Credit card defaults and a corporate fraud more than halved combined profits at South Korean banks including the country's top lender Kookmin Bank in 2003, but profits should more than quadruple in 2004 as the economy recovers, a financial regulator said on Sunday.
The rebound in earnings began in the fourth quarter as Asia's fourth-largest economy picked up after emerging from a brief recession and the government cracked down on easy credit.
Combined net profit at the country's 19 banks plunged 63 percent to a final 1.86 trillion won ($1.6 billion) in 2003 from 5.08 trillion won in 2002, the Financial Supervisory Service said in a statement.
The banks expect 7.8 trillion won of profits in 2004.
South Korean lenders had a tough 2003 because of ballooning losses at credit card units. In addition, there was heavy provisioning against loans to SK Networks Co, which is struggling to emerge from a $1.2 billion accounting fraud unearthed in March.
Banks are still struggling with the aftermath of a credit boom that has left one in 10 South Koreans unable to repay loans and has inflated credit card debts to 14 percent of gross domestic product.
At the heart of the card crisis was LG Card Co, which reported a 5.6 trillion won loss for 2003, the biggest ever by a South Korean firm, because of massive unpaid credit card bills.
LG, the country's top credit card issuer, narrowly escaped bankruptcy early this year after creditors agreed to a $4.5 billion rescue plan.
Woori Bank, a core unit of Woori Financial Group, posted the biggest increase in net profit, up 71 percent to 1.3 trillion won, while Kookmin Bank swung to a loss of 753 billion won due to its exposure to SK Networks and LG Card.