Domestic Banks Earn Over 32 Trillion Won in Interest Income in First Half… Net Profit Down 6.4%

Financial Supervisory Service Releases First-Half 2026 Performance of Domestic Banks

Sharp 43.4% Decline in Non-Interest Income Leads to Decrease in Net Profit

Domestic banks in South Korea posted more than 32 trillion won in interest income in the first half of this year. Driven by an increase in lending and rising interest rates, this figure rose by 2.5 trillion won compared to the same period last year. However, net profit for the period was 900 billion won lower than a year earlier, coming in just under 14 trillion won.

According to the “Provisional Operating Results of Domestic Banks for the First Half of 2026” released by the Financial Supervisory Service on August 23, net profit of domestic banks for the first half of this year totaled 13.8 trillion won. This is a decrease of 900 billion won (6.4%) from the previous year’s 14.7 trillion won for the same period.

Profitability indicators weakened. The return on assets (ROA) for domestic banks was 0.65%, down 0.09 percentage points from 0.74% a year earlier. The return on equity (ROE) dropped by 1.15 percentage points to 8.89%, compared to 10.04% for the same period last year.

The decline in net profit was attributed to a decrease in non-interest income and non-operating profit, even as interest income expanded. In addition, selling and administrative expenses as well as loan loss provisions increased.

By item, banks’ interest income for the first half was 32.2 trillion won, up 2.5 trillion won (8.3%) from 29.7 trillion won a year earlier. Interest-earning assets such as loan receivables grew by 6.4% to 3,628.1 trillion won, and due to rising market interest rates, the net interest margin (NIM) rose by 0.04 percentage points to 1.56% over the same period last year.

In contrast, non-interest income fell sharply. First-half non-interest income was 2.9 trillion won, plunging by 2.3 trillion won (43.4%) from the previous year’s 5.2 trillion won. As market interest rates rose, valuation losses on securities occurred, resulting in securities-related profits turning into deficits, declining by 5.7 trillion won year-over-year—a significant factor in the decrease.

Non-operating profit was 1.1 trillion won, down 200 billion won from 1.3 trillion won a year earlier. Selling and administrative expenses increased by 700 billion won (5.4%) to 14.4 trillion won, mainly due to rises in personnel and material costs. Loan loss provisions also rose by 300 billion won (8.6%) to 3.5 trillion won.

The burden of maintaining asset quality among banks is intensifying. As of the end of June, the delinquency rate for domestic banks was 0.56%, up 0.06 percentage points from 0.50% at the end of last year.

The Financial Supervisory Service is closely monitoring the continued upward trend in the delinquency rate, especially as domestic and global uncertainties are increasing due to factors such as the prolonged geopolitical risks from the Middle East, U.S. tariff policies, and expectations of higher benchmark interest rates.

An official from the Financial Supervisory Service stated, “Given that uncertainties at home and abroad are mounting, we will strengthen monitoring particularly in vulnerable sectors where signs of asset quality deterioration such as rising delinquency rates are appearing. We will continue to encourage banks to strengthen their loss absorption capacity, such as by building loan loss reserves, so that the banking sector can maintain soundness and stable funding supply even in the event of unexpected shocks.”

This content was produced with the assistance of AI translation services.