The combined net profit of local banks amounted to 18.5 trillion won (14 billion U.S. dollars) in 2022, up 9.6 percent from the previous year, according to preliminary data from the Financial Supervisory Service (FSS).
Banks' interest income jumped 21.6 percent over the year to 55.9 trillion won (42.6 billion dollars) last year.
Domestic banks raised lending rates faster than deposit rates to generate profit on the back of policy rate hikes.
The country's central bank began to tighten its monetary policy stance in August 2021, lifting its benchmark interest rate by 3.0 percentage points to 3.50 percent in January this year.
The average net interest margin (NIM) of banks, or the difference between interest received and interest paid, added 0.17 percentage points to 1.62 percent last year.
Non-interest income tumbled 52.0 percent over the year to 3.4 trillion won (2.6 billion dollars) in 2022 on securities-related losses and lower commission profits.
Loan-loss provisions spiked 55.1 percent to 6.3 trillion won (4.8 billion dollars) as banks expanded loan-loss reserves in preparation for uncertainties at home and abroad.
The return on assets of local banks, a key gauge of profitability, declined 0.01 percentage point to 0.52 percent last year, but the return on equity rose 0.44 percentage points to 7.41 percent.
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