Korea's top four commercial banks ― KB Kookmin, Shinhan, Woori and KEB Hana ― suffered a sharp fall in earnings from the foreign exchange sector in the first half of this year due to a rapid rise in the won-dollar exchange rate.
According to data compiled by the Financial Supervisory Service (FSS), the four lenders posted a combined 102.5 billion won ($90.4 million) profit from the foreign exchange sector in the first half of this year, down 92 percent from 1.24 trillion won during the same period last year.
Of the four, KB Kookmin is the only lender that has posted a loss from the sector this year. The bank, which saw a 169.6 billion won profit from its foreign exchange business in the first half of 2017, was in the red in the period for the first time in three years as it saw a 106.8 billion won loss in the first half of this year.
"The loss in the foreign exchange sector was attributed to a sharp rise in the won-dollar exchange rate," said a KB Kookmin Bank official.
"Since we have more foreign currency debt than foreign currency assets, there are few tools for us to use to respond to the volatile movement of the exchange rates."
Shinhan Bank, which marked a 270.7 billion won profit from the sector in the first half of 2017, suffered a 95 percent decline to a 14.5 billion won profit from the same period last year's 270.7 billion won earnings.
KEB Hana and Woori Bank reported 43.33 billion won and 151.5 billion won profits in the area for the first six months of 2018, respectively, down 91.4 percent and 48.3 percent for a year ago.
"Korea's commercial lenders, in general, have more foreign currency debts than their foreign currency assets," an FSS official said.
"Under this financial structure, they eventually experience a loss in foreign exchange and derivative sectors if the won-dollar exchange rate rises."
The won-dollar exchange rate hovered around 1,200 won per dollar at the end of 2016, and dropped to the 1,130 won level by the end of June 2017.
The rate hit the bottom at 1,071 won per dollar in end-December, but has since started rising due to the U.S. Federal Reserve's move to raise the country's key rate. It marked 1,133 won per dollar as of Oct. 10.