More Attractive Income Source
Last year, Korean branches of foreign banks more than tripled their income from a year before by investing in foreign exchange fluctuation.
According to “2015 Business Performances of Foreign Banks’ Branches in Korea,” released by the Financial Supervisory Service on February 8, those branches posted 1,130.2 billion won in net income, an increase of 38.8 billion won from 1,091.4 billion won a year before. In particular, in the foreign exchange and derivative product sector, they enjoyed 576.8 billion won, up 313.2 percent from 139.6 billion a year earlier thanks to a rise in the Korean won-US dollar exchange rate.
The financial watchdog analyzed that they recorded such earnings by predicting the direction of the exchange rate and making investment in foreign currency and derivative products.
The Korean won-US dollar exchange rate gradually rose to 1,124 won at the end of June last year and 1,172 won at the end of December, last year from 1,099 at the end of December of 2014. By contrast, last year, Korean branches of foreign banks inked a year on year drop in income in the interest and stock sector due to the effects of interest rate changes.
Their interest income sank 16.0 percent to 1,536.4 billion won from a year before as margins declined due to an interest rate cut and assets under management increased. In the stock sector, they chalked up 222.1 billion won, a year on year drop of 48.0 percent due to a drop in income from trade and evaluation related to bonds.
“Among 39 branches, 35 enjoyed net income,” the Financial Supervisory Service said. “Four banks such as JP Morgan Chase, HSBC, the Industrial and Commercial Bank of China and Credit Suisse posted 100-plus billion won in net income.”
On the other hand, foreign banks’ branches in Korea had 260.5 trillion won in total assets, a year on year increase of 21.6 trillion won. Their equity capital grew by one trillion won to 17.4 trillion won.