Shinhan Financial Q4 net dips 9.7 pct

SEOUL, Feb. 4 (Yonhap) -- Shinhan Financial Group Co., South Korea's No. 3
financial services company, said Thursday its fourth-quarter earnings declined
9.7 percent from a year earlier on higher loan-loss provisions and one-off
severance payments.
Net profit came to 256.2 billion won (US$222.1 million) in the October-December
period, compared with 283.7 billion won the previous year, the group said in a
regulatory filing. Compared with three months earlier, it tumbled 47.9 percent
mainly due to higher charges set aside for bad loans.
Sales declined 64.6 percent on-year to 8.19 trillion won while operating profit
dipped 5.6 percent to 492.8 billion won, it added.
For the whole year of 2009, the group's net income amounted to 1.3 trillion won,
down 35.3 percent from a year earlier.
"Last quarter, loan-loss provisioning increased to cover the corporate
restructuring and a one-off severance payment occurred," an official at the group
said.
Its non-banking businesses, including credit card and life insurance units,
contributed 60 percent of the total net profit last year, compared with a 47.7
percent in 2008, reflecting the group's balanced business portfolio.
Its total assets reached 303.9 trillion won as of the end of December, down 5.4
percent from the previous year.
Shinhan Bank, the flagship unit of the group, posted a net profit of 184.1
billion won last quarter, down 48.4 percent from a year earlier due to higher
loan-loss reserves. In the final quarter, local banks put aside more provisioning
to cover possible loss stemming from corporate revamps.
Creditor banks of the cash-strapped Kumho Asiana Group decided Dec. 30 to put two
other ailing units -- Kumho Industrial Co. and Kumho Tire Co. -- under a debt
rescheduling program. Shinhan set aside about 150 billion won in provisioning
related to the Kumho group.
But the lender's profitability and asset soundness continued to show improvements.
The lender's net interest margin (NIM), a key barometer of profitability, reached
2.01 percent in the fourth quarter, up from 1.74 percent three months earlier.
Its improving profit margin helped the bank register a 15.1 percent rise in
interest income from the previous quarter.
Korean banks' NIMs were under pressure as record-low benchmark interest rates
narrowed their loan-deposit spread. But signs of an economic recovery and
expectations of a rate hike by the central bank have begun to boost market rates
like returns on certificates of deposit, helping their profit margins improve
later last year.
Shinhan Bank's non-performing ratio stood at 0.99 percent in the fourth quarter,
down from 1.44 percent in the preceding quarter. It said it cleaned up bad loans
worth 756.1 billion won in the cited period.
The country's financial watchdog has advised local banks to lower their bad loan
ratio to around 1 percent by the end of last year.
The bank's loan delinquency rate fell to 0.41 percent, compared with 0.79 percent
the previous quarter, it added. Local banks recently saw their loan default rates
decline as they wrote-off a portion of bad debts and the economy has shown signs
of improvement.
sooyeon@yna.co.kr
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