South Korea's savings banks posted net profit for three straight quarters in fiscal 2014 on the back of decreased loan-loss reserves, the financial watchdog said Sunday.

The combined net income of 79 savings banks operating in the country came in at 344.3 billion won ($316 million) in the period from July last year to March this year, a turnaround from a deficit of 476.8 billion won a year ago, according to the Financial Supervisory Service (FSS).

Since they turned to black in the July-September period for the first time in five years, the secondary lenders have kept afloat for three consecutive quarters, with 173.8 billion won and 162.5 billion won in profit in the second and third quarter, respectively.

The savings banks close their books in June.

The watchdog attributed the sharp rebound to a drop in bad loan expenses, as they set aside 465 billion won for bad loans in the nine-month period, down from 972.9 billion won a year earlier.

The loan delinquency rate of the lenders fell to 13.4 percent as of end-March from 14.7 percent three months ago on decreased household and corporate debt, the FSS said.

The capital adequacy ratio, a key gauge of financial soundness, stood at 14.38 percent at the end of March, up 0.36 percentage point from end-December.

Their combined assets totaled 39.6 trillion won as of the end of March, up by 1.8 trillion won from three months earlier.

Local savings banks had suffered ballooning deficits for years as they had extended huge loans to project financing companies amid a domestic real estate boom.

When the housing bubble burst in 2011 and 2012, many of them ended up shutting down or were taken over by larger banks and foreign funds. (Yonhap)