Domestic Banks Report 13.8 Trillion Won in First-Half Net Profit, Down 6.4%

This year, domestic banks reported a net profit of 13.8 trillion won for the first half, a decrease of 9 trillion won compared to the previous year. Although interest income exceeded 32 trillion won, marking the highest amount ever recorded for a half-year, significant valuation losses on securities due to rising interest rates impacted overall profitability.

According to the Financial Supervisory Service's preliminary report on the first-half performance of domestic banks released on August 23, net profit for the first half of 2026 was 13.8 trillion won, down 9 trillion won (6.4%) from 14.7 trillion won in the same period last year.

In terms of specific categories, domestic banks' interest income rose to 32.2 trillion won, an increase of 2.5 trillion won (8.3%) from the previous year. Interest-earning assets grew by 6.4% to 3,628.1 trillion won, contributing to a 0.04 percentage point increase in net interest margin (NIM).

Conversely, non-interest income saw a significant decline. For the first half, non-interest income totaled 2.9 trillion won, down 2.3 trillion won (43.4%) from the previous year. The rise in market interest rates led to substantial valuation losses on securities, resulting in a 5.7 trillion won decrease in securities-related profits compared to the same period last year. However, profits from foreign exchange and derivatives surged from 2.7 trillion won to 5 trillion won, an increase of 86.8%, and commission income also rose by 18.0% to 3.3 trillion won, partially offsetting the losses from securities.

Profitability indicators also worsened. The return on assets (ROA) for domestic banks fell to 0.65%, down 0.10 percentage points from the same period last year, while the return on equity (ROE) dropped to 8.89%, a decrease of 1.15 percentage points.

The decline in net profit has raised concerns about asset quality. The delinquency rate for domestic banks rose from 0.44% at the end of 2024 and 0.50% at the end of last year to 0.56% by the end of June this year. Consequently, loan loss provisions for the first half increased to 3.5 trillion won, up 300 billion won (8.6%) from the previous year.

Operating expenses also rose to 14.4 trillion won, an increase of 700 billion won (5.4%) from the same period last year. Personnel costs rose by 200 billion won to 8.5 trillion won, while material costs increased by 500 billion won to 5.9 trillion won.

A Financial Supervisory Service official stated, "The prolonged geopolitical risks from the Middle East, expanding U.S. tariff policies, and expectations of further interest rate hikes have increased uncertainty, and the upward trend in delinquency rates continues. We plan to strengthen monitoring, particularly in vulnerable sectors, and continuously encourage banks to enhance their loss absorption capacity through provisions."