Banks Recorded Historic High Profits... Last Year's Net Income Reached 22.4 Trillion Won

FSS Announces 2024 Domestic Bank Business Performance
Record-High Profits Driven by Decreased Loan Loss Expenses and Increased Interest Income
Interest Income Still Accounts for Over 90% of Total Profits, Concentration Continues

Last year, domestic banks in South Korea recorded their highest-ever net income, driven by a decrease in loan loss expenses and an increase in interest income. The concentration of interest income, which accounts for over 90% of total profits, also continued.

According to the provisional data on the 2024 domestic bank business performance released by the Financial Supervisory Service (FSS) on the 14th, the net income of domestic banks last year was 22.4 trillion won, an increase of 1.2 trillion won (5.5%) compared to the previous year.

Bank net income has increased for four consecutive years, recording 12.1 trillion won in 2020, 16.9 trillion won in 2021, 18.5 trillion won in 2022, and 21.2 trillion won in 2023.

Last year, banks' loan loss expenses decreased by about 3.1 trillion won from the previous year to 6.9 trillion won, which had the greatest impact on the increase in net income. Loan loss expenses refer to the amount of accounts receivable or loans that cannot be recovered and are treated as expenses.

An FSS official explained, "With the improvement in the loan loss provision method, banks' provisions increased significantly in 2023, and the base effect of this appeared last year." Despite compensation costs of 1.4 trillion won incurred due to the incomplete sale of Hong Kong equity-linked securities (ELS) last year, the decrease in loan loss expenses offset this.

By bank type, net income of commercial banks increased by 9.8% from 13.6 trillion won in 2023 to 14.9 trillion won last year, while special banks saw a decrease of about 2.0% from 7.7 trillion won to 7.5 trillion won during the same period.

The proportion of interest income in total profits remained high. Of the total profits of 65.3 trillion won by domestic banks last year, interest income was 59.3 trillion won, accounting for 90.8%. Although slightly lower than 91.0% in 2023, it remains at a high level.

The growth rate of interest income last year was 0.2%, significantly slowing compared to the 5.8% recorded in 2023. The net interest margin (NIM) was 1.57%, down from 1.65% in 2023. NIM is calculated by subtracting funding costs from asset management income and dividing by total managed assets, serving as a key indicator of financial companies' profitability. While profit growth continues, it is analyzed that banks' earning capacity is slowing down.

Non-interest income last year was 6 trillion won, an increase of about 200 billion won compared to the previous year. This was influenced by increased gains from securities trading and other securities-related income due to the decline in market interest rates. Banks' selling and administrative expenses were 27.4 trillion won, up 900 billion won from the previous year.

An FSS official said, "Although domestic banks' net income increased last year, the growth of interest income has slowed for two consecutive years. This year, with growing domestic and international uncertainties such as intensified U.S. protectionism and concerns over expanding credit risks in vulnerable sectors, we plan to encourage banks to strengthen their loss absorption capacity to stably perform their core function of financial intermediation."