Disparity in Financial Performance: A Closer Look

On March 9, the financial sector spotlighted a significant gap in the return on equity (ROE) between JPMorgan Chase and domestic financial holding companies in Korea. JPMorgan's annual report, released in February, revealed an impressive ROE of 18% last year, up from 14% in 2022. This starkly contrasts with the ROE of Korean financial institutions, which remains at about half the level of this global banking behemoth.

ROE, a crucial financial metric, measures a company's ability to generate profit from its shareholders' equity, serving as a key indicator of financial performance and efficiency. In Korea, despite the increasing importance of ROE due to value-up policies, domestic financial holding companies lag behind their international counterparts.

Comparative Analysis of ROE

Last year, KB Financial recorded an ROE of 9.72%, Woori Financial 9.34%, Hana Financial 9.12%, and Shinhan Financial 8.6%. In comparison, Wells Fargo, with a similar portfolio to Korean financial holding companies, reported an ROE of 11.4%.

Strategic Shifts Needed

The financial sector suggests that Korean banks need to adopt a more proactive asset management strategy, moving away from an interest income-centered approach. Currently, non-interest income accounts for a significant portion of total income for global banks like JPMorgan and Wells Fargo, at 48% and 42% respectively. In contrast, Korea's four major financial holding companies have a non-interest income share of only 15-25%.

Government Intervention and Future Goals

An analysis indicates that the profitability of domestic financial companies is significantly lacking compared to other countries due to government intervention. Despite these challenges, Korean financial institutions are setting strategic goals to improve their ROE. Shinhan Financial aims to achieve an ROE of 10% by 2027, while Hana Financial Group plans to maintain an ROE of over 10%.