S. Korean banks' Q3 earnings rise 10.8 pct

SEOUL, Nov. 3 (Yonhap) -- South Korean banks' total earnings rose 10.8 percent in
the third quarter from three months earlier on improving lending margins and
lower loan-loss provisions, the financial watchdog said Tuesday.

The combined net profit of 18 commercial and state-run lenders reached 2.3
trillion won (US$1.94 billion) in the July-September period, compared with 2.1
trillion won three months earlier, according to a preliminary estimate by the
Financial Supervisory Service (FSS).
But their total earnings tumbled 40 percent on-year to 4.9 trillion won in the
first nine months of this year as interest income declined and bad-debt expenses
jumped from a year earlier amid the slowing economy, the watchdog said.
Korean banks' net interest margins (NIM), a key barometer of profitability, were
under pressure as record-low benchmark interest rates narrowed their loan-deposit
spread. But signs of an economic recovery and expectations of a rate hike by the
central bank have begun to boost market rates like returns on certificates of
deposit, helping their margins improve.
In the third quarter, their NIM reached 1.93 percent, up from 1.72 percent the
preceding quarter. Interest income booked by local banks rose by 600 billion won
to 7.8 trillion won last quarter, it added.
They put aside a combined 8.9 trillion won in loan-loss reserves in the
January-September period, up 85.7 percent from a year ago as problem loans piled
up, hit by the slumping economy. But last quarter, such provisions fell 1.2
trillion won on-quarter to 1.6 trillion won as the economy began to pick up.
"Local banks' profitability is expected to gradually improve on the back of
rising NIMs and the economic recovery," the FSS said in a statement. "But the
upward trend in their profitability could taper as loan-loss provisions may rise
temporarily on banks' efforts to dispose of bad debts."
The country's financial watchdog advised local banks to lower their bad loan
ratio to around 1 percent by the end of this year.
sooyeon@yna.co.kr
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