The group expanded earnings while maintaining heavy loan-loss preparations
It plans to provide 10 trillion won over five years to strategic industries in Korea’s southeast region
Lee Chan-woo, chairman of NH NongHyup Financial Group, delivers remarks on April 13 at the opening ceremony of the Southeast Maritime, Aviation and Defense Industry Comprehensive Support Center in Changwon, South Gyeongsang Province
[Insight Korea = Park Ji-hun]
NH NongHyup Financial Group, led by Chairman Lee Chan-woo, improved its earnings on the back of its securities business even as it continued to pursue rigorous loan-loss preparations. The group plans to focus more heavily on productive finance, supported by asset quality and loss-absorption capacity that remain stronger than those of many other bank-based financial holding companies.
According to the financial industry on April 29, NH NongHyup Financial Group posted net income of 868.8 billion won in the first quarter. That was an increase of 154.8 billion won, or 21.7 percent, from the same period last year. Before deducting agricultural support payments made to the National Agricultural Cooperative Federation, net income stood at 990.1 billion won, approaching 1 trillion won.
The result marked the group’s strongest first-quarter performance since the first quarter of 2023, when net income reached 947.1 billion won as interest income rose sharply amid steep increases in interest rates.
The securities business played a major role in this quarter’s strong performance. NH Investment & Securities reported net income of 475.7 billion won, of which 280.3 billion won was consolidated into NongHyup Financial’s earnings according to its ownership stake. That amount was well over half of NongHyup Bank’s earnings, which were affected by slower loan growth under the government’s tighter household debt management. As a result, nonbank businesses accounted for 40.5 percent of NongHyup Financial’s first-quarter earnings.
What makes the result especially notable is that it was achieved on the foundation of thorough loan-loss preparation. NongHyup Financial’s nonperforming loan coverage ratio stood at 156.5 percent, while NongHyup Bank’s was 173.3 percent. Both were among the highest levels in the financial holding company and banking sectors. The averages for the four major financial groups — KB, Shinhan, Hana and Woori — and their banking subsidiaries were 123.2 percent and 156.9 percent, respectively, well below NongHyup’s levels.
The nonperforming loan coverage ratio measures loan-loss allowance balances against loans overdue by more than three months. A higher ratio indicates more active preparation for potential credit losses. Because loan-loss provisions reduce net income by the amount newly set aside, building large reserves can be burdensome for chief executives.
NongHyup Financial had not always stood out for unusually aggressive provisioning. Before Mr. Lee took office, its NPL coverage ratio was 178 percent, higher than KB Financial’s 150.9 percent and Woori Financial’s 153.0 percent. But at the time, other financial holding companies were also considered to be sufficiently prepared.
NongHyup Financial’s asset quality is also broadly in line with other financial groups. At the end of the first quarter, its NPL ratio stood at 0.65 percent, lower than the 0.76 percent average of the four major financial holding companies.
Since Mr. Lee took office, NongHyup Financial’s NPL coverage ratio has been widening the gap with other financial groups. Other listed financial holding companies, under pressure to increase shareholder returns, have tended to avoid setting aside provisions beyond appropriate levels and instead use retained earnings for cash dividends and share buybacks.
“Through pre-emptive risk management, we demonstrated strong asset quality indicators and maintained sustainable loss-absorption capacity,” a NongHyup Financial official said.
10 Trillion Won for Strategic Industries in the Southeast
With relatively solid asset quality as a foundation, NongHyup Financial is expected to accelerate its push into productive finance. This month, the group opened a Maritime, Aviation and Defense Comprehensive Support Center in Changwon, South Gyeongsang Province, and began providing financial support tailored to the government’s regional balanced growth initiative known as “Five Poles, Three Special Zones.”
Through the center, NongHyup Financial plans to provide products and services from its affiliates suited to the southeastern region. The bank will offer corporate lending and foreign exchange services. The property and casualty insurance unit will provide ship and cargo insurance. The securities arm will support corporate bond issuance, IPO underwriting and corporate finance, while the capital unit will handle corporate lending.
Through the newly established center, NongHyup Financial plans to provide 10 trillion won over five years to the southeast region and its core industries. The scale is comparable to the 12.3 trillion won increase in bank lending to the manufacturing sector in the southeast over the most recent five-year period through 2025.
“This center will become a comprehensive financial infrastructure that brings together the expertise of all NongHyup Financial affiliates and provides optimized financial solutions for the core industries of the southeast region,” Mr. Lee said.
NongHyup Financial is also accelerating productive and inclusive finance. In January, it launched a special committee on productive finance and, within three months, supplied 7.5 trillion won for related purposes. With 60 percent of its business network located outside the Seoul metropolitan area, the group plans to continue providing steady funding to small and midsize companies and rural communities.
-This article was translated by ChatGPT. (이 기사는 챗GPT가 번역했습니다.)
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