South Korean banks show improved capital adequacy in Q2

South Korean banks saw an improvement in their capital adequacy indicators during the second quarter of this year. According to data released by the Financial Supervisory Service, the total capital ratio based on Bank for International Settlements (BIS) standards rose to 15.77% as of the end of June, up 0.03 percentage points from the first quarter.

The improvement was driven by increased capital from stable net profits and rights offerings, which outpaced the growth of risk-weighted assets. The common equity tier 1 (CET1) ratio rose to 13.62%, a 0.12 percentage point increase from the previous quarter. While most indicators improved, the simple tier 1 capital ratio saw a slight decrease of 0.07 percentage points to 6.59%.

Individual performance varied among institutions. Nonghyup Financial Group saw the most significant increase in its CET1 ratio, rising 0.94 percentage points due to capital increases. Other banks showing improvements included SC, iM, Citibank, and Shinhan. Conversely, K-Bank experienced the largest decline in its CET1 ratio, dropping 1.39 percentage points.

Despite the positive trends, the Financial Supervisory Service noted that external uncertainties, such as prolonged instability in the Middle East and interest rate fluctuations, could increase credit risks and potentially lower capital ratios in the future. The regulator intends to encourage banks to strengthen their loss-absorption capacity and manage capital adequacy to ensure stable financial intermediation.