Shinhan Financial Q2 net falls 44.4 pct on loan-loss reserves

SEOUL, July 29 (Yonhap) -- Shinhan Financial Group Co., South Korea's No. 2
financial services company, said Wednesday its second-quarter earnings declined
44.4 percent from a year earlier on a squeezed interest margin and higher
loan-loss reserves.

Net profit came to 439.7 billion won (US$354.9 million) in the April-June period,
compared with 791.3 billion won from the previous year, the group said in a
regulatory filing. Compared with three months earlier, however, net income soared
272.2 percent.
Sales gained 5.8 percent on-year to 10.2 trillion won while operating profit fell
44.1 percent to 638.9 billion won, it added.
"The group put aside more loan-loss reserves last quarter from a year earlier to
brace for a corporate revamp and the slowing economy," a group official said. The
company set aside 531.4 billion won in such reserves in the second quarter, up
481.5 percent from a year ago.
Korean banks have set aside higher bad-debt provisioning as the slumping economy
and the ongoing process of restructuring ailing companies increases problem
loans, compromising their financial health.
"But the bottom line sharply rose from the preceding quarter due mainly to higher
contributions from the group's non-banking operations and one-off gains," it
said.
The group booked a one-time profit of about 40 billion won by selling its stake
in Hyundai Engineering & Construction Co. in May.
Its total assets reached 314 trillion won as of the end of June, up 3.3 percent
from the previous year.
Shinhan Bank, the flagship unit of the group, posted a net profit of 202 billion
won in the cited period, down 59.1 percent from a year earlier.
The lender's net interest margin (NIM), a key barometer of profitability, reached
1.46 percent in the second quarter, down from 1.66 percent three months earlier.
NIM has slid since the central bank cut its key interest rate by a total of 3.25
percentage points between October and February, though the pace of decline has
eased.
Shinhan Bank's capital adequacy ratio, a key gauge of financial health, reached
15.7 percent as of end-June, up from 14.5 percent at the end of March.
The bank's loan delinquency rate fell to 0.89 percent, compared with 0.9 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 shows signs of
improvement.
sooyeon@yna.co.kr
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