SC, Citibank suffers setback in earnings

By Jhoo Dong-chan

Two foreign banks operating here ― Citibank and SC Bank Korea ― posted disappointing earnings in the first three months of the year.

They have said the setback is temporary and their earnings will bounce back soon, but industry observers said the task won't be easy considering Korea's saturated financial market.

SC Bank Korea said Wednesday it posted a 76 billion won ($63.8 million) net profit in the first quarter of the year. The figure jumped 55.5 billion won, or 270.7 percent, from the previous quarter, but was down 10.9 billion won, or 12.5 percent, from a year ago.

The bank's return on assets (ROA) and return on equity (ROE) were also down 0.1 and 0.4 percentage points year-on-year to 0.48 percent and 4.05 percent, respectively, over the period. Its Bank for International Settlement (BIS) ratio stood at 15.72 percent.

An SC Bank Korea official said the decline was attributed to an increase in its management costs.

“Bond trading grew as market interest rates decreased in the first quarter, but management and extra costs rose over the period,” the official said.

The bank added it will strengthen its ties with its global headquarters to overcome the setback. Utilizing its global network in over 60 countries, the lender will provide differentiated investment opportunities for its customers.

Citibank also suffered a decline in earnings in the period.

The lender said it posted a 60.1 billion won net profit in the first quarter of the year, down 12.9 billion won, or 17.7 percent, from a year ago.

Its ROA and ROE also dropped by 0.1 and 0.4 percentage points to 0.48 percent and 4.05 percent, respectively, during the same period.

A Citibank official said it suffered a one-time administrative expense due to a recent tax treaty between the U.S. and Korea.

“Excluding the one-time expense impact in the fourth quarter of last year, the lender's net income was, in fact, up 65.3 percent in the first quarter of the year from the previous quarter,” he said.

Citibank Korea CEO Park Jin-hei displayed his optimism claiming he saw a positive sign for its future business.

“Citibank's first quarter results reflected a challenging external environment including trade and market volatility. But we are seeing some encouraging signs from strong target customer growth and increases in unsecured personal loans and global client revenues in corporate banking,” he said.

“We will continue to focus on driving a client-centric culture and digital first strategy to deliver our objectives of being the best both for our clients and for sustainable growth.”

An industry insider said it will be a tall task to continue last year's momentum considering the saturated market.

“Not only policy rates but also market interest rates are under growing downward pressure. The economy is also declining. It's not an ideal situation,” said a domestic commercial bank official who asked not to be named.

“I understand they have a different customer group, but it won't be easy to make a turnaround under the current circumstances.”