Will Key S. Korean Financial Firms Experience a Decline in Interest Income for the First Time in 5 Years?
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Synopsis
In an unexpected turn of events, four major South Korean financial institutions are poised to witness a decline in their interest income for the first time since 2020. This trend is driven by stricter lending rules aimed at controlling rising housing prices. Explore the implications of these changes and what they mean for the financial sector.
Key Takeaways
- Four major South Korean financial firms are expected to see a decrease in interest income for the first time in five years.
- Stricter lending regulations are being enforced to control rising housing prices.
- The combined interest income is projected to be 101.47 trillion won, a 4% decrease from the previous year.
- The combined net profit for these firms is forecasted to reach 18.5 trillion won, an increase of over 10% from 2024.
- These changes may signal a broader trend in the financial sector and housing market.
Seoul, December 7 (NationPress) Four prominent financial institutions in South Korea are projected to experience a decline in their interest income for the first time since 2020. This shift is attributed to stricter lending regulations intended to address escalating housing prices, according to data released on Sunday.
KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group are forecasted to achieve a collective interest income of 101.47 trillion won (approximately US$68.8 billion) this year, reflecting a 4% decrease from the previous year, as per information gathered by market analyst FnGuide, reported by Yonhap news agency.
This decline signifies the first occurrence of annual decreases in interest income for these firms in five years.
Following a contraction in 2020 triggered by a steep reduction in borrowing rates due to the COVID-19 pandemic, the companies had enjoyed four consecutive years of increasing interest income.
However, they are expected to face a downturn in interest earnings in 2025, as the government has implemented more stringent lending policies, including a 600 million-won cap on mortgage loans for home purchases within the capital area, in an effort to restrain soaring housing costs.
"The lack of growth in interest revenues is due to increased restrictions on household loans, and the prognosis for future interest income appears bleak as these regulations are likely to persist into the next year," stated a source from one of the financial organizations who wished to remain anonymous.
In contrast, the combined net profit for these leading financial firms is anticipated to reach an unprecedented 18.5 trillion won this year, representing a growth of over 10% from the 16.5 trillion won recorded in 2024.
"The remarkable increase in non-interest income, such as fees from securities brokerage, investment banking, and gains from marketable securities, accounts for this robust performance," the source added, noting that the Bank of Korea did not cut key lending rates as significantly as initially projected.
Specifically, KB Financial is expected to report a net profit of 5.75 trillion won this year, marking a 14.4% year-on-year increase, while Shinhan Financial's net profit is projected to rise by 15% to 5.25 trillion won.
Hana Financial's net profit is likely to increase by 9% to 4.1 trillion won, and Woori Financial is anticipated to record 3.4 trillion won in net profit, reflecting an 8% rise.
Point of View
This development highlights a pivotal shift in South Korea's economic environment. As interest incomes decline, the implications for both consumers and the financial sector could be profound. It's essential to monitor these changes closely, as they may signal broader trends in the housing market and lending practices.
NationPress
09/12/2025
Frequently Asked Questions
Why are financial firms in South Korea seeing a decline in interest income?
The decline is primarily due to stricter lending regulations implemented to curb rising housing prices.
What is the projected interest income for these financial firms this year?
The combined interest income is expected to be 101.47 trillion won, down 4% from last year.
How long has it been since these firms last saw a decrease in interest income?
This marks the first decline in interest income since 2020.
What impact do the new regulations have on the housing market?
The regulations aim to control soaring housing prices by limiting mortgage loan amounts.
What are the expected net profits for these financial firms?
The combined net profit is forecasted to reach a record high of 18.5 trillion won this year.
