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

NH Financial Group said on Nov. 11 that its 3rd quarter net profit amounted to 1.393,7 trillion won, up 29.4 percent YoY. The firm attributed the excellent results to the recovery of the banking sector’s securities dealings, reductions in loan-loss provisions and the growth in the IB sector of the securities affiliates.

The group said the net profit up to the 3rd quarters this year came to 5.989,5 trillion won due to NH Bank’s sustained increase in interest earning assets from early in the year, although the NIM fell by 8 bp from the same period last year. The fee income at 796.7 billion won was down 8.6 percent YoY.

The financial group’s strategy to enhance its non-interest income is bearing fruit.

According to the group’s third quarter 2019 earnings results, the group’s cost-to-income ratio (C/I ratio) recorded 58.4 percent, down 7.2 percent points compared to the end of last year.

Its selling, general and administrative (SG&A) expenses were about 1.12 trillion won, down from 1.1 trillion won.

Although SG&A expenses decreased only 1.75 percent, it was offset by a rise in operating profit.

The C/I ratio shows a bank’s operating costs (administrative and fixed costs) in relation to its operating income. The higher ratio generally indicates lower efficiency.

The improvement in its non-interest income business drove the increase in sales. NongHyup Financial Group’s non-interest income recorded minus 102.9 billion won.

It narrowed 250.9 billion won of losses compared to the same period of last year (minus 353.8 billion won). Net fee income was 796.7 billion won year-to-date, down 8.6 percent year-on-year.

This was mainly because the brokerage commission in NH Investment & Securities fell due to the decrease in stock-trading volumes.

The group’s net interest margin (NIM) recorded 1.79 percent in the third quarter, down 8 basis points year-on-year. Although NongHyup Bank’s year-to-date net interest income showed a small increase, the upward trend seems to have slowed down compared to the year earlier.

“The improvement in profitability was driven by NongHyup Bank’s growth in securities-related income and NH Investment & Securities’ growth in investment banking (IB) business,” said the group’s official.

NongHyup Bank’s securities-related income increased about 74 percent to 246.8 billion won year-on-year and this drove an increase in non-interest income from 164.4 billion won to 279.9 billion won over the same period.

The group’s profitability got even worse after taking a so-called big bath, an accounting plan that reflects bad loans in financial statements in the same fiscal year.

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.

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 NonHyup 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.