Rate cuts help trim earnings at local lenders by 4.1 percentKorean lenders saw their earnings slide 4.1 percent in the third quarter from three months earlier as their interest income shrank after a series of rate cuts by the central bank, the financial watchdog said yesterday.
The combined net income of 18 local banks came to 2 trillion won ($1.82 billion) in the July-September period, compared with 2.1 trillion won in the previous quarter, according to the Financial Supervisory Service (FSS).
Banks’ cumulative earnings for this year reached 7.5 trillion won as of end-September, tumbling 39.2 percent from the 12.3 trillion won logged for the first nine months of 2011, the FSS said, giving weight to a dismal 2012 earnings outlook projected by many analysts.
The declining quarterly profit came on the heels of a drop in interest income, which slid 100 billion won to 9.5 trillion won from the previous three months.
Their net interest margin (NIM), a key gauge of profitability, stood at 2.06 percent in the third quarter, down 0.08 percentage point from the previous three months. Compared to a year earlier, the combined NIM sank 0.25 percentage point, the FSS said.
The regulator noted that the central bank’s decision to cut the key rate in the second half contributed to their worsening performance. The Bank of Korea slashed the benchmark 7-day repo rate by a quarter percentage point to 3 percent in July, and again in October to 2.75 percent, in a bid to boost the slowing economy.