Unable to work due to 2-week quarantine after overseas business trip
Overseas IR activities completely halted this year after March shareholders meeting
Replacing with untact sales... Overseas sales expansion plans scaled down and adjusted
[Asia Economy Reporter Kangwook Cho] The global operations of financial holding companies have come to a halt due to the COVID-19 pandemic. In particular, the overseas business trip schedules of financial holding company heads, who used to actively engage in global sales every year, have been completely "all stopped." As a result, concerns over deteriorating profitability due to an increase in non-performing loans amid the ultra-low interest rate environment and the impact of COVID-19 are growing, making it inevitable that the roadmap to strengthen the global competitiveness of domestic financial companies, represented by the "New Southern Strategy," will face setbacks.
According to the financial sector on the 5th, the CEOs of the four major domestic financial holding companies have completely suspended their overseas schedules this year due to the global spread of COVID-19.
Cho Yong-byeong, Chairman of Shinhan Financial Group, who accelerated his "second-term management" after the approval of his appointment as an inside director at the March shareholders' meeting this year, has decided not to undertake any overseas business trips this year. Chairman Cho is known for his "marathon" schedules, squeezing time for overseas investor relations (IR). Last year, he visited Toronto, Canada in April, followed by San Francisco, USA; Tokyo, Japan in May; and Melbourne and Sydney, Australia in June. In the second half of the year, he also visited Amsterdam, Netherlands; London; and Paris, France to introduce Shinhan Financial's strategic direction and hold meetings with financial company CEOs.
A Shinhan Financial official said, "In a normal year, after the March shareholders' meeting, the CEO would actively conduct overseas investor relations (IR), but this year it has been completely suspended. Due to entry restrictions in various countries and the increased risk of COVID-19 infection, we have decided to cancel overseas trips entirely this year and focus on untact (contactless) sales."
Yoon Jong-kyu, Chairman of KB Financial Group, has also been unable to schedule overseas IR activities this year. Last year, he visited Hong Kong and Australia in March and April, and in the second half of the year, he traveled to the UK, Sweden, Norway, France, Canada, and the USA. However, due to the spread of COVID-19, all institutional investor meetings have been completely suspended. He has even been unable to conduct on-site inspections of Prasac Microfinance, Cambodia's top microloan financial institution, which KB Financial acquired in April.
A KB Financial official said, "Under the current circumstances, if you go on an overseas business trip, you must quarantine for two weeks, during which you cannot work at all. Therefore, we are prioritizing strengthening internal controls, restructuring management systems, and digital innovation."
Kim Jung-tae, Chairman of Hana Financial Group, currently has no concrete overseas schedule. Similarly, Sohn Tae-seung, Chairman of Woori Financial Group, faces uncertainty regarding global activities in the second half of the year. The financial sector predicts that unless the COVID-19 spread dramatically subsides in the second half, these CEOs will be unable to conduct on-site inspections or IR activities for overseas business.
The problem is that if the COVID-19 situation becomes endemic and prolonged, not only stock price support but also various overseas business disruptions will be inevitable. Accordingly, the four major banks, which had planned overseas branch expansions when establishing their business plans this year, have begun to comprehensively review and reduce these plans.
In fact, according to the recent first-quarter reports of the four major commercial banks, the total number of overseas branch openings planned for this year is 41 (including local subsidiaries and branches). By company, Hana Bank plans 26, Shinhan Bank 9, and Kookmin Bank 6. Woori Bank, which had planned to increase overseas branches by two when setting its "2020 branch plan," scrapped this plan while revising its strategy this year. Shinhan Bank also reduced its plan by two branches, now targeting seven overseas branches, including five in Vietnam and two in Cambodia. These plans are expected to fluctuate depending on the COVID-19 situation. Hana Bank, which had the most branch plans this year, is currently reviewing whether to proceed with additional expansion in India.
Experts predict that due to the COVID-19 pandemic, a decline in sales and performance of companies worldwide is inevitable. As the real economy contracts, concerns are growing over setbacks in business expansion in New Southern countries, where domestic banks have recently been actively entering. There are even concerns that foreign direct investment (FDI) by companies, which was the background for banks' overseas expansion, may shrink due to partial reshoring of manufacturing companies after COVID-19, and that local retail sales may decrease due to interest rate declines and increased non-performing loans. According to the Financial Supervisory Service, the net profit of overseas subsidiaries and affiliates of the four major banks (KB Kookmin, Shinhan, Woori, Hana) in the first quarter of this year decreased by 13.8% compared to the same period last year.
Some interpret the cooperation between Shinhan Financial and Hana Financial to strengthen global business as focusing on mutual survival rather than overheated competition.
A financial sector official said, "If overseas business were actively progressing, we would not be overly concerned about cost waste due to excessive competition. However, as financial companies face difficulties both domestically and internationally, it seems they are focusing on cooperative relationships for survival."
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