Excessive Concentration in Asia

About 70 percent of Korean financial companies' overseas branches are concentrated in Asia.
About 70 percent of Korean financial companies' overseas branches are concentrated in Asia.

The combined net profits of South Korean financial firms’ overseas offices, such as banks, credit card companies and indemnity insurance companies, reached US$930 million (1 trillion won) last year. Out of the US$930 million (1 trillion won), banks’ overseas branches took up most with US$807 million (867.5 billion won).

According to a report titled “South Korean financial companies’ overseas expansion trend and current financial status in 2017” released by the Financial Supervisory Service on May 3, the number of overseas offices run by domestic financial firms reached 431 in 43 countries as of the end of 2017, up 24 from a year earlier. The figure continued to increase from 359 at the end of 2011, showing a 20 percent growth for six years. By sector, banks had the highest rise with 185, followed by investment banks with 115, insurance companies with 85, specialized credit financial firms with 44 and financial groups with 2.

The combined net profits of overseas branches under domestic financial companies amounted to US$930 million (1 trillion won), up 42.1 percent from a year ago.

By bank, which occupied most of the total profits made by financial companies abroad, KEB Hana Bank ranked first with 340.2 billion won (US$316.32 million). The bank recorded 63.4 billion won (US$58.95 million) of net profits in the Indonesian market alone. An official from KEB Hana Bank said, “PT Bank KEB Hana, a subsidiary in Indonesia, saw its net profits rise about 10 percent last year compared to a year earlier. As most of the total profits made by our subsidiaries in Southeast Asia came from PT Bank KEB Hana, we will seek to make the top 20 bank list there by continuously considering mergers and acquisitions with Indonesian banks in the future.”

Shinhan Bank generated 235 billion won (US$218.5 million), with its branches in Southeast Asia, such as Vietnam, Cambodia and Indonesia, accounting for 25.3 percent, or 59.6 billion won (US$55.42 million) of the total profits in the global market. Shinhan Bank Vietnam alone posted more than 45.3 billion won (US$42.12 million) in net profits.

Woori Bank took third place among four domestic banks in terms of net profits overseas last year with 161.4 billion won (US$150.07 million). The bank had 44.02 billion won (US$40.883 million) of net profits in the Southeast Asian market last year. PT Bank Woori Saudara Indonesia alone generated 38.49 billion won (US$35.79 million) of net profits. KB Kookmin Bank, which is having a hard time in the global market, recorded 23.5 billion won (US$21.83 million) of net profits overseas last year. It was still a relatively lower performance even considering the fact that bank entered the global market later than other banks. An official from KB Kookmin Bank said, “Based on growth potentials of Southeastern countries, including Vietnam, Cambodia and Laos, we are planning to gain ground in not only small and housing loans but also digital banking sectors this year.”

However, there are problems to solve as 70 percent of 431 overseas offices are concentrated in Asia and the overseas branches take up a mere share of the total net profits, though they continue to grow. The overseas branches of domestic banks accounted for only 7.7 percent of the total profits as of last year.

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