'Corporate Bank Prepares for COVID Loan Defaults, H1 Net Profit 821 Billion KRW... Down 16.7% YoY'

Preparing for COVID-19 Financial Support Shortfalls
500 Billion KRW in Bad Debt Provisions Set Aside in H1
Fulfilling the Core Role of Partner Finance for SMEs and Small Business Support

Exterior view of IBK Industrial Bank headquarters, Euljiro, Jung-gu, Seoul

[Asia Economy Reporter Kim Min-young] IBK Industrial Bank of Korea (IBK) faced a performance decline of over 15% year-on-year as it built up reserves to prepare for the economic crisis caused by the novel coronavirus disease (COVID-19) and focused on financial support for small and medium-sized enterprises (SMEs) in the first half of this year. This is the fate of a policy bank that serves as a partner financial institution for SMEs and small business owners.

On the 27th, IBK announced that it recorded a net profit of 821 billion KRW on a consolidated basis, including subsidiaries, in the first half of the year. This performance is a 16.7% decrease compared to the same period last year (985.9 billion KRW), due to proactive reserve accumulation to prepare for economic downturns.

On a standalone basis, excluding subsidiaries, IBK recorded a net profit of 714 billion KRW, down approximately 17.6% from 866.2 billion KRW in the same period last year.

The impact of COVID-19 is significant. IBK’s net interest margin was 1.69%, down 0.09 percentage points from the previous quarter and 0.29 percentage points lower than the first half of last year (1.89%).

The large increase in the provision for loan losses, which is set aside to prepare for future losses, also affected the decline in performance. IBK’s provisions in the first half amounted to 500 billion KRW, 155.5 billion KRW more than the same period last year. This was to prepare for the possibility that COVID-19 financial support could lead to non-performing loans. If the bank had set aside provisions at the same level as last year, the decline in performance would have been significantly smaller.

IBK played a significant role as a partner for SMEs in the first half. The bank’s SME loan balance recorded 176.5 trillion KRW, an increase of 13.8 trillion KRW (8.5%) compared to the end of last year and 10 trillion KRW (6.0%) compared to the previous quarter. The market share of SME loans rose by 0.2 percentage points to 22.8%, further solidifying its position as the leading bank in the SME financial market.

A bank official explained that timely financial support for SMEs and small business owners facing funding difficulties due to the COVID-19 crisis was the reason IBK was able to widen its gap with competing banks.

Asset quality improved further. The total delinquency ratio improved by 0.06 percentage points year-on-year to 0.44%, and the ratio of non-performing loans classified as substandard or below improved by 0.08 percentage points year-on-year to 1.18%, showing a sound level.

An IBK official stated, “Despite concerns over economic slowdown due to the prolonged COVID-19 pandemic, we will continue steady growth by establishing a sustainable growth foundation through innovative finance and systematic asset quality management.”

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