Financial Holdings' $34 Billion Interest Windfall: Shareholders Reap Dividends, Borrowers Face Rising Rates

Cumulative net profit of the four major financial holding companies in the third quarter exceeds KRW 17 trillion... Despite KB and Shinhan's double-digit growth rate cut, some banks' preferential interest rates are reduced... The burden of loan interest rates remains

Korea's four largest financial holding companies earned interest profits close to 34 trillion won through the third quarter of this year. Net profit also exceeded 17 trillion won. While financial holding companies expanded dividends and share purchases, household loan interest rates approached 5% per annum. In some banks, the reduction in prime interest rates was greater than the reduction in additional interest rates, increasing controversy surrounding the effect of lowering loan interest rates.

The total accumulated net interest income of KB, Shinhan, Hana, and Woori Financial Group in the third quarter of 2026 was KRW 33.8537 trillion, and the net profit for controlling shareholders was KRW 17.1019 trillion. Net profit increased by 8.2% compared to the same period last year.

#### Financial holding company with interest income of 34 trillion won... Net profit also exceeded 17 trillion won

Among the four major financial holding companies, KB Financial Group has the highest net profit. The cumulative amount in the third quarter was KRW 5.7921 trillion, an increase of 13.1% from the same period last year. Shinhan Financial Group also recorded KRW 5.0274 trillion, a 12.7% increase, exceeding KRW 5 trillion in cumulative net profit in the third quarter for the first time.

Hana Financial Group increased by 5.6% to 3.6243 trillion won. Woori Financial Group announced that it decreased by 4.9% to KRW 2.6581 trillion, but increased by 18.7% excluding one-time profits from the acquisition of an insurance company last year.

Net interest income was KRW 9.9853 trillion at KB Financial Group, KRW 9.3493 trillion at Shinhan Finance, KRW 7.4832 trillion at Hana Financial Group, and KRW 7.359 trillion at Woori Financial Group. All four locations increased compared to the same period last year.

The difference in performance was also influenced by the provisions built up in preparation for insolvency. Hana Financial Group's operating profit increased by 10.2% before reflecting provisions, surpassing Shinhan Financial Group (7.5%). However, due to the burden of provisions and an increase in the effective tax burden, the final net profit growth rate was only 5.6%. KB Financial Group and Shinhan Financial Group's loan loss reserves decreased by 5.9% and 4.5%, respectively.

#### Shareholder returns are expanding... Controversy over reduction of preferential interest rates at some banks

Financial holding companies expanded shareholder returns based on improved performance. KB Financial Group decided to pay a cash dividend of 1,167 won per share for the third quarter, and Shinhan Financial Group announced a dividend of 740 won per share and a share purchase worth 450 billion won. Hana Financial Group also plans to pay a dividend of 1,165 won per share and purchase and cancel treasury shares worth 250 billion won. Woori Financial Group's quarterly dividend is 220 won per share.

On the other hand, household loan interest rates are on the rise. According to the Bank of Korea, the interest rate on household loans based on new deposits from deposit banks in September rose to 4.96% per annum for the fifth consecutive month. The mortgage loan interest rate was 4.88% per year, the highest in 14 years and 5 months, and the fixed mortgage loan interest rate was 5.11% per year, exceeding 5%.

The effectiveness of improving the system to lower interest rates is also controversial. Since July 1, an amendment to the Banking Act has been implemented to prevent some statutory contributions from being reflected in the additional interest rate on loans. However, it was found that some banks lowered the additional interest rate and at the same time reduced the preferential interest rate to a greater extent.

According to the Korea Federation of Banks announcement, KB Kookmin Bank lowered the additional interest rate from 3.42% to 3.34% from June to August, but also reduced the preferential interest rate from 1.96% to 1.65%. NH Nonghyup Bank also reduced the preferential interest rate by 0.61 percentage points while lowering the additional interest rate by 0.26 percentage points during the same period.

At the National Assembly's Political Affairs Committee audit last month, Min Byeong-deok, a member of the Democratic Party of Korea, criticized this interest rate adjustment, saying it could undermine the purpose of the law amendment. The bank presidents responded that they would check and report the detailed interest rate calculation details.

The banking industry explains that the average discount range has been reduced as the handling of mortgage loans with large preferential interest rates has decreased due to management of the total amount of household loans. In fact, the interest rate difference between new loans and deposits in September was 1.12% points, down 0.07% points from the previous month. Not all increases in interest income can be explained by increases in deposit and loan margins.

Nevertheless, the household loan interest rate based on the new amount increased by 0.53 percentage points from 4.43% in April to 4.96% in September. If the loan interest rate rises by 0.5 percentage points, the annual interest based on a balance of 300 million won increases by 1.5 million won through simple calculation. While financial holding companies are returning large profits to shareholders, questions remain about how much actual benefit the improvement in the system for lowering loan interest rates has provided to borrowers.