S Korean banks mark first quarterly loss in 8 years

Special Report:Global Financial Crisis

SEOUL, Feb. 3 (Chinese media) -- South Korean banks marked

the first quarterly loss last quarter in eight years due to increased loan-loss

reserves and full-year earnings decreased by nearly 48 percent, the financial

watchdog said Tuesday.

Total losses of 18 commercial and state-run banks

climbed to 300 billion won (215.4 million U.S. dollars) in the fourth quarter of

2008, while the total profits a year earlier and three months earlier marked 1.9

trillion won (1.4 billion U.S. dollars) and 1.5 trillion won (1.1 billion U.S.

dollars) respectively, according to a preliminary estimate by the Financial

Supervisory Service (FSS).

It was the first quarterly loss since the fourth

quarter of 2000 when their losses marked 4.6 trillion won, or 3.3 billion

U.S.dollars. Combined with earnings for the rest of the quarters of 2008, the

on-year total earnings dropped 47.4 percent to 7.9 trillion won, or 5.7 billion

U.S. dollars.

Their net interest margin (NIM), a key barometer of

profitability, also made 2.39 percent in the fourth quarter, down from 2.44

percent the previous year, according to the watchdog.

Local lenders set aside 1 trillion won, or 0.7

billion U.S. dollars, in loan-loss reserves in the fourth quarter to prepare for

the shipbuilders and construction firms going through reconstruction, according

to FSS. For the whole year, local banks'loan-loss reserves amounted to 9.9

trillion won, or 7.1 billion U.S. dollars up 121.3 percent from a year earlier.

"Hit by the global economic slump, bad loans

increased in the fourth quarter. Given the fast cooling economy, local banks'

earnings outlook for the current quarter seems to be gloomy," said Joo

Jae-seong, assistant governor at the watchdog's banking service division.

Profit margins are expected to stay on a downward

slope due to skyrocketing funding costs and record low interest rates, said Joo.