Last Year Domestic Banks' Net Profit 21.3 Trillion KRW... 15% Increase from Previous Year

Interest Income 59.2 Trillion Won... Increased by 5.8% but Growth Slows Down

The Financial Supervisory Service announced on the 14th that the net profit of domestic banks in 2023 reached 21.3 trillion KRW, marking a 15.0% (2.8 trillion KRW) increase compared to the previous year (18.5 trillion KRW).

This increase was due to the expansion of interest-earning assets such as loan receivables and the decline in market interest rates, which led to rises in interest income and non-interest income by 3.2 trillion KRW and 2.4 trillion KRW respectively. Based on this, domestic banks set aside 3.6 trillion KRW in loan loss provisions, an increase from the previous year, to strengthen their loss absorption capacity.

Seoul Yeouido Financial Supervisory Service building. Photo by Younghan Heo younghan@

The return on assets (ROA) of domestic banks rose by 0.06 percentage points (p) to 0.58% from 0.52% the previous year, and the return on equity (ROE) increased by 0.50 p to 7.92% from 7.42%.

Interest income reached 59.2 trillion KRW, up 5.8% (3.2 trillion KRW) from 55.9 trillion KRW the previous year, driven by an expansion in net interest margin (NIM). However, this growth rate in interest income significantly slowed compared to the 21.6% increase recorded the previous year.

Non-interest income rose by 68% (2.4 trillion KRW) to 5.8 trillion KRW from 3.5 trillion KRW the previous year. This was largely due to a significant increase in securities-related gains, such as securities valuation and trading profits (5 trillion KRW), compared to 100 billion KRW the previous year, influenced by the decline in market interest rates.

Operating expenses increased by 1.1% (30 billion KRW) to 26.6 trillion KRW compared to the previous year. Labor costs decreased by 500 billion KRW due to reductions in retirement benefits (300 billion KRW decrease) and honorary retirement benefits (100 billion KRW decrease), while material costs rose by 700 billion KRW.

Loan loss expenses rose by 55.6% (3.6 trillion KRW) to 10 trillion KRW from 6.4 trillion KRW the previous year. This was attributed to additional provisions for loan losses following improvements in the loan loss provision calculation method.

The Financial Supervisory Service stated, “This year, risk factors such as concerns over credit risk expansion due to high interest rates and the possibility of a reduction in net interest margin are latent.”

They added, “We will continue to refine the bank soundness system to ensure that banks are equipped with crisis response capabilities and can stably perform their fundamental role of financial intermediation.”

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