Profits of Korean Banks’ Foreign Branches Reach $1.61 Billion

The profits of the overseas branches of Korean domestic banks have registered double-digit growth for two consecutive years, surpassing 10% of total net profit. The significant reduction in loan loss expenses by nearly half proved effective.

According to the “2024 Domestic Banks’ Overseas Branches Management Status and Localisation Indicator Evaluation” released by the Korean Financial Supervisory Service (FSS), the net profit of domestic banks’ overseas branches last year was $1.614 billion, up 21.3% from the previous year.

It increased from $991 million in 2022 to $1.333 billion in 2023, and exceeded $1.6 billion last year, showing an increase of about 63% in two years, the report said.

The share of overseas branch profits in total net profit 16.22 billion was 9.9%, up 1.8 percentage points from 2023 (8.1%) and the key to the profit increase is the reduction in non-performing loans. Last year, loan loss expenses for overseas branches decreased by 45.6% year-on-year to $594 million.

The FSS explained that the profit base expanded due to the reduction of non-performing assets in overseas branches. In fact, the non-performing loan ratio improved by 0.28 percentage points to 1.46% from the end of the previous year (1.74%).

High Profits from US

Region-wise, profits increased in the US ($229 million) and Singapore ($49 million), while they decreased in Indonesia ($56 million) and China ($27 million).

As of the end of last year, the number of overseas branches of domestic banks totalled 206, an increase of 4 from the previous year. Of these, 92 were branches, 60 were local subsidiaries, and 54 were representative offices.

By region, Asia had the largest share (68%), followed by the Americas (14.1%) and Europe (13.6%). By country, Vietnam and India had 20 each, the United States 17, and China 16, FSS said.

Total assets of overseas branches increased by 3.3% to $217 billion. The asset size was largest in the United States ($35.79 billion), followed by China ($31.8 billion) and Hong Kong ($24.74 billion).

The average localisation rating remained at Level 2+, with entities in Cambodia achieving the highest score of Level 1+. Operations in Indonesia, Japan and the Philippines also performed strongly, each rated at Level 1. The index is rated from Level 1 to 5. The closer to Level 1, the higher the localisation level.

Listed Firms

Meanwhile, the combined market value of listed firms in the country increased to more than $2 trillion in the second quarter from three months earlier, driven by a rally in the country’s stock market, a corporate tracker said on Monday.

The market capitalisation of 2,758 companies listed on the country’s main and secondary markets came to a combined $2.09 trillion as of end-June, up 22.9%, or round $388 billion, from the previous quarter.

A total of 2,066 firms, or 74.9%, saw their market cap rise over the cited period, while 599 firms, or 21.7%, posted declines. The remaining 93 firms, or 3.4%, either remained unchanged or were newly listed.

According to South Korea’s Yonhap News Agency, in the first quarter, in contrast, more than 60% of the listed firms had experienced a drop in their market cap.

The number of companies with a market capitalisation exceeding $73 million came to 284 as of end-June, up 42 from three months earlier. Those with a valuation of over $730 million rose to 55 from 43 over the same period.