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Savings banks' net deficit narrows in fiscal 2013

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(GlobalPost/GlobalPost)

By Kim Boram

SEOUL, Aug. 6 (Yonhap) -- South Korean savings banks' net losses narrowed in fiscal 2013 as they have successfully executed stringent restructuring to clean out their balance sheets following a series of bankruptcies a few years ago, the financial watchdog said Wednesday.

The combined net loss of 87 savings banks stood at 448.3 billion won (US$433 million) in the period from July last year to June this year, falling 59.4 percent, or 656.8 billion won, from 1.1 trillion won in the previous time frame, according to the Financial Supervisory Service (FSS). The banks close their books in June.

The decline came as their bad loan reserves decreased sharply over the cited period as part of the local secondary lenders' debt workout processes to improve their financial health, the FSS said.

For the April-June period, the lenders net swung to the black for the first time since 2008 at 23.8 billion won.

The savings banks set aside 1.1 trillion won for bad loans in the one-year period, down 387.9 billion won from a year ago.

The loan delinquency rate of the lenders fell 17.9 percent as of end-June, compared with 21.3 percent tallied at the end of June 2013, with soured corporate debts sliding 4.8 percentage points to 22.2 percent and bad loans to households edging down 0.3 percentage point to 11 percent.

The capital adequacy ratio, a key gauge of financial soundness, stood at 14.42 percent at the end of June, up 4.47 percentage points from a year earlier.

Their combined assets totaled 36.8 trillion won as of end-June, down 6 trillion won from a year earlier.

The FSS said that the improved figures show the local savings banks have successfully exited the aftereffects of the 2008 financial crisis and the following collapses in 2010 and 2011.

"Savings banks have made consistent efforts through tough restructuring since 2011, and their top executives changed their mindset to devote themselves to management," FSS Deputy Gov. Kim Jin-soo said.

About 30 troubled savings banks have been shut down by the watchdog since 2011, with the industry's combined assets dropping to 36.8 trillion won as of June from 86.8 trillion won in 2010, according to the FSS.

The troubles stem from their easy loans to companies engaged in property financing without thorough assessment of the viability of the projects. They were unable to collect the loans as the local real estate market fell into a deep slump in 2008.

A number of heads of the lenders were indicted for embezzling and misappropriating company money.

Kim said the FSS will encourage the secondary lenders to run their own credit management boards to screen out potential bad debtors and adopt tightened monitoring systems to oversee the banks' lending procedures.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/140806/savings-banks-net-deficit-narrows-fiscal-2013