Korean savings banks swung to profit last year, ending two consecutive years of losses as the sector gradually recovers from the fallout of troubled real estate project financing (PF) loans. Delinquency and non-performing loan ratios also showed modest improvement.
According to the 2025 fiscal year results released by the Korea Federation of Savings Banks on the 20th, the combined net profit of 79 savings banks totaled 417.3 billion won last year, an increase of 840.5 billion won from the previous year-end. The savings bank sector had recorded consecutive net losses of 575.8 billion won in 2023 and 423.2 billion won in 2024, marking the first return to profitability in three years.
The federation attributed the earnings improvement to increased gains from securities operations and reduced loan loss provisions. Non-interest income, which includes securities gains and losses, improved significantly from negative 589.1 billion won in 2024 to negative 68.6 billion won last year. Loan loss provisions decreased from 3.72 trillion won in 2024 to 3.26 trillion won last year.
Asset quality indicators also improved. The delinquency ratio stood at 6.0% at year-end, down 2.5 percentage points from 8.5% at the end of the previous year. Corporate loan delinquency improved by 4.8 percentage points to 8.0% from 12.8%, while household loan delinquency edged up slightly to 4.7% from 4.5%. The substandard-and-below loan ratio, which indicates non-performing loans, fell 2.3 percentage points to 8.4% from 10.7%.
The Bank for International Settlements (BIS) capital adequacy ratio rose 0.9 percentage points to 15.9% from 15.0%. The liquidity ratio reached 151.1%, well above the statutory requirement of 100%, while the loan loss reserve ratio stood at 111.3%, exceeding the regulatory minimum by 11.3 percentage points. The federation noted that capital adequacy reached record-high levels due to increased equity from net profit and capital injections, along with reduced risk-weighted assets from loan portfolio contraction.
Meanwhile, total loans in the savings bank sector fell 2.9 trillion won to 93.5 trillion won from 97.9 trillion won, reflecting reduced lending amid the real estate market slump and household debt management policies. Deposits also declined 3.2 trillion won to 99 trillion won from 102.2 trillion won. The federation emphasized that liquidity remains sufficient despite the decrease in deposits.
"In 2026, the savings bank industry is expected to continue facing a challenging business environment due to delayed recovery in the real estate market and sustained household debt management policies," a Korea Federation of Savings Banks official said. "However, we plan to make vigorous efforts to faithfully fulfill our core function as community financial institutions, alongside intensive self-rescue measures."
