Shinhan Financial's Profit Rises 34% as Bad-Loan Costs Decline in Korea
Shinhan Financial Group Co., South Korea’s largest financial company by market value, said second- quarter profit advanced 34 percent as the nation’s economy recovered and provisions for bad debts declined.
Net income rose to 588.6 billion won ($496 million) in the three months ended June 30 from 439.7 billion won a year earlier, the Seoul-based company said today in an e-mailed statement. That beat the average of 568.3 billion won from 15 analysts’ estimates in last 28 days compiled by Bloomberg.
Shinhan is set to benefit in the second half from wider profit margins on lending after the central bank this month tightened monetary policy to damp inflation risks. Economic growth forecast at 5.9 percent this year may reduce bad debts further at Shinhan, which makes the majority of its loans to households and small businesses.
“The net interest margin should rise in the second half, helped by the central bank’s rate hike,” said Han Jeong Tae, an analyst at Hana Daewoo Securities Co. in Seoul. Shinhan also makes fewer loans than rivals for construction projects, which may increase bad debts for some lenders, said Han.
The Bank of Korea raised its benchmark interest rate on July 9 for the first time since the global crisis, joining counterparts across Asia in unwinding monetary stimulus as the region leads world growth. The central bank lifted the seven-day repurchase rate to 2.25 percent from a record 2 percent.
Interest Income
Shinhan posted 1.93 trillion won in interest income last quarter, compared with 1.48 trillion won a year earlier. The company’s net interest margin, a key measure of profitability from lending, widened to 3.48 percent from 2.77 percent, Shinhan said.
The company in the second quarter set aside 307 billion won in loan-loss provisions, compared with 531.4 billion won a year earlier. Non-performing loans fell to 1.48 percent of total credit, from 1.49 percent three months earlier.
Shares of Shinhan Financial gained 0.6 percent to 49,200 won in Seoul trading before earnings were released. The stock has risen 14 percent this year.
Hana Financial Group Inc., South Korea’s fourth-biggest financial company, reported an unexpected decline in second- quarter profit on July 19 after provisions against bad loans increased. Net income fell 8 percent to 180.8 billion won last quarter, compared with the 220.5 billion won median of 23 analyst estimates compiled by Bloomberg.
The Financial Supervisory Service said in June that 65 companies must improve finances or restructure loans with creditors, prompting lenders to set aside combined 2.2 trillion won in additional reserves.
To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net
Rate These Stories
Rate this Page