(4 May 2005 – South Korea) South Korean banks are feeling the pinch in their earnings as they battle to stave off the competition from foreign banks.The country’s financial regulator, Financial Supervisory Service (FSC), said the banks’ profits would plateau in 2005 because of falling interest and fee incomes.
The watchdog said local banks were showing an inability to diversify their revenue streams and that the inroads made by foreign banks had resulted in a fall in loan deposit spreads and fee incomes.
Citigroup and Standard Chartered have bought stakes in Korean banks over the past 12 months.
Korean banks also needed to improve efficiencies, FSC said, and were suffering from a surge in bad loans.
FSC said the combined pre-provisioning profit of 19 domestic banks was currently sitting at 4.62 trillion won, down almost 12 percent on the previous year.
The regulator forecast the banks would post profits this year but that earnings would level off in 2006 and beyond.