UPDATE 1-S.Korean banks' 2007 net profit seen at record

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SEOUL, Dec 26 (Reuters) - South Korean banks are estimated to have earned a record profit this year thanks to one-off gains such as proceeds from LG Card's sale, officials at the regulatory Financial Supervisory Service (FSS) said on Wednesday.

FSS deputy governor Kim Dae-pyung said in a regular briefing that domestic banks' combined net profit was estimated at 15.8 trillion won ($16.82 billion), up 16 percent from 13.6 trillion won in 2006.

The figure, compiled from banks' own estimates, would mark a record annual profit on a combined basis.

However, excluding gains from the $7.2 billion sale of then creditor-owned LG Card to Shinhan Financial Group (055550.KS), their net profit is likely to have shrunk from last year, another FSS official said.

"Proceeds from the LG Card sale account for about 3.2 trillion to 3.3 trillion won in the combined net profit," said the official at the financial watchdog's bank supervision division.

"When you exclude that portion, banks' net profit actually fell from last year."

Local banks, led by top lender Kookmin Bank 060000.KS, are weighed by rising interest rates and stalled deposit growth, with clients moving to higher-yielding accounts offered by brokerages.

The banks also face a tough year ahead due to higher credit costs caused by the U.S. subprime mortgage crisis. ($1=939.2 Won) (Reporting by Lee Chang-ho, writing by Rhee So-eui; Editing by Sei Chong)