The first-half performance of the three regional financial holding companies showed divergence. JB Financial Holdings posted record-breaking results driven by loan growth and increased profits from its capital subsidiary, while BNK Financial Holdings and iM Financial Holdings saw year-on-year profit declines due to accounting losses and rising costs, despite solid core business earnings.
According to the financial sector on the 28th, the combined net profit for the first and second quarters of the three financial holding companies—BNK, iM, and JB—totalled 1.0931 trillion won, a 5.4% decrease compared to the same period last year.
Performance varied by holding company. JB Financial's first-half net profit reached 385.7 billion won, setting a record high for all time. Interest income rose 9.56% year-on-year to 1.0879 trillion won, driven by lending focused on risk-adjusted profitability, which led to a 6.8% increase in combined won-denominated loans from Gwangju Bank and Jeonbuk Bank. The net interest margin (NIM) fell 2 basis points (1BP=0.01 percentage point) year-on-year to 2.53%.
Non-interest income declined by 14.57% to 126.1 billion won, largely due to reduced valuation gains from sluggish performance in bond operations and the investment banking segment amid rising bond yields. However, JB Woori Capital boosted results with a 34.2% year-on-year increase.
A reduction in provisions also contributed positively to earnings. Last year, cumulative provision burdens were heavy due to changes in the loan loss rate (LGD) calculation method for bank assets and amortization of real estate project financing (PF). This year, those burdens eased, resulting in a 3.43% year-on-year decline in provisions.
Excluding JB Financial, BNK Financial and iM Financial posted somewhat weaker results. BNK Financial's net profit fell 13.5% year-on-year to 411.8 billion won. Last year, the company recorded high profits due to a one-time sale gain of 54.4 billion won from the BNK Gangnam Core Office Fund. However, in the second quarter this year, exercising pre-emptive rights on a real estate fund acquired during the purchase of the Yeouido BNK Financial Tower resulted in costs of 44 billion won being recognized, leading to valuation losses compared to book value as BNK Financial acquired full ownership stakes in the building.
BNK Financial stated that this share acquisition granted it 100% ownership rights. Park Sung-wook, CFO of BNK Financial, said during a conference call, "Since the transaction was valued based on fair market value for real estate, a difference arose between book value and payment amount, which was recognized as financial expense for this accounting period. Through this transaction, we have secured 100% economic rights over the Yeouido BNK Financial Tower, and all future rental income and profits from its sale will accrue entirely to the group." He added, "Although the situation has improved, there are areas where accounting losses were recorded."
Excluding this item, core business performance remained solid. Both interest and non-interest income grew simultaneously. In particular, fees surged 54.6% year-on-year due to sharp increases in commissions from stock custody, derivatives, and real estate project financing. Provisions also decreased, falling 10.5% year-on-year as provisions for PF loans and credit facilities both declined.
iM Financial's net profit fell 4.43% year-on-year. Although interest income (up 4.10%) and non-interest income (up 5.19%) both rose, costs also increased. General and administrative expenses rose by approximately 65 billion won due to one-time personnel costs and higher education fee rates. Additionally, provisions related to credit growth increased by about 10 billion won, further pressuring net profit.
Asset quality improved across all three companies. BNK Financial and iM Financial saw their delinquency rates improve by 5 basis points and 16 basis points, respectively, while the share of non-performing loans (NPL) decreased by 16 basis points and 23 basis points, respectively. Meanwhile, JB Financial's delinquency rate worsened by 23 basis points, and its NPL ratio deteriorated by 28 basis points.
Regional financial holding companies also raised their shareholder return targets compared to last year. JB Financial projected a shareholder return of 375 billion won based on an assumed annual net profit of 750 billion won. If implemented as planned, this would exceed last year's figure by 55.4 billion won. Last year, BNK Financial also announced a total shareholder return rate in the mid-40% range. iM Financial will additionally implement the repurchase and cancellation of an extra 30 billion won worth of its own shares. Furthermore, it plans to cancel a total of 150 billion won worth of its own shares by 2027.
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