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S. Korean Banks' Net Profits Fell Sharply In 2016 Due To Shipbuilding Industries Woes

By March 6, 2017 at 5:10 am
The banks’ combined net profits fell 31.8 percent in 2016 from the previous year, according to the FSS. (Photo : Getty Images)

South Korean banks recorded a sharp decline in net income in 2016, due to huge loan loss spending as a result of the financial troubles of several companies in the shipbuilding industry, according to data from the Financial Supervisory Service (FSS) released Monday.

The banks' combined net profits stood at 3 trillion won last year, a 31.8 percent decline from 2015, according to the FSS.

Specialized banks, which include state-run lenders like the Export-Import Bank of Korea and the Korea Development Bank (KDB), were hit by a net loss of 3.5 trillion won in 2016, according to a report by the Yonhap News Agency.

In 2016, the KDB's net losses reached 3 trillion won, the widest deficit since 1998 when the country just went through a foreign exchange crisis.

The loan loss expenditures of specialized banks increased by 2.2 trillion won to 8.9 trillion won following the restructuring of South Korea's huge shipbuilding companies STX Offshore & Shipbuilding Co. and Daewoo Shipbuilding & Marine Engineering.

State-run Industrial Bank of Korea (IBK) reported last month that its net profit climbed 1.2 percent in 2016 from the previous year as interest income increased. The lender's regulatory filing showed last year's net profit stood at 1.16 trillion won, compared to 1.15 trillion won from the previous year.

At the same time, the net profit of Seoul-based commercial banks soared 32.5 percent from the previous year to 5.5 trillion won in 2016.

KB Financial Group said last month that because of improved profitability, its net profit increased 26.2 percent in 2016 to surpass the 2 trillion won mark.

The banking giant posted a full-year net profit of 2.14 trillion won last year, an increase of 26.2 percent from the previous year, and marks the first time that the group's net profit surpassed the 2 trillion won mark in the last five years.

Meanwhile, the return on assets (ROA) of the country's banks slid by 0.13 percent, a decline of 0.08 percentage point. The return on equity (ROE) also fell by 0.93 percentage point to 1.65 percent. Last year's ROA and ROE were the lowest since 2000. 

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