S Korea banks post higher net profit in Q1

Banks in South Korea logged a larger amount of net profit in the first quarter from a year earlier as rising borrowing costs drove up their interest income, data showed yesterday.

Their combined net income had come to 5.6 trillion won (US$4.4 billion) in the January-march period, up 0.7 percent from a year earlier, according to the preliminary data from the Financial Supervisory Service (FSS).

Banks have basked in rising profits recently as they raised interest rates on loans in line with the government's curbs on lending and the Bank of Korea's move to hike borrowing costs to tame inflation.

In April, the central bank raised its policy rate by a quarter percentage point to 1.5 percent, the fourth rate increase since August last year.

The combined interest income of the banks stood at 12.6 trillion won in the first quarter, up 1.8 trillion won, or 16.9 percent, from a year earlier, the data showed.

Their net interest margin (NIM), a key barometer of profitability, also improved to 1.53 percent in the first quarter, up from 1.43 percent a year before.

The data, however, showed that their non-interest income, including fees, and profits from securities, almost halved to 1.3 trillion won amid recent stock market downswings.

Despite their robust first-quarter earnings, the FSS said that it is necessary for banks to beef up their capacities to absorb shocks from home and abroad amid growing uncertainty at home and abroad.

The regulator expressed concerns over a possibility of economic slowdown in advanced countries, default risks in emerging markets and other downside factors weighing on the domestic economy.