BNK Financial Group, iM Financial Group, and JB Financial Group reported a combined first-half net profit of 1.0931 trillion won, marking a 5.4% decline compared to the same period last year, according to financial sector data released on the 29th. The downturn stems from surging corporate loan delinquency rates and regional economic weakness that pressured asset quality across all three institutions. This contrasts sharply with South Korea's big five financial holdings—KB, Shinhan, Hana, Woori, and NH Nonghyup—which posted record-breaking combined net profits of 13.1183 trillion won during the same period, up 9.7% year-over-year amid buoyant stock market conditions.
Regional Holdings Report 1.09 Trillion Won Combined Net Profit in First Half
The three regional financial holdings generated 1.0931 trillion won in net profit during the first half, down 5.4% from the prior-year period. JB Financial increased interest income 4% from the first quarter. iM Financial's second-quarter interest income reached 422.1 billion won, nearly unchanged from the previous quarter's 421.5 billion won. BNK Financial's interest income declined 5.1% quarter-over-quarter, though this figure includes accounting factors related to real estate fund preferential purchase rights; excluding one-time items, interest income rose 0.7% from the prior quarter.
BNK Financial's second-quarter combined bank net interest margin (NIM) fell 4 basis points from the previous quarter. iM Financial's conference call noted that rising interest rates have not translated into improved group profitability. iM Bank increased its proportion of three-month variable-rate loans since late last year to enhance interest rate sensitivity, but higher funding costs in the capital segment partially offset margin improvements in the banking division.
Corporate Loan Delinquency Rates Climb Across All Three Groups
JB Financial's corporate loan delinquency rate jumped 8 basis points quarter-over-quarter to 1.50%. Two years prior, this metric stood at just 0.52%. Jeonbuk Bank specifically experienced rising delinquency trends in wholesale/retail and manufacturing sectors, which include neighborhood shops, traditional markets, and supermarkets. Delinquency rates in these sectors increased 0.4 percentage points from the previous quarter.
BNK Financial Group maintained focus on managing its overall non-performing loan (NPL) ratio and delinquency rate, though the institution has struggled to lower the absolute levels of these indicators, which have trended upward since the first quarter of last year. The group's NPL ratio has hovered around 1.5% this year, while the delinquency rate has centered near 1.3%. Kyongnam Bank's NPL ratio exceeded 1% for the first time this year; two years ago, the figure was merely 0.43%. Its delinquency rate also rose 10 basis points quarter-over-quarter.
iM Bank's NPL ratio increased 11 basis points from the prior quarter. While total delinquency rates remained at similar levels, corporate delinquency rates climbed 9 basis points.
Authorities Expand Regional Financial Support
Authorities have moved to expand regional financial support, though the effects on regional financial holdings' performance and asset quality metrics require time to materialize. A financial investment industry official stated, "Increasing funding supply to regional companies and small business owners is separate from borrowers' repayment capacity recovering. In a prolonged regional economic downturn, regional banks face growing dual burdens of performing financial support roles while managing asset quality."
FAQ
What caused the profit decline at regional financial holdings in the first half?
The 5.4% decline in combined net profit to 1.0931 trillion won resulted from surging corporate loan delinquency rates and regional economic weakness. JB Financial's corporate loan delinquency rate rose 8 basis points to 1.50%, while funding cost pressures compressed net interest margins across all three groups despite loan asset growth.
How did regional holdings' performance compare to major financial groups?
The three regional holdings' 5.4% profit decline contrasted with the big five financial holdings (KB, Shinhan, Hana, Woori, NH Nonghyup), which increased net profits 9.7% to a record 13.1183 trillion won during the same first-half period, benefiting from buoyant stock market conditions.
What asset quality challenges did regional banks face in the second quarter?
BNK Financial Group's NPL ratio hovered around 1.5% with delinquency rates near 1.3%. Kyongnam Bank's NPL ratio exceeded 1% for the first time, up from 0.43% two years prior. iM Bank's NPL ratio increased 11 basis points quarter-over-quarter, with corporate delinquency rates climbing 9 basis points.
