Major South Korean Financial Groups Seek New Revenue Streams Amid Lending Challenges

As household loan regulations and rising delinquency rates disrupt traditional growth strategies, South Korea's four major financial groups are reassessing their revenue strategies for the second half of the year. Despite record-breaking performance in the first half, expanding lending in the latter half is expected to be challenging, leading to a focus on non-interest income, corporate finance, digital assets, and cost efficiency.

According to the financial sector on June 29, Shinhan Financial Group will kick off a series of management strategy meetings next month, followed by KB, Hana, and Woori Financial Groups.

These meetings will review first-half results and adjust strategies following personnel changes. This year, the key topic in the financial sector is growth beyond lending. The four major financial groups recorded a historic profit of over 5.3 trillion won in the first quarter alone, but growth driven by lending is expected to be constrained in the second half due to regulatory pressures and concerns about financial soundness. Consequently, discussions will likely center on corporate finance, non-interest income, non-bank sectors, and artificial intelligence transformation (AX).

KB Financial Group, led by Chairman Yang Jong-hee, whose term ends in November, is expected to focus on capital efficiency and enhancing non-bank competitiveness rather than making drastic strategic changes. Earlier this year, KB Financial conducted a 700 billion won capital increase for KB Securities and followed up with an additional 1 trillion won capital increase on June 26. The strategy will likely prioritize growing the securities and capital markets while maintaining stable return on equity (ROE) across the group. KB Kookmin Bank, a subsidiary, was the only major bank to exceed its household loan target last year, so this year it is expected to discuss ways to reduce reliance on household loans by expanding corporate sales and high-quality corporate lending.

Shinhan Financial Group is expected to accelerate the enhancement of its operational system through AX. Chairman Jin Ok-dong has consistently emphasized the need to prepare for financial services that keep pace with technological changes. The launch of the 'Shinhan Super SOL,' which allows users to access banking, card, securities, and insurance services through a single application, reflects this approach. In the second half, discussions may extend beyond simple app integration to include AI-based customer management, advanced credit assessments, group data integration, and strengthening non-face-to-face sales capabilities.

Hana Financial Group is also set to hold a strategy meeting next month to discuss securing leadership in new businesses such as digital assets and stablecoins. Hana was the first financial group to invest 1 trillion won in Dunamu, the leading company in the virtual asset sector. As a result, there is speculation in the market about the potential division of roles, with banks issuing stablecoins, exchanges handling distribution, and big tech companies managing payment infrastructure. Hana Financial is expected to refine its new business strategy to align with the anticipated legislative developments regarding digital assets in the second half, involving participation from its banking, securities, and card subsidiaries.

Woori Financial Group's key executives are also expected to gather at the end of next month to focus on defending profitability and enhancing cost efficiency. Woori was the only major financial group to report a decline in performance in the first quarter. With a relatively weak non-bank portfolio and the need for time to realize corporate finance results, it is anticipated that a strategy to defend profitability through cost reductions, such as managing selling and administrative expenses, will be necessary in the short term. Additionally, strengthening non-bank sectors like securities and insurance may be discussed as a medium- to long-term goal.

A financial sector official stated, "As delinquency rates rise and household loan regulations continue, the traditional method of increasing loans to boost profits is facing limitations. The competition among financial groups in the second half will depend on who can find stable revenue sources outside of lending."