Banks see overseas profits increase

By Kang Seung-woo

A total of 11 Korean banks’ overall profits from overseas operations rose 28.8 percent in 2010 from a year ago on the back of a growth in interest income, the financial watchdog said Monday.

According to the Financial Supervisory Service (FSS), net earnings by 92 overseas branches and local subsidiaries excluding 36 liaison offices tallied $369.1 million (401.6 billion won) last year, up from $286.4 million in the previous year.

The jump in net profit came after lenders’ interest income steeply rose thanks to lower prices to borrow foreign currencies, the FSS said.

The overseas units made $1.13 billion in interest last year, compared with $973.7 million in 2009.

As of the end of 2010, 11 local banks including Kookmin, Shinhan, Woori, Hana Banks and Korea Exchange Bank (KEB) operated 128 overseas units ― 52 branches, 40 local subsidiaries and 36 liaison offices in 32 countries.

KEB leads the pack with 27 units, followed by Woori and Shinhan, which each has 21 and 17 operations. Kookmin, the nation’s biggest lender by assets, operates 11.

With net profit growing, net return on assets and net interest rate margins also expanded 0.05 percentage point and 0.12 percentage point respectively, from 2009 to post 0.61 percent and 2.14 percent.

“The operations of Korean banks’ foreign outlets seemed recover from the global financial crisis last year given soaring net earnings and stable fund raising,” said an official of the FSS.

The total assets of the overseas operations advanced 4.9 percent to $56.45 billion last year from $53.83 billion in 2009, it said. The number accounts for 3.5 percent of the lenders’ collective assets.

The FSS attributed the asset increase to lenders’ active operations in emerging markets such as China and Vietnam, which saw a rise of $1.49 billion and $880 million respectively.

Earlier this year, the FSS said banks will increase their operations in overseas markets, mostly in China, Vietnam and India, this year in a bid to secure new growth engines beyond the saturated domestic market.

In 2011 nine lenders are projected to open 27 overseas branches ― 16 branches, eight local subsidiaries and three liaison offices and by country, six branches are scheduled to open in each of China and Vietnam, with five in India, according to the FSS.

The move came on the heels of eased regulations which permit banks to report new overseas branches after establishment.

Kookmin is set to open five operations this year, followed by Hana with four. Another five banks each plan to launch three overseas businesses.

Despite the growing expansion plans, the FSS said that their global projects may not go ahead due to current uncertainty.

“A devastating earthquake in Japan and upheaval in the Middle Eastern countries may derail banks’ overseas expansion, so the FSS plans to keep monitoring the overseas management and internal control system,” the official said.