The nation’s major savings banks, including Hyundai Swiss, HK and Solomon, will swing to a third-quarter profit due to a healthier loan portfolio restructured recently to favor more small lending to individuals and less project finance, officials said.

Solomon Savings Bank, the largest of its kind in Korea in terms of assets, is to post more than 20 billion won ($17.85 million) in profit for July-September, according to provisional data compiled by the Financial Supervisory Service.

Hyundai Swiss Savings Bank and HK Savings Banks, the next two biggest lenders in the secondary banking sector, are expected to post 26.2 billion won and 26.1 billion won in net profit breaking with years of industry-wide deficits from soured loans to the housing sector.

“There won’t be more industry-wide probe on savings banks this year but we need to look into their financial data further to see if they really made a turnaround from prolonged deficits,” an FSS official said.

Some interpreted the improved performance as a temporary boost in sales.

“They stopped being so aggressive about lending money for risky projects after so many troubled banks were suspended this year,” a manager at a savings bank said.

Sixteen savings banks were suspended this year for failing to meet capital requirements after their loans to real estate projects went sour. The suspension led to revelations of illegal project financing loans, graft scandals and a host of other illegal practices.

The Financial Services Commission has begun the process of selling six of the 16 distressed savings banks, inviting brokerages and commercial banks to make bids.

By Cynthia J. Kim (cynthiak@heraldcorp.com)