Last Year Foreign Banks' Domestic Branches Net Profit 1.5564 Trillion KRW... 6% Increase YoY

Financial Supervisory Service, Yeouido, Seoul. Photo by Younghan Heo younghan@

Foreign bank domestic branches (foreign bank branches) posted a net profit of over 1.5 trillion won last year.

According to the "2023 Foreign Bank Domestic Branches Business Performance" announced by the Financial Supervisory Service (FSS) on the 20th, 33 foreign bank branches recorded a net profit of 1.5564 trillion won, an increase of 88.4 billion won (6%) compared to the previous year. The FSS excluded Credit Suisse Seoul branch, which experienced a temporary large loss due to downsizing caused by the head office's insolvency, from the analysis.

Looking at the items, interest income was 1.2323 trillion won, down 283.8 billion won (18.7%) from the previous year. Interest income decreased as overseas funding costs rose compared to fund management income. Foreign bank branches mainly raise funds in dollars and operate them through Korean won government bonds and loans, but last year, overseas funding interest rates rose more sharply than domestic interest rates.

Non-interest income was 1.873 trillion won, an increase of 551 billion won (41.7%) compared to the previous year. Despite a decrease in foreign exchange and derivative-related profits due to reduced volatility in exchange rates and interest rates, non-interest income increased as securities-related gains turned from losses in the previous year to profits due to the decline in market interest rates.

Specifically, securities gains were 1.0315 trillion won, an increase of 2.4563 trillion won compared to the previous year. At the end of last year, market interest rates fell, resulting in bond trading and valuation gains from government bonds and others.

Foreign exchange and derivative-related profits were 1.0191 trillion won, down 1.6506 trillion won (61.8%) from the previous year. The main cause was a significant decrease in derivative segment profits due to reduced volatility in exchange rates and interest rates and decreased transaction volume.

The total assets of foreign bank branches amounted to 404.4 trillion won, and the return on assets (ROA) was recorded at 0.38%.

Provision expenses were 61.3 billion won, an increase of 11.7 billion won compared to the previous year. The non-performing loan ratio was 0.16% as of the end of last year, down 0.4 percentage points from the previous year.

The FSS explained that foreign bank branches, excluding Credit Suisse, showed profits similar to the previous year. However, it added that due to the business structure with many securities, foreign exchange, and derivative transactions, profitability could be significantly affected by future movements in macroeconomic variables.

An FSS official stated, "We will encourage thorough liquidity management and solid capital securing to ensure stable performance of roles such as supplying foreign currency to the domestic foreign exchange market."

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