Shinhan Financial Group posted a net profit of 997.1 billion won in the first quarter, up 29.3 percent from 771.4 billion won in the same period last year. The result is a whopping 62.9 percent increase from three months ago and the highest quarterly income since the financial group was established as a holding company in 2001.
In the January-March period, Shinhan Financial Group’s NIM went up 0.04 percentage point on-quarter to 2.01 percent, while that of KB Financial Group 0.06 percentage point to 1.95 percent, and Woori Bank 0.07 percentage point to 1.91 percent.
KRW loan balance as end of 1Q17 marked 184 tril. down by 0.5 percent year-to-date. Corporate, high-quality unregistered SME loans increased by 3.3 percent, bringing up corporate loan growth to 0.8 percent year-to-date. Retail and mortgage loans decreased by 2.4 percent in Q1 due to mortgage securitization, resulting retail loan down by 1.7 percent year-to-date. Low cost deposits increased by 2.8 percent year-to-date. whereas time savings decreased by 3.2 percent year-to-date.
Group NIM marked 2.01 percent, a 4bp improvement quarter-on-quarter. NIM is consistently showing stabilizing trend. SHB’s NIM improved by 4bp quarter-on-quarter to 1.53 percent from 1.49 percent.
The income surge from increased lending interest rates, however, is expected to stir criticism over banks’ excessive profit-making from loan-deposit margin. At a meeting with bank chiefs, Financial Supervisory Service Governor Zhin Woong-seob said that banks heavily rely on easy operations taking advantage of various policy compensation systems instead of mediating funds based on self-risk management capability and urged them to improve on this matter in the mid- to long-term.
Net profit rose 17.2 percent to 2.77 trillion won ($2.35 billion) last year, the third consecutive year for the group to post more than 2 trillion won in net income. It also marks Shinhan's second-biggest earnings in its history after 3.1 trillion won recorded in 2011.
Shinhan Bank's net profits soared 30.2 percent to 1.9 trillion won last year from a year earlier. The volume of the bank's won-denominated loans climbed 4.4 percent from 2015. But its net interest margin (NIM), a measurement of profitability, fell one basis point to 1.49 percent, hit by the Bank of Korea's decision in June to lower the key interest rate.
Shinhan's non-banking affiliates such as Shinhan Card Co. and Shinhan Life Insurance Co. also helped boost its earnings.
The card issuer's net profit rose 3 percent to 715.9 billion won, with the insurer's net profit surging 50.2 percent to 150.6 billion won. Shinhan Financial Group's new chief executive said recently that South Korea's most profitable financial company is eyeing opportunities for mergers and acquisitions in the Asian market and further afield, as it seeks to exploit fast-growing demand for financial services in the region.
Chairman Cho Yong-byoung said that Shinhan will prepare carefully for M&A opportunities and be ready to move when a deal comes up. Cho took the helm of the group on March 23, from Han Dong-woo, who had led the group for the last six years.
"We believe there will be many chances in overseas markets. In particular, we are focusing on six markets in Asia and the U.S., where we have our key operations," said Cho at a press conference. "We will make efforts to find out opportunities through market survey and networks."
The six major markets are Vietnam, Indonesia, India, China, Japan and the U.S., Shinhan said. The group has business operations in 20 countries globally, having 165 bank branches and other sales channels.