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NongHyup Financial Q1 profit drops 35% YOY on rising provisions

NongHyupFinancial Group Inc. reported a 35% drop in net profit for thequarter ended March 31, as provisions for credit losses jumped 57% year overyear.

Consolidated net profit attributable to controllingshareholders fell to 89.4 billion won from 137.6 billion won in the firstquarter of 2015.

The drop in net income was driven primarily by a surge inprovisions for credit losses, which grew to 357.5 billion won from 227.8billion won in the prior-year quarter.

The group's interest income rose year over year to 1.676trillion won from 1.649 trillion won, while operating income for the quarterdropped to 240.2 billion won from 302.0 billion won in the year-ago quarter.

The group's estimated nonperforming loan ratio at the end ofMarch 31 deteriorated to 2.08%, from 1.66% in the prior-year period, butimproved from 2.27% in the previous quarter. The group's NPL coverage ratiofell to 82.70% at the end of March from 102.48% in the prior-year period and85.46% at the end of December 2015.

Net interest margin, including the credit card business ofthe group's banking unit NongHyupBank, fell to 1.84% from 2.03% in the prior-year period and 1.90%in the previous quarter.

The group's BIS capital ratio at March 31 fell to 13.38%from 13.74% in the prior-year period and the previous quarter. Its commonequity Tier 1 and Tier 1 ratios for the period were 9.62% and 10.85%, respectively,compared to 9.99% and 11.44%, respectively, at March 31, 2015, and 9.61% and11.06% at the end of 2015.

NongHyup Bank's first-quarter net income plunged 64.2% to32.2 billion won from 90 billion won in the prior-year quarter.

The bank's interest income for the quarter increased yearover year to 1.052 trillion won from 1.049 trillion won. The bank's provisionsfor credit losses jumped 61.9% to 332.8 billion won from 205.6 billion won inthe first quarter of 2015.

The bank's operating income for the quarter dropped yearover year to 1.162 trillion won from 1.980 trillion won.

The bank's nonperforming loan ratio was 2.15% as of March31, up from 1.64% in the first quarter of 2015 but down from 2.27% at Dec. 31,2015.

As of March 31, the bank's BIS capital ratio clocked in at14.27%, up from 14.22% in the prior-year period and from 14.16% in the previousquarter. Its common equity Tier 1 was 10.80%, down from 11.21% at March 31,2015, but up from 10.72% at the end of 2015. Its Tier 1 ratios for the period clockedin at 11.13%, down from 11.53% in the prior-year period but up from 11.04% inthe prior quarter.

As of May 2, US$1 wasequivalent to 1,139.90 South Korean won.