South Korean banks’ NIMs to support stable profitability in H2

The four biggest banks’ NIMs climbed to levels higher than pre-COVID.

South Korean banks’ rising net interest margins or NIM should support its profitability in the second half of 2022, reports Fitch Ratings.

The first half performance of the four major Korean banks—Kookmin Bank, Shinhan Bank, KEB Hana Bank, and Woori Bank—were boosted thanks to a 15 basis point (bp) average improvement in their NIMs, soaring to higher levels than during the pre-COVID era.

Additional policy rate hikes will improve these banks’ NIMs further in the next few quarter and help sustain stable financial profiles, Fitch said.

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“This is despite the increased social and political pressure on banks to share the burden of supporting vulnerable borrowers, whose debt-service capacity is weakening due to higher interest rates and slowing economic growth,” the report added.

Increased revenue from the repricing of loans will also offset the rise in credit costs and expenses as the moderate pace of monetary tightening is sustained, the ratings agency said.