Korean banks took in less interest in the first half, paid out a great deal less, and still reported 6.4 percent lower profit

Korean banks paid less for their money.

That is where the first half went. The Financial Supervisory Service puts the combined net income of the country's 20 domestic banks at 13.8 trillion won for January to June, down 0.9 trillion won or 6.4 percent on the same six months of last year, in a preliminary release posted to its board on 23 August. Net interest income over that period rose by 2.5 trillion won to 32.2 trillion, an increase of 8.3 percent.

The annex on the last page is where those two figures stop looking like a contradiction. Gross interest revenue did not rise at all. It fell 1.2 percent, from 72.5 trillion won to 71.7 trillion. What moved was the other side of the ledger: interest expense fell 7.7 percent, from 42.8 trillion won to 39.5 trillion. On the arithmetic of the table, the whole of the improvement in the interest line came out of what the banks pay and none of it out of what they take in.

The release explains the same line differently, and both explanations sit within three pages of each other. It attributes the rise to interest earning assets, whose average balance grew 6.4 percent to 3,628.1 trillion won, and to a net interest margin up four hundredths of a point to 1.56 percent.

The 5.7 trillion won that went the other way

Non-interest income is where the profit went.

It came to 2.9 trillion won against 5.2 trillion a year earlier, a fall of 43.4 percent. Almost every component of it rose. Fees were up 18 percent to 3.3 trillion won, trust income up 58.7 percent to 1.0 trillion, and foreign exchange and derivatives income up 86.8 percent to 5.0 trillion. One line swamped all three. Securities related income swung from a 3.2 trillion won profit to a 2.5 trillion won loss, a movement of 5.7 trillion in six months, and 4.4 trillion of that swing is valuation rather than realised trading.

The supervisor puts it down to market rates and prints them. The three year government bond yield stood at 2.953 percent at the end of 2025 and 3.703 percent at the end of June, a rise of 75 basis points. Over the equivalent stretch a year earlier it had moved 14.4 basis points the other way.

Costs, provisions and one series at the back

Selling and administrative expenses came to 14.4 trillion won, up 0.7 trillion or 5.4 percent, split between 8.5 trillion of staff costs and 5.9 trillion of everything else. Loan loss provisioning was 3.5 trillion won, up 8.6 percent, and that average conceals a split worth reading twice: the general banks provisioned 12.7 percent less than a year earlier while the special banks provisioned 104.4 percent more. Return on assets fell to 0.65 percent from 0.74, and return on equity to 8.89 percent from 10.04.

The last thing the release does is print a delinquency series without dwelling on it. Won loan delinquency, measured each December, ran 0.25 percent in 2022, then 0.38, then 0.44, then 0.50 in 2025. The preliminary reading for the end of June this year is 0.56 percent.

Around that number the supervisor lists prolonged geopolitical risk in the Middle East, American tariff policy and a widening expectation that the policy rate will rise. It says it will step up monitoring of the segments where soundness is slipping and keep pressing banks to build loss absorbing capacity, provisioning included.

Every figure here is marked preliminary on the face of the release, and any of it can move when the twenty banks settle their accounts.