The performance of the four major financial groups and regional financial institutions is diverging significantly. While the large financial groups are benefiting from a booming stock market, particularly in their non-banking sectors, regional banks are expected to see a decline in profitability due to sluggish local economies and structural limitations.
According to financial information provider FnGuide on July 21, the combined forecast for net profit in the second quarter of 2026 for KB, Shinhan, Hana, and Woori Financial is 5.778 trillion won. This represents a 7.3% increase compared to 5.3839 trillion won in the same period last year.
In contrast, regional financial groups are expected to report the opposite trend. The forecast for net profit for the three regional financial groups—BNK, iM, and JB Financial—for the second quarter is 610.7 billion won, a 9.1% decrease from 671.8 billion won in the same period last year. If market expectations are confirmed, the net profit of the four major financial groups will exceed that of the three regional financial groups by more than nine times.
Among regional financial groups, only JB Financial is expected to see an increase in net profit. JB Financial's forecast for the second quarter is 212.6 billion won, up 2.4% from 207.7 billion won during the same period last year.
iM Financial is projected to decrease from 154.3 billion won last year to 148.7 billion won, a 3.6% drop. BNK Financial is expected to see the largest decline, from 309.2 billion won to 249.4 billion won, a 19.4% decrease. Analysts attribute this to a one-time profit from the sale of BNK Digital Tower in Gangnam, Seoul, last year, which creates a challenging base effect for this year.
The key factor distinguishing the performance of large financial groups from regional banks is the competitiveness of their non-banking sectors. With active trading in the domestic stock market and a recovering asset management market, large financial groups with securities firms have directly benefited.
In contrast, regional financial groups are relatively focused on capital and insurance in their non-banking operations. The lower contribution of profits from securities subsidiaries means that the benefits of a booming stock market are less pronounced for regional banks compared to their larger counterparts.
The ongoing struggles of the local economy are putting pressure on the profitability of regional financial institutions. These banks have a high proportion of loans to small and medium-sized enterprises and small business owners. However, the impact of high interest rates and inflation has dampened economic vitality in the region, leading to reduced demand for corporate financing and investment activity.
Market analysts believe that the performance gap among financial groups is likely to continue in the second half of the year. While rising benchmark interest rates can increase banks' interest income, regional financial groups face the dual burden of a loan structure centered on small businesses and a slowing local economy. Observers suggest that narrowing the gap with large financial groups in the short term will be challenging.
Choi Jeong-wook, a researcher at Hana Securities, stated, “Some regional financial groups like iM Financial and BNK Financial are expected to fall short of market expectations. The losses from bond trading and stock valuation losses at capital companies may lead to a wider performance gap among financial groups than initially anticipated.”
* This article has been translated by AI.
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