After a year of disappointing results in the Top 1000 in 2020, South Korea’s banks have returned to strength, posting an impressive set of improvements in their Tier 1 capital positions.
While the banks are doing well, the country’s regulator has cautioned them to take a conservative approach to their capital management while the pandemic continues. The country saw its gross domestic product decline by 1% in 2020, as exports of its electronic goods declined. While the banks have performed strongly, there is concern about the quality of loans given out during the pandemic.
KB Financial Group (KBFG), the country’s largest bank, has shuffled up one spot to 60th in the 2021 main ranking, as a result of adding 10.8% to its Tier 1 capital, now at $33.9bn. It also increased its asset base by 25.3%, to $561.3bn.
But it is closely followed by Shinhan Financial Group (SFG), which maintains second place in the country ranking but moves up four places to 61st place in the Top 1000. And it is closing the gap, growing its Tier 1 capital by 21.8%, double that of KBFG.
Korea Development Bank (KDB) also climbs the rankings, moving to 63rd from 67th with a very impressive 26.9% increase in Tier 1 capital, to $33.1bn. It also posted a 649.1% increase in pre-tax profits. KDB holds a secure position, with 100% state ownership. Further, the bank is covered by the KDB Act, which requires the government to compensate the bank for any annual net loss that is not covered by the bank’s reserves.
The lender comes top of the country’s best-performing ranking and leads in every metric except for asset quality, where it places last out of the seven largest South Korean banks. Total operating income for KDB skyrocketed in 2020, rising by 236.1%. The figure dwarfs the just over 17% increase recorded by KBFG and NongHyup Financial Group.
KDB also recorded the best return on assets (ROA) ratio of 0.64%, up 54 basis points (bps). Hana Financial Group (HFG) the only other South Korean bank to see an improvement in ROA, to 0.58%.
This year KBFG fared less well in the best-performing rankings – falling from first in 2020 to fourth place overall. Its best performance metric was liquidity, which looks at indicators such bps changes in loans-to-asset ratio and loans-to-deposits ratio.
HFG comes top for asset quality, recording the lowest level of non-performing loans, one of the key indicators for this performance category.
