🚨 Korea's Top 4 Financial Groups Hit Record High: Over 10 Trillion Won Despite Rate Cuts

Today Korean Economic News | 2025.07.26

📌 Profits Soar Despite Lower Rates… Financial Groups Fly High Thanks to Non-Interest Income

💬 Korea's top 4 financial holding companies achieved over 10 trillion won in net profit during the first half of 2025, setting a new half-year record. Despite concerns about lower interest income from rate cuts, securities and fee income grew significantly to support their performance. KB, Shinhan, and Hana Financial all recorded their best-ever results, while Woori Financial saw its net profit decrease overall but achieved its highest quarterly performance in Q2. KB Financial's pure fee income alone exceeded 1 trillion won in Q2, and both Shinhan and Hana showed major growth in securities and asset management sectors. Experts say "Financial companies are experiencing structural changes as they move away from traditional interest margin profit models to secure diverse revenue sources."

1️⃣ Easy to Understand

You might think bank profits would drop when interest rates fall, but Korea's top 4 financial holding companies actually achieved their best-ever results in the first half of this year. The secret was that various revenue sources beyond traditional loan interest grew significantly.

First, let me explain what a 'financial holding company' is. A financial holding company is a large group that owns banks, securities firms, insurance companies, credit card companies and other financial companies as subsidiaries. Korea's top 4 financial holdings are KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group.

Usually, banks' main revenue source is the 'interest margin.' This is the difference between the interest they pay to customers for deposits and the interest they charge for loans. For example, if deposit interest is 3% and loan interest is 6%, the 3% difference becomes the bank's profit. So when the Bank of Korea lowers the base rate, loan interest also falls, and people expected bank profits to decrease.

But this year was different from expectations. Even though rates fell, the top 4 financial holdings' first-half net profit exceeded 10 trillion won, setting a new half-year record. The reason was that 'non-interest income' grew significantly.

Non-interest income means revenue earned through methods other than loan interest. For example, fees received when selling funds or insurance products, credit card fees, securities trading fees, foreign exchange trading profits, etc.

Looking at KB Financial Group alone, its pure fee income exceeded 1 trillion won in Q2. This was because KB Securities' stock trading fees, KB Kookmin Bank's fund sales fees, and KB Insurance's insurance revenue all increased. Shinhan Financial and Hana Financial similarly earned big profits from asset management, investment banking (IB) business, and securities trading.

This year especially, the stock market was active and individual investors' stock trading increased a lot, causing securities sector profits to grow significantly. Also, as interest rates fell, people became more interested in investment products like funds and stocks rather than deposits, increasing financial companies' asset management fee income.

In the end, this means financial companies are changing from the traditional method of simply lending money and receiving interest to creating profits through various financial services.

2️⃣ Economic Terms

📕 Financial Holding Company

A financial holding company is a holding company that owns various financial companies like banks, securities firms, insurance companies, and credit card companies as subsidiaries.

• It can utilize each financial sector's expertise while creating group-level synergy.
• It provides one-stop financial services to customers and creates revenue diversification effects for the company.
• Korea began introducing these in earnest from the early 2000s.

📕 Interest Margin

Interest margin is the difference between the interest banks pay on deposits and the interest they charge on loans.

• This is banks' traditional and most basic revenue source.
• If deposit rate is 3% and loan rate is 6%, the interest margin is 3 percentage points.
• When interest rates change, the interest margin also changes, directly affecting bank profits.

📕 Non-Interest Income

Non-interest income covers all revenue except loan interest.

• This includes fee income, securities trading profits, foreign exchange trading profits, derivative trading profits, etc.
• Recently, financial companies are actively expanding non-interest income for revenue diversification.
• It's evaluated as a stable revenue source that's relatively less sensitive to economic cycles and interest rate changes.

📕 Pure Fee Income

Pure fee income means pure fee revenue received as compensation for providing financial services.

• This includes fund and insurance sales fees, credit card fees, account management fees, etc.
• It's a highly efficient revenue source that can be obtained without investing much capital.
• It's an important indicator showing a financial company's service competitiveness and customer base.

3️⃣ Principles and Economic Outlook

✅ Changes in Financial Companies' Revenue Structure

• Let's analyze the background behind the top 4 financial holdings' record performance and changes in revenue structure.

  • First, they're shifting from traditional interest margin-focused to fee-focused revenue structure. In the past, banks mainly focused on the simple intermediary role of taking deposits and making loans. But recently, they're increasing fee income through various financial services like asset management, investment banking (IB), securities brokerage, and insurance sales. For KB Financial Group, Q2 pure fee income reached 1.0141 trillion won, up 14.5% from the same period last year. This resulted from increases in KB Securities' stock trading brokerage fees, KB Kookmin Bank's fund sales fees, and KB Asset Management's management fees. Shinhan Financial Group also saw first-half non-interest income increase over 25% year-on-year, with its share of total revenue exceeding 40%.

  • Second, interest income remained solid even in a rate-cutting environment. The market worried that banks' interest income would decrease significantly due to the Bank of Korea's rate cuts. But actually, the interest margin was maintained more stably than expected due to loan balance increases and differences in the speed of deposit rate adjustments. Especially, both household and SME loans continued to increase, expanding the loan volume itself, which largely offset the rate decline effect. Also, banks adjusted deposit rates faster than loan rates, temporarily expanding the interest margin.

  • Third, stock market activation and increased individual investment significantly boosted securities sector performance. During the first half, KOSPI and KOSDAQ markets showed relatively stable flows, making individual investors' stock trading active. Especially, interest in theme stocks like AI, semiconductors, and secondary batteries increased, significantly boosting stock trading volume. This directly translated into securities firms' stock trading brokerage fee income. Major securities firms like KB Securities, Shinhan Investment & Securities, and Hana Securities saw first-half net profit increase over 30% year-on-year for this reason. Also, the IPO market became active, earning considerable profits from M&A and investment banking business.

