From left, headquarters of Shinhan Financial Group, Woori Financial Group, KB Financial Group and Hana Financial Group in Seoul / Courtesy of each financial group

The net profit of Korea's top four financial holding companies — KB Kookmin, Shinhan, Hana and Woori — is expected to near a record-high of 17 trillion won ($11.7 billion) this year, data showed Thursday. Net interest margins expanded as subsidiary banks increased additional loan rates in response to financial authorities' household loan regulation policies.

According to data from market tracker FnGuide, their accumulated net profit this year is projected to reach 16.9 trillion won, marking a 13.4 percent increase compared to the same period last year.

Since 2020, the annual profits of the four financial holding companies have seen continuous growth, driven by policy rate hikes and an increase in loan assets. The combined annual profit rose from 11.7 trillion won in 2020 to 15.5 trillion won in 2022. While they declined to 14.9 trillion won last year, they are once again expected to set another record.

Notably, Woori Financial Group is expected to post an extraordinary 484.9 percent surge in net profit this year, reaching 398.3 billion won. KB Financial Group is also keeping pace, reporting a 165 percent increase during the same period, with profits amounting to 676.8 billion won.

Shinhan Financial Group and Hana Financial Group are also forecast to show significant growth, with Shinhan recording a 33.6 percent increase, or 734.3 billion won, and Hana recording a 40 percent increase, or 621.2 billion won.

The record-breaking performance anticipated this year is largely attributed to higher lending rates aimed at curbing household loans. Despite the Bank of Korea policy rate cuts, banks have been instructed to tighten their grip on loan issuances due to a surge in real estate investments. As a result, the interest rate gap between deposits and loans has widened.

Another contributing factor is the significant provisions set aside in 2023 to prepare for potential insolvencies, such as delinquencies in real estate project financing. However, from the first to third quarters of this year, their cumulative loan loss provisions decreased by 10.9 percent, amounting to 4.9 trillion won.

Last year, financial authorities also requested that banks contribute financially to society for "mutual growth," criticizing them for reaping record-high profits despite the public's struggle. Last December, 18 domestic banks, including the top four, collectively allocated at least 2 trillion won for initiatives such as support for vulnerable groups, which was reflected as a loss in their net income.

As banks reaped record-high profits from lending rates, market watchers believe financial authorities' pressure for contributions is expected to intensify further. The Financial Services Commission is currently coordinating the specific details and scale of the second support measure with the banking sector.