Financial groups rebound

The country’s major financial groups are seeing an improvement in third-quarter earnings compared to the April-June period with a decline in their loan loss reserves. In the second quarter, earnings fell short of market expectations as they were strangled by mounting loan reserves, mainly because of debt-ridden STX Group.

Yesterday, KB Financial Group said its net profit in the third quarter reached 462.9 billion won ($435.8 million), up 180 percent compared to the second quarter’s 165.3 billion won. The net profit of KB Kookmin Bank, the group’s flagship company, reached 338.2 billion won, 593 percent higher than the second quarter’s 48.8 billion won.

When comparing year-on-year figures, however, accumulated net profit for KB Financial Group from January through September was 35.9 percent lower at 1.04 trillion won compared to last year’s 1.63 trillion.

“Full-year net profit should drop 20 percent year-on-year to 1.4 trillion won in 2013, but we expect a rebound to 1.6 trillion won in 2014,” said Han Jeong-tae, an analyst at Hana Daewoo Securities. “Earnings should normalize going forward.”

Shares of KB Financial Group, meanwhile, closed at 42,000 won yesterday, 0.47 percent lower. The earnings report was announced after the stock market closed at 3 p.m.

“We expect KB Financial Group shares to surge if it acquires Woori Investment and Securities as it will set the groundwork for the group to strengthen its non-banking business,” said Hwang Seok-kyu, a researcher at Kyobo Securities. “Among bidders, we expect KB Financial Group to bid the most, considering its capital flexibility.”

KB’s earnings announcement was made one week after Hana Financial Group in its regulatory filing said it posted 377.5 billion won in net profit in the third quarter. The figure is 62.8 percent higher than the previous quarter’s 231.8 billion won. From a year ago, net profit jumped 62.6 percent.

“The reason Hana Financial Group saw improvement is because its loan loss reserves declined by a significant amount,” said an industry official.

In the second quarter, its loan loss reserves were 294.9 billion won, including 150 billion won related to STX Group, but the reserves fell to 181.4 billion won in the third quarter.

While Shinhan Financial Group, Woori Financial Group and others are expected to announce their own earnings next week, a Kyobo Securities report forecast last month that the combined net profit of the country’s four major financial groups will increase 40.9 percent from the second quarter to 1.6 trillion won. Shinhan will announce its third quarter earnings Tuesday and Woori on Friday.

BY LEE EUN-JOO [angie@joongang.co.kr]