[KB · Shinhan Financial Group's leadership analysis] Yang Jong-hee vs. Jin Ok-dong, What are the measures for growth through profit diversification?

[Korea Financial Times, Han Aran] KB Financial Group and Shinhan Financial Group, which are vying for the title of leading financial group, are diversifying their revenues to ensure sustainable growth. While KB Financial Group Chairman Yang Jong-hee is focusing on strengthening the non-banking sector, Shinhan Financial Group Chairman Jin Ok-dong is accelerating his efforts to boost global profits.

KB Financial Group's non-banking sector net profit for the first half of this year was KRW 1.276 trillion, up 11.1% from the first half of last year (KRW 1.149 trillion), according to a report by the financial sector on the 1st. 1. The non-banking segment's share of the group's total net profit rose to 49% from 41% in the same period.

KB Financial Group's contribution to the non-banking sector jumped from 33.5% in 2020 to 41.3% in 2021, before falling to 27.9% in 2022 and rising again to 29.6% as of last year.

Compared to other financial holding companies, KB Financial Group is relatively less dependent on banks, but with more than half of its revenue coming from banks, it needs to diversify its revenue.

KB Financial Group, which has grown its size through active mergers and acquisitions with the launch of the holding company in 2008, plans to expand its profit base by focusing its capabilities on the growth of existing non-bank affiliates.

Chairman Yang has been strengthening the non-banking division since taking over in November last year. “We will continue to generate profits from non-banking sectors such as securities, insurance, and cards while managing fundamentals to generate 10% ROE,” he said at an investor presentation (IR) in New York in May.

KB Financial Group aims to increase its share of non-banking and non-interest income sectors to 40%. KB Financial Group will include specific ROE enhancement measures in its corporate value enhancement plan to be announced in the 4th quarter of this year.

Shinhan Financial Group announced late last month that it aims to achieve an ROE of 10% by 2027 through an enterprise value enhancement plan.

To achieve this, the group will boost earnings power in non-interest, capital markets, and global segments, shrinking low-yielding assets while expanding higher-yielding assets.

Since taking office in March last year, Chairman Jin has emphasized the global segment and related growth strategies. Shinhan Financial Group aims to achieve a 30% share of global P&L by 2030.

Shinhan Financial Group's global P&L has continued to grow, reaching KRW 394.9 billion in 2021, KRW 564.6 billion in 2022, and KRW 563.8 billion in 2023. During the same period, the proportion of global profits and losses also increased to 9.8%, 12.1%, and 12.9% of the group's total profit and loss.

In the first half of this year, global P&L was KRW 410.8 billion, on track to reach KRW 1 trillion annually. The global P&L share was 15.0%.

Shinhan Financial Group's non-banking segment is considered a relative weakness compared to KB Financial Group. Shinhan Financial Group's non-bank sector net profit share was 27.2% in the first half of this year, down 7.3%p from the first half of last year (34.5%).

On an annualized basis, it increased from 36.2% in 2019 to 41.7% in 2020 and soared to 42.4% in 2021, but has been declining for two consecutive years to 39.0% in 2022 and 35.0% last year.

Shinhan Financial Group is trying to strengthen its competitiveness in the non-banking sector with the goal of raising the share of non-bank profits to 50% by 2030.

KB Financial Group, on the other hand, is still struggling in its global business. In the case of KB Kookmin Bank's Indonesian subsidiary, KB Bank (formerly Bukopin Bank), growth is put on hold as a large-scale deficit continues.

KB Financial Group, on the other hand, is still struggling in its global business. In the case of KB Kookmin Bank's Indonesian subsidiary, KB Bank (formerly Bukopin Bank), growth is put on hold as a large-scale deficit continues.

In the first half of this year, KB Financial Group's overseas sector net profit was KRW 3.3 billion, the smallest among the four major financials, and the proportion of global net profit was only 0.1%.

In his first reorganization late last year, Chairman Yang transformed the global division into a dedicated holding unit and placed it at the front of the organizational chart.

Han Aran (aran@fntimes.com)