The ‘pure operational power’ scores of the four major banks (KB Kookmin, Shinhan, Hana, and Woori) showed diverging performances last year. Shinhan Bank and Woori Bank improved their operational efficiency and grew their operational power, while KB Kookmin Bank and Hana Bank's operational power declined. Last year's differences in non-interest revenue institutional sector performances affected efficiency and revenue growth.
According to the business reports released by each bank on the 26th, the profits before the bank reserves (provision profits) of the four major banks totaled 20.3238 trillion won last year. By bank, KB Kookmin Bank had the highest provision profits of 5.3129 trillion won among the four major banks. Following that was Shinhan Bank with 5.1551 trillion won. Hana Bank and Woori Bank ranked third and fourth, respectively, with 4.9648 trillion won and 4.8910 trillion won.
Provision profits refer to the amount before setting aside provisions for bad debts, which is calculated by deducting expenses such as selling management costs from operational profits. If current profits or operational profits are used to assess the overall performance of corporations, provision profits serve as a measure of the profits garnered by financial institutions from pure operational activities. The profits from selling real estate or equity owned by financial institutions and one-time factors affecting financial statements, such as setting aside provisions for bad debts, are excluded.
Last year, the growth patterns of provision profits varied by bank, resulting in changes in rankings. Provision profits at Shinhan Bank increased by 4.9% from 4.9144 trillion won in 2023 to 5.1551 trillion won last year. During the same period, Woori Bank grew from 4.3100 trillion won to 4.8910 trillion won, a 13.5% increase. Conversely, KB Kookmin Bank's provision profits decreased by 10.8%, from 5.9554 trillion won to 5.3129 trillion won. Hana Bank's provision profits also declined by 11.7%, from 5.6237 trillion won to 4.9684 trillion won. As a result, Hana Bank's ranking dropped from second place in 2023 to third place last year. In contrast, Shinhan Bank rose from third place to second. Woori Bank remains in fourth place but is closely pursuing Hana Bank.
In terms of operational efficiency measured by the cost-to-income ratio (CIR), only Shinhan Bank and Woori Bank succeeded in making improvements. Shinhan Bank's CIR decreased from 43.2% in 2023 to 41.8% last year. During this period, Woori Bank's CIR fell from 46.8% to 43.4%. KB Kookmin Bank maintained its CIR at 43.2%, the same as last year. Hana Bank's CIR rose from 38.7% to 41.3%. However, Hana Bank's CIR performance remained the best among the four major banks last year. The CIR indicates the proportion of operational profits taken up by expenses. It is an efficiency indicator showing the scale of profits relative to the expenses incurred by the bank. A lower CIR indicates better efficiency.
The key factors differentiating the growth and regression of provision profits and CIR are non-interest revenue, according to a shared perspective among banks. Analysts say that since the disparity in interest margin (the difference between deposit and loan rates) among each major bank is not significant, the ability to generate non-interest income will influence efficiency and revenue. A representative from a major bank noted, "Commissions earned from various sales, such as bancassurance (insurance sales within banks), income securities sales, and real estate project financing, must drive the increase in non-interest revenue for the provision profits and CIR indicators to improve."