Terms for judging the earnings and financial health of banks, insurers, brokerages and card companies. 21 terms in total.
Interest a bank earns on loans minus the interest it pays on deposits, divided by its total interest-earning assets. It shows a bank's core profitability and has a big effect on bank stock prices.
e.g. Rising interest rates tend to widen NIM, and falling rates tend to narrow it.
The gap between the interest rate on loans and the rate on deposits. The wider it is, the more a bank earns from lending, so it is the starting point of bank earnings.
e.g. Loan rate 5% - deposit rate 3% = 2 percentage point spread
An expense a bank sets aside in advance for loans it expects not to be repaid. When the economy weakens and provisions rise, profit shrinks, which weighs on financial stocks.
The share of loans where the borrower has missed a scheduled principal or interest payment. A rising rate signals bigger losses ahead, which is negative for bank and card company stocks.
A bank's capital divided by its risk-weighted assets, following Bank for International Settlements (BIS) standards. It shows how much loss a bank can absorb. Only with a comfortable margin above the regulatory minimum can a bank raise dividends and other shareholder returns.
A capital ratio calculated using only the highest-quality capital, common equity. Korean financial holding companies often size their shareholder returns by this ratio, so investors watch it closely.
e.g. Many holding companies say they will use capital above their CET1 target for buybacks and dividends.
A company that owns financial subsidiaries such as banks, brokerages, insurers and card companies. Most large Korean banks are listed as holding companies, so you need to look at non-bank subsidiaries as well as the bank itself.
A government policy launched in 2024 to fix the undervaluation of Korean stocks (the Korea discount). It encourages companies to disclose shareholder return plans such as share cancellations and higher dividends, and low price-to-book sectors like financials are often mentioned as targets.
A test that assumes bad scenarios, such as a recession or a sharp rate spike, to see whether a financial firm can withstand the losses. For large US banks, the results affect their dividend and buyback plans.
A rush of depositors withdrawing money all at once because of rumors that a bank is in trouble. Banks lend out most deposits, so a sudden large outflow can sink even a healthy bank, and financial stocks as a whole can plunge.
e.g. In 2023, Silicon Valley Bank (SVB) in the US failed after large deposits left within two days.
The total premiums an insurer has collected directly from customers. It is a basic measure of an insurer's business size and growth.
The share of premiums collected that an insurer pays out as claims. A rising loss ratio cuts underwriting profit and weighs on property and casualty insurer stocks.
e.g. Collect $100 in premiums and pay $80 in claims: loss ratio 80%
The loss ratio plus the expense ratio (operating and administrative costs). Below 100% means the insurer makes a profit from underwriting; above 100% means an underwriting loss.
e.g. Loss ratio 80% + expense ratio 18% = combined ratio 98% (underwriting profit)
The new insurance accounting standard applied to Korean insurers from 2023. It values insurance liabilities at market value and recognizes profit over the life of each contract, so reported earnings changed a lot compared with before.
Under IFRS 17, the stock of profit an insurer expects to earn from contracts it has written. It is released into earnings little by little each year, so strong growth in new-business CSM is read as a sign of solid future profit.
Korea's capital adequacy measure showing an insurer's ability to pay claims on time. A higher ratio means a sturdier balance sheet, and an insurer needs a cushion above the regulator's recommended level to raise dividends easily.
The fee a brokerage earns for executing stock trades on behalf of clients. When market trading volume rises, commission income grows, so brokerage stocks often draw attention in bull markets.
e.g. When daily trading value rises sharply, a brokerage's commission income rises with it.
Income a brokerage earns from arranging IPOs, bond issuance and M&A advice for companies. It grows strongly when capital markets are active, while riskier areas like real estate project financing can turn into losses when the economy worsens.
The total assets an asset manager or brokerage manages for clients. Fees are often proportional to AUM, so steadily growing assets point to stable earnings.
The fee a shop pays the card company on each card payment. It is the card companies' main revenue source, and in Korea the government adjusts the fee rate periodically, so each cut weighs on card company earnings.
A field that combines finance and technology to offer payments, transfers, loans and similar services mainly through apps. Payment companies earn fees in proportion to transaction volume, so investors watch consumer spending and the growth rate of payment volume together.