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Banks rake in hefty interest income in 1st half

Finance 13:52 August 12, 2019

SEOUL, Aug. 12 (Yonhap) -- South Korean banks enjoyed hefty interest income in the first six months of the year backed by low interest rates and increased mortgage loans, data showed Monday.

The local banks logged a combined interest income of 10.5 trillion won (US$8.64 billion) in the April-June period, breaching the 10 trillion-won mark for the fifth consecutive quarter, according to the data from the Financial Supervisory Service (FSS).

The second-quarter figure put their interest income in the first half at 20.6 trillion won, the financial watchdog said.

Banks rake in hefty interest income in 1st half - 1

Such a large interest income came despite a slight drop in the net interest margin (NIM), or the difference between interest paid and interest received, of local banks.

The average NIM of local banks came to 1.61 percent in the first half of the year, compared with 1.67 percent from the same period last year when the banks posted a combined interest income of 19.7 trillion won, according to the FSS.

The on-year increase in interest income was largely attributed to a rise in the sheer size of increased mortgage loans extended by the local banks and other assets under management, which gained 6.8 percent on-year in the first half.

The banks' non-interest income grew at a faster clip than their interest income, surging 17.2 percent on-year to 3.6 trillion won in the January-June period.

With the increase in both interest and non-interest income, the banks' combined net profit climbed to 8.7 trillion won from 8.3 trillion won over the cited period.

Their average return on assets, on the other hand, slightly dropped to 0.67 percent in the first half from 0.69 percent a year earlier, with their average return on equity also slipping to 8.64 percent from 8.85 percent over the cited period.

The FSS explained the drop was largely due to the banks' assets and equities growing at a faster rate than their net profit.
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