S. Korean banks' quarterly earnings soar in Q2

SEOUL, Aug. 3 (Yonhap) -- South Korean banks' total earnings quadrupled in the
second quarter from three months earlier on lower loan-loss provisions and
one-off gains from stake sales, the financial watchdog said Monday.

The combined net profit of 18 commercial and state-run lenders reached 2.3
trillion won (US$1.9 billion) in the April-June period, up 302 percent from three
months earlier, according to a preliminary estimate by the Financial Supervisory
Service (FSS).
But their total earnings declined 57.4 percent on-year to 2.8 trillion won in the
first half as commission income declined and loan-loss reserves jumped on-year,
the watchdog said.
"The solid quarterly earnings came as loan-loss reserves declined compared with
the previous quarter and one-time profits were generated from selling stakes or
securities," an official at the FSS said. Local banks saw significant one-off
gains in the last quarter as they unloaded stakes in Hyundai Engineering &
Construction Co. in May.
Local banks put aside 7.1 trillion won in bad-debt provisions in the first half,
up 206.4 percent from a year ago as problem loans piled up, hit by the slumping
economy. But in the second quarter, such reserves declined 42.9 percent
on-quarter to 2.6 trillion won as the economic downturn eased and loan
delinquency rates fell.
Korean banks' net interest margin (NIM), or the difference between interest
income and interest expenses, came in at 1.85 percent in the January-June period,
down from 2.28 percent the previous year, affected by falling market rates.
The watchdog predicted that the NIM is likely to recover down the road as some
market rates like returns on government bonds are slightly rising.
But it added that as uncertainty surrounding the pace of a global economic
recovery persists, local banks are urged to rigorously perform risk management by
putting aside loan-loss reserves adequately.
sooyeon@yna.co.kr
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