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| From left are Standard Chartered Bank Korea CEO Park Jong-bok and Citibank Korea CEO Yoo Myung-soon. Yonhap |
By Lee Min-hyung
Standard Chartered (SC) Bank Korea and Citibank Korea desperately need to find the means to tackle their falling revenue in Korea ― the two are major overseas lenders here that were hit hard by the COVID-19 pandemic last year.
Both banks reported double-digit declines in net profit in 2020, compared to the year before. SC Bank Korea reported 257.1 billion won, down 18.2 percent from the previous year; while Citibank Korea chalked up 187.8 billion won in net profit, a drop of 32.8 percent
In addition, a series of other indices also indicated that it is high time they seek out new growth engines for a timely rebound in the local financial market, where uncertainty keeps escalating due to tightened dividend regulations and the prolonged low interest rate.
According to data from the two lenders, SC Bank Korea's return on assets (ROA) dropped by 0.14 percentage points to 0.32 percent last year from the year before. The figure for Citibank Korea dropped by 0.19 percentage points to 0.35 percent during the same period.
The ROA is a key barometer of gauging how profitable a company is. Of note is that the figures are far below the average of the nation's commercial lenders. According to data from the Financial Supervisory Service, the average ROA of Korean banks last year stood at 0.42 percent.
Industry officials said market conditions here in 2021 would remain tough for foreign banks due to toughening competition with local players and lingering virus uncertainties.
"Domestic banking groups are also desperately looking for new revenue sources amid the rapidly changing financial environment after the pandemic, even if they reported decent earnings last year amid the coronavirus-sparked economic doldrums," a bank industry source said.
"Foreign banks will be under growing pressure to normalize their earnings here this year, and toward that end, they need to make changes in their strategies," the source said.
Early this year, speculation surfaced that Citibank Korea might be sold off in the near future after reports that its head office in the U.S. was considering withdrawing its retail banking business from the Asia-Pacific region including Korea.
Both lenders plan to focus more on enhancing their wealth management businesses this year. This has been a years-long strategy of Citi's Korean operation, which cut its branch offices down to 39, compared to 133 as of the end of 2016. The move was part of the firm's efforts to cut its reliance on retail banking and raise profitability in the wealth management area.
Citibank Korea reported a gross profit of 1.22 trillion won, down by 8.3 percent from the previous year. But the lender said the figure dropped by 2.9 percent during the same period when excluding one-time costs regarding the sale of its office building in 2019.
