🟡 Korea’s Major Banks Reap ₩21 Trillion in H1 Interest Profits Amid Rate Cuts
Date: July 27, 2025
Source: Hankyoreh (한겨레)
🧾 Summary (non-simplified):
Despite South Korea's ongoing interest rate cuts, the country’s four major financial holding companies (KB, Shinhan, Hana, and Woori) recorded a combined ₩21.09 trillion (approx. $16.2 billion USD) in interest income during the first half of 2025. This marks a 1.4% year-over-year increase. President Lee Jae-myung has openly criticized the "interest profiteering" model and called for a shift toward “productive finance,” prompting the financial sector to convene an emergency meeting scheduled for July 28.
💰 Breakdown of H1 2025 Interest Earnings:
Total: ₩21.09T (~$16.2B), up ₩2.82T YoY
Shinhan Financial: ₩5.72T (~$4.4B), +1.4%
Woori Financial: ₩4.51T (~$3.5B), +2.7%
Hana Financial: ₩4.49T (~$3.5B), +2.5%
KB Financial: ₩6.37T (~$4.9B), −0.4%
📈 Net Interest Margins (NIM):
Despite rate cuts, NIM remained strong due to an increase in low-cost deposits and lower funding costs:
Shinhan: 1.90% (+0.04%)
Hana: 1.73% (+0.04%)
Woori: 1.71% (+0.04%)
KB: decreased from 1.98% to 1.96%
One CFO attributed deposit growth to increased public sector funds, salary accounts, and demand deposits:
“Over ₩6 trillion in core low-interest deposits, ₩5 trillion from public funds in early-year project disbursement, and ₩1 trillion from personal payroll inflows.”
🏦 Interest Margin Analysis:
A significant driver of increased profits was the widening spread between lending and deposit rates, especially in household loans excluding state-backed financing:
Shinhan: From 0.54% → 1.45%
Hana: From 0.53% → 1.39%
KB: From 0.69% → 1.38%
Woori: From 0.77% → 1.32%
The rise in lending rates has been maintained despite falling deposit rates—justified under policy goals such as controlling capital flows into real estate and managing household debt.
⚖️ Political Pressure & Strategic Response:
President Lee’s statement on July 24 urged banks to shift away from "easy mortgage lending" and engage in nation-building investment:
“Rather than clinging to interest income from mortgage loans, I urge financial institutions to expand productive investments that contribute to real economic growth.”
In response, the Financial Services Commission (FSC) will meet with leaders from key associations (banks, insurance, capital markets) to discuss a policy shift.
🔄 Shift to “Productive Finance”:
Focus areas: AI industries, advanced ventures, and capital markets
Possible participation in the planned ₩100 trillion “National Strategic Industries Fund”, with ₩50 trillion in government-led anchor funding
💬 Industry Perspective:
A commercial bank official remarked:
“The increase in household debt from rising housing prices inadvertently boosted bank profits. However, due to capital requirements and shareholder return policies, expanding enterprise lending remains complex.”
⚖️ Five Laws of Epistemic Integrity
✅ Truthfulness of Information – 🟡 Moderate to High
The article presents accurate aggregate data (NIMs, profit, interest spreads), but interpretation remains somewhat politicized, echoing the President’s narrative.📎 Source Referencing – 🟡 Moderate
Internal figures are attributed to financial institutions and Bank Federation data, yet primary datasets (e.g., FSC reports, BoK data) are not directly cited.🧭 Reliability & Accuracy – 🟡 Moderate
Trends in profitability and interest margin dynamics are presented clearly, though systemic factors like household debt exposure and regulatory drag are underexplored.⚖️ Contextual Judgment – 🟡 Moderate
While the article touches on the mortgage-profit debate, it fails to address the deeper macro-financial structure (velocity of money, capital allocation friction, FX implications). The framing leans toward a moral critique rather than structural analysis.🔍 Inference Traceability – 🟡 Moderate
The causality implied—high interest profits despite rate cuts, thus justifying executive criticism—is asserted but not deeply justified. The role of Basel III constraints or Korea’s risk-weighting models is missing.
🧩 Structured Opinion – BBIU Analysis
Topic: Interest Rate Spread, Political Theater, and the Untouchable Banking Cartel
South Korea’s four major financial groups (KB, Shinhan, Hana, and Woori) posted ₩21 trillion (~$15B USD) in net interest income in the first half of 2025, despite a formal interest rate easing cycle. Instead of this being viewed as a financial resilience story, the administration has turned these figures into political ammunition.
1. Weaponizing Bank Profits
President Lee’s public rebuke of “interest profiteering” sets the stage for a policy pivot: pushing banks toward “productive lending” such as AI or biotech startups. While this may appear visionary, the timing and framing are tactical—deflecting public frustration over housing costs and personal debt by placing blame on banks.
But here's the problem:
Deposit rates have dropped rapidly, tracking policy rates.
Loan rates remain sticky, especially mortgage loans—allegedly to curb speculative real estate activity.
→ This intentionally widened interest rate spread has increased bank profits by design, and now the same government is punishing banks for following incentives created by monetary policy and regulatory tone.
2. No Real Competition
International banks (e.g., Citibank) have exited or withdrawn from retail lending. Why?
Regulatory opacity
Low deposit base access
Inability to compete with banks enjoying soft guarantees and backdoor support from the state
The Korean financial system is cartelized, and foreign players are structurally excluded. Competition is discouraged, not by law, but by network capture, cultural alignment, and retirement pipeline incentives.
3. The Gwanpia Firewall
The revolving door between regulators and domestic banks remains Korea’s most formidable structural barrier. Former officials rarely challenge the system they plan to join. This firewall ensures:
No interest rate reform
No foreign bank access
No fintech disruption (unless absorbed by the cartel)
The government performs symbolic critiques, while protecting the architecture of exclusivity behind the scenes.
4. What Needs to Happen
Transparent breakdown of interest spreads by borrower class
Public accountability for monetary vs. regulatory contradictions
Real foreign bank access, including deposit channel rights and guarantee parity
Gwanpia restrictions extended to all high-sensitivity sectors, not just finance
