Domestic Banks Expand New Southern Market Entry Despite COVID-19... 197 Overseas Branches

Overseas Store Assets of $165 Billion
Increase in Acquisitions and Loans from Local Financial Institutions
Soundness and Profitability Deteriorate Due to COVID-19

[Asia Economy Reporter Oh Hyung-gil] Despite the impact of COVID-19, the number of overseas branches of domestic banks increased, and the assets of these overseas branches also grew significantly. However, due to insolvencies in industries affected by COVID-19 such as aviation and shipping, the soundness and profitability of overseas branches deteriorated.

According to the 2020 management status and localization index evaluation results of domestic banks' overseas branches released by the Financial Supervisory Service on the 15th, the number of overseas branches of domestic banks at the end of last year was 197 in 39 countries, an increase of 2 compared to the previous year. Nine branches were added and seven branches were closed.

New branches were concentrated in the New Southern Region and China.

Kookmin Bank established corporations in Cambodia, Indonesia, and Myanmar, while Jeonbuk Bank and Gwangju Bank each established corporations in Cambodia and Vietnam. The Korea Development Bank added a corporation in Indonesia.

On the other hand, Shinhan Bank closed its Hong Kong corporation due to the integration of local corporations, and Woori Bank eliminated its Cambodia corporation through a merger of newly established corporations. KB Kookmin Bank closed its local corporation while opening a branch in the UK. Hana Bank excluded its Myanmar corporation due to changes in shareholding ratio.

By country, domestic banks' overseas branches were concentrated in Asia with 138 branches in Vietnam (18), China (17), India (16), and Myanmar (15), accounting for 70.1% of the total. The Americas had 27 branches (13.7%), Europe 24 branches (12.2%), and others (Oceania and Africa) 8 branches (4.1%).

Status of Domestic Banks' Overseas Branches by Country (Source: Financial Supervisory Service)

The total assets of overseas branches amounted to $165 billion (approximately 184 trillion KRW), an increase of 23.4% compared to the end of the previous year. This accounts for about 6% of the total assets of domestic banks (2,978 trillion KRW).

Assets of overseas branches in the New Southern Region, such as Kookmin Bank's acquisition of Indonesia's Bukopin Bank and Cambodia's Prasac MFI, increased by 46.1% to $44.5 billion compared to the previous year.

Assets in China increased by 8.8% to $29.8 billion, while major advanced countries also recorded growth with the US at $22.7 billion (37.1%), Japan at $16.9 billion (19.2%), and the UK at $14.5 billion (16.3%).

The non-performing loan ratio of overseas branches rose by 1.51 percentage points from the previous year to 2.14%. However, excluding Kookmin Bank's Bukopin Bank (non-performing loan ratio of 29.8%), which was acquired under the condition of acquiring a non-performing bank, the non-performing loan ratio stands at about 0.85%.

The net income of overseas branches was $733 million, a decrease of 25.4% from the previous year, and the return on assets (ROA) was 0.44%, down 0.30 percentage points from the previous year.

Meanwhile, the comprehensive evaluation grade of the localization index for domestic banks' overseas branches improved by one level from 2019 to '2+'.

This content was produced with the assistance of AI translation services.