While domestic banking markets reach saturation, Korean financial institutions are aggressively expanding their footprint abroad. However, their global scorecards present a starkly mixed picture.

According to an analysis of H1 earnings reports from five major lenders—KB Kookmin, Shinhan, Hana, Woori, and IBK (Industrial Bank of Korea)—released by Cookie News on the 19th, the combined net profit of their key overseas subsidiaries totaled KRW 454.966 billion (approx. $330 million) for the first half of the year, including non-controlling interests.

Shinhan Leads the Pack with Balanced Growth

Shinhan Bank is currently dominating the global race. For the first half of the year, Shinhan’s 10 major overseas subsidiaries posted a combined net profit of KRW 304.008 billion. Shinhan Vietnam Bank (KRW 120.346 billion) and Japan's SBJ Bank (KRW 93.137 billion) accounted for roughly 70% of the total profit, while Shinhan Kazakhstan Bank also contributed a solid profit of KRW 38.451 billion. Notably, none of Shinhan's overseas entities reported a loss.

Looking ahead, Shinhan plans to further expand its territory. In its semi-annual report, the bank stated, "To build a well-balanced global portfolio across different nations, we are currently pursuing the establishment of a local subsidiary in Uzbekistan," adding, "We will accelerate qualitative growth through differentiated global expansion."

KB Kookmin Stumbles in Indonesia Despite Cambodian Strength

KB Kookmin Bank’s five major overseas subsidiaries generated a total net profit of KRW 122.038 billion. Cambodia's KB Prasac Bank spearheaded the performance, earning KRW 112.569 billion—accounting for over 90% of the combined total. Operations in China and Myanmar also remained in the black.

However, KB Bank in Indonesia (formerly Bukopin Bank) recorded a net loss of KRW 4.105 billion in the first half. Although this represents a sharp contraction from the KRW 80.885 billion loss recorded during the same period last year, it has yet to achieve a turnaround.

Acquired with an existing operational base, KB Bank carried a heavy burden of non-performing loans (NPLs) from the start. Subsequent pandemic-driven defaults forced KB Kookmin to pump over KRW 2 trillion into normalization efforts.

A KB Kookmin official noted, "Despite rising interest income from improved Net Interest Margins (NIM), we experienced a pre-provision operating profit (PPOP) deficit due to sluggish non-interest income. We will continue our efforts to lay the groundwork for a full-year turnaround by expanding prime loans and deposits, while actively curbing and preventing the spread of distressed assets."

Hana Bank Balances Russian Rebound against European Losses

Hana Bank posted a combined net profit of KRW 75.271 billion across its nine major overseas subsidiaries. KEB Hana Bank Russia (KRW 31.676 billion) and PT Bank KEB Hana Indonesia (KRW 31.025 billion) drove the performance. The Russian entity benefited from the resolution of one-off factors like foreign asset valuation losses, alongside overall operational improvements in interest income and trading gains. The Indonesian subsidiary showed an upward trajectory fueled by higher fee-based and non-interest income.

Conversely, KEB Hana Bank Germany (KRW 7.160 billion net loss) and KEB Hana Bank Brazil (KRW 966 million net loss) dragged down the aggregate figures. Hana attributed these losses to preemptive loan-loss provisions set aside for specific loan assets.

A Hana Bank official stated, "We expect continued strong performance in the Americas driven by global investment opportunities. However, lingering macroeconomic uncertainties—such as prolonged China property slumps and US-China trade tensions—maintain a persistent downturn. We will prioritize high-quality, low-risk assets while maintaining a strict risk management stance."

IBK Expands Footprint, Managing New Market Growing Pains

IBK’s four overseas subsidiaries posted a total net profit of KRW 19.120 billion. IBK China (KRW 14.497 billion) and IBK Indonesia (KRW 9.494 billion) served as primary profit engines. Meanwhile, IBK Poland—launched last year and currently in its foundational setup phase—recorded a net loss of KRW 7.642 billion, tempering overall earnings.

IBK's fifth overseas entity, IBK Vietnam Bank, officially commenced operations last month, with earnings yet to be tabulated. IBK plans to leverage its expertise in policy finance for small and medium-sized enterprises (SMEs) to deliver differentiated financial services in Vietnam.

Woori Hit Hard by Indonesian Financial Accident

Woori Bank’s 11 major overseas subsidiaries suffered a combined net loss of KRW 65.471 billion. Although Woori Bank Vietnam and Woori America Bank posted solid net profits of KRW 36.386 billion and KRW 26.517 billion respectively, they failed to offset a massive KRW 150.733 billion net loss incurred by Bank Woori Saudara in Indonesia. Operations in Brazil, the Philippines, Cambodia, and Europe also finished in the red.

In June of last year, Bank Woori Saudara was struck by a financial scandal amounting to $78.5 million (approx. KRW 107.8 billion), when Woori Bank publicly disclosed that it had uncovered fraud involving an Indonesian corporate client.

The Imperative of Global Expansion and Risk Mitigation

Banks continue to press forward with foreign expansion despite these hurdles due to the severe limitations of a saturated domestic market. "The domestic market is not only saturated but small in scale," a commercial bank official remarked. "We have no choice but to look abroad to find new growth engines."

Major banks are moving beyond traditional financial hubs like London, New York, and Hong Kong into emerging markets in Southeast Asia, Central Asia, and India. Southeast Asia, in particular, is prized for its high youth demographic, growing investment and loan demand driven by rapid economic development, geographic proximity, and the heavy presence of Korean enterprises.

Typically, overseas expansion mirrors the footprint of Korean corporations abroad. Because securing local corporate clients from scratch in unfamiliar cultural and regulatory environments is immensely challenging, banks initially establish a foothold by servicing Korean corporate subsidiaries before branching out into local client acquisition and new business ventures.

Another banking insider warned, "If we secure differentiated competitiveness through digital innovation and successfully anchor ourselves, we can expect stable long-term returns. Developing countries also generate steady demand for national infrastructure projects. However, turning these opportunities into real profit requires thorough due diligence on local markets and customer bases. Venturing blindly into global business is a recipe for total failure."

Experts emphasize that for overseas ventures to thrive sustainably, banks must expand their local customer bases while reinforcing advanced financial risk management capabilities. While relying on supporting Korean companies abroad provides a reliable entry point, it has limitations for long-term growth.

Professor Yang Jun-seok of the Department of Economics at Catholic University of Korea advised, "Korean banks tend to operate more conservatively relative to our national economic size. While this maintains stability, we need to take bolder risks if we want to cultivate the financial industry as a future growth engine. At the same time, because aggressive business strategies carry corporate and systemic risks, they must be paired with sophisticated risk management capabilities."

[ⓒ Global Economic Times. 무단전재-재배포 금지]