S.Korean banks face grim profit outlook

The economic slowdown and squeezed profit margins are keeping South Korean banks from generating more profit.

"Korean banks' sustained falls in net interest margin are making it difficult for them to earn interest income more and more, raising the need to diversify profit sources," said Lee Byung-yoon, a senior research fellow at the Korea Institute of Finance

Local banks' combined net income in the first half amounted only to 5.5 trillion won or US$4.85 billion, almost half from the 10 trillion won the previous year, according to data by the Financial Supervisory Service.

The report said a fall in the first-half income mainly came as one-off profits like stake sales were missing this year, but it also resulted from a decline in total profits against banks' assets.

Local banks' NIM came in at 2.13 percent in the second quarter, from 2.18 percent three months earlier, according to the FSS.

Local banks' NIM has been on the decline as market interest rates have fallen on prospects for a rate cut bythe central bank.

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