FSS. Weekly Newsletter. August 10-14, Summary of Press Releases Weekly Market Briefing.

Transcription

1 FSS Weekly Newsletter August 10-14, 2015 Summary of Press Releases Weekly Market Briefing Financial Supervisory Service 38 Yeoui-Daero Youngdeungpo-Gu Seoul KOREA

2 Summary of Press Releases Bank Earnings, Second Quarter 2015 (Issued August 11) Domestic banks reported preliminary net income of KRW2.2 trillion for the second quarter of 2015, down KRW200 billion from a year earlier. This decline was attributed to a fall in interest income because of decreased net interest margin. Table 1. Net Income, Second Quarter 2015 (In trillions of KRW) Q Year Q2 Commercial banks National banks Regional banks Specialized banks Total Figures for 2015 Q2 bank earnings were preliminary as of the release date and subject to change. Return on Assets and Return on Equity Return on assets (ROA) for the second quarter of 2015 was 0.42%, down 0.09% from the same period a year earlier. Return on equity (ROE) for the first half of 2015 was 0.42%, higher than 0.31% for However, the figure was significantly lower than 0.60%, the average for the prior decade ( ). Compared to a year ago, ROE also fell from 6.65% to 5.51%. Although ROE for the first half of 2015 marked an improvement with 5.43% from 4.05% for 2014, it was lower than 8.04%, the average for the previous ten years. In comparison, the ROA and ROE for U.S. commercial banks in 2014 were 1.00% and 8.97%, respectively. Table 2. ROA and ROE, Second Quarter 2015 (In percent) Q Year Q2 ROA ROE Figures for 2015 Q2 bank earnings were preliminary as of the release date and subject to change. FSS Weekly Newsletter / AUGUST 10-14,

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4 Non-interest Income Non-interest income rose 59.5% from a year earlier to KRW2.5 trillion in the second quarter of A slight rise in service fees as well as an increase in securities-related income contributed to the growth. Table 4. Non-interest income, Second Quarter 2015 (In trillions of KRW) Q Year Q2 Service fees/commissions Trust service income Securities income FX-derivatives income Others Total Figures for 2015 Q2 bank earnings were preliminary as of the release date and subject to change. Selling and Administrative Expenses Selling and administrative expenses for the second quarter of 2015 came to KRW5.6 trillion, up 4.9% from the same period a year earlier. This rise mostly resulted from increased labor cost driven by a rise in early retirement payment. Table 5. Selling and Administrative Expenses, Second Quarter 2015 (In trillions of KRW) Q Year Q2 Labor cost Material cost Total Figures for 2015 Q2 were preliminary as of the release date and subject to change. Loan Loss Expenses The aggregate loan loss expenses defined as the sum of (1) provision for loan losses, and (2) regulatory adjustment to provision for loan losses (the difference between regulatory minimum and IFRS-based provision) for the second quarter of 2015 was KRW2.1 trillion, up 14.6% from the same period a year earlier. Loan loss expenses increased mostly because a number of large businesses sought workout with their creditors. Table 6. Loan Loss Expenses, Second Quarter 2015 (In trillions of KRW) Q Year Q2 Provision for loan losses Regulatory adjustment to provision for loan losses Total Figures for 2015 Q2 were preliminary as of the release date and subject to change. Non-operating Income Non-operating income for the second quarter of 2015 turned negative with a loss of KRW295.0 billion, up from KRW88.4 billion a year earlier. This was mostly driven by losses from equity investments in subsidiaries. FSS Weekly Newsletter / AUGUST 10-14,

5 Table 7. Non-operating Income, Second Quarter (In billions of KRW) Q Year Q2 Subsidiaries-related income Others Total Figures for 2015 Q2 were preliminary as of the release date and subject to change. 2 Others include income from rent and disposition of tangible assets. Table 8. Summary income statement, Second Quarter 2015 (In trillions of KRW) Q Year Q2 Interest income Interest revenue Interest expense Non-interest income Service fees/commissions Trust service income Securities-related income Securities trading Valuation gains Dividend income FX-derivatives income Income on loan sales Total income Selling and administrative expenses Operating income before provision for loan losses Provision for loan losses Operating income Non-operating income Subsidiaries-related income Income tax Net income under K-IFRS Regulatory adjustment to provision for loan losses Net income Figures for 2015 Q2 were preliminary as of the release date and subject to change. Savings Banks Net Income, Financial Status and Asset Quality for Fiscal 2014 (Issued August 11) Net Income Preliminary net income of 79 savings banks for the fiscal 2014 from July 2014 to June 2015 totaled KRW500.8 billion, a KRW1.79 trillion jump from the KRW508.9 billion loss a year earlier. This marked an overall improvement in the banks operations after six years of continued losses. Compared to a year ago, interest income and others increased with provision for loan losses plummeting, contributing to the huge growth in net income. Specifically, the banks all reported increased net income from the fiscal 2013, and most of them were in the black. In particular, medium FSS Weekly Newsletter / AUGUST 10-14,

