South Korea banks post 6.4% profit drop in H1 2026

Interest earnings climbed 8.3% to $23.8b but failed to offset weaker revenue elsewhere.

South Korea’s domestic banks reported a 6.4% year-on-year (YoY) decline in net income in the first half of 2026 as weaker non-interest income and higher costs offset stronger interest earnings.

Preliminary net income fell to $10.2b (KRW13.8t) from $10.9b (KRW14.7t) a year earlier, according to the Financial Supervisory Service (FSS). Commercial banks posted $6.7b (KRW9.1t) in net income, whilst specialised banks recorded $3.4b (KRW4.6t).

Bank profitability also weakened. Return on assets fell to 0.65% from 0.74%, whilst return on equity declined to 8.89% from 10.04% in the same period last year.

Interest income increased 8.3% YoY to $23.8b (KRW32.2t) from $22.0b (KRW29.7t). The regulator attributed the increase to a 6.4% rise in interest-bearing assets and a higher net interest margin, which increased to 1.56% from 1.52%.

However, non-interest income fell 43.4% YoY to $2.1b (KRW2.9t) from $3.8b (KRW5.2t). 

Securities-related income swung to a $1.8b (KRW2.5t) loss from $2.4b (KRW3.2t) in income a year earlier as higher market interest rates resulted in securities valuation losses. 

Fee and commission income rose to $2.4b (KRW3.3t) from $2.1b (KRW2.8t), whilst foreign exchange and derivatives income increased to $3.7b (KRW5t) from $2.0b (KRW2.7t).

Operating costs also increased. Selling, general and administrative expenses rose 5.4% YoY to $10.6b (KRW14.4t), whilst loan loss expenses climbed 8.6% YoY to $2.6b (KRW3.5t).

The FSS said it will monitor banks’ financial stability and push them to strengthen their capacity to absorb losses amidst increased uncertainty. 

The first-half figures are preliminary and are based on the separate financial statements of 20 domestic banks.

($1.00 = KRW1353.05)