Outlook rosy for South Korea's financial groups: analysts

Analysts forecast that South Korean financial services groups will post robust earnings this year.

However, they added that net profits will depend on the size of interest income and loan-loss reserves.

Analysts estimated that earnings by the Korea's top four banking groups may reach 8.42 trillion won this year, down around 5 percent from a year earlier. But if the one-off gain from the sale of the builder worth 1.2 trillion won is eliminated, this year's earnings are likely to surpass the 2011 net bottom, they said.

KB Financial Group and its three local rivals posted a record combined net profit of 8.86 trillion won or US$7.86 billion last year, mainly due to an increase in interest income and a one-off gain from a stake sale of Hyundai Engineering & Construction Co., according to FnGuide, a financial information provider.

Market watchers said that earnings of the financial services firms are likely to be swayed by government regulations on card commissions and the size of loan-loss reserves.

Local card firms are being criticized for charging smaller merchants far higher commissions than large retailers, pocketing income from the heavy fees. The financial regulator is seeking to impose a fixed commission rate for smaller retailers.

 Analysts also anticipate good earnings for banking groups based on reduced loan-loss reserves due to low chances that a large sum of loans to ailing shippers or builders will turn sour.

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Tags: earnings outlook, South Korean banks, South Korea financial sector, bank net profits