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S. Korean banks shift to net loss of 400 bln won in Q2

All News 13:55 September 01, 2016

SEOUL, Sept. 1 (Yonhap) -- South Korean banks shifted to a net loss in the second quarter from a year earlier due to increased nonperforming loans in some major banks, the financial watchdog said Thursday.

The country's 17 commercial and state-run banks posted a combined net loss of 400 billion won (US$358 million) in the April-June period, swinging from a net profit of 2.2 trillion won a year earlier, the Financial Supervisory Service (FSS) said in a statement.

The FSS said state-run banks incurred a net loss of 2 trillion won due to the ongoing restructuring of the shipping and shipbuilding industries in the second quarter, compared with a net profit of 300 billion won a year ago.

Quarter-on-quarter, the banks saw their financial health improve slightly in the second quarter helped by increased capital and decreased risky assets, the statement said.

Their average capital adequacy ratio stood at 14.39 percent as of the end of June, up 0.41 percentage point from the previous quarter, it said.

The ratio, a key barometer of financial soundness, measures the proportion of a bank's capital to its risk-weighted credit. The Basel, Switzerland-based Bank for International Settlements, an international organization of central banks, has advised lenders to maintain a ratio of 8 percent or higher since late 1992.

The amount of the banks' equity capital increased 2.7 trillion won in the second quarter, while their risky assets decreased 22.3 trillion won, the statement said.

KEB Hana Bank, South Korea's largest bank by assets, posted the highest capital ratio of 16.82 percent, followed by Citibank Korea Inc. with 16.49 percent and the state-run Korea Development Bank (KDB) with a ratio of 15.15 percent.

Policy lender KDB, the main creditor of Hanjin Shipping Co., has a credit exposure of 660 billion won to the cash-strapped shipping line. On Wednesday, Hanjin Shipping filed for court receivership, a day after its creditors rejected its request for fresh funds.

The shipping company has been suffering worsening financial health stemming from a continued fall in freight rates amid the global economic slowdown.


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