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Banks' 2020 earnings down 11.5% on loan-loss reserves

Corporate logos of South Korea's leading banks (Yonhap)
Corporate logos of South Korea's leading banks (Yonhap)
South Korean banks saw their 2020 earnings decline 11.5 percent from a year earlier as they set aside more loan-loss reserves amid the pandemic, data showed Monday.

Their combined net profit came to 12.3 trillion won ($10.9 billion) last year, compared with 13.9 trillion won the previous year, according to preliminary data from the Financial Supervisory Service (FSS).

The decline in net profit came as local banks sharply increased loan-loss reserves last year to cope with the fallout from the COVID-19 pandemic.

Loan-loss provisions grew 3.3 trillion won or 88.7 percent on-year to 7 trillion won, it added.

Local banks' interest income grew 500 billion won on-year to 41.2 trillion won. Their non-interest income amounted to 7.3 trillion won last year, up 800 billion won from a year earlier.

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

Local banks' NIM has been on the decline since the first quarter of last year, affected by a long streak of low rates. (Yonhap)