Financial firms rush to Southeast Asia

By Jhoo Dong-chan

Korean financial firms are expanding their presence in Southeast Asia.

Major banks are tapping into the world's most rapidly growing economies, which are considered to be their next overseas cash cows, in a bid to overcome difficulties in finding new revenue sources in the saturated domestic financial market.

Securities and credit firms have yet to build a strong presence as much as Korean lenders have in the region, but a few companies have managed to obtain a meaningful outcome in certain countries. They say they will slowly but steadily continue their expansion by entering one country at a time.

Among the nation's commercial banks, Shinhan Bank is setting a good example by strengthening its foothold in Vietnam following its takeover of the retail unit of AZN Vietnam, the Vietnamese unit of the Australian banking group, in April 2017.

The lender is trying to flex its muscles not only in banking but also in the credit card business.

On Monday, the bank said it has forged strategic ties with Samsung Electronics to build an online payments ecosystem in Vietnam where customers are rapidly embracing changes driven by digital technologies.

Considering Vietnam as its beachhead for the Southeast Asian market invasion, the lender established its local corporate body Shinhan Vietnam Bank in 2009.

Shinhan Vietnam Bank is now the largest foreign bank there with assets worth a combined total of $3.3 billion. It also has about 900,000 customers in 30 cities.

In a bid to expand its presence in Southeast Asia, Shinhan Financial Group Chairman Cho Yong-byung visited Indonesia and Myanmar in April to meet local financial officials to secure new business and investment opportunities.

Revenue from overseas operations accounted for only 5.2 percent of Shinhan Bank's total net profit in 2011, but has since grown steadily to 8.6 percent in 2014 and 9.3 percent in 2016 thanks to its steady earnings in the region.

Last year, overseas revenue made up 13.7 percent of the lender's total earnings.

"Shinhan is looking for another opportunity in Indonesia. The country is considered to be the next blue ocean with a financial infrastructure having yet to be fully established," said a bank official.

"We will continue expanding our global channels to form an Asian financial belt connecting India, Cambodia, Myanmar, Vietnam, Indonesia, Hong Kong, Singapore, the Philippines, China and Japan."

KEB Hana Bank has chosen Indonesia as a stronghold for its advancement into Southeast Asia.

It has jointly established a business network with its affiliate Hana Capital in Indonesia since it first entered the country by acquiring local lender PT Bank Bintang Manunggal in 2007. It now has 70 branches and local offices there.

In June, KEB Hana Bank Indonesia was also named as the country's Best Bank by local business journal Investor. It is classified as one of the big lenders in Indonesia.

"We believe the market still has room for further growth," a KEB Hana Bank official said.

"Hana's financial technologies utilizing biometric verification and AI are also well-received in the country. We expect further earnings from the market on the back of the country's economic growth."

Of the nation's lenders, Woori Bank has the largest business network there with a total of 351 branches and offices in eight Southeast Asian countries as of end of July. It recently purchased VisionFund Cambodia, a Cambodian financial firm with 106 outlets.

It used to focus mainly on loans to Koreans and Korean firms in the early stages, but is now actively acquiring local financial firms to become a bigger player.

The lender's total assets in the global sector are 25.41 trillion won ($23.1 billion) now, up 57 percent from its 2014 figure of 16.17 trillion won.

Not only lenders but also other financial firms are accelerating their entry into Southeast Asia.

Korea Investment & Securities landed Vietnam in 2010, and has since beefed up its presence by acquiring local brokerages there. It is the country's eighth-largest brokerage by assets under management. It is also the second-largest foreign brokerage after British Dragon Capital.

The securities firm is now eyeing the Indonesian market as its next destination for overseas cash cow.

"Korea Investment & Securities has successfully developed a business model in Vietnam. Now, we aim to introduce the model in Indonesia," said a company official.

"We are trying to focus on one country at a time. While doing so, we expect we can improve our business model into a more flexible and profitable one."

The brokerage said last month it acquired local securities firm Danpac to establish Korea Investment & Securities Indonesia. It added that it will also launch asset management soon.

Compared to Korea's banks and brokerages, credit card and capital firms have yet to establish a strong presence in the region, but are expanding their investments.

According to the Financial Supervisory Service (FSS), domestic capital firms have 37 branches in 15 countries worldwide. Of them, 29 branches, or 78.4 percent, are located in Southeast Asia. Their total assets in the emerging economies are 490.1 billion won now, up 37.1 percent from a year ago.

The FSS said it will help banks and other financial firms make forays overseas by providing consulting services and clearing regulatory issues abroad.

"In September, the FSS will open a one-on-one consulting service at Financial Hub Korea's webpage (www.fnhubkorea.kr) where a financial firm can ask questions or submit suggestions related to its business expansion into foreign markets," said Financial Hub Korea head Jin Tae-kyoung.