The combined net profit of South Korea's four biggest financial holding groups topped 17 trillion won through the third quarter, setting a record high. Among the groups, KB Financial widened its lead over Shinhan Financial. In banking, Shinhan Bank stayed No. 1, but KB Kookmin Bank cut the profit gap by more than half and closed in. Hana Bank, which had closely trailed KB Kookmin Bank through the first half, fell further behind in the third quarter.

As of Oct. 30, the financial sector said combined net profit at the four groups - KB, Shinhan, Hana and Woori - reached 17.1 trillion won through the third quarter, up 8.2 percent from 15.8 trillion won a year earlier. KB Financial and Shinhan Financial each posted more than 5 trillion won in cumulative net profit, leading overall results.

The net profit through the third quarter was close to last year's combined full-year net profit of 18.0 trillion won. With only more than 856.9 billion won in additional net profit needed in the fourth quarter, a new annual record also looks likely.

KB Financial widens gap with Shinhan to 764.7 billion won, cements holding-group lead

KB Financial ranked first in cumulative net profit among the four holding groups. Its net profit for the first nine months rose 13.1 percent from a year earlier to 5.8 trillion won. Third-quarter net profit fell 4.3 percent from the previous quarter to 1.9 trillion won, but it was the largest among the four groups.

Shinhan Financial ranked second, with cumulative net profit rising 12.7 percent from a year earlier to 5.0 trillion won. Third-quarter net profit was 1.6 trillion won, down 12.9 percent from the previous quarter.

The gap in cumulative net profit between the two groups widened to 764.7 billion won at the end of the third quarter from about 441.8 billion won at the end of the first half, an increase of about 322.9 billion won. KB Financial earned 322.9 billion won more than Shinhan Financial in third-quarter net profit, widening the gap.

Improved performance in securities helped KB Financial maintain the lead. KB Securities' cumulative net profit through the third quarter rose 114.9 percent from a year earlier to 1.1 trillion won. The group's cumulative net fee and commission income also rose 38.5 percent to 4.0 trillion won. Non-bank units accounted for about 40 percent of net profit.

Shinhan Financial also saw higher profit at non-bank units such as securities and cards. Cumulative non-bank profit and loss through the third quarter rose 27.3 percent from a year earlier to 1.8 trillion won. Shinhan Investment's cumulative net profit rose 78.9 percent to 642.9 billion won, and Shinhan Card's rose 27.7 percent to 485.8 billion won.

Both groups posted growth in cumulative results, but their third-quarter net profit fell from the previous quarter as non-interest income shrank on lower securities trading value and rising market interest rates. KB Financial's non-interest income in the third quarter fell 42.9 percent from the previous quarter, while Shinhan Financial's fell 45.5 percent.

Hana Financial, in third place, posted cumulative net profit of 3.6 trillion won through the third quarter, up 5.6 percent from a year earlier. Third-quarter net profit was 1.2 trillion won, keeping quarterly results in the 1.2 trillion won range this year. As fee income rose in wealth management and investment banking, cumulative fee income climbed 29.8 percent to 2.1 trillion won.

Woori Financial was the only one of the four groups to post a decline in cumulative net profit. Its cumulative net profit through the third quarter fell 4.9 percent from a year earlier to 2.7 trillion won. The result reflected a base effect from one-off gains including bargain purchase gains recorded during an insurer acquisition last year. Excluding that factor, cumulative net profit rose 18.7 percent.

Quarterly results showed a recovery. Woori Financial's third-quarter net profit rose 4.4 percent from the previous quarter to 1.0 trillion won. It posted net profit above 1 trillion won for two straight quarters for the first time since the group was launched.

Shinhan Bank keeps top spot, KB Kookmin narrows gap by more than half

Unlike the holding groups, Shinhan Bank maintained the No. 1 spot in cumulative net profit in banking, while KB Kookmin Bank rapidly closed the gap.

