South Korean banks recorded an 18.4 percent year-on-year increase in combined net profit in the first half of 2025, driven by a sharp rise in non-interest income that offset a marginal decline in interest earnings. The Financial Supervisory Service reported that the aggregate net profit of 20 local banks reached 14.9 trillion won, or approximately USD 10.66 billion, in the January to June period, up from 12.6 trillion won in the same period last year.
While interest income slightly decreased by 0.4 percent to 29.7 trillion won, banks saw a substantial boost in earnings from non-interest sources. Non-interest income surged 53 percent to 5.2 trillion won, supported by stronger performances in asset management, fee-based services, and trading activities. The increase highlights a shift in revenue composition amid an evolving financial environment. Banks also raised their loan-loss reserves to strengthen buffers against potential credit risks.
Provisions for bad loans rose 23 percent year-on-year to 3.2 trillion won in the first half, reflecting a more cautious stance amid continued economic headwinds and rising household debt concerns in the domestic market. Profitability indicators improved notably during the period. Return on assets climbed to 0.75 percent from 0.67 percent a year earlier, while return on equity rose to 10.18 percent, an increase of more than one percentage point.
Profitability ratios improve across banking sector
The gains reflect more efficient capital utilization and improved balance sheet management across the sector. The overseas operations of South Korea’s four major commercial banks KB Kookmin, Shinhan, Hana and Woori also contributed to the improved earnings. Combined net profit from their international businesses reached 465.3 billion won in the first half, up 10 percent from 423.6 billion won a year earlier. These results underscore the importance of global diversification in the sector’s earnings profile.
KB Kookmin Bank reported a notable turnaround in its overseas business, shifting from a 37.1 billion won loss in the first half of 2024 to a 72.7 billion won profit this year. The recovery was attributed to improved operations in Indonesia through its local subsidiary, cost-cutting efforts, and expanded local governance measures. Shinhan Bank also posted overseas net profit growth of 6 percent to 315.2 billion won, though this represented a slowdown from last year’s double-digit pace.
Korean banks eye long-term stability through diversification
Performance in Vietnam weakened, with a 9.4 percent drop in subsidiary profits, while operations in Japan offset losses with a 20 percent rise in profit. Hana Bank and Woori Bank, however, experienced declines in international earnings. Hana’s overseas net profit fell 36 percent to 44.9 billion won, affected by lower interest rates in Canada and Germany as well as foreign exchange losses linked to the Russian ruble. Woori Bank’s international profit dropped to 32.5 billion won, a sharp decline linked to a financial fraud case in Indonesia that required substantial provisions.
The results reflect a strong overall performance in the banking sector for the first half of the year, supported by diversified income streams and prudent risk management, despite challenges in some overseas markets. The surge in non-interest income, combined with improved profitability ratios and effective cost control measures, highlights the resilience of South Korean banks in navigating a complex global financial landscape. – By MENA Newswire News Desk.