Regional financial groups posted record earnings last year, but worsening asset quality at their core banking units is a key risk undermining their profits and financial stability, market watchers said Friday.
The holding companies’ figures came on the back of strong nonbank subsidiaries such as securities and capital firms, and the easing of real estate project financing provisions.
However, their regional bank subsidiaries’ heavy exposure to small and medium-sized enterprises (SMEs) are leading to rising delinquencies.
According to financial market data, BNK Financial, JB Financial and iM Financial saw their combined net profit surpass 1.96 trillion won ($1.3 billion) last year, up 21.5 percent from a year earlier.
Their subsidiaries logged mixed and comparatively weak results.
Of BNK Financial’s bank subsidiaries, Busan Bank posted 439.3 billion won in net profit, up 7 percent from a year earlier, but Kyongnam Bank saw their figure fall 5.6 percent to 292.8 billion won.
Of JB Financial’s bank affiliates, Jeonbuk Bank recorded a net profit of 228.7 billion won, a 4.6 percent increase, while Kwangju Bank’s figure stood at 272.6 billion won, down 5.4 percent from the previous year.
The divergence is explained in large part by rapid deterioration in SME loan portfolios, a core revenue base for regional lenders.
As of end of last year, overdue SME loans at five regional banks — Busan, Kyongnam, Kwangju, Jeonbuk and iM Bank — surpassed 1.36 trillion won, up 75.1 percent from a year earlier.
Delinquency ratios at the regional lenders climbed to as high as 1.46 percent, unlike Seoul-based major commercial banks, whose combined average delinquency rate stood at around 0.3 percent.
Source: Korea Times News