Combined net profit at the four major banks - KB Kookmin, Shinhan, Hana and Woori - totalled 13.0 trillion won through the third quarter. All four banks increased cumulative net profit from a year earlier.

Shinhan Bank's cumulative net profit through the third quarter rose 9.8 percent from a year earlier to 3.7 trillion won. It was the largest in both profit size and year-on-year growth among the four banks. KB Kookmin Bank ranked second, with cumulative net profit rising 6.3 percent to 3.6 trillion won.

The gap in cumulative net profit between the two banks narrowed by 125.7 billion won to 107.4 billion won at the end of the third quarter from 233.1 billion won at the end of the first half. In third-quarter net profit alone, KB Kookmin Bank posted 1.4 trillion won, earning 125.7 billion won more than Shinhan Bank's 1.2 trillion won.

Shinhan Bank's third-quarter net profit fell 5.9 percent from the previous quarter, while KB Kookmin Bank's rose 20.1 percent, showing a difference in quarterly momentum. Shinhan Bank kept the lead in cumulative results, but KB Kookmin Bank stepped up its chase on the back of third-quarter performance.

Hana Bank ranked third with cumulative net profit of 3.3 trillion won through the third quarter, up 5.8 percent from a year earlier. Its profit gap with KB Kookmin Bank was just 104.3 billion won through the first half, but widened to 260.6 billion won by the end of the third quarter.

In third-quarter net profit alone, KB Kookmin Bank posted 1.4 trillion won while Hana Bank earned 1.2 trillion won, a difference of 156.3 billion won. As a result, Hana Bank, which had been chasing second place through the first half, fell further behind KB Kookmin Bank in the third quarter.

The gap in cumulative net profit between Shinhan Bank and Hana Bank also widened by 30.6 billion won to 368.0 billion won at the end of the third quarter from 337.4 billion won in the first half.

Woori Bank's cumulative net profit through the third quarter rose 4.7 percent from a year earlier to 2.4 trillion won. It had the smallest cumulative net profit among the four, but third-quarter net profit alone rose 22 percent from the previous quarter to 1.0 trillion won, the highest on record for a single quarter.

Differences in performance by bank were influenced by growth in interest income and fee income and expanded loan assets. Shinhan Bank's won-denominated loans rose 3.3 percent from the end of last year as of end-September, with corporate loans up 4.7 percent. KB Kookmin Bank's won-denominated loans were 391 trillion won, up 3.5 percent from the end of last year. Hana Bank saw fee income increase from retirement pensions and bancassurance, while Woori Bank's asset growth led by corporate loans supported the earnings recovery.

In the third quarter, net interest margin (NIM) was 1.72 percent at KB Kookmin Bank, 1.58 percent at Shinhan Bank and 1.57 percent at Hana Bank. Woori Bank's cumulative NIM for January to September was 1.48 percent. Some banks' third-quarter NIM fell from the previous quarter due to factors including higher funding cost burdens from rising market interest rates.

After third-quarter results, the leadership race among holding groups and banks showed different patterns. In holding groups, KB Financial held onto first place by widening the gap with Shinhan Financial. In banking, KB Kookmin Bank closed in on Shinhan Bank, cutting the gap between first and second by more than half. Hana Bank fell further behind KB Kookmin Bank, while Woori Bank remained fourth in cumulative net profit despite a quarterly recovery.

Na Sang-rok (나상록), managing director in charge of finance at KB Financial, which posted the largest net profit among the four holding groups, said on a conference call that fee and commission income could slow due to declining securities trading value. He said the group would continue net profit growth through profit expansion in banking and insurance, improved cost efficiency and provisioning management.

He added that it plans to diversify its earnings base and strengthen its focus on fundamentals while continuing to expand the group's fundamentals.

Seo Gi-won (서기원), chief financial officer at KB Kookmin Bank, said there are cautious elements in the fourth-quarter outlook. He said bank bond and market interest rate rises are expected to be reflected in loan asset yields in earnest, and that it will be important to efficiently manage funding cost burdens.