KEB swings to loss in Q1

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SEOUL, May 8 (Yonhap) -- South Korea's No. 5 lender Korea Exchange Bank (KEB)
said Friday it posted its first quarterly loss in more than five years in the
first quarter due mainly to squeezed interest margins and higher loan-loss
reserves.

Net loss came to 74.8 billion won (US$59.5 million) in the January-March period,
a turnaround from a net profit of 267.4 billion won a year earlier, the lender
said in a regulatory filing. It marked the first net loss since the fourth
quarter of 2003.
Sales jumped 72 percent on-year to 7.03 trillion won while operating loss reached
142.6 billion won, it added.
"The net loss came as the lender's profit margin fell and loan-loss provisions
increased amid the slowing economy," said an official at KEB. The lender's
provisions for bad loans rose more than quadrupled on-year to 325.2 billion won,
it added.
The bank's net interest margin (NIM), a key barometer of profitability, came in
at 2.18 percent in the first quarter, down 0.64 percentage point from three
months earlier as returns on certificates of deposit (CDs), which are tied to
lending rates, sharply declined. KEB expected its NIM to improve starting in the
second quarter.
South Korea's central bank had made six consecutive rate cuts totaling 3.25
percentage points to an all-time low of 2 percent until February, which pulled
down market rates like yields on CDs.
The lender's loan delinquency ratio rose 0.32 percentage point on-quarter to 1.24
percent amid the slowing economy.
Meanwhile, KEB's capital adequacy ratio, a key gauge of financial health, came in
at 14.3 percent as of the end of March, up from 12.65 percent at the end of
December, mainly because it sold 250 billion won in hybrid bonds to boost its
capital reserves.
The bank's total assets reached 116 trillion won as of end-March, up from 114
trillion won three months earlier.
In September last year, British banking giant HSBC Holdings Plc pulled out of a
deal to buy a 51.02 percent stake in the lender, citing falling asset values amid
global financial market turmoil.
Recently, the state-run Korea Development Bank said it is interested in buying
KEB, raising high prospects of potential takeover moves in the local banking
sector.
sooyeon@yna.co.kr
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