Global competitiveness key for Korean financial group amid slow growth

Park Jung-hoon, CEO of the Woori Finance Research Institute, speaks during a press meeting at Woori Financial Group's headquarters in Seoul, Wednesday. Courtesy of Woori Financial Group

As Korea enters a period of low growth, its financial holding companies are being urged to strengthen their long-term global competitiveness, taking a cue from Japan’s earlier success on a similar path.

The advice came during a press meeting hosted by the Woori Finance Research Institute Wednesday to mark the publication of its new book, "Japan’s Great Economic Transformation."

"The key of Japanese financial groups' recovery was finding a 'second Japan' in the global market," said Park Jung-hoon, CEO of the Woori Finance Research Institute.

According to data presented at the meeting, the annual domestic operating profit of Japan’s major financial groups — MUFG, SMFG and Mizuho — declined by 11 percent, from 6.8 trillion yen ($46.8 billion) in 2006 to 6 trillion yen in 2023.

However, over the same period, their overseas operating profit rose nearly fivefold, from 1.2 trillion yen to 6.1 trillion yen. As a result, the share of overseas earnings in their total operating profits expanded from 15 percent to 50 percent.

"Even financially solid Japanese groups took more than a decade to achieve these results," Park said. "Korean financial groups must also steadily build global competitiveness from a long-term perspective."

This shift in earnings structure drove a sharp recovery in their stock prices, which had remained stagnant for nearly a decade until 2021. By the end of 2024, the stock prices had surged to between 2.6 and 3 times their previous levels.

"The key to Japanese financial groups’ value-up success also lies in their global business expansion," Park said.

Japan’s experience holds important lessons for Korea, where overseas earnings still make up only a small share of financial groups' profits.

According to an analysis by Samil PwC, the overseas portion of total operating profit for the four major groups — KB, Shinhan, Hana and Woori — stood at just 11 percent last year. While that figure has more than doubled from 4.3 percent in 2013, it still amounts to only one-fifth of Japan’s level.