One-off allowances cost Shinhan

25-Nov-2020 Intellasia | KoreaTimes | 6:51 AM Print This Post

Shinhan Bank reported a steep earnings decline for the third quarter in its major overseas markets ? such as China and Vietnam ? as a result of allocating higher allowances for potential bad debts amid the unceasing economic uncertainty surrounding the COVID-19 pandemic, the lender said Tuesday.

According to data from the Financial Supervisory Service (FSS), Shinhan Bank China reported a net profit of 11.5 billion won ($10.35 million) during the July-September period, down by 56.9 percent from a year ago.

Aside from the virus factor, the lender also decided to accumulate more allowances for bad debts, as the average credit ratings of the Chinese subsidiary’s major corporate clients there declined this year, according to the lender.

“Our profit in China reported a decline in the third quarter from the previous year, as part of our preemptive step to increase the volume for the bad debt reserve due to the virus-induced uncertainty and local clients’ falling credit ratings,” an official from the lender said.

Shinhan Bank Vietnam also reported a slight fall in its third-quarter net profit for a similar reason. The lender reported a 91.7 billion won profit during the same period, down 2.8 percent from the previous year.

Despite the fall in the two of its major overseas markets, the lender’s net profit reported two-digit growth in some other emerging Asian territories ? such as Cambodia and Kazakhstan.

The Cambodian subsidiary of the lender reported a net profit of 10.7 billion won, up 64.6 percent from a year ago, while at the same time achieving 61.5 percent growth in Kazakhstan during the same period.

Despite the growth, the combined third-quarter net profit of Shinhan’s 10 overseas subsidiaries came to 171.1 billion won, down by about 10 percent from a year ago, as the lender’s earnings in non-Korean markets come mostly from three core markets ? China, Japan and Vietnam.

Other major lenders, such as KB Kookmin Bank, Hana Bank and Woori Bank, however, reported growth in their major overseas markets including China.

Of note is Hana’s outstanding earnings growth in the Chinese market. The lender reported a net profit of 86.8 billion won there, up by 180.9 percent from a year ago. The lender said the growth is attributable to its strategy of expanding mobile partnerships with local financial players, which allowed it to make money amid the pandemic.

Last week, Hana Bank China clinched a partnership with Ant Group, the largest fintech firm there, allowing the former to expand its digital sales channels.

KB and Woori also posted growth of 16.3 percent and 50 percent in terms of third-quarter net profit there during the same period.

Overseas subsidiaries of KB Kookmin Bank, which is in a rivalry with Shinhan, reported an earnings surprise by chalking up 83.8 billion won in third-quarter net profit, up by 544 percent from the previous year.

The growth came as a result of decent earnings from Cambodia’s largest microfinance deposit-taking institution, Prasac Microfinance, which the lender acquired last year.


Category: Korea

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