Foreign Bank Branches' Net Income Dropped by 102.8 Billion Won Last Year

Foreign Currency Funding Costs Increase
Securities Income Down 227.3% Year-on-Year
Both Interest and Non-Interest Income Decline

Last year, the operating performance of foreign bank branches in Korea declined by more than KRW 100 billion compared to the previous year. The overall results were dragged down by a 227.3% year-on-year decrease, as profits from securities turned into losses and the burden of foreign currency funding costs increased under the strong US dollar interest rate policy.

Net Income Status of Foreign Bank Branches over the Last 3 Years. Financial Supervisory Service

According to the “2025 Provisional Operating Results of Foreign Bank Branches in Korea” released by the Financial Supervisory Service on March 24, the net income of foreign bank branches in Korea last year was KRW 1.6773 trillion, a decrease of KRW 102.8 billion (5.8%) from the previous year (KRW 1.7801 trillion). Interest income declined as funding costs remained relatively high compared to asset management returns, and non-interest income also decreased due to a drop in bond prices caused by rising government bond yields at year-end.

Interest income amounted to KRW 913.7 billion, a decrease of KRW 45.1 billion (4.7%) from the previous year. The high cost of foreign currency funding persisted amid strong dollar interest rates, while yields on assets such as government bonds fell, shrinking the net interest margin (NIM). Last year, the three-year government bond yield dropped from 3.57% in 2023 and 3.11% in 2024 to 2.57% in 2025.

Non-interest income also decreased by KRW 49.6 billion (2.0%) to KRW 2.4909 trillion compared to the previous year. While foreign exchange and derivatives profits increased by KRW 961.3 billion (43.1%) due to expanded exchange rate volatility, losses related to securities offset these gains. The KRW-USD exchange rate, which stood at 1,470 won at the end of 2024, fell to 1,434.9 won at the end of 2025. As a result, foreign exchange and derivatives profits increased by 43.1% year-on-year to KRW 3.1942 trillion.

However, securities profits turned into losses, with a deficit of KRW 544.8 billion. This figure represents a decrease of KRW 972.7 billion and a 227.3% drop compared to the previous year. The Financial Supervisory Service explained, "A sharp rise in government bond yields at year-end resulted in significant valuation losses on securities (-KRW 452.1 billion)." Interest income is based on the average annual yield since it represents cumulative income for the year, while securities gains and losses are evaluated at year-end prices, so the year-end rate is used as the basis. At the end of 2024, the three-year government bond yield stood at 2.59%, but it climbed to 2.95% at the end of 2025.

Total assets amounted to KRW 450.1 trillion, with a return on assets (ROA) of 0.37%. On the cost side, selling and administrative expenses rose by KRW 55.9 billion (5.1%) to KRW 1.1561 trillion, and provisions increased by KRW 5.8 billion (16.8%) to KRW 40.5 billion. The Financial Supervisory Service stated that, as financial market volatility is intensifying due to a combination of recent shocks from the Middle East and ongoing domestic and international economic uncertainties, it will continuously monitor the funding, asset management, and liquidity of foreign bank branches.

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