Foreign banks see shrinking gain from Korean branches

Foreign banks with branches in South Korea reported a decline in earnings here in 2017, on falling interest and trading income, data showed Wednesday. 

The 38 branches from global banks across the globe had logged a combined 680.7 billion won ($642.8 million) of net income in 2017, down 10.6 percent from the previous year, according to preliminary data from the Financial Supervisory Service. The branches suffered a drop in interest income by 58.3 billion won, or 5.2 percent on-year.

The loss from trading securities and stock valuation tripled in 2017 compared to a year prior, from 71.2 billion won to 227.7 billion won, partly due to rate hikes that prompted a loss in trading income by 119.7 billion won.

On the other hand, the strong local currency against the dollar contributed to a rise in the branches’ income related to foreign exchange. The profit from foreign exchange came to 1.56 trillion won in 2017, a sharp contrast to the 260.4 billion won loss in 2016. The derivatives-related income went into the red in 2017, reporting a combined 715.9 billion won loss, from a 1 trillion won gain in 2016.

The FSS said in a statement Wednesday it would keep close tabs on the branches’ possible financial exposure and change in profit model.

Korea is home to the branches of 38 banks from 16 countries including six from China and the United States, four from France and Japan, and three from Singapore.

By Son Ji-hyoung 
(consnow@heraldcorp.com)