The local branches of foreign banks in South Korea suffered a sharp drop in their net profits last year on decreased interest income, the financial watchdog said Tuesday.

They posted 764.9 billion won ($668 million) in combined net profits during the year, down 31.8 percent from 2015, according to the Financial Supervisory Service, which cited preliminary data.

In particular, the net interest income of the 37 foreign bank branches plunged 26.2 percent on-year to 1.1 trillion won.

"It means unfavorable internal rate conditions of foreign banks' local branches, as many foreign banks changed interest rate policies amid concerns about uncertainties in global financial markets," the FSS said.

Their total assets came to 264.3 trillion won, a 2.4 percent fall compared to the previous year. (Yonhap)