Domestic Banks' Q1 Net Profit at 6.7 Trillion Won...Down 3.9%

Securities Profit and Loss Turn Negative Due to Rising Market Interest Rates
ROA and ROE Also Decline

The net profit of domestic banks in the first quarter of this year amounted to 6.7 trillion won, down 300 billion won from the same period last year. While interest income increased due to a rise in interest-earning assets such as loan receivables and an improvement in net interest margin (NIM), non-interest income decreased as valuation losses on securities grew amid rising market interest rates.

According to the "2026 Q1 Domestic Bank Business Performance (Provisional)" released by the Financial Supervisory Service on May 20, the net profit of domestic banks in the first quarter was 6.7 trillion won, a decrease of 300 billion won or 3.9% from 6.9 trillion won in the same period last year. Net profit of commercial banks rose by 1.6% year-on-year to 4.3 trillion won, while net profit of specialized banks fell by 12.3% to 2.4 trillion won.

Non-interest income declined by 35.6% from the same period last year. In the first quarter, domestic banks' non-interest income totaled 1.3 trillion won, down 700 billion won from 2 trillion won a year earlier. Fee income increased by 10.1% to 1.5 trillion won, and trust-related income also rose by 48.6% to 500 billion won. However, losses related to securities, which turned into a deficit of 1.2 trillion won, weighed down overall non-interest income.

The deterioration in securities-related gains and losses was largely due to rising market interest rates. According to the Financial Supervisory Service, while the yield on 3-year government bonds fell by 1.9 basis points in the first quarter of last year, it rose by 60.6 basis points in the first quarter of this year. As a result, valuation gains and losses on securities shifted from a profit of 1.4 trillion won in the same period last year to a loss of 1.8 trillion won in the first quarter of this year. Selling and administrative expenses also increased. In the first quarter, selling and administrative expenses of domestic banks reached 7.2 trillion won, up 400 billion won from 6.8 trillion won a year earlier. Personnel expenses increased by 100 billion won to 4.3 trillion won, and material expenses rose by 200 billion won to 2.8 trillion won, respectively.

Profitability indicators also worsened. The return on assets (ROA) of domestic banks stood at 0.64% in the first quarter, down 0.07 percentage points from 0.71% in the same period last year. Return on equity (ROE) was 8.68%, a decrease of 0.89 percentage points from 9.57% a year ago.

Interest income continued to grow. In the first quarter, interest income of domestic banks amounted to 15.8 trillion won, up 1 trillion won or 6.4% from 14.9 trillion won in the same period last year. This increase was attributed to the average balance of interest-earning assets rising by 162.1 trillion won year-on-year to 3,556 trillion won, as well as the net interest margin improving by 0.03 percentage points to 1.56%.

Among commercial banks, internet banks showed remarkable growth. The net profit of internet banks in the first quarter was 300 billion won, up 45.3% from the same period last year. Regional banks also recorded a 4.0% increase to 300 billion won. In contrast, the net profit of major commercial banks slightly decreased by 0.6% year-on-year to 3.7 trillion won.

The Financial Supervisory Service explained that the decrease in net profit of domestic banks in the first quarter was due to a combination of factors: a decline in non-interest income, increased selling and administrative expenses, and a reduction in non-operating profit, despite the rise in interest income. The Financial Supervisory Service stated, "Given the growing domestic and external uncertainties, we will guide banks to strengthen their loss-absorbing capacity so they can maintain soundness even amid unexpected shocks. We will also continue to encourage banks to faithfully fulfill their social and public responsibilities, such as productive and inclusive finance, based on solid profitability."

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