Business Korea newspaper said, in the context of the prolonged US-China trade war, and the Chinese economy slowing down, the profits of Korean banks in the country of 1.4 billion people were declining.
However, these banks recorded better profits in Southeast Asia, including the Vietnam market.
South Korean analysts said that the profit gap of Korean banks in two markets, China and Vietnam, had been narrowed to $22 million. Therefore, the country’s commercial banks such as Shinhan Bank, Kookmin Bank, Woori Bank and Hana Bank need to come up with new strategies for the markets.
Profits plummeted in China.
Specifically, in the first half of 2019, net profit at the Chinese branch of four Korean commercial banks, including Shinhan, Kookmin, Woori and Hana Bank, reached $37.81 million, decrease 44 percent, compared to the same period in 2018.
Return on assets (ROA) was only 0.58 percent, lower than one percent level of Chinese banks, as well as 0.75 percent of foreign banks in the Chinese market.
In particular, Hana Bank, the bank that recorded the most significant drop in profits, closed several branches in China. Specifically, in the first half of 2019, Hana Bank’s Chinese net profit only reached $12.04 million, declined 68 percent compared to the same period in 2018. Along with that, the number of branches also decreased from 30 to 27 offices in this country.
Lee Chi-Hoon, a researcher at the Korea International Financial Centre, explained that the business environment in China had become worse in the context of China’s economic downturn. Also, Korean corporations’ investment in China had been slowed down after tensions between the two countries related to the Missile Defense System (THAAD). Therefore, the Korean banking system’s strategy of focusing on Korean businesses in China had reached its limit.
Increase sharply in Vietnam
Contrary to the decline in China, Korean commercial banks achieved stable growth in the Vietnamese market.
According to data from the Korea Financial Supervisory Service (FSS), in 2018, the net profit of Korean commercial banks in Vietnam reached $131.8 million, an increase of 116 percent compared to 2017.
In the first half of 2019, the Woori Bank Vietnam branch recorded a net profit of $6.83 million, rising 130 percent over the same period.
Meanwhile, in 2018, the net profit of these banks in the Chinese branch (excluding Hong Kong) reached $153.8 million, only $22 million higher than the gain from Vietnam.
