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South Korean banks’ earnings down 11.5% in 2020

This is due to an increase in loan-loss provisions, which grew 88.7% to $6.1b.

South Korean banks’ 2020 earnings declined 11.5% compared to a year earlier as they buffered up reserves to combat expected loan losses amidst the COVID-19 pandemic, reports Yonhap, based on preliminary data from regulators.

Local banks’ combined net profit came at $10.9b (KRW12.3t), compared with KRW13.9t won 2019, according to the Financial Supervisory Service (FSS).

The decline came as banks’ increased loan-loss provisions in 2020. Loan-loss provisions grew by $2.9b (KRW3.3t) or 88.7% YoY to about $6.1b (KRW7t).

Interest income grew by about $440m (KRW500b) to reach $36.2b (KRW41.2t). Meanwhile, non-interest income amounted to $6.4b (KRW7.3t) won last year, up KRW800b from a year earlier.

The average net interest margin (NIM) of banks stood at a record low of 1.38% in the fourth quarter of last year, down 0.02 percentage point (ppt) from three months earlier.

Local banks' NIM has been on the decline since the first quarter of 2020, affected by a long streak of low rates, Yonhap reports.

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