Domestic Banks' Q3 Net Profit Decreases by 1 Trillion Won...Specialized Banks' Profit Halved

Domestic Banks' Net Profit 6.2 Trillion KRW... 13.9% Decrease YoY
Commercial Banks Up 14.8%... Specialized Banks Halved

In the third quarter of this year, the net profit of domestic banks decreased by about 1 trillion won compared to the previous quarter. In particular, special banks saw their net profit halved as credit loss expenses more than doubled from the previous quarter.

According to the Financial Supervisory Service's "Domestic Banks' Operating Performance (Provisional)" on the 19th, the net profit of domestic banks in the third quarter of this year was 6.2 trillion won, down 13.9% (1 trillion won) from the previous quarter (7.2 trillion won). During the same period, the return on assets (ROA) of domestic banks was 0.65%, down 0.12 percentage points. The return on equity (ROE) fell 1.83 percentage points to 8.55%.

In the third quarter of this year, the net profit of commercial banks was 4.4 trillion won, up 14.8% (600 billion won) from the previous quarter. The net profits of regional banks and internet banks were 400 billion won and 170 billion won, respectively, similar to the previous quarter. During the same period, the net profit of special banks recorded 1.3 trillion won, down 54.2% (1.6 trillion won). This is analyzed to be due to the base effect caused by an increase in credit loss expenses and an increase in non-operating income in the previous quarter.

Looking at the performance of domestic banks by item, interest income was 14.6 trillion won, down 1.9% (300 billion won) from the previous quarter. Despite a 0.8% increase in interest-earning assets, the net interest margin (NIM) sharply contracted due to a narrowing loan-deposit interest rate spread. The NIM in the third quarter of this year was 1.52%, down 0.07 percentage points from the previous quarter.

Non-interest income was 2.3 trillion won, up 50.9% (800 billion won) from the previous quarter. Gains related to securities increased by 800 billion won due to a decline in market interest rates, and foreign exchange and derivatives-related gains also rose by 300 billion won.

Selling and administrative expenses were 6.6 trillion won, up 2.8% (200 billion won) from the previous quarter. Personnel expenses increased by 200 billion won to 3.9 trillion won, while material expenses remained at a similar level to the previous quarter at 2.7 trillion won.

Credit loss expenses were 2 trillion won, up 50.6% (700 billion won) from the previous quarter. Among these, the increase in credit loss expenses at special banks reached 400 billion won. This is a base effect caused by a decrease in credit loss expenses due to the reversal of provisions following the normalization of some large corporations in the previous quarter.

Non-operating income recorded a deficit of 200 billion won, down 1 trillion won from the previous quarter. In the previous quarter, non-operating income increased by 800 billion won due to the reversal of impairment losses on subsidiary investment shares, resulting in a surplus.

An official from the Financial Supervisory Service said, "Although credit loss expenses increased mainly at special banks in the third quarter of this year, this is due to the base effect from the previous quarter," adding, "As the NIM of domestic banks narrows and volatility in domestic and international financial markets may increase, we plan to guide banks to respond diligently to potential risks."