Commercial banks’ profitability and earnings fell to their lowest since the 2009 global financial crisis due mainly to low interest rates.
According to the Financial Supervisory Service, Korean banks saw their three major indices for profitability mark a three-year low in 2012.
“The banking industry reported a worse performance in three indices ― return on assets (0.49 percent), return on equity (6.41 percent) and net interest margin (2.1 percent),” the FSS said in a statement.
The weak profitability invited a retreat in yearly net profit. The local banks posted 9 trillion won ($8.3 billion) in collective earnings, compared with 11.8 trillion won in 2011 and 9.3 trillion won in 2010.
In particular, their quarterly earnings continued to fall last year ― 3.3 trillion won in the first quarter, 2.1 trillion won in the second, 2 trillion won in the third and 1.5 trillion won in the fourth.
Regulatory officials predicted that the banking sector would also face an unfavorable business environment this year, raising the possibility of a protracted era of low interest. The benchmark rate set by the Bank of Korea stayed at 2.75 percent per annum.
The drop in net profit of the flagship banking sector was estimated to have negatively affected earnings of their parent financial groups.
Four major financial groups ― Woori, KB, Hana and Shinhan ― are scheduled to make public their 2012 earnings this Friday.
