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S. Korean banks' Q2 net down amid low rates

South Korean banks' second-quarter profit slipped 5.4 percent from a year earlier on a decrease in interest income, the financial watchdog said Tuesday.

The combined net profit of 18 local lenders stood at 2.2 trillion won ($1.89 billion) in the April-June period, compared with 2.4 trillion won the previous year, according to the Financial Supervisory Service.

The weak bottom line was affected by a 6 percent on-year fall in their interest income, which stood at 8.3 trillion won in the second quarter, down from 8.8 trillion won a year earlier.

Their interest income has been on a steady decline since the fourth quarter of 2014 as the Bank of Korea trimmed the policy rate by 1 percentage point to a record low of 1.5 percent in the past one year.

In contrast, non-interest income surged 59.5 percent on-year to

2.5 trillion won from 1 trillion won on the back of an increase in investment returns.

The net interest margin, a key gauge of profitability, dropped to an all-time low of 1.58 percent from 1.63 percent three months earlier, according to the watchdog.

The return on assets, another measure of banks' profitability, came in at 0.42 percent in the second quarter, down 0.09 percentage point from a year earlier, it said. (Yonhap)