South Korean lenders saw their earnings grow more than four-fold in the second quarter from a year earlier, due mainly to decreased loan-loss reserves and one-off gains from the sale of a stake in a local builder, the financial watchdog said Thursday.

The combined net income of 18 local banks came to 5.9 trillion won (US$5.6 billion) in the April-June period, compared with 1.3 trillion won a year earlier, according to the Financial Supervisory Service (FSS).

The on-year surge came as reserves against bad loans sharply declined, the FSS said. The local lenders set aside a combined 2.6 trillion won in reserves against bad debts in the second quarter, compared with 5.6 trillion won a year earlier.

Their non-interest income more than doubled to 4.7 trillion won from 1.9 trillion won a year earlier, boosted by a stake sale in the country's top builder Hyundai Engineering & Construction Co.

Seven banks, including Kookmin Bank and Citibank, raked in a combined pre-tax profit of 3.2 trillion won from the stake sale.

Their interest income reached 9.8 trillion won in the second quarter, slightly up from 9.4 trillion won a year earlier, according to the FSS. (Yonhap News)