The combined net income of local banks amounted to 5.4 trillion won (4.2 billion U.S. dollars) in the July-September quarter, down 23.9 percent from the previous quarter, according to preliminary data from the Financial Supervisory Service (FSS).
Interest income remained high in the cited quarter as domestic banks raised lending rates faster than deposit rates amid the policy rate hikes.
Non-interest income retreated in double figures as higher interest rates expanded losses from bond investment.
The central bank had left its benchmark interest rate unchanged at 3.50 percent since January after lifting it by 3.0 percentage points for the past one and a half years.
The average net interest margin (NIM) of banks, or the difference between interest received and interest paid, shrank from 1.68 percent in the first quarter to 1.67 percent in the second quarter and 1.63 percent in the third quarter as the authorities instructed banks to refrain from excessive interest income.
Loan-loss expenses jumped 44.2 percent over the quarter to 2.0 trillion won (1.5 billion dollars) in the third quarter as banks expanded loan-loss reserves in preparation for uncertainty at home and abroad.
The return on assets of domestic banks, a key gauge of profitability, declined 0.20 percentage points to 0.58 percent in the cited quarter, while the return on equity tumbled 2.78 percentage points to 7.87 percent.
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