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Non-interest earnings make up 12% of profits generated by Korean banks

Non-interest related earnings made up just 12 percent of profits generated by local banks in 2018, much below the global average, a local think tank said Sunday.

The latest findings clearly showed the high degree of dependence on interest and the need to diversify the business portfolios of lenders, the report by Korea Institute of Finance said.

It said that out of the 45.8 trillion won (US$40.3 billion) in total profits reported by banks, non-interest earnings stood at 5.5 trillion won.


By lender, Woori Bank had the highest percentage of non-interest earnings at 16 percent, followed by Shinhan and Hana at 13.6 percent and 12.3 percent, respectively, with KB Kookmin standing at 11 percent.

By contrast, at the worldwide level, 20-30 percent of earnings reported by banks came from non-interest sources.

KIF said the reliance on interest is directly related to lenders‘ strategy of providing funds to “safe” companies and individuals that can bring in interest. This strategy, while less risky, has hurt diversification efforts and kept bank lenders from seeking other means of making profits.

“With a drop in growth and with state regulators tightening borrowing rules, banks need to come up with more innovative strategies for sustainable growth,” a researcher said. (Yonhap)