Business · Companies · 1 day ago
Report urges South Korean banks to prioritize risk-adjusted returns
A Korea Institute of Finance report says South Korean banks should change how they pursue growth.
From 2010 to 2025, their assets grew faster each year on average than South Korea’s nominal economy.
In 2024, private-sector loans by the country’s banks equalled 160.3% of GDP, well above the OECD average of 68%.
Yet at the end of 2025, the four largest South Korean banking groups had lower average profitability and market valuations than comparable global groups.
The report says focusing on growth without balancing risk and returns can lead to more bad loans when the economy weakens.
It recommends directing capital toward assets that earn returns in line with their risks, while improving risk management and finding new sources of income.
It also calls for changes to low-return businesses, overseas assets, board oversight and staff performance measures.
A Korea Institute of Finance report says South Korean banks should shift from asset growth to strategies focused on risk management and profitability.
The report says banks’ expansion has not translated into stronger corporate value.
From 2010 to 2025, South Korean banks’ average annual asset growth was 6.19%, above nominal economic growth of 4.52%.
At the end of 2025, the four largest South Korean banking groups had an average price-to-book ratio of 0.68 and return on assets of 0.64%, below comparable global banks.
The report recommends raising returns on risk-weighted assets and changing management systems, incentives and governance.
- Who
- South Korean banks; the report was written by Kim Woo-jin, a senior research fellow at the Korea Institute of Finance.
- What
- The report urges banks to shift from asset growth toward risk management and profitability, including higher returns on risk-weighted assets.
- When
- The report was issued on October 10, 2026.
- Where
- South Korea.
- Why
- The report says asset expansion has not raised banks’ corporate value and growth-focused strategies can increase bad loans when the economy weakens.
This story does not have two clearly opposing sides.
South Korean banks have continued growth that entails risks rather than stable growth based on risk management, but a strategy focused solely on growth has limits in raising banks’ value.
South Korean banks’ average annual asset growth was 6.19%, exceeding nominal economic growth of 4.52%.
South Korean banks’ private-sector lending reached 160.3% of GDP, compared with an OECD average of 68.0%.
The four largest South Korean banking groups recorded an average price-to-book ratio of 0.68 and return on assets of 0.64%.
The Korea Institute of Finance report called on banks to focus on risk-adjusted returns and improve management systems.
- Report author
- Kim Woo-jin, senior research fellow at the Korea Institute of Finance
- Asset growth
- 6.19% annual average in 2010–2025
- Nominal economic growth
- 4.52% in 2010–2025
- Private-sector lending
- 160.3% of GDP in 2024; OECD average was 68.0%
- South Korean banks’ average PBR
- 0.68 at the end of 2025; comparable global-bank average was 2.32
- South Korean banks’ average ROA
- 0.64% at the end of 2025; comparable global-bank average was 1.03%
Sources
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