Bank's Q1 Net Interest Margin Hits Record Low at 1.46%... Net Profit Down 18% YoY

On the 6th, market bank presidents are attending the 'Financial Risk Response Team Meeting' held at the Bankers Hall in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kim Hyo-jin] Due to the impact of ultra-low interest rates, the net interest margin (NIM), a key profitability indicator for domestic banks, recorded the lowest level ever in the first quarter of this year as the interest spread significantly narrowed. Net income for the same period also decreased by 18% compared to the same period last year.

According to the '2020 Q1 Domestic Banks' Operating Performance' report released by the Financial Supervisory Service on the 13th, the banking sector's net interest margin in the first quarter was recorded at 1.46%.

This is 0.15 percentage points lower than the same period last year, marking the lowest figure ever. The net interest margin has been continuously declining since Q1 last year (1.62%).

During the same period, banks' net income was 3.2 trillion KRW, down 700 billion KRW (17.8%) from 4 trillion KRW in Q1 last year. Most profit and loss items were similar to the previous year, but loan loss provisions increased by 300 billion KRW. Non-operating losses, including losses from subsidiary equity, also increased by 400 billion KRW.

Interest income for banks in Q1 was 10.1 trillion KRW, a decrease of 22.9 billion KRW (0.2%) compared to the same period last year. Non-interest income was 1.7 trillion KRW, down 21.3 billion KRW (1.2%) from the previous year. Gains related to marketable securities decreased by 200 billion KRW, while gains from foreign exchange and derivatives increased by 200 billion KRW.

Selling and administrative expenses were 5.6 trillion KRW, down 2.03 billion KRW (0.4%) compared to the same period last year. Material costs increased by 100 billion KRW, but labor costs decreased by 100 billion KRW due to a base effect from the payment of retirement benefits in Q1 last year.

Loan loss provisions for banks in Q1 were 1 trillion KRW, an increase of 300 billion KRW (42.5%) compared to the same period last year. This is explained by the reversal of provisions related to shipbuilding loans in Q1 last year.

Non-operating losses increased by 400 billion KRW compared to the same period last year, resulting in an 800 billion KRW deficit in Q1. Corporate tax expenses were 1.1 trillion KRW, down 58.7 billion KRW (5.2%) from the previous year due to the decrease in net income.

The banks' return on assets (ROA) in Q1 was 0.48%, and return on equity (ROE) was 6.29%, down 0.15 percentage points and 1.70 percentage points respectively compared to the same period last year.

This content was produced with the assistance of AI translation services.