are widely expected to remain weaker as their net interest margin (NIM), a key measure of profitability, has been on the decline because market rates fell in tandem with the central banks’ rate cuts.

KEB’s NIM stood at 2.3 percent in the third quarter, down from 2.42 percent three months earlier.

Local banks also had to put aside higher reserves to cover potential loan losses stemming from court receivership by mid-sized builder Kukdong Engineering & Construction and its holding company Woongjin Holdings.

KEB’s third-quarter loan-loss reserves reached 172.3 billion won last quarter, up 18.8 billion won from three months earlier. KEB did not specify the amount of reserves related to the Woongjin failures.

The bank’s total assets reached 110.5 trillion won as of end-September, up from 108.8 trillion in the second quarter.

Shares of KEB inched down 0.5 percent to 8,010 won on the main bourse. The result came out after the market closed.

Meanwhile KEB’s parent company and Korea’s No. 3 banking group Hana Financial Group announced weaker-than-expected earnings for the third quarter Friday, hit by squeezed profit margins and higher loan-loss reserves.

Net income amounted to 233.9 billion won in the July-September period, up 13.9 percent from the previous year, the group said in a regulatory filing. Net profit gained 16.1 percent from three months earlier.

The group’s bottom line was lower than a market consensus of 289.6 billion won polled by Yonhap Infomax, the financial news arm of Yonhap News Agency. The group said its NIM stood at 2.12 percent in the third quarter, down 0.08 percentage point from the second quarter.

They also had to put aside higher reserves to cover potential loan losses stemming from court receivership by mid-sized builder Kukdong Engineering & Construction and its holding company Woongjin Holdings.

Yonhap