By Yoon Ja-young
Staff Reporter
Banks, which have been competing to increase their bulk instead of diversifying their income portfolio, are seeing their profitability fall.
According to the Financial Supervisory Service (FSS), 18 banks recorded 3.3 trillion won in net profits in the first quarter of the year, down 48.6 percent from a year earlier.
The huge plunge is mostly due to the 2007 extraordinary profit banks gained by selling shares of LG Card. The 2.8 trillion won profit they made by selling their stakes in the credit card company was included in the first-quarter profits last year.
Even when excluding the profit from LG Card transaction, however, their net profit fell 8.9 percent from the previous year.
Their return on assets (ROA) recorded 0.89 percent, dipping from 2 percent a year ago, and net interest margin (NIM) fell to 2.38 percent from 2.46 percent. The FSS attributed the falling NIM to banks' special promotion of high interest rate deposits and the falling ratio of low interest rate deposits. An increasing number of people have been withdrawing money from their low interest rate ordinary savings accounts to put it into cash management accounts aggressively promoted by securities firms.
The banks made 8.2 trillion won from interest, up 10.5 percent from the previous year, but their profit from non-interest income sources fell 68.6 percent to record 1.9 trillion won. Income from commissions recorded 1.1 trillion won, growing 4.9 percent. Commissions charged on private customers, such as those for money transfer or use of ATMs, recorded 165.6 billion won, down 23 percent.
``They are showing poor performances in core indices that reflect their fundamental ability to create income. Banks should be diversifying management and enhancing effectiveness,'' the FSS said.