Korean banks' Q1 net income marginally up amid depressed capital markets

South Korean bank’s combined net profit edged up 0.7 percent on year in the first quarter on rises in lending rates that helped to offset plunge in non-interest fee income from depressed asset market.

Korean lenders generated 5.6 trillion won ($4.4 billion) in net income from January to March this year, up 0.7 percent from a year ago, according to the Financial Supervisory Service (FSS) on Wednesday.

Their interest income, generated from interest-bearing assets like commercial loans and mortgages, jumped 16.9 percent on year to 12.6 trillion won on rising interest rates. This contributed to net income margin to add 0.09 percentage point versus a year ago. Net income margin is a key profitability measurement of comparing the difference between banks’ interest income and interest paid out to their lenders against the amount of their interest-bearing assets.

The difference between lending and deposit rates came to 1.93 percent in the first quarter, rising 0.15 percentage point from a year ago.

Non-interest income, earned primarily from fees, like transaction fees and account service charges, plunged 49.4 percent on year to 1.3 trillion won. The fall was mainly owed to sluggish securities market.

Selling, general and administrative expenses rose 6.4 percent on year to 6.1 trillion won. Bad debt expense jumped 41.2 percent on year to 800 billion won.

Excluding special purpose banks, net income of general lenders increased 27.4 percent on year to 3.6 trillion won. Commercial lenders saw net income grow 27.5 percent on year to 3.2 trillion won. Regional banks’ net income gained 32.4 percent on year to 400 billion won. Internet-only lenders earned 30 billion won in net income, down 23.4 percent on year.

FSS advised stronger monitoring and capital adequacy management in the face of growing uncertainties in the local and global economy.

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