[Dailyan = Reporter Lee Se-mi] A forecast has been released predicting that the financial industry’s performance will slightly improve next year due to increased investment returns and reduced funding costs. However, it is also expected that the growth in loans within the banking sector, which had been growing since the onset of the COVID-19 pandemic, will slow down.
Hana Financial Research Institute published a report on October 30 detailing the financial industry outlook for 2025.
The institute predicts that the loan growth in the banking sector, which has been on a rising trend since COVID-19, will slow down next year. The sectors that have driven loan growth, such as household and corporate areas, are expected to see slight growth due to continued management of household loans and increased demand in direct financial markets.
While regular deposits, which increased due to perceived interest rate peaks, will see a reduced growth rate as interest rates begin to decline. Instead, funds are expected to flow into low-cost deposits due to increased demand for short-term funds and funds awaiting investment.
Researcher Lee Soo-young stated, “Despite being in an environment where interest income is decreasing due to a sustained decline in NIM and loan growth slowdown, the profitability of the banking sector will maintain a similar level to this year due to improvements in non-interest income, such as fees, and reduced bad debt expenses due to eased credit risks.”
The profitability of the banking sector is expected to remain at a level similar to this year despite a slight decline in NIM, and the profitability of the securities and asset management sectors is anticipated to improve due to capital inflows into bonds. In the card industry, profitability is expected to improve slightly due to a reduction in funding cost burdens from declining bond issuance interest rates, while sectors like capital, savings banks, and real estate trust companies are expected to continue struggling due to delays in clearing real estate PF.
The securities industry is expected to recover its performance due to improved conditions in domestic and overseas stock investments, bond management, and corporate bond issuance as interest rates decline, although a full recovery may take time due to ongoing sluggishness in the real estate PF market. In the asset management sector, despite ongoing sluggishness in real-asset investment, growth centered around traditional funds such as bond-type funds and overseas ETFs, as well as discretionary assets, is expected to continue due to expectations of interest rate declines.
The life insurance sector is expected to continue efforts to expand capital due to increased liabilities from falling interest rates, through methods such as issuing hybrid securities and subordinated bonds. Meanwhile, the non-life insurance sector is expected to grow with a focus on long-term insurance where securing contract margins is easier, with fintech companies expanding their influence.
Although the credit card industry is expected to see improved profitability due to a slight decrease in funding cost burdens, there are still downward pressures due to recalibration of eligible costs. In contrast, the capital industry is expected to face increased pressure on profitability due to a temporary decrease in vehicle purchase demand, leading to declining growth in leasing and installment segments, alongside the burden of clearing bad debts.
The savings bank industry, struggling with real estate PF issues, is expected to continue with selective and conservative operations, adhering to reinforced soundness management next year. As for the real estate trust sector, the prolonged time required for clearing PF defaults, bottlenecks in executing small-scale public auctions, and difficulties in securing buyers and restructuring capital will delay improvements in soundness. Additionally, the prolonged sluggishness in the regional distribution market and non-residential demand will contribute to these delays.
In terms of regulation, while debtor-side regulations such as continued household loan management and improvements in the real estate PF system are expected to be strengthened, capital-side regulations such as corporate value-up support measures and amendments to ISA-related tax laws are expected to be eased.
Furthermore, the financial industry is seen as reaching its growth limits with uncertainties continuing due to the accumulating household debt and delays in resolving real estate PF issues, making it urgent to devise cost-reduction measures.
Particularly, as the policy of easing network separation is promoted and the introduction of external AI models through innovative financial services becomes possible, productivity enhancement through AI and innovation in financial services are expected to accelerate.