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| Industrial Bank of Korea CEO Yoon Jong-won takes part in a regular meeting of the Korea Federation of Banks in Seoul, on Oct. 26. Yonhap |
By Lee Min-hyung
The Industrial Bank of Korea (IBK) is urged to reform its overseas businesses by taking preemptive measures to get its snowballing debt under control amid the unexpected COVID-19 outbreak.
According to data from the Financial Supervisory Service (FSC), the state-run lender's Indonesian branch reported a net loss of 22.4 billion won ($20.5 million) for the first three quarters combined in 2020, widening a losing streak since it tapped into the territory in September last year.
This is in contrast to earnings growth from Indonesian branches of Korea's major commercial banks. Hana Bank reaped a net profit of 41.2 billion won in the Southeast Asian market during the same period, topping the list of earnings among Seoul-based lenders operating businesses there. Shinhan and Woori banks also posted billions of won in net profits during the same period.
The IBK attributed the widening loss to the pandemic shock.
"It has been only about a year after we made inroads into the market, but the COVID-19 shock came as a huge and unexpected setback for us at a crucial time when we need to push for aggressive expansion there," a spokesman at the lender said.
"We have made investments to establish infrastructure, but the virus panic started weighing heavily on our businesses. Other Korean commercial lenders have years- or even decades-long experience doing business there, but this is not the case for the IBK."
The IBK said it is doing the utmost to normalize its dismal performance there, but this is very tough for now, as the virus strain is out of control there, according to the official.
The lender focused on offering loans to small- to mid-sized enterprises, and the interest margin is one of its biggest cash cows. As Indonesia has massive growth potential thanks to the country's young population, the IBK also sought to expand its earnings there by partnering with local companies and those operating business there.
"The problem was that our loan business portfolio in Indonesia was highly vulnerable to unexpected negative impacts from the pandemic," the official said.
But the virus-induced uncertainties keep posing a growing burden to the lender's overseas businesses.
In April, the IBK received a preliminary license to operate its business in Myanmar along with KB Kookmin Bank.
Even if the IBK has recently been authorized to start its business there, the lender remains in a dilemma over when to make inroads into the territory amid virus-related uncertainties.
