Reviewing Last Year's Overseas Performance of the Four Major Banks

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[Asia Economy Reporter Song Hwajeong] The overseas business growth of the four major banks has somewhat slowed down due to the impact of COVID-19.

According to the Financial Supervisory Service's Financial Information Statistics System on the 5th, the transnationalization index of the four major banks?Kookmin, Shinhan, Hana, and Woori?stood at 15.5% as of the end of last year, up 4 percentage points compared to the end of 2019 before COVID-19. It rose by 0.75 percentage points compared to the end of the previous year.

The transnationalization index is an indicator that shows the degree of internationalization of a company, calculated by aggregating the ratios of overseas business assets to total bank assets, overseas branch income to total bank income, and overseas branch personnel to total bank personnel.

While the average of the four major banks showed an upward trend compared to the end of the previous year, the trends varied by bank. The most prominent in internationalization was Kookmin Bank. Kookmin Bank's transnationalization index rose sharply from 3% at the end of 2019 to 18% at the end of last year, showing a steep increase in internationalization despite COVID-19. The ratios of overseas assets, overseas income, and overseas personnel all showed an upward trend. As of the end of last year, Kookmin Bank's overseas assets amounted to KRW 29.5213 trillion, accounting for 6% of total assets, doubling from 3% at the end of 2019. Overseas income was KRW 1.3458 trillion, with its share of total income rising from 2% at the end of 2019 to 5%. Overseas personnel surged to 12,967 from 932 at the end of 2019. Accordingly, the overseas personnel ratio jumped from 5% to 43%. In 2020, Kookmin Bank acquired a 67% stake in Indonesia's Bukopin Bank, becoming the largest shareholder, and established a local corporation in Myanmar the same year, which appears to have significantly improved the transnationalization index.

Woori Bank also showed an upward trend in the transnationalization index. Woori Bank's index rose from 15% at the end of 2019 to 17% at the end of last year. As of the end of last year, overseas assets amounted to KRW 41.1224 trillion, with an overseas asset ratio reaching 10%, up 1 percentage point from 9% at the end of 2019. Overseas income recorded KRW 1.1832 trillion. The overseas income ratio fell by 1 percentage point from 6% at the end of 2019 to 5%. Overseas personnel numbered 7,989, with their share rising from 29% at the end of 2019 to 37%.

On the other hand, Shinhan and Hana Banks showed slower internationalization. Shinhan Bank's transnationalization index stood at 15% at the end of last year, maintaining the same level as at the end of 2019. Hana Bank's index fell from 13% at the end of 2019 to 12% at the end of last year. Shinhan maintained an overseas asset ratio of 10%, but its overseas income ratio dropped from 9% to 8%. The overseas personnel ratio increased from 26% to 28%. Hana's overseas asset ratio rose from 9% to 10%, and overseas income ratio increased from 7% to 8%, but the overseas personnel ratio decreased from 24% to 19%. However, Hana Bank explained that it continues to grow global income through its equity investment in the Bank for Investment and Development of Vietnam (BIDV). A Hana Bank official said, "Since equity investments are not reflected in the transnationalization index, growth appears slow, but we are achieving overseas results." In November 2019, Hana Bank invested KRW 1 trillion to acquire a 15% stake in BIDV, becoming the second-largest shareholder. BIDV's net profit last year was KRW 800.354 billion, an increase of 118.8% compared to the previous year.

Kim Woojin, Senior Research Fellow at the Korea Institute of Finance, pointed out, "Despite some achievements such as the Southern Policy, the overseas expansion performance of domestic banks is still considered insufficient," adding, "The proportion of overseas income is significantly lower compared to advanced country banks (around 40%)."

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