The commercial banking sector is estimated to have posted a weak earnings performance in the second quarter in the wake of factors like record-low interest rates, restructuring costs and reserves against insolvent loans, compiled forecasts in the brokerage industry showed Friday.

Banks and financial groups, such as KB Financial and Woori Bank, are scheduled to publicize their second-quarter performance later this month.

According to finance info provider FnGuide, the average of analysts’ projections indicated that the first-tier banking sector will see their collective net profit stay at 1.86 trillion won ($1.63 billion).

The estimate is down by 11.3 percent, or 238.3 billion won, from 2.09 trillion won in the same period last year.

Hana Financial Group is estimated to report the quarterly earnings of 297.9 billion won, down 28.6 percent from 417.8 billion won a year earlier.

Aside from the drop from the net interest margin amid the lowest key rate, which is set at 1.75 percent, brokerage analysts highlighted loan loss provisions for possible bad loans issued to POSCO Plantec and STS Semiconductor & Telecommunications, which are estimated at 50 billion won and 15 billion won, respectively.

Some picked the prolonged conflicts during the merger process between Hana Bank and Korea Exchange Bank in the first half, which was recently settled down.

KB Financial, which had reported the No. 1 earnings in the first quarter, is expected to see a 25.7 percent on-year drop in the second quarter -- from 391.7 billion won to 290.6 billion won.

The core negative factor cited by analysts was the payments to outgoing workers who applied for KB’s voluntary redundancy program. Meanwhile, researcher Choi Jin-seok from NH Investment & Securities said, “Excepting for 330 billion won in the restricting cost, prospects for the group are favorable as its loan loss reserves have shrunk.”

The Industrial Bank of Korea is estimated to see its profit fall by 13.5 percent from 291.2 billion won to 251.9 billion won, and state-controlled Woori Bank by 2 percent from 221 billion won to 216.6 billion won.

Shinhan Financial is also forecast to follow suit with an estimated 6.7 percent drop. But it is expected to surpass its competitors in net earnings to reap 538.9 billion won.

Some predicted worse-than-expected earnings in the banking sector due to its possibly insolvent loans to Daewoo Shipbuilding & Marine Engineering, whose quarterly loss is said to have reached 2 trillion won.

The performance report for Shinhan Financial is slated for July 22, KB Financial for July 23, Hana Financial for July 24, Woori Bank for July 28 and IBK for July 30.

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