(image: Yonhap)
SEOUL, Aug. 20 (Korea Bizwire) — Listed companies showed slower growth in net profits in the first half of the year, while banks raked in approximately 20 trillion won in interest fees alone.
As the growth rate of listed companies was smaller, banks enjoyed a boom with interest income proving to be a significant driver of growth.
According to the Financial Supervisory Service and the Korea Exchange, the net profits of the 536 companies (excluding 96 financial institutions) listed on the KOSPI in the first half of this year was 6.34 trillion won, which was just a 1.27 percent increase from the year before.
Even though this amount was greater than the highest net profit recorded ever last year, total net profits fell to 4 trillion won, for a 7.3 percent decrease, after removing Samsung Electronics from the equation.
Meanwhile, banks saw net profits increase by 4 percent from last year to total 8.4 trillion won in the first half of the year. Of note, interest income grew 9.5 percent to 19.7 trillion won.
Business insiders say that banks were able to bring in huge profits by leaving interest rates on savings untouched while raising loan interest rates quickly, thus profiting from the savings-loan margin.
The polarization of falling corporate growth rates vis-à-vis the increase in growth rates for banks is more evident in this year’s second quarter, during which corporate net profits fell 6.41 percent from the previous quarter.
Banks, however, enjoyed a 3.1 percent increase in profits from interest fees in the same period.
This was possible as banks increased interest rates on bank loans by 0.07 percentage points while only raising interest rates for deposits by 0.04 percentage points.
Financial critics are voicing worry over the current business practices of banks, which leave many small to mid-sized business without access to loans as financial institutions prefer to make “safe” profits from lending secured against land or other guarantees.
Cho Nam-hee, the head of the Financial Consumer Agency, said that the high profits posted by banks signify that they charged interest rates at levels higher than what was appropriate.
H. S. Seo (hsseo@koreabizwire.com)
