Seoul: Savings banks returned to profitability in the first half of the year, reversing from a loss a year earlier, driven by a reduction in loan-loss reserves, data revealed on Friday.

According to Yonhap News Agency, the combined net profit of 79 savings banks across the nation reached 257 billion won (US$185 million) during the January-June period. This marks a significant turnaround from a net loss of 396 billion won recorded in the same period last year. A key factor contributing to this improvement was a reduction in loan-loss reserves by 686 billion won compared to the previous year.

The data indicated an improvement in asset soundness for these banks, with the delinquency rate dropping to 7.53 percent at the end of June from 8.51 percent a year earlier. Corporate loan rates decreased by 1.99 percentage points year-on-year to 10.82 percent in the first half, while household loan rates saw a slight increase of 0.07 percentage points to 4.6 percent over the same period.

The average capital adequacy ratio for savings banks stood at 15.6 percent at the end of June, further reflecting improved financial health. In contrast, the previous year saw these banks suffering a net loss for the second consecutive year, with a combined net loss of 397 billion won following a loss of 576 billion won the year before. The losses were mainly attributed to high-risk short-term real estate project financing loans.