6 and large savings banks with more than KRW500 billion in assets achieved much larger net income than a year earlier. In respect of ownership structure, the largest Figure 1. Net Income Trend, FY2007 to FY2014 increase in net income came from those owned by securities companies, funds and other financial groups. (In millions of KRW) 10,000 3,367 5, ,000 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY ,089-7,728-11,252-16,590-20,000-30,000-27,777 Table 1. Net Income, FY 2014 FY 2013 FY 2014 Operating income Interest income 2, ,194.1 Non-interest income Securities income Service fees/commissions Others Selling and administrative expenses Provision for loan losses 1, Non-operating income Net income Table 2. Net Income by Assets, FY 2014 FY 2013 FY 2014 More than KRW1 trillion Between KRW500 billion and KRW1 trillion Between KRW300 billion and KRW500 billion Between KRW100 billion and KRW300 billion Less than KRW100 billion (In billions of KRW) (In billions of KRW) FSS Weekly Newsletter / AUGUST 10-14,

7 Table 3. Net Income by Ownership Structure, FY 2014 Owned by FY 2013 FY 2014 Financial holding companies and banks Securities companies, funds, and others Businesses Individuals Financial Status (In billions of KRW) At the end of June 2015, the total assets of 79 savings banks amounted to KRW40.2 trillion, up 9.4% from KRW36.7 trillion a year earlier. This rise mostly resulted from a KRW4.6 trillion increase in loans. Table 4. Financial Status, FY 2014 FY 2013 FY 2014 June 2014 Dec 2014 Mar 2015 June 2015 Shareholders equity 4, , , ,611.7 Liabilities 32, , , ,616.0 Total assets 36, , , ,227.7 Asset Quality (In billions of KRW) At the end of June 2015, the delinquency rate of total loans by 79 savings banks was 11.5%, 6.1% less than a year earlier. The ratio of bank loans classified as substandard or below (SBLs) also fell from 18.9% to 12.3%. This improvement in asset quality was attributed to the resolution of SBLs in accordance with an ongoing plan to reduce bad loans. Table 5. Delinquency Rate by Loan Type, FY 2014 FY 2013 FY 2014 June 2014 Dec 2014 Mar 2015 June 2015 Business loans Construction Real estate & housing Project finance loans Household loans Unsecured loans College student loans Small unsecured loans to individuals Total Table 6. SBL and Coverage Ratio, FY 2014 FY 2013 FY 2014 June 2014 Dec 2014 Mar 2015 June 2015 SBL ratio Coverage ratio (In percent) (In percent) FSS Weekly Newsletter / AUGUST 10-14,

