Domestic Banks' Q3 Net Profit 4.6 Trillion Won...Up 1.1 Trillion Won Driven by Loan Growth

[Asia Economy Reporter Park Sun-mi] The net profit of domestic banks in the third quarter surged to 4.6 trillion won, driven by an increase in loan assets. Financial authorities plan to encourage banks to maintain their loss absorption capacity amid concerns that borrowers' repayment ability may deteriorate due to the prolonged impact of COVID-19 and rising interest rates.

According to the Financial Supervisory Service on the 16th, the net profit of domestic banks in the third quarter this year was 4.6 trillion won, an increase of 1.1 trillion won compared to 3.5 trillion won in the third quarter of last year. The cumulative net profit from the first to the third quarter also rose by 5.3 trillion won to 15.5 trillion won compared to the same period a year ago.

The increase in interest income by 1.3 trillion won due to the growth in loan assets significantly impacted the rise in net profit. The interest income of domestic banks in the third quarter was 11.6 trillion won. This is attributed to the net interest margin (NIM) rising by 0.04 percentage points year-on-year to 1.44%, as well as the continued increase in interest-earning assets such as loan receivables.

On the other hand, non-interest income of domestic banks in the third quarter was 1.2 trillion won, down 600 billion won from 1.8 trillion won in the same period last year. Most sectors, including foreign exchange and derivatives (-500 billion won), securities (-100 billion won), and fees (-30 billion won), saw declines.

Loan loss provisions of domestic banks in the third quarter were 300 billion won, down 1.1 trillion won from 1.5 trillion won in the same period last year. This was influenced by the continued sound asset quality and the base effect of increased provisions made last year due to COVID-19.

Meanwhile, the return on assets (ROA) of domestic banks in the third quarter rose by 0.09 percentage points to 0.56% compared to 0.47% in the same period last year. The return on equity (ROE) also increased by 1.07 percentage points to 7.36% from 6.29% in the same period last year.

A financial authority official said, "In the situation where the impact of COVID-19 is prolonged and market interest rates have recently risen, there is a possibility that the repayment ability of marginal borrowers may deteriorate," adding, "we will encourage banks to maintain their loss absorption capacity by adequately setting aside provisions."

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