By Jhoo Dong-chan
Korean banks have been making every effort over the years to set up strong presences in Southeast Asia to find new sources of income abroad.
But some financial analysts are expressing caution that their over eagerness to make inroads into Vietnam and other emerging economies in the region could spell trouble for them, because putting all their eggs in one basket is not a good investment strategy.
Lenders should also turn their eyes to Central Asia and other regions to diversify markets and cushion themselves against possible risks arising from Southeast Asia, the analysts said.
"Major banks are attempting to make inroads into Southeast Asia since they tend to focus on making short-term profits in foreign markets," said Inha University professor Lee Min-hwan.
"It is natural for them to choose ASEAN countries with high economic growth over advanced economies with low interest rates. However, the region is not a blue ocean anymore due to heated competition among Korean banks."
According to the Financial Supervisory Service (FSS), the nation's 12 banks are operating 185 branches abroad. Of them, 129 branches, or 69.7 percent, are located in Asia.
Major banks are operating more branches in Vietnam with 19 compared with 16 in China, demonstrating their convergence in the region. They have also opened 13 branches in Myanmar, more than they have in Hong Kong with 12. They also have eight branches in Indonesia, the same number as in Japan.
Highlighting the region's importance, Industrial Bank of Korea CEO Kim Do-jin visited Hanoi in Vietnam as a participant in President Moon Jae-in's state visit to the country last month to inspect the bank's operations there. Aiming to convert the bank's Hanoi and Ho Chi Minh branches into a local corporate body, Kim said the bank will expand its operations in the region.
KB Kookmin Bank CEO Huh In also visited Myanmar and Cambodia, April 2, to meet ministers and state bank officials from both countries. The bank introduced its digital bank "Liiv KB Cambodia" in 2016 to expand its customer base there, and said it will take a similar approach in neighboring countries such as Myanmar and Vietnam.
When Huh was appointed CEO in November, he said in his inauguration that Cambodia will be the bank's pivot for the Southeast Asian market.
Shinhan Bank CEO Wi Sung-ho will also visit the Philippines next month to participate in the Asia Development Bank meeting while checking the bank's M&A operation there. The bank also participated in bidding to acquire a 20 percent share of the country's East West Bank as the sole bidder last year, but has yet to reach a deal.
"It is an obvious decision for banks to concentrate on profitable regions when distributing their investments abroad," said a Korea Institute of Finance researcher.
"However, the tendency of major banks to concentrate solely on Southeast Asia could lead to problems. If the region faces a crisis, it could deal a severe blow to them."
Korean banks have been making every effort over the years to set up strong presences in Southeast Asia to find new sources of income abroad.
But some financial analysts are expressing caution that their over eagerness to make inroads into Vietnam and other emerging economies in the region could spell trouble for them, because putting all their eggs in one basket is not a good investment strategy.
Lenders should also turn their eyes to Central Asia and other regions to diversify markets and cushion themselves against possible risks arising from Southeast Asia, the analysts said.
"Major banks are attempting to make inroads into Southeast Asia since they tend to focus on making short-term profits in foreign markets," said Inha University professor Lee Min-hwan.
"It is natural for them to choose ASEAN countries with high economic growth over advanced economies with low interest rates. However, the region is not a blue ocean anymore due to heated competition among Korean banks."
According to the Financial Supervisory Service (FSS), the nation's 12 banks are operating 185 branches abroad. Of them, 129 branches, or 69.7 percent, are located in Asia.
Major banks are operating more branches in Vietnam with 19 compared with 16 in China, demonstrating their convergence in the region. They have also opened 13 branches in Myanmar, more than they have in Hong Kong with 12. They also have eight branches in Indonesia, the same number as in Japan.
Highlighting the region's importance, Industrial Bank of Korea CEO Kim Do-jin visited Hanoi in Vietnam as a participant in President Moon Jae-in's state visit to the country last month to inspect the bank's operations there. Aiming to convert the bank's Hanoi and Ho Chi Minh branches into a local corporate body, Kim said the bank will expand its operations in the region.
KB Kookmin Bank CEO Huh In also visited Myanmar and Cambodia, April 2, to meet ministers and state bank officials from both countries. The bank introduced its digital bank "Liiv KB Cambodia" in 2016 to expand its customer base there, and said it will take a similar approach in neighboring countries such as Myanmar and Vietnam.
When Huh was appointed CEO in November, he said in his inauguration that Cambodia will be the bank's pivot for the Southeast Asian market.
Shinhan Bank CEO Wi Sung-ho will also visit the Philippines next month to participate in the Asia Development Bank meeting while checking the bank's M&A operation there. The bank also participated in bidding to acquire a 20 percent share of the country's East West Bank as the sole bidder last year, but has yet to reach a deal.
"It is an obvious decision for banks to concentrate on profitable regions when distributing their investments abroad," said a Korea Institute of Finance researcher.
"However, the tendency of major banks to concentrate solely on Southeast Asia could lead to problems. If the region faces a crisis, it could deal a severe blow to them."
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