8 Capital Adequacy The BIS capital ratio of 79 savings banks at the end of June 2015 was 14.57%, up 0.29% from a year ago. This increase mostly resulted from a rise in equity capital exceeding a growth in risk-weighted assets. Table 7. BIS Capital Ratio, FY 2014 (In billions of KRW, percent) FY 2013 FY 2014 June 2014 Dec 2014 Mar 2015 June 2015 Equity capital 4, , , ,709.5 Risk-weighted assets 28, , , ,330.9 BIS ratio FSS to Prevent Damage from Debt Collection after the Completion of Extinctive Prescription (August 10) The Financial Supervisory Service announced on August 10 that it would work to prevent damage from collection of debts, whose extinctive prescription the extinction of a right or claim due to a time lapse has been completed. The announcement is a follow-up to the special measures to stamp out five financial evils that the FSS introduced in April. The period of prescription for loans extended by financial companies classified as commercial claims is five years. Once the prescription has been completed, the debtor is no longer obliged to repay the debt. However, the prescription may be interrupted and may commence to run afresh when the debtor repays part of the debt or when the court orders payment. In general, creditors write off such debts, but some sell them off to debt collectors, namely private money lenders. Since 2010, a total of 162 financial firms have sold off KRW412.2 billion (outstanding principal balance) worth of loans extinguished by prescription to debt collectors for KRW12 billion. These money lenders then aim to collect more than what they have paid for from the creditors. They contact consumers in many cases low income individuals and disadvantaged groups without sufficient financial knowledge and often entice them to make a small payment while offering them to reduce the principal amount. However, any payment creates an interruption of the prescription period and the majority of such debtors fall victim to excessive debt collection by money lenders over debts they were not obliged to repay. In order to prevent damage from reckless loan practices and to restore consumer confidence in the financial sector, the FSS plans to issue an administrative guidance in the second half of this year to call on the financial firms to refrain from collecting or selling off loans extinguished by prescription. Information on the completion of extinctive prescription will also be made available on the notice of assignment of a claim, which is delivered to the debtor when the extinguished debt is to be assigned to a third party. The FSS also expects to promote the concept of extinctive prescription to the general public and encourage consumers to actively reach out to consumer support centers that operate across the country for further assistance. FSS Announces Details for Streamlined Sales Process for Investment Products (August 12) The Financial Supervisory Service announced on August 12 detailed plans to streamline sales of investment products. Under the Financial Investment Services and Capital Market Act, more stringent regulations were introduced to protect consumers against evercomplicated financial products and prevent financial incidents similar to that of Tongyang s. However, there have been concerns about current practices working against the interests of both financial firms and consumers. FSS Weekly Newsletter / AUGUST 10-14,

9 As such, the new plans aim to help consumers wishing to purchase investment products while ensuring adequate protection. The number of signatures required when signing contracts to purchase such products will decrease significantly. The entire process for purchasing financial investment products, which used to take more than an hour, is expected to be completed in less than thirty minutes. The plans also call on financial firms to improve consumer protection when making any investment recommendations or soliciting vulnerable consumers. FSS Weekly Newsletter / AUGUST 10-14,

10 Weekly Market Briefing August 10-14, /10 8/11 8/12 8/13 8/14 Change Mon Tue Wed Thu Fri 8/10-14 Stock Indexes KOSPI 2, , , , % KOSPI % KOSDAQ % Treasury and Corporate Bond Yields 3-Yr. Treasury Yr. Treasury Futures Yr. Corporate Bonds (AA-) Foreign Exchange Rates Won/Dollar 1, , , , % Won/100 Yen % 1-month NDF 1, , , , % Foreign Investors Net Stock and Bond Purchases (In billions of KRW) KOSPI KOSDAQ KRX-listed Bonds , ,386.0 Daily KOSPI and KOSDAQ Trading Volume (In billions of KRW) Stocks 7, , , , (Foreign Investors) 2, , , , ,138.3 Bonds 6, , , , Net cumulative amount for the week of August 10-14, 2015; FSS Weekly Newsletter / AUGUST 10-14,

11 FSS Overseas Offices New York 14 th Floor, 780 Third Avenue New York, NY Tel: Fax: Washington, DC 1701 K Street, N.W., Suite 205 Washington, DC Tel: Fax: London 4 th Floor, Aldermary House, Queen Street London EC4N 1TX Tel: Fax: Frankfurt Feuerbach str Frankfurt am Main Tel: Fax: Tokyo Yurakucho Denki Building, South Kan 1051, 7-1 Yurakucho 1-Chome, Chiyoda-ku, Tokyo Tel: Fax: Beijing Room C704, Office Building, Kempinski Hotel Beijing, Lufthansa Center, No. 50, Liangmaqiao Road, Chaoyang District, Beijing Tel: Fax: Hong Kong Suite , Jardine House, 1 Connaught Place, Central, HONG KONG Tel: Fax: Hanoi #1203, 12th floor, Daeha Business Center, 360 Kim Ma, Ba Dinh, Hanoi Tel: Fax: FSS Weekly Newsletter / AUGUST 10-14,

12 About This Publication The FSS Weekly Newsletter is freely available online as a PDF document at This publication, like other English publications the FSS issues for the benefit of the general public, is intended for informational use only and does not carry any legal authority. The reader is further advised that, while every effort is made to be faithful to the original Korean text, the FSS neither warrants the accuracy of the English translation nor assumes any liability for any mistranslation contained in this publication. The content of this publication is protected under the copyright laws of the Republic of Korea and as applicable elsewhere. Information obtained from this publication should be attributed to the Financial Supervisory Service of Korea. Please your questions, suggestions, or comments for FSS Weekly Newsletter to intlsupport@fss.or.kr. FSS Weekly Newsletter / AUGUST 10-14,