South Korean Bank Earnings Slip 5.9% as Income From Equity Trading Falls

South Korean banks’ combined profit slipped 5.9 percent in the fourth quarter as earnings from equity trading declined, according to preliminary figures from the country’s financial regulator.

Net income at the 18 lenders totaled 1.6 trillion won ($1.4 billion) for the three months ended Dec. 31, down from a revised 1.7 trillion won a year earlier, the Financial Supervisory Service said in an e-mailed statement today. That compares with a 2.7 trillion-won profit in the previous quarter.

Earnings from stock trading fell to 100 billion won from 900 billion won a year earlier, the regulator said. The nation’s benchmark Kospi index lost 11 percent in 2011, its first drop in three years, as Europe’s sovereign debt crisis led to a rout in global equities.

South Korean regulators are urging lenders to keep sufficient buffers for losses as economic growth decelerates, reaching 0.4 percent in the fourth quarter, the slowest pace in two years.

Net new provisions against bad debt declined to 2.6 trillion won from 3.1 trillion won. Total credit costs, including items that are deducted after net income, rose to 4.9 trillion won from 3.4 trillion won a year earlier as lenders set aside more funds by applying stricter rules to classify bad loans, the regulator said today. The costs include bad-debt provisions, credit-loss reserves and expenses from selling soured loans.

Net interest margin, a measure of profitability on lending, narrowed to 2.23 percent in the period, compared with 2.31 percent a year earlier and 2.32 percent in the previous three months, the FSS said.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net.

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