Shinhan Financial Q1 net jumps over six-fold on improving margin

(ATTN: UPDATES with more info and details from conference call in paras 5, 8-9, 13-15)
SEOUL, April 29 (Yonhap) -- Shinhan Financial Group Co., South Korea's No. 3
financial services company, said Thursday its first-quarter earnings rose more
than six-fold from a year ago on improving profit margins and lower loan-loss
reserves.
Net profit came to 779 billion won (US$698.2 million) in the January-March
period, up 559.5 percent from the previous year, the group said in a regulatory
filing. Compared with three months earlier, net income climbed 204.1 percent.
Sales declined 57.7 percent on-year to 9.45 trillion won while operating profit
jumped 442.1 percent to 1.1 trillion won, it added.
"The group's profit margins improved and bad-debt expenses fell, allowing the
bottom line of its banking unit to recover quickly," an official at the group
said.
Shares of Shinhan Group closed 0.63 percent lower at 47,000 won on the main bourse.
South Korean banks are widely forecast to report stronger first-quarter earnings
as the economic recovery has helped them cut loan-loss reserves and see an
improvement in net interest margins (NIMs), a key gauge of profitability, which
were heavily squeezed by the global financial meltdown.
Shinhan Bank, the flagship unit of the group, logged a net profit of 588.6
billion won in the first quarter, up 698.3 percent from the previous year as its
margin rose and it set aside less loan-loss reserves amid the economic recovery.
The lender's NIM reached 2.18 percent in the first quarter, up from 2.01 percent
three months earlier and returning to the pre-crisis level.
The group said in a conference call that if funding costs do not go up sharply,
the lender's NIM is likely to remain at a stable level.
Shinhan Bank also booked a one-off after-tax profit of 121.3 billion won last
quarter by unloading its stake in Hynix Semiconductor Inc. in mid-March.
Creditors of Hynix Semiconductor have raised 923.2 billion won by selling its
6.67 percent stake in the world's second-largest memory chipmaker through block
trade.
The group saw its loan-loss reserves decline in the first quarter amid the
economic rebound and decreased risks from corporate overhauls. It put aside 214.2
billion won in such reserves, down from 374.4 billion won in the fourth quarter,
when Korean banks had to brace for higher bad-debt expenses stemming from their
exposure to ailing Kumho Asiana Group.
Shinhan Group's total assets reached 311.7 trillion won as of the end of March,
down 4.1 percent from the previous year.
Regarding expected takeover moves in the banking sector, Shinhan said it will
focus more on organic growth rather than jumping into the race for merger and
acquisitions.
"The group views chances as slim that additional takeovers (of local banks) would
raise the group's corporate value," Shin Sang-hoon, president at the group, said
in a conference call.
The Korean banking sector is poised to undergo a wave of mergers and acquisitions
this year amid the government's efforts to privatize Woori Finance Holdings Co.
Meanwhile, U.S. buyout fund Lone Star Funds is resuming the process of selling
Korea Exchange Bank.
sooyeon@yna.co.kr
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