Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Foreign banks' net profits tumble
By Yi Whan-woo
Foreign banks operating here, particularly Korean arms of U.S. banks, suffered a sharp fall in their net profits in 2012 due to the won’s appreciation, according to the Financial Supervisory Service (FSS) Friday,
The combined net profit of the 39 foreign bank branches fell by 11.6 percent to 1.08 trillion won ($995.78 million) last year from 1.23 trillion won in the previous year.
Falling interest income and losses from derivatives investment were cited as the main reasons, according to the financial regulator.
The year-on-year interest income dropped 2.5 percent to 2.17 trillion won over the same period.
The branches also posted a combined loss of 160.5 billion won from investments in derivatives compared with the previous year’s 165.7 billion won profit. The loss was caused by the strengthening won. The local currency gained 82.7 won to 1,071.1 won against dollar at the end of December from 1,153.8 won at the end of June.
The eight U.S. and 18 European bank branches fared worse because they had a large portion of investments in derivatives, the FSS said.
The net profit of the U.S bank branches plunged by 88.1 percent to 23.9 billion won, while that of European bank branches retreated 10.4 percent to 373.3 billion won.
Eighteen branches of Asian banks, in contrast, saw net profits rise by 12.5 percent to 690.6 billion won, centered on their main business of providing loans. Four Japanese bank branches had a 29.8 percent increase in earning, the highest compared to ones from other countries.