South Korea's banks sharply increased their net profits in the third quarter of this year mainly on reduced costs, official data showed Monday.

The combined net income of the banks here came to 3.2 trillion won ($2.7 billion) during the July-September period, up 151.2 percent from a year earlier, according to the Financial Supervisory Service (FSS). It marks the highest level since they posted 3.3 trillion won in combined net income in the first quarter of 2012.

"The growth was mostly attributable to an increase in interest income resulting from expanding assets under management and temporarily growing FX-derivatives income with falling loan loss expenses of specialized banks," said Min Byeong-jin, an FSS official.

The volume of bank loans classified as substandard or below (SBLs) dropped to 29.1 trillion won over the three months from 30.4 trillion won recorded in the previous quarter. The ratio of SBLs dipped 0.08 percentage point to 1.71 percent.

Interest income increased only 2.1 percent on-year to 8.6 trillion won, while the net interest margin (NIM), a measurement of profitability, fell 0.02 percentage point to 1.54 percent.

Meanwhile, the delinquency rate of local banks' won-denominated loans climbed 0.01 percentage point to 0.81 percent in October from a month earlier, the FSS added.

It's lower than the on-month growth rate of 0.04-0.06 percentage point recorded in October between 2013 and 2015.

The delinquency rate of loans to large companies stood at 2.57 percent, down 0.10 percentage point from September, while that of loans to small and medium-sized firms increased 0.04 percentage point to 0.83 percent.

When it comes to household loans, the rate rose 0.01 percentage point on-month to 0.31 percent. (Yonhap)