May 3 -- Kookmin Bank, South Korea's largest bank, said first-quarter
profit fell 47 percent as higher funding costs crimped margins on
loans. ****nhan Financial Group and Woori Finance Holdings Co. also
re****ted lower earnings today.
Kookmin's net income fell to 631.5 billion won ($625.5 million) in the
three months ended March 31 from 1.18 trillion won a year earlier, the
Seoul-based bank said in a regulatory filing.
``We probably won't see a further contraction in the margins in the
second quarter as banks try to seek higher interest on loans,'' said
Mo Jae Sung, who helps manage the equivalent of $1 billion at Hanwha
Investment Trust Management Co. in Seoul, including Kookmin, ****nhan
and Woori shares. ``We also don't expect a rapid outflow of money from
banks to the stock market.''
argins at Kookmin and its rivals were squeezed as banks competed to
attract deposits to secure capital for repayment of 11 trillion won of
bonds during the quarter, Mo said. South Korean banks are looking to
expand overseas as they face increasing rivalry at home and higher
funding costs sparked by the global credit crunch.
First-quarter net income at ****nhan, South Korea's largest financial
services company by market value, fell 35 percent to 620.4 billion won
from a year ago. Net income at Woori, the country's third-largest by
market value, dropped 38 percent to 546.3 billion won during the same
period.
Margins Shrink
Kookmin's net interest margin, a measure of loan profitability, fell
31 basis points to 3.08 percent in the first quarter. The margin at
****nhan's main banking unit dropped 12 basis points to 2.18 percent,
while Woori's contracted 6 basis points to 2.4 percent. Korea Exchange
Bank re****ted a 13 basis point drop to 3.06 percent. A basis point is
0.01 percentage point.
Deposit growth at South Korean banks slowed to 0.4 percent in 2007,
compared with a 5.7 percent expansion a year ago, as investors put
their money into the stock market that climbed 32 percent last year,
according to the Bank of Korea. The benchmark Kospi index dropped 3.8
percent so far this year.
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