South Korea's savings banks earned more than 760 billion won in net profit in the first half of this year, extending a recovery in earnings. Sharply higher gains from securities holdings and lower loan-loss costs from writing off bad debt drove the improvement. Still, a renewed rise in corporate loan delinquencies leaves pressure on asset quality.
The country's 79 savings banks posted combined net profit of 765.8 billion won in the first half, up 508.8 billion won, or 198.0%, from 257 billion won a year earlier, the Financial Supervisory Service said on the 28th. Net profit nearly tripled in a year and marked the highest half-year level since the first half of 2022.
Non-interest income led the improvement. Non-interest income came to 436.4 billion won in the first half, up sharply from 47.4 billion won a year earlier. Gains tied to securities such as stocks and bonds rose 401.2 billion won from a year earlier.
Lending is also expanding again, led by corporate loans. Loan assets at savings banks stood at 95.8 trillion won at the end of June, up 2.3 trillion won, or 2.5%, from 93.5 trillion won at the end of last year. Corporate loans rose to 48.5 trillion won from 46.2 trillion won over the same period, driving overall loan growth. Household loans held roughly steady at 39.6 trillion won.
Private-sector mid-rate loans for low- and middle-income households and borrowers with lower credit scores also increased. The outstanding balance of private mid-rate loans rose 600 billion won to 18.2 trillion won at the end of June from 17.6 trillion won at the end of last year. The Korea Federation of Savings Banks said mid-rate living-stability loans launched in June contributed to the increase.
The sector's overall size grew slightly as a result. Total assets at savings banks reached 120.6 trillion won at the end of June, up 2.6 trillion won, or 2.2%, from 118 trillion won at the end of last year. Deposits rose 1.4 trillion won, or 1.4%, to 100.4 trillion won from 99 trillion won over the same period.
Delinquency rates climbed, driven by corporate loans. The overall delinquency rate stood at 6.26% at the end of June, up 0.22 percentage points from 6.04% at the end of last year. The household loan delinquency rate fell to 4.60% from 4.67%, while the corporate loan delinquency rate jumped 0.38 percentage points to 8.38% from 8.00%.
The ratio of substandard-or-below loans, a measure of non-performing debt, improved 0.27 percentage points to 8.16% at the end of June from 8.43% at the end of last year. The capital adequacy ratio under Bank for International Settlements standards, however, fell 0.12 percentage points to 15.73% from 15.85% over the same period. The Financial Supervisory Service said the decline reflected growth in risk-weighted assets from higher lending outpacing growth in equity capital from net profit and other factors.
The Korea Federation of Savings Banks said the industry is expected to stay profitable in the second half but that an unfavorable business environment will persist, citing a delayed recovery in the property market and weakening debt-servicing capacity among vulnerable borrowers. It said it plans to gradually expand credit to small business owners and vulnerable borrowers.
The federation added that it would pursue higher profitability by diversifying its business base, including through more lending to mid-sized companies and expanded loans linked to online peer-to-peer lending platforms, while strengthening internal controls and risk management.
