Chairman Kim Gwang-soo of NH Financial Group. (Photo: NHFG)

NongHyup Financial Group Inc. reported a net profit of 564.4 billion won ($476.6 million) in the second quarter, surging 30.4 percent from the previous three months thanks to solid earnings from its major lending unit.

Net profit in the first half totaled 997.1 billion won, up 20.2 percent from the same period a year earlier, its best six-month earnings since its transition to a holding company in 2012, according to its regulatory filing released July 26.

Its interest income in the first six months of the year climbed 4.1 percent to 3.99 trillion won. Net interest margin, a measure of profitability, was down 0.04 percentage point to 1.82 percent, largely due to the 18.1 trillion won stretch in interest assets, the company explained. Commission income fell 7.3 percent to 566.9 billion won.

Its non-performing loan ratio in the second quarter improved 0.07 percentage point from the previous three months to 0.84 percent.

Growth was led by its biggest unit NongHyup Bank. The lender reported a net profit of 845.6 billion won in the first half, up 26.5 percent from a year ago. Its bad debt recovery of 67.1 billion won served as a one-off gain. But even when excluding this factor, its net profit surged 16.5 percent.

NongHyup Financial Group said in a regulatory filing on July 22 that its net income for the first quarter ended March jumped 11 percent from the same period a year ago to 432.7 billion won ($373.1 million) on a consolidated basis. It is the first time that NongHyup Financial raised over 400 billion won in net profit in the first quarter after it transformed into a holding company structure, the group said.

NongHyup Financial owed the stellar result largely to a surge in interest income and securities commissions at its banking and brokerage units. The group’s net income could increase to 505.1 billion won if 103.4 billion won worth of quarterly funds paid to National Agricultural Cooperative Federation for agricultural support was added.

The solid earnings suggested that the financial group’s flagship banking and securities businesses have successfully maintained steady growth under the new leadership of Kim Gwang-soo, who took the helm a year ago.

By company, its key lending unit NH NongHyup Bank and brokerage unit NH Investment & Securities each saw its net profit soar to a quarterly record high in the January-March period.

NH NongHyup Bank reported a net profit of 366.2 billion won in the first quarter, up 15 percent from the same period a year earlier. Interest income jumped 7 percent to 1.3 trillion won during the same period, while non-interest income including commissions from foreign exchange and derivative products increased 43 percent to 99.5 billion won.

“NongHyup seeks to expand mostly in Southeast Asia where it can help boost agriculture financing, investment banking, retail banking and microfinance. Our main Southeast Asian base will be Vietnam.”

Vietnam’s population is “young” with a vibrant agriculture industry, he explained, adding there are a lot of Korean companies seeking to enter the market there.

NongHyup Financial Group is looking to either acquire a firm or set up a joint venture to launch investment banking operations in Indonesia next year, said Hong Jae-eun, the chief strategy officer of the agriculture financial holding company.

NongHyup Financial opened a branch in Hanoi in 2016, and is preparing to launch another one in Ho Chi Minh City. Under Vietnam's regulations, a foreign financial company can be incorporated there after opening two branches in two years. “After the bank’s incorporation in Vietnam, we could then pursue acquisitions to boost our retail banking operations,” the CSO said.