SEOUL: South Korean banks’ total net earnings in 2015 were nearly halved from the previous year to record the worst performance since 2003 when credit card bubble spilled over to the banking sector. Surge in loss reserves due to escalated corporate troubles amid protracted business slowdown and decreased revenue from record-low lending rates hurt their balance sheet.
According to preliminary bank earnings released by the Financial Supervisory Service on Thursday, net profit by local banks decreased by 2.5 trillion won ($2.03 billion), or 42.6 percent, to 3.5 trillion won in 2015 against the previous year, making up just half of what local insurers earned last year.
Banks reported a net loss of 2.1 trillion won in the fourth quarter ended December, reversing the black figures of 1.3 trillion won in the third, 2.2 trillion won in the second, and 2.1 trillion won in the first. The blow came from a 1.5 trillion won loss by state-run Korea Development Bank (KDB) as it had to shoulder a bulk of bad credit from large companies.
Commercial banks last year overall reported a net profit of 4.4 trillion won. KB Kookmin Bank, Shinhan Bank and KEB Hana Bank earned a combined net income of 3.7 trillion won last year, decreasing 12.6 percent from 4.3 trillion won in 2014 due to poorer revenue from both interest and non-interest operations. Provincial banks registered a combined profit of 700 billion won.
Local banks’ interest income declined by 1.4 trillion won to 33.5 trillion won in 2015. Non-interest income improved 2.4 trillion won to 5.9 trillion won, not because of better operation, but through sale of shares in Korea Housing Guarantee.
State-funded special purpose banks like KDB, Export-Import Bank of Korea, Industrial Bank of Korea, Nonghyup Bank and Suhyup Bank recorded a combined loss of 900 billion won, contrasting with a net profit of 1.1 trillion won in 2014, largely because of KDB’s corporate bailout.
