Thanks to the low interest rate environment and rising competition from online banks.
When Shinhan Bank acquired Indonesian bank Centratama Nasional Bank in 2016 as well as the Australia and New Zealand Banking Group’s retail business in Vietnam in 2017, the bank was driven by a hunger for higher profits and more lucrative growth markets. The low interest rate environment at home and rising competition from online banks have pushed South Korean lenders to expand abroad. Shinhan Bank Vietnam said it posted a “low” non-performing loan ratio of less than 1% and “good” credit growth of 12.8% in 2016.
As South Korean banks seek growth in other countries, Southeast Asia has been particularly appealing, especially in countries where their corporate customers are also expanding footprint. Vietnam has attracted not only Shinhan Bank, but also Korea Development Bank and Woori Bank, with the former cementing a comprehensive cooperation agreement with Commercial Joint Stock Bank and the latter launching an overseas unit. South Korean investments in Vietnam reached more than $6b in August 2017, making it the largest foreign investor in the country, representing more than a quarter of the total, according to data from Vietnam’s Foreign Investment Agency.
South Korean banks also plan to expand in Indonesia, where KEB Hana Bank has increased its presence to at least 59 offices in 11 provinces in Indonesia, as well as in the Philippines, where KB Kookmin plans to open its first branch to follow in the footsteps of Woori and Shinhan. Moreover, KEB Hana Bank, Kookmin Bank, and Shinhan Bank have reduced the number of their domestic branches by 15% as of June 2017 compared to the peak at the end of 2012, according to a Moody’s report.
In December 2017, Moody’s upgraded its outlook on Shinhan Bank and KEB Hana Bank to stable from negative due to an absence in asset quality deterioration or profitability that the agency was previously concerned about. “Moody’s expects that these banks’ liquidity, funding and capitalization will remain stable at current levels over the outlook period.”
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