S. Korea Bank Profits Drop on Securities Losses

(MENAFN) South Korea's banking sector posted a sharp decline in first-quarter net income, as a dramatic collapse in non-interest earnings offset robust lending gains, according to data released Wednesday by the country's financial regulator.

Aggregate net profit among domestic lenders totalled 6.7 trillion won ($4.4 billion) between January and March — a 3.9 percent drop from the year-earlier period — the Financial Supervisory Service reported.

Interest income, however, told a different story, climbing 6.4 percent to 15.8 trillion won ($10.5 billion), buoyed by an expansion in interest-bearing assets and a widening net interest margin (NIM). The NIM edged up 0.03 percentage points year-on-year to 1.56 percent, while interest-bearing assets surged 4.8 percent to 3,556.0 trillion won ($2.36 trillion).

The Bank of Korea held its benchmark rate steady at 2.50 percent following four consecutive cuts — two in 2024 in October and November, and two more in February and May 2025. Analysts are now eyeing a potential policy reversal, with rate-hike speculation gaining traction amid mounting inflationary pressures linked to ongoing Middle East tensions.

The sector's non-interest income bore the heaviest blow, plunging 35.6 percent to 1.3 trillion won ($862.8 million), as elevated market interest rates triggered significant securities valuation losses.

On a more encouraging note, loan-loss provisions eased 16.2 percent to 1.4 trillion won ($929.2 million) over the same period.

Key profitability metrics deteriorated across the board. Return on assets slipped 0.07 percentage points to 0.64 percent, while return on equity fell 0.89 percentage points to 8.68 percent.

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