The five major banks reported a decrease in profits from trust services that manage customer assets last year compared to the previous year. Profit from trusts declined due to the impact of significant losses in Hong Kong equity-linked securities (ELS) ahead of surpassing 1 trillion won in trust profits. Banks are seeking new avenues by shifting their focus from specific monetary trusts like ELS to inheritance and gift trusts, such as wills.
According to the Financial Supervisory Service's financial statistics information system on the 16th, the total operating revenue from trust services for the five major banks, including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, was 908.8 billion won last year, a 7.5% decrease compared to the previous year. The operating revenue from trust services increased from 878.1 billion won in 2022 to 982.3 billion won in 2023, coming close to 1 trillion won, but profit declined last year, leading to reverse growth.
A trust refers to a system where cash, real estate, financial products, and other assets are entrusted to banks or financial institutions for management and operation. The operating revenue from trust services refers to the profits gained by financial institutions for managing and operating entrusted assets. Since 2022, as the stock market entered a slump due to rising benchmark interest rates, banks primarily sold specific monetary trusts like ELS and derivative-linked securities (DLS) targeting high returns to generate profit.
However, as the Hong Kong H index began to plummet from the end of 2023, banks halted ELS sales one after another, leading to a decline in operating revenue from trust services. Among the banks, Kookmin Bank, which had the largest sales of Hong Kong ELS, saw significant revenue decreases. Revenue, which was 251.1 billion won in 2023, plunged by 25% to 187.5 billion won last year. In contrast, Woori Bank, which was minimally affected by the Hong Kong ELS situation, saw its revenue increase by 10%, from 161.7 billion won to 178.4 billion won during the same period. Hana Bank recorded the highest annual revenue, although it still decreased by 6.8%, from 225.4 billion won to 210.1 billion won. Additionally, NH Nonghyup Bank (-7.5%) and Shinhan Bank (-3.9%) also experienced declines in revenue.
Banks are expanding products and services such as wills and trusts to find breakthroughs as their growth slows. A will substitute trust is a product where customers entrust their assets to financial institutions, receive operational profits, and inherit assets to designated beneficiaries according to a prior agreement in case of death. The balance of wills and trusts at the five major banks has rapidly increased, rising from 2.5 trillion won at the end of 2022 to 3.5 trillion won in the first half of last year. Since the end of last year, banks have also started a 'claim trust' business to manage death insurance payouts on behalf of customers.
Banks argue that improving regulations on trust services is necessary to increase non-interest income. The Korean Banking Association requested amendments to the Capital Markets Act to expand the scope of trustable assets to include debts and collateral during a meeting between the ruling People Power Party and bank executives on the 9th. A bank official noted, "Expanding the scope of trustable assets would be effective in increasing non-interest income."