Korean banks focus more on Viet Nam for impressive growth
South Korean banks are focusing more on Viet Nam as the market is emerging as a major source of earnings for the bank amid slowdown in the Chinese market.
South Korean banks are focusing more on Viet Nam as the market emerges as a major source of earnings for the banks amid their slowdown from China.
South Korean banks are seeing their earnings in China decrease due to the prolonged trade between China and the US and the slowdown in economic growth rates. However, they are showing higher profits in the Southeast Asian region, including Viet Nam, thanks to the Korean government’s New Southern Policy, the Business Korea newspaper reported.
South Korean commercial banks are showing a steady growth in Viet Nam. The net profits of domestic banks in Viet Nam came to US$131.80 million in 2018, showing a 116 per cent rise ($70.80 million) from $61 million in 2017, according to the data from the Financial Supervisory Service (FSS).
Woori Bank Vietnam also saw its net profits surge 130 per cent year-on-year to $8.17 billion won ($6.83 million) in the first half.
Meanwhile, the net profits of Chinese subsidiaries of South Korea’s top four commercial banks, including Shinhan, Kookmin, Woori and Hana Bank, came to 45.20 billion won ($37.81 million) in the first half of this year, down 44 per cent, or 36.30 billion won ($30.36 million), from a year ago. The return on assets (ROA) also stood at 0.58 per cent, falling short of 1 per cent of Chinese banks as well as 0.75 per cent of foreign banks in China.
According to Lee Chi-hoon, a researcher at the Korea Center for International Finance, the business environment in China has worsened as a whole amid the slowing Chinese economy. Furthermore, Korean conglomerates’ investment in China has shrunk after the Terminal High Altitude Area Defense (THAAD) issue. As a result, the Korean banks’ strategy of focusing on South Korean firms operating in China has reached its limits.
Accordingly, Hana Bank, which suffered the biggest drop in net profits among commercial banks, has closed down some branches. After the net profits of the Chinese subsidiary of Hana Bank plunged 68 per cent on year to 14.40 billion won (US$12.04 million) in the first half, the bank has reduced the number of its branches in China from 30 to 27.
Some analysts pointed out that domestic commercial banks need to come up with a new strategy for China as their earnings gap between China and Viet Nam has been narrowed to $22 million. — VNS
