Will KB manage to achieve profit in Myanmar?

KB Kookmin Bank headquarters in Seoul's Yeouido district / Courtesy of KB Kookmin Bank

By Lee Min-hyung

KB Kookmin Bank opened its first subsidiary in Myanmar last week and all eyes are on whether the lender will be able to keep the Southeast Asian branch in the black in its first year despite lingering COVID-19 uncertainties.

In December, KB won the license from the country's central bank to open ten branch offices. KB Financial Group identifies Myanmar as a strategic market possessing huge growth potential.

The banking arm is not the first company to tap into the territory. KB Kookmin Card established an office in the city of Yangon in 2017.

The lender set a target of generating operating profits there by the end of 2021. Considering initial investment costs, it is hard for any bank to report a surplus in a short period of time after tapping into overseas markets. On top of that, coronavirus-related uncertainties also pose a major hurdle for the lender.

KB plans to focus on widening its corporate and housing finance there under partnerships with Korean and local firms. Even if the license allows the lender to undertake aggressive expansion by opening up to 10 branches there, KB is expected to remain low profile for the time being as part of its strategy to hedge potential risks surrounding the pandemic.

“We are going to develop our expertise in digital banking and housing finance and make efforts to become a leading lender there,” an official from KB said.

The lender has maintained a favorable relationship with financial authorities in Myanmar for many years. KB and Myanmar's Construction and Housing Development Bank signed a partnership in 2014, and the bank has since held a series of educational workshops there focusing on housing finance and digital banking.

“We are also going to spare no efforts in helping the authorities there expand their social overhead capital,” the official said.

Myanmar is emerging as one of Asia's strategic markets among Korean lenders. Shinhan Bank, a fierce rival of KB, is also operating businesses there.

Korea's state-run lenders are also paying growing attention to the market, with the Industrial Bank of Korea also receiving a license to do business in Myanmar. Earlier this month, the Korea Development Bank opened its first office in Yangon. The lender received preliminary approval to open the office in April, but the pandemic shock put the brakes on the plan.