SEOUL, July 30 (Yonhap) -- Financial holding companies in South Korea are expected to perform the worst this year since the 2008 global financial crisis, dented by the low-rate policy and corporate defaults, the financial regulator said Tuesday.
Twelve banking groups, including No. 1 player Woori Finance Holdings Co., are estimated to log a combined net profit of 7.3 trillion won (US$6.56 billion) in 2013, down 25.5 percent from the previous year, according to the data by the Financial Supervisory Service (FSS).
The forecast will mark the lowest in the last five years, the FSS said. They saw their combined net income tumble to 3.56 trillion won and 3.59 trillion won in 2008 and 2009, respectively, in the wake of Lehman Brothers collapse.
A year later, their combined net income doubled, before reaching a record 12.8 trillion won in 2011, on the back of aggressive expansion and favorable market conditions, the data showed.
The dim outlook for this year came as banking firms have seen their interest income slide due to the central bank's easing cycle. The Bank of Korea has cut the key rate three times since July last year to 2.5 percent to prop up the slowing economy.
The lower rate weighs down banks' profitability as they rely heavily on interest income for their returns.
The banking groups have also suffered huge losses from the debts they extended to a few large companies that were cash-strapped and filed for either bankruptcy or restructuring.
Market watchers pointed out that local banking industry has been busy growing in size to 12 players from only four before 2008 but that it has failed to really beef up their financial health.
In a bid to revamp the situation, the FSS plans to roll out as early as next month a set of measures aimed at improving the banking groups' profitability and their ownership structure, the regulator said.
In the first quarter, banking groups posted a combined net income of 1.83 trillion won, equivalent to only 18.7 percent of their quarterly earnings a year earlier, according to FSS data.