[Bank Southeast Asia Expansion Record] Shin Nambang, the 'Profit Maker' for Commercial Banks... Accelerating Market Entry

[Image source=Yonhap News]

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[Asia Economy Reporter Yoo Je-hoon] The 'New Southern' region is emerging as a key profit driver for major domestic commercial banks. Their local subsidiaries have posted remarkable performance. The banking sector expects continued overseas market expansion as Southeast Asia's economic development and growth are in full swing.

According to the Financial Supervisory Service's electronic disclosure system on the 12th, Shinhan Vietnam Bank recorded a net profit of 129.1 billion KRW last year, up 7.1% from the previous year. This accounts for half of Shinhan Bank's total overseas subsidiary revenue (about 250 billion KRW) and is comparable to major non-banking subsidiaries of Shinhan Financial Group.

Shinhan Vietnam Bank, established in 2009 after entering the local market in 1993, is a wholly owned overseas subsidiary of Shinhan Bank. As of the end of last year, it had built a network of 43 branches nationwide, including the five major cities in Vietnam (Hanoi, Ho Chi Minh, Haiphong, Da Nang, Can Tho), solidifying its leading position among foreign banks in the country.

Growth is also continuing in other New Southern regions. Shinhan Cambodia Bank, in which Shinhan Bank holds a 98% stake, posted a net profit of 20.1 billion KRW last year, up 26.7% from the previous year. Although its assets, around 850 billion KRW, do not reach the levels of neighboring Vietnam (8 trillion KRW) or Indonesia (1.45 trillion KRW), its rapid growth is notable.

Other major domestic banks also show remarkable results in the New Southern region overseas businesses. KB Kookmin Bank’s microfinance company in Cambodia, Prasac Microfinance, whose stake was increased to 100% last year, is a key profit contributor. With about 180 local branches and a 44% market share, it recorded a net profit of 205.3 billion KRW last year.

Woori Bank’s overseas subsidiaries, Cambodia Woori Bank and Indonesia Woori Sodara Bank, posted net profits of 48.7 billion KRW and 47.2 billion KRW respectively, up 59.2% and 57.5% year-on-year, forming a strong duo. Vietnam Investment and Development Bank (BIDV), in which Hana Bank acquired a 15% stake for 1 trillion KRW in 2019, also posted a net profit of 800.3 billion KRW, up 118.1%.

However, there are cases facing difficulties. Indonesia KB Bukopin Bank, ambitiously acquired by KB Kookmin Bank, recorded a net loss of 43.4 billion KRW in 2020, which widened to 272.5 billion KRW last year. KB Bukopin Bank, a mid-sized bank with about 400 branches locally, was acquired by Kookmin Bank with an investment of 400 billion KRW but has yet to normalize despite multiple capital increases. KB Financial Group Chairman Yoon Jong-kyu stated at last month’s shareholders meeting that the bank’s deterioration was recognized even before the acquisition and that more time is needed for normalization.

With the COVID-19 endemic expected this year, market conditions are also anticipated to improve. Huh Young-taek, Vice President and Head of Management Division at Shinhan Financial Group, said in a recent earnings conference call regarding overseas business, "This year, lockdowns in emerging countries such as Vietnam and Indonesia are expected to be lifted," adding, "The suppressed demand due to lockdowns could become a growth momentum."

A financial industry official explained, "The Southeast Asian market is at a stage of growth and development similar to Korea in the 1980s and 1990s, leading to rapidly expanding financial demand," and added, "Accordingly, interest rates are also high, making it an attractive market for financial companies."

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