In the first quarter of this year, savings banks recorded a net profit of 44 billion won, successfully turning into the black. However, with the economic recession affecting the ability of debtors to repay, the arrears rate rose to the 9% range.
According to the Korea Savings Bank Association, 79 savings banks nationwide reported a net profit of 44 billion won in the first quarter. This marks a successful turnaround from a loss of 154.3 billion won in the first quarter of last year. The Korea Savings Bank Association noted that the provision for losses was improved compared to the same period last year, as the amount allocated for proactive loan loss provisions decreased by about 300 billion won.
The total interest income of savings banks in the first quarter was recorded at 13.489 trillion won, a decrease of 59.9 billion won compared to the same period last year, which had 14.088 trillion won. In the first quarter, interest income was 22.705 trillion won, which decreased by 215.5 billion won compared to the same period last year due to a reduction in loan size.
Interest expenses decreased by 155.6 billion won to 921.6 billion won as a result of stabilized deposit rates compared to the same period last year. The decrease in the allocation for loan loss provisions that had been proactively set aside last year affected the performance. The allocation for loan loss provisions in the first quarter of savings banks was 905.8 billion won, decreasing by 323.4 billion won compared to the same period last year, which was 1.2292 trillion won.
The arrears rate has increased. In terms of soundness indicators, the arrears rate of savings banks in the first quarter was 9%, up 0.48 percentage points from the end of last year, which was 8.52%. The arrears rate of savings banks has been on the rise as the repayment ability of debtors declines due to the economic downturn.
Specifically, the arrears rate for corporate loans was 13.65%, while the arrears rate for household loans was 4.72%, rising by 0.84 and 0.19 percentage points, respectively, compared to the end of last year. The ratio of non-performing loans was 10.59%, a decrease of 0.07 percentage points compared to the end of last year, which was 10.66%.
The total assets of savings banks were 118.6 trillion won, down 23 billion won (1.9%) from the end of last year, which was 120.9 trillion won. The loans (96.5 trillion won) decreased by 14 billion won (1.4%) over three months as loans focusing on corporations decreased. By sector, household loans remained stable at 40.4 trillion won, but corporate loans decreased by 12 billion won compared to the end of last year, totaling 48.2 trillion won.
The size of deposits (99.6 trillion won) has fallen below the 100 trillion won mark. This represents a decrease of 26 billion won compared to the end of last year, which was 102.2 trillion won. It has decreased for five consecutive months since November of last year, falling below 100 trillion won for the first time in eight months.
The equity capital of savings banks remained at 14.5 trillion won, the same level as the end of last year. Additionally, the Basel III standard capital adequacy ratio of savings banks rose by 0.26 percentage points to 15.28%, compared to the end of last year, which was 15.02%. The capital adequacy ratio maintained a level twice the legal standard (8% for assets over 1 trillion won and 7% for assets under 1 trillion won).
The Korea Savings Bank Association plans to focus on the resolution of non-performing loans. To this end, it will establish a subsidiary to support the purchase of industry non-performing loans (NPLs) within the first half of the year and plans to commence operations in the second half. The Korea Savings Bank Association said, "For the time being, the focus will remain on strengthening risk management centered on management stability, and a full-fledged turnaround is expected by the end of the year."