South Korean bank executives saw their net profit for 2011 jump 29 percent from a year earlier due mainly to lowering loan-loss reserves and one-off gains from the sale of a stake in a local builder, the financial watchdog said Tuesday.

Combined net income of 18 local banks reached 12 trillion won (10.65 billion U.S. dollars) in 2011, up 29.2 percent from the previous year, according to the Financial Supervisory Service (FSS) .

The on-year jump came as costs against bad loans sharply declined to 11.8 trillion won last year from 15 trillion won in 2010 when local lenders set aside huge loan-loss reserves amid large firms'restructuring and rising sour loans in the real estate project-financing field.

Seven banks reaped one-off gains last year, including Kookmin Bank and Citibank, which raked in a combined pre-tax profit of 3.2 trillion won after selling their stakes in the country's top builder Hyundai Engineering & Construction in the second quarter.

By income sources, interest income of domestic lenders came to 39.3 trillion won in 2011, up 3.4 percent from a year before due to a rise in lending rates and growth in assets that offer interest returns, according to the FSS. Non-interest income expanded 14 percent on-year to 8.3 trillion won last year.

Meanwhile, local banks' profitability improved slightly. The average rate of return on assets (ROA) for local lenders stood at 0.68 percent in 2011, up 0.14 percentage points from the previous year, while the return on equity (ROE) reached 8.55 percent last year, up 1.33 percentage points from a year before.