The share of non-bank assets hit 20.3% from 14.5% in 2013.
Banks in South Korea are shifting their focus into diversifying their business towards non-lending activities and overseas assets in an effort to weather against the silver tide of a rapidly ageing population, according to Moody’s Investors Service.
Much like Japan, lenders in South Korea have been grappling with a weakening domestic loan market as the country officially become an aged society in 2017 with over 14% of the population aged 65 or older.
“Of the seven fast-aging markets, consumer banking growth will be most constrained in Korea, because both banking penetration, as measured by the share of bank account holders in the population, and household leverage are high in the country,” Moody's Investors Service said in an earlier report.
As a result, the country’s major financial groups have been growing their non-banking portfolios with the proportion of these assets rising from 14.5% in 2013 to 20.3% by end-June. The goal is to have overseas operations account for more than 20% of banking assets and earnings over the medium to long term.
In fact, the number of branches by Korean banks operating abroad hit 431 by end-2017, up from 407 in 2016 and 382 in 2013.
"A stronger and more resilient profit stream is the key credit benefit of a sustainable diversification away from domestic lending, and it is also a potential driver for Korean banks to revive their low structural profitability," analyst Ok Tae-jong said in a report.
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