What's Happening?
Industrial Bank Co., Ltd. is projected to maintain stable asset quality, capitalization, profitability, and liquidity over the next 12-18 months, according to Moody's Ratings. The bank's profitability is expected to remain around the 2024 level of 0.75%. The net interest margin (NIM) narrowing is anticipated to slow as declining deposit rates help keep total liability costs lower. The bank's NIM has already narrowed by 12 basis points to 1.72% for the first nine months of 2025. Recovery of fee income from wealth management and capital market-related business also supports the company's profitability. However, credit costs are expected to remain high due to the risk of forming new non-performing loans (NPLs). The bank's buffer for loan loss reserves
is expected to mitigate volatility in profitability. Industrial Bank has strengthened its retail deposit acquisition, with retail deposits making up 29% of total deposits as of June 2025.
Why It's Important?
The steady outlook for Industrial Bank is significant as it reflects the bank's resilience in maintaining profitability despite challenges such as narrowing NIM and high credit costs. This stability is crucial for stakeholders, including investors and customers, as it indicates the bank's ability to manage risks and sustain financial health. The bank's strategy to enhance retail deposit acquisition and maintain a moderate funding structure with ample liquidity coverage is vital for its long-term sustainability. The bank's performance can influence the broader financial sector, setting a benchmark for other institutions in managing profitability amidst economic fluctuations.
