Savings Banks See Net Profits Fall 80 Percent
By Yoon Ja-young
Staff Reporter
The net profit of 106 savings banks plummeted 80.8 percent this past year to 72.5 billion won, said the Financial Supervisory Service (FSS).
Savings banks saw their net profit decline drastically in the 2008 fiscal year ending in June, due to a falling net interest margin and the loss incurred from distressed debts, a regulator said. The income from the interest decreased by 135.5 billion won, while losses snowballed as they sold off bad debt to enhance the soundness of the assets they had.
Banks faced difficulties last year due to losses incurred in real estate project financing (PF) amid the collapse of a bubble in the real estate market.
The delinquency ratio also stood high at 15.8 percent as of the end of June, up 1.8 percentage points from a year ago. The regulator attributed it to the economic slowdown.
The ratio has been rising, from 14 percent in June 2008 to 15.5 percent last December to 15.8 percent in June 2009.
Their BIS ratio, which reflects financial soundness, meanwhile, stood at 9.8 percent, rising 0.64 percentage points from a year ago.
It is mostly due to the banks' efforts to increase capital. During the 2008 fiscal year, the capital increase totaled 435 billion won and the issuance of subordinated bonds totaled 407.3 billion won.
``Following capital infusion, savings banks had their BIS ratio rise notably. Their profitability or the soundness of assets, however, plunged due to worsening business conditions,'' the regulator said.
The FSS, however, expected the savings banks to mark better performances upon falling interest rates, which means less costs to raise funds, and the expansion of loans and the slowdown in rise of the delinquency ratio.
While most banks fell into deficit, those who had less exposure to real estate project financing are taking the opportunity to expand their business. Hyundai Swiss, for example, acquired Yehanwul Savings Bank, which has been under the Korea Deposit Insurance Corporation (KDIC). Tomato Savings Bank and Pureun, which had less exposure to PF, also opened up branches in provinces through acquisition.