[비즈한국] BNK Financial Group138930 posted sluggish results for the first quarter of this year, and the outlook remains unfavorable. BNK Financial Group, which includes Busan Bank and Kyongnam Bank as its subsidiaries, is struggling largely due to the poor economic forecast for the Busan region. For Chairman Bin Dae-in, this year is effectively the final year of his term. If the group’s poor performance continues into the second half, it is expected that any improvement in earnings will remain uncertain for the foreseeable future.
Chairman Bin Dae-in took office as the head of BNK Financial Group in March 2023. He achieved decent results last year; the group’s operating profit grew 9.33% from 801.2 billion KRW in 2023 to 875.9 billion KRW in 2024, and net profit rose 10.47% from 678.9 billion KRW to 750 billion KRW over the same period.
However, the Q1 performance this year is poor. BNK Financial Group’s operating profit dropped 33.9% from 311.5 billion KRW in the first quarter of last year to 205.8 billion KRW this year, while net profit fell 32.5% from 254.6 billion KRW to 171.8 billion KRW. The group explained, "Net profit decreased compared to the same period last year due to a drop in interest-related earnings and an increase in loan loss provisions."
Of course, other regional financial groups like JB Financial Group175330 also saw a slump in Q1 performance. JB Financial Group’s operating profit decreased by 4.6% from 228 billion KRW in Q1 last year to 217.5 billion KRW this year, and net profit fell 5.2% from 176 billion KRW to 166.9 billion KRW. JB Financial Group counts Gwangju Bank and Jeonbuk Bank as subsidiaries. Nevertheless, the scale of BNK Financial Group's earnings decline is significantly steeper than that of JB Financial Group.
Chairman Bin Dae-in’s term expires in March 2026. This is effectively the last year for him to deliver concrete results. In contrast, JB Financial Group Chairman Kim Ki-hong’s term runs until March 2028, meaning he has more time in his tenure than Chairman Bin.
The chairman of BNK Financial Group is eligible for one consecutive reappointment. While Chairman Bin has not publicly discussed a bid for a second term, the possibility remains. To challenge for another term, he must demonstrate performance that can convince the board of directors and shareholders.
However, the securities industry expects that it will be difficult for BNK Financial Group to improve its performance in the short term. The group’s core subsidiaries are Busan Bank and Kyongnam Bank, which, being regional banks, face limitations in business expansion. Amidst this, the recent stagnation of the local economy has darkened the outlook for these regional banks.
Seol Yong-jin, an analyst at SK Securities, analyzed, "BNK Financial Group recorded performance that significantly fell short of expectations due to the impact of large-scale provisions related to regional companies such as Samjung and Kumyang," adding, "Considering internal and external environments such as the sluggish regional economy, I believe uncertainty has increased."
iM Bank (formerly Daegu Bank) transitioned from a regional bank to a commercial bank last year, expanding its business territory. Perhaps due to this, the operating profit of its parent company, iM Financial Group (formerly DGB Financial Group139130), rose from 158.5 billion KRW in Q1 last year to 209.1 billion KRW this year, and net profit increased from 113 billion KRW to 158.7 billion KRW—increases of 31.91% and 40.47%, respectively.
However, it is realistically difficult for Busan Bank and Kyongnam Bank to convert to commercial banks in the short term. While regional banks are allowed to have up to 15% ownership by non-financial players, commercial banks are limited to 4%. Samsung Life Insurance032830 was the largest shareholder of iM Financial Group with a 6.95% stake in 2018. Although Samsung Life is a financial firm, it is classified as a non-financial player because its largest shareholder is Samsung C&T. Consequently, Samsung Life sold a portion of its stake in 2019 and currently holds 3.35%. It was because Samsung Life lowered its stake to below 4% that iM Bank's conversion to a commercial bank was possible.
The largest shareholder of BNK Financial Group is the Lotte Group, which holds a 10.54% stake. Specifically, it consists of: Lotte Shopping023530 (2.68%), Busan Lotte Hotel (2.45%), Lotte Scholarship Foundation (1.81%), Japan’s Lotte Holdings (1.48%), Lotte Chilsung Beverage (1.05%), family members (0.59%), and Hotel Lotte (0.48%). Additionally, Hyupsung Construction and its related parties hold a 6.54% stake in BNK Financial Group. For Busan Bank and Kyongnam Bank to convert to commercial banks, Lotte Group and Hyupsung Construction would have to sell a significant portion of their BNK shares. If Lotte Group sells its stake, its influence over BNK Financial Group would effectively disappear. This is why the financial sector expects that a conversion to commercial banks for Busan and Kyongnam Banks will not be easy.
Another proposed method for improving performance is strengthening the non-banking sector. BNK Financial Group has BNK Securities as a subsidiary but does not own an insurance company. While BNK Securities posted a net profit of 13.3 billion KRW last year, it was not at a level that would significantly impact the overall bottom line.
The problem is that other financial firms are also interested in M&As with insurance companies. Woori Financial Group is currently in the process of acquiring Tongyang Life and ABL Life. Furthermore, Korea Investment Financial Group and Kyobo Group are also reviewing insurance company acquisitions. Because insurance companies are in high demand, BNK Financial Group would face fierce competition to acquire one. Kim Nam-goo, Chairman of Korea Investment Financial Group, said after the shareholders' meeting in March, "We are carefully reviewing various alternatives to acquire an insurance company." A Kyobo Life official, while deciding on the recent acquisition of SBI Savings Bank, stated, "We will also actively pursue the acquisition of property and casualty insurance companies in the future."
If the Busan and Gyeongnam regional economies recover, one could expect a rise in BNK Financial Group's performance, but there are no signs of local economic revitalization. For Chairman Bin Dae-in, it is expected that his reputation will depend on whether he can overcome this crisis this year.