ID :
183127
Thu, 05/19/2011 - 12:44
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Shortlink :
https://oananews.org//node/183127
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S. Korean banks face growth challenges: Moody's
SEOUL (Yonhap) - South Korean banks are lagging behind their regional counterparts in recovering from the global financial crisis as they face hurdles to further growth, Moody's Investors Service said Thursday.
"The Korean banking system is still recovering from earnings and asset quality problems. By contrast, many Asian peers have fully recovered," Choi Young-il, a senior analyst at the global ratings agency, said in a meeting with reporters.
According to Choi, the average return on assets of the country's 18 lenders stood at 0.56 percent last year. The figure is expected to improve to around 0.7 percent this year, but it still falls behind the fully-recovered level.
Downside pressure on net interest margins, a key gauge of profitability, is also prevalent, he added.
Choi said slowing loan growth is also feared to threaten local lenders as it is likely lead to heated competition in expanding customer bases and lowering loan margins.
Meanwhile, the analyst said the local banking industry's consolidation moves will not be an easy task.
"Consolidation efforts are forecast to take time as challenges lie in creating competitiveness by integrating banks with different sizes and sales forces," he said.
Choi's remarks came after the government on Tuesday unveiled a road map to restart the sale of its stake in Woori Finance Holdings Co. State-run lender KDB Financial Group Inc. was reported to be mulling acquiring the No. 2 banking group in a bid to create a megabank.
If realized, the consolidated entity would become the country's biggest financial group with combined assets of around 500 trillion won (US$460 billion).
"Woori Finance's sales network and employee size is much larger than KDB Financial. Even if the consolidation succeeds, it's likely to take a long time to fully integrate the two entities," Choi said, declining to comment on the feasibility of the merger.
"The Korean banking system is still recovering from earnings and asset quality problems. By contrast, many Asian peers have fully recovered," Choi Young-il, a senior analyst at the global ratings agency, said in a meeting with reporters.
According to Choi, the average return on assets of the country's 18 lenders stood at 0.56 percent last year. The figure is expected to improve to around 0.7 percent this year, but it still falls behind the fully-recovered level.
Downside pressure on net interest margins, a key gauge of profitability, is also prevalent, he added.
Choi said slowing loan growth is also feared to threaten local lenders as it is likely lead to heated competition in expanding customer bases and lowering loan margins.
Meanwhile, the analyst said the local banking industry's consolidation moves will not be an easy task.
"Consolidation efforts are forecast to take time as challenges lie in creating competitiveness by integrating banks with different sizes and sales forces," he said.
Choi's remarks came after the government on Tuesday unveiled a road map to restart the sale of its stake in Woori Finance Holdings Co. State-run lender KDB Financial Group Inc. was reported to be mulling acquiring the No. 2 banking group in a bid to create a megabank.
If realized, the consolidated entity would become the country's biggest financial group with combined assets of around 500 trillion won (US$460 billion).
"Woori Finance's sales network and employee size is much larger than KDB Financial. Even if the consolidation succeeds, it's likely to take a long time to fully integrate the two entities," Choi said, declining to comment on the feasibility of the merger.
