BNK, JB, DGB feared to suffer earnings fall on weak non-banking portfolio

The Korea Times

The Korea Times

Finance

Sun, December 3, 2023 | 19:25

Companies

BNK, JB, DGB feared to suffer earnings fall on weak non-banking portfolio

Posted : 2023-04-11 08:47

Updated : 2023-04-12 08:56

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By Lee Min-hyung

Provincial banking groups such as BNK, JB and DGB Financial Group are forecast to suffer an earnings fall this year due to their weak non-banking business structures.

Last year, the three financial holding firms generated robust profit growth, which was driven by improved loan-to-deposit margins amid global monetary tightening.

Nonetheless, the outlook appears murky for an extended winning streak this year, as the rate hike cycle nears its end and their non-banking businesses take up only a slight portion of their annual earnings.

According to data from the Financial Supervisory Service, JB Financial Group reaped a 2022 net profit of 618.3 billion won ($468.51 million), up 17.7 percent from the previous year. BNK also achieved a slight earnings rebound of 2.9 percent during the same period. But DGB Financial Group suffered an earnings fall of 21.2 percent, as the weak performance of its securities and insurance arms offset the solid revenue growth of its banking affiliate.

Unlike major large-cap financial holding firms including KB, Shinhan, Hana and Woori, the mid-sized regional financial companies are forecast to suffer a bigger earnings fall this year compared with a year ago, as they will generate smaller earnings from their cash-cow banking businesses, according to market analysts.

"The interest rate of newly-sold loan products has been on the gradual decline since December 2022, so the loan-to-deposit margin of most banks will turn into a path for decline sometime around the first half of this year," said Kim Do-ha, an analyst at Hanwha Investment & Securities.

Financial watchdogs also continue to step up pressure on financial firms, urging them to refrain from making "excessive" interest profits and reduce their respective interest margins.

Amid a dismal earnings outlook, the National Pension Service (NPS) is on a selling spree of stocks of the three major regional financial holding firms. The NPS' stock ownership ratio in BNK reached 8.47 percent as of the end of March, down 1.01 percentage points from October last year. The company sold off more than 3.29 million BNK shares during the period.

The state-run pension fund also sold off around 1.92 million DGB shares between February and March. The NPS holds a 7.17 percent stake in JB Financial in February, down 1.04 percentage points from August last year.

mhlee@koreatimes.co.kr

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