South Korean banks posted surprisingly good first half earnings on the back of an economic recovery and an uptick in interest rate, industry data showed Sunday, stirring up concerns over their bonus plans amid ballooning household debt.
According to the data, the country's four biggest banking groups -- Shinhan Financial Group Co., KB Financial Group Inc., Woori Bank and Hana Financial Group Inc. -- posted a combined 5.88 trillion won (US$5.25 billion) in net profit for the first six months of the year.
Shinhan Financial earned a net profit of 1.89 trillion won, marking the largest half-yearly net profit, while KB Financial also logged a record first-half profit of 1.86 trillion won.
Net profit of Woori Bank and Hana Financial also pierced the 1 trillion won levels each.
Their record-breaking performances are attributable to a hike in interest rate for household loans, with the country's total home lendings reaching nearly 1,400 trillion won.
As a result, the banks' net interest margin, a key barometer of profitability, improved considerably.
Kookmin Bank, the key banking unit of KB Financial, saw its net interest market rise 0.06 percentage point on-quarter to 1.72 percent in the second quarter, while the corresponding figure for Shinhan Bank reached 1.56 percent, up 0.03 percentage point from the previous quarter.
However, the companies will be prohibited from paying bonus payments to their executives despite an overflow of net profits.
Under a revised ordinance on local financial groups, which will take effect in September, the companies are not allowed to give out bonuses in a lump sum. They should split the planned payments and give 60 percent in the cited year of gains and the rest in the following three years.
Kim Jung-mi email@example.com
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