Guarding against losses eats into banks’ profits

Korean banks saw their combined net profit from overseas operations fall 13.5 percent in the first half of this year from a year earlier due mainly to an increase in loan-loss provisions, the financial regulator said yesterday.

Net income by 134 overseas units and branches managed by 11 local banks reached $371.6 million in the January-June period, compared with $429.4 million a year earlier, according to the Financial Supervisory Service (FSS).

The weaker bottom line came as they set aside more reserves to brace for possible loan losses in the jittery global climate, the FSS said. Their combined loan-loss reserves stood at $107.7 million as of end-June, up 71.2 percent from the previous year.

Their non-interest income tumbled 51.5 percent to $8.1 million over the cited period on securities investment losses, contributing to the profit decline, it added.

In contrast, the overseas outlets’ combined interest earnings rose 8.3 percent to $694.7 million, as borrowing costs dropped thanks to a lower benchmark rate in the offshore market.

Their average net interest margin, a key gauge of profitability, came in at 1.69 percent, down 0.44 percentage point from the first half of 2011.

Their combined assets totaled $69.2 billion as of end-June, up 8.1 percent from last year, the regulator added.

Yonhap