South Korean lenders saw their profit sink more than 50 percent last year as they suffered a decline in interest income and set aside more reserves against bad loans, the financial regulator said Thursday.

The combined net income of 18 local banks, including market leaders Woori and Kookmin, reached 4 trillion won ($3.77 billion) in 2013, down from the 8.7 trillion won the previous year, according to the Financial Supervisory Service.

Local banks’ profit has been rising, reaching 11.8 trillion won in 2011 and 9.3 trillion won in 2010.

The financial watchdog attributed the sharp decline in their earnings to low interest rates and increased loan-loss reserves.

The Bank of Korea, the country’s central bank, has maintained its key interest rate at a two-year low of 2.5 percent since May last year after cutting the borrowing costs by a quarter percentage point in a bid to fuel growth amid the protracted downturn.

The net interest margin, a key gauge of profitability, came to 1.87 percent, the lowest since 2002, the watchdog said. (Yonhap)