July 23rd, 2008 | by admin |
* What: April-June results of banks and Samsung Securities
* When: Kookmin on July 28, Samsung Sec in early August
* Kookmin's earnings likely more than doubled due to a lowcomparison base; other banks and brokerages' earnings declined
By Kim Yeon-hee and Park Jung-youn
SEOUL, July 23 (Reuters) - Most major South Korean banksand brokerages likely posted weaker earnings in the lastquarter as stock markets tumbled and higher funding costseroded margins.
A softening economy and inflation near 10-year highs couldcrimp loan growth in coming months and spur more delinquencies,prompting lenders to take more charges against potential loanlosses.
Persistent worries about the slowing global economy andcredit crisis, meanwhile, are likely to continue to weigh onstock markets, clouding the outlook for brokerages' commissionincome and mutual fund sales.
"We would not expect any fundamental improvement in thebanking sector," said Shim Kyu-sun, a banking analyst of CJInvestment & Securities.
"Taking into consideration the pace of commodity priceincreases and economic slowdown, all aspects of banks -- growthpotential, profitability and asset soundness -- look unstable."
Shinhan Financial (055550.KS: Quote, Profile, Research, Stock Buzz), Samsung Securities(016360.KS: Quote, Profile, Research, Stock Buzz) and Woori Finance (053000.KS: Quote, Profile, Research, Stock Buzz) are expected toreport profit declines of up to 16 percent in the April-Junequarter from a year-ago, while Hana Financial (086790.KS: Quote, Profile, Research, Stock Buzz) islikely to report a near 6 percent gain.
Top lender Kookmin Bank (060000.KS: Quote, Profile, Research, Stock Buzz) is expected to reportits quarterly profit more than doubled, due largely to a lowcomparison base from last year, when its quarterly profittumbled 70 percent due to heavy back taxes and stiffcompetition.
More detailed estimates for banks are at the end of thisreport.
Interest income at Kookmin (KB.N: Quote, Profile, Research, Stock Buzz) and other banks probablyremained flat in the April-June period compared with threemonths earlier as shrinking lending margins offset modest loangrowth.
Analysts said net interest margins (NIM), a key measure ofbanks' profitability, fell an average 10 basis points in thesecond quarter from three months earlier as the global creditsqueeze pushed up borrowing costs from bond issuance. Lendingprobably expanded 4-5 percent.
Kookmin's NIM may have slid to the 2-percent level after itplunged by 31 basis points in the first quarter from the fourthquarter of 2007, analysts estimated.
The bank's net profit for the whole of 2008 is forecast tofall to 2.6 trillion won from last year's 2.8 trillion won,according to Thomson Reuters Estimates.
Jun Kwang-woo, chairman of the regulatory FinancialServices Commission, called on banks last week to refrain fromexcessive lending and competition, saying it could hurt theirbusinesses.
"With Korean banks aggressively expanding their loan bookduring 2004-2007, the possibility of a pickup in delinquencyratios cannot be dismissed," Merrill Lynch analyst Bryan Songsaid in a recent note.
The outlook for brokerages is also cloudy.
South Korea's benchmark stock index KOSPI hasdropped 18 percent so far this year, with foreign investorsoffloading 8.7 trillion won of shares in their longest everselling streak of 32 sessions on the domestic bourse as ofTuesday.
Brokerages, led by Samsung Securities, likely took a bathon their investments in stocks and bonds in the June quarter,but commission income may have benefited from increased stockmarket volatility as investors flooded them with sell orders.
Average daily trading volumes rose to 306 million shares inthe quarter from 274 million shares a year ago. --------------------------------------------------------------COMPANY PROFIT % CHANGE DATE
(average in billion won) Kookmin (060000.KS: Quote, Profile, Research, Stock Buzz) 621 162 July28 Shinhan Financial (055550.KS: Quote, Profile, Research, Stock Buzz) 632.8 - 7.8 LateJuly Woori Finance (053000.KS: Quote, Profile, Research, Stock Buzz) 516.0 - 16.4 July31 Hana Financial (086790.KS: Quote, Profile, Research, Stock Buzz) 289.7 5.9 July29 Samsung Securities (016360.KS: Quote, Profile, Research, Stock Buzz) 87.1 - 9.6 EarlyAug
(Editing by Keiron Henderson & Kim Coghill)
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