Foreign Bank Profits in South Korea Fall Nearly 6% Amid Cost Pressures; Domestic Asset Quality Holds Steady

Foreign Bank Earnings Decline on Rising Costs

Foreign bank branches operating in South Korea suffered a nearly 6 percent drop in earnings during 2025, as high financial costs and valuation losses from equity holdings compressed profit margins, according to data from the Financial Supervisory Service (FSS) reported by Yonhap News.

The combined net profit of 32 foreign banks reached 1.68 trillion won (US$1.11 billion) in 2025, falling by 103 billion won, or 5.8 percent, from the previous year's net income of 1.78 trillion won. Total assets stood at 450.1 trillion won at the end of December.

Revenue declined across both primary income streams. Interest income dropped 4.7 percent year-on-year to 914 billion won, while non-interest income fell 2 percent to 2.49 trillion won. The FSS attributed the profit decline specifically to elevated financial costs and losses related to equity holdings, though detailed breakdowns of these valuation adjustments were not disclosed in the preliminary data release.

Domestic Banking Sector Maintains Stable Asset Quality

In contrast to the earnings pressure facing foreign institutions, South Korea's domestic banking sector demonstrated resilience in credit quality during the fourth quarter of 2025. The ratio of loans classified as substandard or below (SBL) remained unchanged at 0.57 percent from the previous quarter, holding steady at 16.6 trillion won (US$11.1 billion) in absolute terms as of end-December.

Newly soured loans totaled 5.9 trillion won during the October-December period, an increase of 0.4 trillion won from the third quarter. Domestic banks wrote off 5.7 trillion won in bad loans during the same timeframe, up 0.1 trillion won from the previous quarter.

The data revealed divergent trends across lending segments. Business loan quality improved marginally, with the SBL ratio declining 0.01 percentage points to 0.70 percent. However, household loan credit quality showed slight deterioration, with the SBL ratio rising 0.01 percentage points to 0.31 percent as of end-December.

Verification and Data Context

All statistical claims regarding foreign bank profitability, income composition, and domestic loan classification data are derived from official FSS regulatory filings as reported by Yonhap News Agency. The foreign bank statistics cover the calendar year 2025, while domestic bank asset quality data reflects positions as of December 31, 2025. Both datasets carry high confidence ratings based on mandatory regulatory reporting standards.