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| Headquarters of BNK Financial Group in Busan / Yonhap |
By Yi Whan-woo
Regional banking groups are struggling with falling earnings in the face of a freeze on the benchmark interest rate and a sluggish real estate project financing market concentrated in areas outside Seoul.
Such declining profits are in contrast to the increased earnings reported by four of the largest banking groups in Seoul ― KB, Shinhan, Hana and Woori.
Busan's BNK Financial Group and JB Financial Group headquartered in Jeonju, North Jeolla Province, suffered declines in their respective net profits in the first quarter.
In a regulatory filing released Thursday, BNK Financial Group announced its quarterly net profit shed 7.1 percent year-on-year to 256.8 billion won ($191.6 million).
The company noted the net profit of its flagship affiliate Busan Bank went up 13.2 percent year-on-year to 145.3 billion but that of another banking arm, Kyongnam Bank, retreated 2.5 percent to 85 billion won over the cited period.
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| JB Financial Group headquarters in Jeonju, North Jeolla Province / Korea Times file |
Also on Thursday, JB Financial Group reported that its net profit in the January-March period dropped 2.4 percent from the previous year to 163.4 billion won.
Among its banking arms, Kwangju Bank saw its net income ticking up 15.3 percent year-on-year to 73.2 billion won while Jeonbuk Bank saw its net income inching down 1.8 percent year-on-year to 53.4 billion won.
Industry sources noted the Bank of Korea (BOK) has kept its policy rate steady at 3.5 percent since February and that such a freeze is making it tougher for regional banking groups to raise profits as compared to the Seoul-based banking groups.
The sources pointed out that, while all banking groups in Korea rely on their banking arms for their earnings, the regional companies have less diverse business portfolios as well as fewer affiliates than their Seoul peers and thus have less opportunity to reap gains if the interest rate is kept steady.
During the first three months of the year, KB Financial Group reported a 2.5 percent increase in net profit from the previous year.
Shinhan Financial Group posted a 0.2 percent increase over the same period, while Hana Financial Group went up 22.1 percent and Woori Financial Group marked an 8.6 percent increase.
The sources said that the real estate project financing market has not fully recovered following a liquidity crunch that began last fall which is a major reason why the regional banks are not faring well.
