Savings banks affiliated with financial holding companies are facing growing profitability pressures as they cut real estate project financing (PF) loans and expand policy-based loans such as Sunshine Loan and Saitdol. While policy loans are filling the gap left by PF loans and high-interest credit loans, analysts say there are limits to an earnings recovery given the nature of policy lending.
According to Korea Investors Service (KIS) on the 7th, the share of policy loans at the five financial holding-affiliated savings banks rated by KIS—Shinhan, KB, NH, BNK and IBK—rose from 27% at the end of 2023 to 35% at the end of last year. The shift reflects efforts to reduce real estate financing while increasing policy loans as PF delinquency rates climbed during 2023-2024.
KIS analyzed that "bank-affiliated savings banks have seen improved stability after scaling back PF, but their profitability is on a declining trend." This means that products such as Sunshine Loan and Saitdol carry lower loss risk than ordinary credit loans because they are backed by guarantees from bodies such as the Korea Inclusive Finance Agency, but their low interest rates also generate limited interest income.
The earnings slump at financial holding-affiliated savings banks is continuing. The five banks evaluated by KIS posted a net loss of 113.5 billion won last year, widening from a loss of 7.1 billion won the prior year. Expanding the scope to seven savings banks including those affiliated with Hana and Woori, the combined net loss grew from 100.3 billion won in 2024 to 129.5 billion won last year. A savings bank official said, "After the June 27 lending regulations, it has become much harder for the savings bank sector to significantly increase credit lending, and bank-affiliated savings banks in particular face pressure to expand policy loans under the inclusive finance stance." He added, "As commercial banks and internet-only banks have also entered the Sunshine Loan market, rate competition has intensified, further increasing profitability pressures."
