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Financial groups' 2012 earnings outlook remains rosy: analysts

All Headlines 13:29 February 18, 2012

SEOUL, Feb. 18 (Yonhap) -- South Korean financial services groups are widely expected to post robust earnings this year, but net profits will depend on the size of interest income and loan-loss reserves, analysts said Saturday.

Top banking group KB Financial Group and its three local rivals posted a record combined net profit of 8.86 trillion won (US$7.86 billion) last year, mainly due to an increase in interest income and a one-off gain from a stake sale of Hyundai Engineering & Construction Co., according to FnGuide, a financial information provider.

Analysts estimated that earnings by the four banking groups may reach 8.42 trillion won this year, down around 5 percent from a year earlier. But if the one-off gain from the sale of the builder worth 1.2 trillion won is eliminated, this year's earnings are likely to surpass the 2011 net bottom, they said.

Market watchers said that earnings of the financial services firms are likely to be swayed by government regulations on card commissions and the size of loan-loss reserves.

Local card firms are being criticized for charging smaller merchants far higher commissions than large retailers, pocketing income from the heavy fees. The financial regulator is seeking to impose a fixed commission rate for smaller retailers.

Analysts anticipated good earnings for banking groups this year as loan-loss reserves are likely to be reduced due to low chances that a large sum of loans to ailing shippers or builders will turn sour.

"An expected fall in loan-loss reserves will help local banking groups continue to post handsome earnings," said Hwang Seok-kyu, an analyst at Kyobo Securities Co.

sooyeon@yna.co.kr
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