Japanese savings banks seek niche in Korea
Customers engage in financial transactions at a savings bank in Jong-no, central Seoul, Wednesday afternoon. / Korea Times photo by Choi Kyong-ae
By Choi Kyong-ae
Japanese savings banks said Thursday they will seek a new niche in Korea’s retail and corporate finance markets as business environments get tougher amid falling rates.
The capital-based banks represented here by SBI, JT Chinae and OSB are making an aggressive push to increase their market share in Korea. They account for nearly 20 percent of 40 trillion won ($34 billion) worth of the country’s overall savings by assets.
They still see bigger business opportunities here compared to Japan where savings banks find fewer growth engines due to nearly flat interest rates, according to people in the industry.
“We are planning to introduce a series of Internet-only products as customers increasingly prefer financial transactions on their mobile devices. Those products carry higher interest rates compared to products sold at outlets,” an SBI official said.
Currently, Korea’s key interest rate is at a record low 1.5 percent and it may fall further to support growth.
SBI has extended small loans to individuals and small- and medium-sized companies which have restricted access to mainstream commercial banks. As for individuals, the value of loans is largely less than 3 million won per person, he said.
An official at JT Chinae said they will offer loans of up to 10 million won per person to help low-income families raise their children, educate them and meet medical care costs at an annual interest of 5 percent.
The two officials declined to be identified.
In the past several years, Japanese microfinance lenders have acquired Korea’s financially-insolvent savings banks to enter the Korean markets.
In 2013, SBI Holdings spent 1.3 trillion won to acquire Hyundai Swiss Savings Bank. In the 2014 fiscal year which ended in June this year, SBI posted a net profit of 20 billion won, swinging from a net loss of 330 billion won a year earlier.
“To remain profitable from now on, we are considering advancing to installment finance markets for items such as second-hand cars, massage chairs and construction equipment including cranes and forklift trucks,” the SBI official said.
Other Japanese savings banks are expected to consider joining the installment finance markets in a diversification strategy.
The government’s stricter regulations on advertisements on TVs and its pressure for savings banks to lower the upper limit of interest rates further from the current 34.9 percent will continue to weigh on the bottom line of Japanese savings banks, he said.
“If the upper limit is lowered to 29.9 percent next year, many of small-sized lenders will go bankrupt,” the JT Chinae official said.
Savings banks remain vulnerable as most of customers who seek loans from them have low credit ratings and are less capable of repaying their debts compared to customers who take out loans at commercial banks, he said.
“The public negative awareness about microfinance lenders such as Sanwa Money and APRO Financial Group which runs consumer financing brand Rush & Cash should be improved,” Lee Sang-hoon, a spokesman for the Korea Federation of Savings Banks, said.
At the end of 2014, the number of microfinance companies that had more than 10 billion won in assets jumped to 165 from 129 at the end of 2012, according to the Financial Services Commission.