By Yoon Ja-young
The country’s banks are looking further overseas amid low interest rates and market saturation. While they previously focused on just East and Southeast Asian markets, they are trying to expand operations to other regions including the Middle East and Latin America.
Shinhan Bank is planning to open a branch in Dubai, the United Arab Emirates, to support Korean firms operating there with trade financing.
It has also decided to provide $85 million in loans to an agricultural development program by the Myanmar government. The bank, which has successfully advanced into the Vietnamese market, hopes to expand its presence in Southeast Asia.
“We expect to create bigger profits from overseas operations as we have expanded our global presence over the past years,” an official said.
Industrial Bank of Korea (IBK) CEO Kwon Seon-joo also said at a press conference that she is considering advancing into the Middle East.
“We will actively consider inroads into overseas markets through M&As or investment in shares of foreign financial firms. We will expand global investment banking operations and strengthen overseas operations centered around Vietnam and other Asian countries,” Kwon told reporters.
IBK also plans to transform its offices in Phnom Penh and Jakarta into branches.
Woori Bank plans to open branches in Mumbai and Guargaon in India, following one in Chennai.
Korea Exchange Bank plans to expand its banking network in Canada, opening a new branch and office in January.
In March, it plans to open a new branch in India and an office in Mexico. The bank currently has 91 overseas branches and offices in 23 countries.
According to the Financial Supervisory Service, local banks have 160 operations in 34 countries, which is eight more than the last year.
Until a few years ago, Korean banks were confining themselves to the domestic market. Overseas assets still take only 4.5 percent of their total, while global banks operate between 30 and 60 percent of their assets overseas.
They have been actively seeking advancement overseas recently, haunted by low interest rates and low growth. According to the Korea Institute of Finance, the net profit of the local banks is expected to be 5.7 trillion won this year, up 46.6 percent from 2013. Though it is a steep increase, it is still disappointing when considering that net profit stood at around 7 trillion won in 2008 and 2009, and around 15 trillion won in 2007.
“With the two key rate cuts this year, the net interest margin has been contracting,” the institute said in a report.
It added that it would be difficult for the banks to expect better profitability as the low interest rate is expected to continue next year.
“Globalization of the financial firms is one of the most pressuring tasks,” said Ha Yung-ku, who was inaugurated as the chairman of the Korea Federation of Banks last month. “We will prepare measures to support banks in local operations, helping each make use of their strengths,” he added.