Seoul  - Combined profit at South Korea's major lenders fell 57.4 per cent in the first half of the year as commission margins narrowed and reserves against bad loans rose, the nation's financial watchdog said Monday.

Combined net profit at the 18 commercial and state-run banks plunged to 2.8 trillion won (2.3 billion dollars) from 7.6 trillion won in the same period a year ago, the Financial Supervisory Service said.

In the second quarter, net profit quadrupled from the first quarter to 2.3 trillion won as provisions for bad loans dropped to 2.6 trillion won from 4.5 trillion won, the agency said.

A reduction in bad loans allowed the lenders to reduce their provisions against defaults, it said.

Loan defaults slowed in the second quarter after Asia's fourth-largest economy expanded at its fastest pace in nearly six years.

Despite the improvement, the agency warned banks to strengthen their credit-risk management, given the uncertainties that continue to persist in the global economy. (dpa)