Korean banks brace for massive Q1 losses

SEOUL, March 29 (Yonhap) -- Most South Korean banks are on course to post big
losses for the first quarter of this year on provisions for troubled construction
firms and shipbuilders, a financial regulator warned on Sunday.
The profitability of local banks, including industry leaders Kookmin Bank and
Shinhan Bank, is being eroded by higher provisions for non-performing loans as
the nation's economy almost certainly faces a recession this year.
"In January and February, the banking industry posted a combined loss of about
100 billion won (US$74.1 million)," said an official with the regulator.
"As lenders will have to set aside more provisions at the end of this quarter,
most banks are likely to report losses and the total amount of losses will rise
further."
On Tuesday, the Financial Services Commission plans to inject 3.9 trillion won
into five lenders to replenish their capital bases and help stimulate lending to
cash-strapped companies.
The five are Kookmin Bank, Hana Bank, Woori Bank, the National Agricultural
Cooperative Federation (Nonghyup) and the National Federation of Fisheries
Cooperative (Suhyup).
South Korea's economy is expected to shrink 2.2 percent this year in what would
be the first annual contraction since 1998.
To help bolster local financial firms, the government plans to create a 40
trillion won fund to buy distressed corporate bonds from them.
"Banks should take steps to avoid systemic risks amid a rise in distressed
assets," said Lee Byung-geon, an analyst at Shinyoung Securities.
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