South Korean banks reported worsening profitability overseas this year, having previously advanced into foreign countries in reflection of the saturated domestic market.

The Financial Supervisory Service said Tuesday that 148 operations of Korean banks in 33 countries posted a return on assets, a key index for earnings ratio, of 0.83 percent during the first half of the year.

The figure is lower than the 0.96 percent of 2012 (1.13 percent in the first half of 2012) and 1.19 percent in 2011, reported by the lenders.

Their net interest margin also stayed at 1.51 percent in the first half of 2013, compared with 1.91 percent in 2012 (1.74 percent in the first half of 2012), 2 percent in 2011 and 2.14 percent in 2010.

“Due to their reduced income in the interest sector, the banking industry’s overseas operations saw their earnings fall 14.5 percent on a year-on-year basis,” the FSS said in a statement.

The operations such as branches and corporations posted net profit of $282 million during the first six months of 2013, compared with $330 million over the same period a year before.

Further, they saw the bad loan ratio climb from 0.9 percent at the end of 2012 to 1.2 percent at the end of June 2013.

With the 2008-2009 global financial crisis fading, local banks have been rushing abroad to get the upper hand in emerging markets such as Vietnam, Indonesia and China.

“Though their collective assets in the overseas market have continued to increase amid competition to find a niche, they fall far behind competitors including Japanese lenders in terms of glocalization strategy as well as profitability,” said a banking research analyst.

The overseas units’ combined assets have been on a steady upward trend ― $53.8 billion at the end of 2009, $56.5 billion at the end of 2010, $64 billion at the end of 2011, $69 billion at the end of 2012 and $71.5 billion at the end of June 2013.

Meanwhile, in the domestic market, the FSS revealed that the two major profitability indices ― return on assets and return on equity ― for the banking sector this year dropped to their lowest levels since 2003.

By Kim Yon-se (kys@heraldcorp.com)