0
/NongHyup Financial Group

NongHyup Financial Group was found to have incorrectly stated the net profit contribution ratios of its subsidiaries in its third-quarter earnings report released last month, without detecting the errors for two weeks. The net profit contribution ratios of its nonbanking businesses, including NH Investment & Securities, were overstated compared with the actual calculated figures, while that of its banking business was understated.

As NongHyup Financial Group is one of South Korea's five largest financial holding companies, its failure to detect numerical errors in official investor relations (IR) materials, even at the level of the chief financial officer (CFO) and IR staff, appears likely to draw criticism over inadequate data verification.

According to financial investment industry sources on Nov. 11, NongHyup Financial Group's "Third Quarter 2026 Business Results" report, released and posted on its website on Oct. 28, showed the securities business accounting for 29.1% of net profit contributions. However, the same report listed NH Investment & Securities' ownership-adjusted net profit at 800.1 billion won, equivalent to approximately 28.8% of the combined ownership-adjusted net profit of all subsidiaries, which totaled 2.7769 trillion won. The ratio shown in the chart was therefore 0.3 percentage points higher than the actual calculated figure.

By contrast, the banking business's contribution ratio was understated. NongHyup Bank's ownership-adjusted net profit was 1.7523 trillion won, accounting for 63.1% of the total, but the chart showed 62.8%, or 0.3 percentage points lower than the actual figure.

The net profit contribution ratio of the entire nonbanking business was also overstated. According to the report, the combined ownership-adjusted net profit of nonbanking affiliates was 1.0246 trillion won, accounting for 36.9% of the total. However, the chart showed 37.2%, or 0.3 percentage points higher than the actual calculated figure.

The error is notable because it involved a key indicator of NongHyup Financial Group's earnings structure. The net profit contribution ratios of individual affiliates are used to compare profit generation between banking and nonbanking businesses and assess the extent of income diversification. South Korean financial holding companies have long stated their intention to reduce their reliance on banking businesses, which generate profits through interest margins, and increase the contribution of nonbanking businesses. NongHyup Financial Group has also emphasized strengthening the competitiveness of its nonbanking businesses, yet their net profit contribution ratio was presented as higher than the actual calculated figure.

The problem is that the numerical errors went undetected even though the official earnings report had gone through a reporting process involving working-level staff and relevant executives. Critics say the preparation and verification of the report were inadequate, given that the errors could have been identified simply by checking the net profit figures and their total on the same page.

However, the errors identified were limited to the chart showing contribution ratios calculated from net profit, rather than the net profit figures themselves. NongHyup Financial Group's cumulative consolidated net profit for the first three quarters of this year stood at 2.5278 trillion won, and no errors have been identified in the calculation of the reported earnings figures themselves.

An official at NongHyup Financial Group said, "The actual net profit contribution ratio of the securities business is indeed 28.8%." The official added, "We have confirmed that a mistake was made while preparing the chart, and we plan to correct the report."

                                                                                                              Park Ju-yeon