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(LEAD) Shinhan Financial Q2 net down 12.1 pct on poor margin
SEOUL, July 30 (Yonhap) -- Shinhan Financial Group Co., South Korea's No. 4 banking group, said Tuesday its second-quarter earnings declined 12.1 percent from a year earlier on a fall in profit margin.

   Net income amounted to 555.3 billion won (US$498.4 million) in the April-June period, compared with 631.8 billion won in the previous year, the group said in a regulatory filing. From three months earlier, net profit gained 15.5 percent.

   The bottom line was higher than a market consensus of 536.9 billion won in a poll made by Yonhap Infomax, the financial news arm of Yonhap News Agency.

   In the first half, the group's combined earnings fell 29 percent on-year to 1.04 trillion won on squeezed profit margin and higher loan-loss reserves.

   Local banking groups are suffering from falling profitability, finding it difficult to generate profits amid a long streak of low rates and the economic slowdown. Adding to worries, a series of corporate restructuring led them to set aside more reserves to cover possible loan losses.

   Shinhan Financial said that its net interest margin (NIM), a key gauge of profitability, reached 2.27 percent in the second quarter, down from 2.33 percent three months earlier.

   Its loan-loss reserves declined 23.1 percent on-year to 251 billion won in the second quarter, but it set aside the reserve worth 637.1 billion won in the first half, up 9.2 percent from a year earlier in a bid to cover expenses related to corporate overhaul.

   Shinhan Bank, the flagship unit of the group, logged a net profit of 361 billion won last quarter, down 7.7 percent from the previous year.

   The bank's NIM came in at 1.74 percent in the second quarter, down from 1.78 percent in the first quarter.

   The group's total assets stood at 379 trillion won as of end-June, up 4.9 percent from the year earlier.

   However, in what may be an encouraging sign for stable growth, the group's combined income from its non-banking business including its card unit accounted for 42 percent of the group's total earnings in the first half, up from 36.7 percent the previous year.

   As most Korean banks heavily rely on interest income, they are quite sensitive to swings in market rates. Banks' lending rates have been on the decline amid the central bank's accommodative stance.

   Shares of Shinhan Financial closed at 40,700 won on the main bourse, up 1.5 percent from Monday's close. The earnings result came out after the market closed.