Net profit fell by 20% due to increased provision despite an increase in interest income
(Seoul = Yonhap Infomax) Reporter Mab Ji-hyeon and Lee Su-yong = As the interest burden on households and corporations increases following the increase in the interest rate, and the conditions for repaying vulnerable borrowers worse, the delinquent rate of banks’ savings is also turning on a red light.
Although interest income increased, there was a 20% reduction in net profit compared to the previous year due to a preventive provision to prepare for future insolvency risks.
According to the Financial Supervisory Service on the 24th, the total loan delinquency rate of 79 savings banks at the end of last year was 3.4%, up 0.9 percentage points (p) from the end of the previous year.
The corporate loan delinquency rate was 2.8%, and the home loan delinquency rate was 4.7%, each up 1%co from the end of last year.
Savings banks are used more often by vulnerable borrowers than commercial banks, and the decline in borrowers’ ability to repay following the Bank of Korea’s successive base rate hikes from the second half of last year is cited as the reason for the high delinquency rate. .
The substandard and subordinated loan ratio was 4.1%, up 0.7%p since the end of the previous year.
The ratio of loan loss provision to required reserve was 113.3%, down 0.2% last year.
Net profit also fell compared to the previous year due to a preventive provision to respond to soundness risks.
Total annual net profit last year was 1.5957 trillion won, down 18.8% from the previous year (1.9646 trillion won).
Interest income increased by 789.3 billion won compared to the previous year, but this is because the amount of the loan loss provision increased significantly to 835.6 billion won due to the introduction of the obligation to accumulate bad debt provisions for the unused balance of restricted loans.
At the end of last year, total assets were 138.6 trillion won, up 17.2% (20.3 trillion won) from the end of the previous year.
Among them, the total loans were 115 trillion won, up 14.4% (14.5 trillion won) from the end of the previous year. Household loans rose by 6.2%, mainly credit loans, and corporate loans increased by 19.6%, mainly corporate loans.
Equity capital was 14.5 trillion won, up 15.1 percent from the end of last year. This was mainly due to an increase in retained earnings of 1.3 trillion gained as a result of the realization of net profit.
The standard capital adequacy ratio of the Bank for International Settlements (BIS) was 13.25%, which decreased slightly from the end of the previous year, but remains high compared to the regulatory ratio (7-8%).
The Financial Supervisory Service observed that the delinquency rate of savings banks and others was getting somewhat worse, but it was not a worrying situation as it was lower than before Corona 19, and the BIS ratio was generally good, with a ratio BIS is much higher than the rate. regulatory ratio.
An official from the FSS said, “We are taking preventive measures such as checking risk factors to prepare for the possibility of potential insolvency risks becoming a reality.” We intend to improve,” he said.
However, the savings banks industry showed a position that it is rather good considering the main users in relation to the decrease in net profit last year.
The Korean Federation of Savings Banks said, “At the end of last year, the net profit of savings banks decreased year on year, but this was due to rising interest rates and increased uncertainty, and it was not limited to the savings bank industry. .”” he explained.
The association added, “Despite the fact that the main traders are low-income and low-credit people who are sensitive to external shocks, they have realized a high level of profit in a difficult environment.”
He added that the savings banking industry is at a level where soundness indicators can be controlled.
“The increase in the delinquency rate and the substandard and lower loan ratio is a result of the general weakening in the repayment ability of merchants due to a decrease in market liquidity,” the Korea Central Association said.
To prepare for this year’s financial market uncertainty, savings banks plan to strengthen screening standards, conservatively evaluate collateral values, and strengthen advance risk management by accumulating additional allowances for bad debts.
jhson1@yna.co.kr
sylee3@yna.co.kr
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