Banks’ profit jumps 41% as bad-loan ratio drops

Kookmin Bank, Korea’s largest lender, and local rivals posted a 41 percent jump in combined profit last quarter as widening lending margins increased interest income and provisions for bad loans fell.

The 18 lenders net income climbed to 2.1 trillion won ($1.9 billion) for the three months ended Dec. 31, from 1.5 trillion won a year earlier, the Financial Supervisory Service said Tuesday in an e-mailed statement. Interest income rose to 9.7 trillion won from 9.3 trillion won, and loan-loss costs fell to 3.2 trillion won from 3.6 trillion won a year earlier.

The report adds to evidence that the nation’s banks are reducing loans that soured last year as they helped restructure construction companies amid a real-estate slump. While the Bank of Korea’s three interest-rate increases since July allowed lenders to charge more for loans, the FSS pointed to risks ahead.

“Potential risks persist because of concerns over Europe’s continuing fiscal woes and global inflation pressures,” the FSS, Korea’s financial regulator, said in the statement.

Average net interest margin, a measure of loan profitability, climbed 4 basis points from a year earlier and 16 basis points from the previous quarter to 2.38 percent, the report showed. The central bank has lifted its policy rate three times from July to the current 2.75 percent to control inflation and stabilize the economy.

Lenders’ bad-loan ratio dropped for a second straight quarter as banks wrote off or sold soured debt, the FSS said in a separate e-mailed statement. Non-performing loans at the 18 banks accounted for 1.86 percent of lending as of Dec. 31, down from 2.32 percent three months earlier, the statement said.

Newly classified bad loans increased by 6.7 trillion won in the fourth quarter, moderating from 9.7 trillion won in the July-to-September period and 12.8 trillion won in the three months to June, the FSS said.

Woori Bank, the banking unit of Woori Finance Holdings Co., had the highest bad-loan ratio among major commercial lenders at 3.24 percent. Kookmin Bank, Korea’s largest lender by assets and a unit of KB Financial Group Inc., posted a ratio of 1.78 percent, according to the FSS. 

(Bloomberg)