Korean bank profits fall as slump forces larger loan provisions

04-Aug-2009 Intellasia | Bloomberg | 7:01 AM Print This Post

Combined profit at Kookmin Bank, South Korea’s largest, and local rivals fell 57 percent in the first half of 2009 as the nation’s economic slump forced them to more than triple provisions against bad loans.

Net income at the 18 lenders fell to 2.8 trillion won ($2.3 billion) in the first six months, from 7.6 trillion won a year earlier, the Financial Supervisory Service said today in an e- mailed statement. Loan-loss reserves jumped to 7.1 trillion won from 2.3 trillion won, the agency said.

Earnings improved from three months earlier in the quarter ended June 30 as growth in bad loans eased, letting banks set aside fewer provisions, the agency said. Asia’s fourth-largest economy expanded at the fastest pace in almost six years in the second quarter, slowing the pace of defaults.

Combined second-quarter profit totalled 2.3 trillion won, almost four times the 600 billion won earned in the first three months of the year, according to the agency. Second-quarter provisions slowed to 2.6 trillion won from 4.5 trillion won in the three months to March.

“There are still uncertainties about whether improvements in company earnings and the global economic recovery will continue,” the financial watchdog agency said. “Banks should continue to strengthen credit-risk management.”

The agency said on July 30 it will tell banks to lower their bad-loan ratios to less than 1 percent by end of the year. Non- performing loans accounted for 1.5 percent of total bank lending at the end of June.

Kookmin on July 30 reported a 65 percent drop in second- quarter profit. Earnings fell by 59 percent at Shinhan Bank, an arm of the country’s second-biggest financial group by market value, and by 43 percent at Hana Bank, the fourth-biggest lender.



Category: Korea

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