Restructuring Pays Off: Savings Banks Return to Profit with 257 Billion Won Net Income in First Half

Savings Banks Return to Profit in First Half of Year
Proactive Provisioning and Bad Asset Disposal Drive Turnaround
Mutual Finance Cooperatives See Profit Decline Due to Passive Bad Debt Management

The savings bank industry, which had been struggling for several years due to defaults on real estate project financing (PF) loans and other issues, succeeded in turning a profit in the first half of this year.

According to the "Business Performance of Savings Banks and Mutual Finance Cooperatives for the First Half of 2025" released by the Financial Supervisory Service on the 29th, the total net profit of domestic savings banks in the first half of this year was 257 billion won. This marks a turnaround from a net loss of 395.8 billion won recorded during the same period last year. Savings banks had posted losses for four consecutive half-year periods from the first half of 2023 through the second half of last year, mainly due to defaults on real estate PF loans.

The Financial Supervisory Service explained that savings banks were able to return to profitability because they had proactively set aside loan-loss provisions by strengthening PF project feasibility assessments and had worked to reduce non-performing loans. As a result, the ratio of substandard and below loans dropped from 11.75% at the end of the first half of last year to 9.49% at the end of the first half of this year. The delinquency rate at the end of the first half of this year also improved to 7.53%, down 0.99 percentage points from 8.52% at the end of last year, indicating improved asset soundness.

Total assets of savings banks stood at 118.8 trillion won at the end of the first half, down 2.1 trillion won from the end of last year. This decrease was due to a reduction in loan assets, mainly corporate loans, as a result of conservative business strategies focused on resolving non-performing loans and managing asset quality. The capital adequacy ratio also rose to 15.60% at the end of the first half, up from 14.98% at the end of last year, due to a decrease in risk-weighted assets from reduced loan assets and an increase in equity capital from net profits.

A Financial Supervisory Service official stated, "Savings banks returned to profitability as a result of actively resolving non-performing loans and proactively setting aside loan-loss provisions, which reduced credit loss expenses," and added, "In the second half of the year, we will continue to guide savings banks to actively resolve non-performing loans and set aside sufficient provisions."

Unlike savings banks, which succeeded in turning a profit, mutual finance cooperatives such as NH Nonghyup, credit unions, and fisheries cooperatives saw their performance decline. The net profit of mutual finance institutions in the first half of this year was 417.6 billion won, down 646.3 billion won (60.8%) from 1.0639 trillion won in the same period last year. The main reason was a 24.6% decrease in net profit from the financial (credit business) sector, which amounted to 2.0772 trillion won compared to the same period last year. The Financial Supervisory Service cited a decrease in interest income and an increase in credit loss expenses as the causes.

At the end of the first half, the delinquency rate rose to 5.7%, up 1.16 percentage points from the end of last year, and the ratio of substandard and below loans increased to 6.27%, up 1.01 percentage points from the end of last year, indicating a general deterioration in asset quality.

A Financial Supervisory Service official stated, "Mutual finance cooperatives had been somewhat passive in resolving non-performing assets, and defaults on real estate development loans led to increased credit loss expenses and a decrease in net profit," and emphasized, "However, their loss-absorbing capacity remains at a sound level, so we will encourage them to accelerate the resolution of non-performing assets and improve their profit structure going forward."

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