• The change in financial companies' revenue structure is evaluated as a structural change following digital transformation and changing customer needs, not just a temporary phenomenon. This presents a sustainable growth model for the financial industry.

✅ Individual Performance Analysis and Strategies by Financial Holding

• Let's examine each of the top 4 financial holdings' individual performance and growth strategies in detail.

  • First, KB Financial Group showed balanced growth through comprehensive financial synergy. KB Financial Group recorded first-half net profit of 2.385 trillion won, up 8.6% year-on-year, achieving the highest first-half performance ever. What's particularly notable is that all major subsidiaries including banks, securities, insurance, and cards showed balanced growth. KB Kookmin Bank maintained stable interest income as both household and corporate loans increased, and KB Securities saw brokerage fees increase significantly due to active stock trading. KB Insurance also performed well in auto and general insurance, and KB Kookmin Card saw fee income increase as card usage rose with consumption recovery. This comprehensive financial synergy supported KB Financial Group's stable growth.

  • Second, Shinhan Financial Group is attempting differentiation through digital transformation and overseas business expansion. Shinhan Financial Group recorded first-half net profit of 2.143 trillion won, up 15.2% year-on-year. Especially, Shinhan Bank's digital banking service expansion and Shinhan Investment & Securities' online trading platform strengthening contributed to performance improvement. Shinhan Financial is converting customer touchpoints to digital through its 'Digital First' strategy, improving operational efficiency. Also, revenue from overseas markets like Southeast Asia and China is steadily increasing, securing new growth drivers in preparation for domestic market saturation.

  • Third, Hana Financial Group and Woori Financial Group also showed differentiation strategies utilizing their respective strengths. Hana Financial Group recorded first-half net profit of 1.482 trillion won, up 22.1% year-on-year, showing the highest growth rate. Especially, Hana Securities' IB division and Hana Asset Management's fund management performance were good. Hana Financial is targeting niche markets with services specialized for SMEs and individual customers. Woori Financial Group recorded first-half net profit of 1.234 trillion won, down 4.8% year-on-year, but achieved record quarterly performance for Q2 alone. Woori Financial has strengths in corporate finance targeting public enterprises and mid-sized companies, so it's evaluated as having great growth potential along with the government's infrastructure investment expansion.

• Each financial holding is growing based on different strengths and strategies, contributing to overall financial industry competitiveness improvement and diversity expansion.

✅ Future Outlook and Challenges for the Financial Industry

• Let's comprehensively analyze whether financial holdings' strong performance can continue and future challenges.

  • First, non-interest income-centered growth momentum is likely to continue in the second half. As the possibility of additional rate cuts by the Bank of Korea increases, interest margin revenue is expected to gradually shrink. However, rate cuts are likely to lead to economic recovery and asset market activation, which will have a positive impact on non-interest income. Especially, stock market trading volume increases, expanded fund inflows, and housing mortgage loan increases due to real estate market recovery will act as factors expanding fee income. Also, as companies' investment expansion and M&A activation are expected, there will be additional profit opportunities in investment banking business.

  • Second, digital transformation and fintech competition are becoming new variables for the financial industry. With the growth of internet-only banks like Kakao Bank and Toss Bank and fintech companies, existing financial companies are also becoming more active in digital transformation. This will lead to improved operational efficiency and customer experience, helping improve profitability in the long term. However, initial investment costs are high, and there may be conflicts with existing branch-based business models, requiring careful approaches. The gap between financial companies that achieve successful digital transformation and those that don't is expected to widen.

  • Third, regulatory environment changes and ESG management are emerging as new challenges. Financial authorities are strengthening loan regulations to manage household debt and enhance financial stability, so there will be constraints on expanding traditional loan business. Also, capital requirements are increasing due to full implementation of Basel III regulations and changes in international accounting standards. Accordingly, financial companies face the challenge of improving capital efficiency and strengthening risk management. Additionally, as social demands for ESG (Environmental, Social, Governance) management increase, securing competitiveness in new areas like green finance and socially responsible investment is also becoming important.

• The future of the financial industry will develop in a direction where traditional financial services and innovative digital technology harmonize, and customer-centered service innovation will become core competitiveness in this process.

4️⃣ In Conclusion

The record first-half performance of the top 4 financial holdings is a symbolic event showing that Korea's financial industry has entered a new growth stage. Recording the highest-ever performance through non-interest income expansion despite a rate-cutting environment proves that financial companies' business models are successfully evolving.

The biggest significance of this performance is that financial companies have moved away from traditional interest margin-centered revenue structures to expand their business areas through fee income from various financial services. KB Financial Group's pure fee income breaking through 1 trillion won is a symbolic example of this change.

What's particularly notable is that each financial holding is growing based on different strengths and strategies. KB Financial's comprehensive financial synergy, Shinhan Financial's digital transformation, Hana Financial's niche market specialization, and Woori Financial's corporate finance strengths each demonstrate their differentiated competitiveness.

However, future challenges are also significant. Continuous rate-cutting pressure, intensified competition with fintech companies, strengthening financial regulations, and ESG management requirements are among the many challenges financial companies must solve. To survive in this environment, digital innovation and customer-centered service development are essential.

Most importantly, this growth must be sustainable. It should not stop at short-term performance improvement but develop in directions that help customers and society in the long term. Finding the balance point where financial companies fulfill social responsibility while securing profitability will be a key future challenge.

Ultimately, this strong performance shows the maturity of Korea's financial industry while meaning that greater challenges have begun for securing future competitiveness. Financial companies that actively respond to the changing financial environment will be able to achieve continuous growth.