Banks' net profit rises 171%

Banks in South Korea saw their gross net profit reach 8.1 trillion won ($7.19 billion) during the first half of this year, an over 2.7 times increase on-year, while their operating profit surged by more than sixfold, data showed Tuesday.

The net profit of all banking institutions -- including commercial banks, provincial banks, state-owned banks, cooperative banks and the central bank -- surged 171.4 percent from 3 trillion won in the first half of 2016.

The operating profit jumped to 9.7 trillion won in the first half of 2017, from 1.5 trillion won the previous year. 

The robust performances were attributed to state-led banks’ recovery from bad debts expenses last year, according to preliminary data from the Financial Supervisory Service. 

The net profit of “special banks,” referring to banks other than commercial and provincial banks in Korea, stood at 2.9 trillion won, up 3.9 trillion won from the 1 trillion won net loss a year before.

In 2016, Korea’s policy lenders, such as the Korea Development Bank and the Export-Import Bank of Korea, decided to write off the liabilities of financially pinched shipbuilders, which cost the banks 8.4 trillion won in the first half of 2016.

Expenses for bad loans among special banks fell to 1.6 trillion won in the first half of this year, while that of commercial banks were 1.2 trillion won, 25 percent lower than a year before.

The net interest income of the banks rose 6 percent on-year, while the noninterest income soared 40.9 percent.

Banks’ net interest margin -- interest income minus interest expense that is key to measuring banks’ profitability -- widened by 0.06 percentage point on-year to 1.61 percent in the first half of 2017, marking the highest since 2015. The corresponding figure for US commercial banks during the cited period was 3.14 percent, according to the FSS.

The gap in loan-deposit margins had steadily narrowed here since the fourth quarter of 2010, but began to widen starting the fourth quarter of 2016.

Banks’ performance in terms of creating wealth slightly improved, data showed. The return on assets was 0.71 percent, up 0.44 percentage point on-year, while the return on equity came to 8.98 percent, up 3.43 percentage points from a year prior, both the highest since 2011.

By Son Ji-hyoung (consnow@heraldcorp.com)