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| Office buildings of major financial companies here are seen in Seoul's Yeouido financial district in this file photo. Yonhap |
Major financial firms feared to suffer earnings slowdowns
By Lee Min-hyung
Large-cap financial stocks are extending lukewarm performances as foreign investors have dumped their shares en masse amid expectations of an overall earnings slowdown in the financial industry here, analysts said Tuesday.
Shares of major financial firms displayed a sharp rally early this year after reporting record profits in 2022. The unprecedentedly hawkish cycle of rate hikes enabled them to profit on massive interest margins throughout last year.
But the momentum is losing steam gradually in the second quarter, as the rate hike cycle appears to have come to an end. The diminishing hope of the interest profit growth is forecast to put the brakes on the near-term recovery of their stock prices, analysts said. Aside from the interest profit, they also encounter escalating uncertainties in their non-banking businesses, particularly from securities affiliates, in the face of scandalous financial fiascos.
Data also showed foreign investors have engaged in a mass selling spree of major financial shares here. According to the Korea Exchange, foreigners sold 363 billion won ($279.55 million) worth of Shinhan Financial Group shares between March 24 and June 26, the largest among the listed financial firms here.
They also sold 286.4 billion won worth of Hana Financial Group shares during the same period. Other major financial holding firms, such as KB Financial Group and Meritz Financial Group, faced a similar fate, with foreigners dumping 200.5 billion won and 191.8 billion won worth of their shares, respectively, over the past three months.
Shares of KB topped 60,000 won in February, but failed to defend the momentum of the solid rally. Its stock price fell to around 47,000 won as of Tuesday. Stocks of other financial firms also showed a similar curve.
Analysts said the macroeconomic circumstances here and abroad will not be positive enough for a possible rebound of financial shares.
"The overall market surroundings for the financial industry will not be favorable enough in the second half," Jun Bae-seung, an analyst at eBest Investment & Securities, said. "Even if expectations are growing (over the possible capital inflow) in the stock market after the end to the rate hike cycle, most companies face a growing burden on their financial soundness, which will put the brakes on their possible stock recovery."
The analyst said the securities industry will continue grappling with real estate project financing uncertainties for the time being.
Other analysts also said some financial players' earnings will not be able to meet market expectations in the second quarter due to the sluggish performance of their non-banking profits. Shinhan Financial Group is hit particularly hard by the selling spree of foreign investors.
"Shinhan's net profit in the second quarter is forecast to reach 1.21 trillion won, down by 8.7 percent from a year earlier, due to its bad debt costs and potential declines in stock trading revenues," Daishin Securities analyst Park Hye-jin said. "Shinhan will have to pile up more allowance for bad debts due to the recent financial scandal sparked by sales of a risky contract for difference (CFD)."
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