Banks defy expectations in Q3

Major commercial banks overshot earnings forecasts in the third quarter on the back of robust interest income.

KB Financial Group cemented its position as the top performer, with its recently acquired non-bank affiliates and high margins boosting profit.

The holding unit that controls KB Kookmin Bank, KB Securities and other insurance affiliates posted 897.5 billion won ($804.8 million) net profit, a 59 percent increase from last year’s third quarter.

In the first three quarters of this year, KB Financial Group has already surpassed last year’s net profit, at 2.76 trillion won versus last year’s annual net profit of 1.69 trillion won.

Heather Kang, an analyst at Mirae Asset Daewoo Securities, said that margins from lending acted as the main driver of growth.

“The bank’s net interest margin climbed two basis points quarter on quarter to 1.74 percent, driven by an increase in low-cost core deposits,” the analyst said, “a growth strategy centered on high-margin loans and a more sophisticated pricing scheme.”

She noted that won-based loans increased 2.7 percent compared to the previous quarter, which led to the increase in net interest income.

Analysts said that the unit’s acquisition of full ownership in KB Insurance and KB Capital also contributed to the record-high earnings.

Meanwhile, Shinhan Financial Group registered 817.3 billion won in net profit in the third quarter, up 15.4 percent from last year.

Won Jae-woong, an analyst at NH Securities & Investment, cited the growing volume of loans to small businesses as the key driver for Shinhan’s profit growth.

“Along with lower administrative expenses, higher interest income led the growth,” the analyst said.

“The reason for the rise is the expansion of loans to small businesses. Won-denominated loans jumped 3.2 percent compared to the previous quarter, and those for operators of small businesses grew 4.6 percent.”

Shinhan Financial Group registered 892 billion won in net profit, up 30.5 percent from a year ago. Its quarterly performance was better than expected from analysts’ viewpoint.

Woori Bank also benefitted from growth in loans to small-business owners.

Hana Financial Group generated third-quarter net profit that was slightly lower than market estimates.

Net profit at the group came to 510 billion won, up 13.32 percent from last year. The growth reading is 3 percentage points below the market consensus.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]