Korean banks can expect higher profits this year

Measures taken by the government and central bank proved to be successful in hampering NPL growth.

Hana Institute of Finance, a private think tank, in a report, said, "In 2010, banks will have improved the asset quality and business environment, which would increase profitability of the financial sector."

"Profitability will improve as NPL growth slows, provisioning costs ease and net interest margins continue to rise," the report said.

It noted, however, that external growth of the banking sector would be limited as the economic recovery would lose momentum toward the end of the year, hurting profitability of small and medium-sized enterprises and household finances, according to a report in the Korea Herald.

According to reports by brokerages, combined net profits of four financial holding companies and five other listed banks are expected to surge to 10 trillion won ($8.92 billion) in 2010, up by more than 50 percent from 5.64 trillion won ($5.03 billion) in 2009.