Last Year Foreign Bank Branches' Net Profit Surpasses 1 Trillion Won... Due to Increase in Interest Income

Total Assets of 330.1 Trillion KRW... 8.1% Increase YoY
Authorities "Will Continuously Monitor to Prepare for Financial Market Volatility"

[Asia Economy Reporter Kwangho Lee] Last year, the net income of foreign bank domestic branches (foreign bank branches) in Korea surpassed 1 trillion won. This was the result of increased interest income and foreign exchange and derivative gains.

According to the "2020 Foreign Bank Domestic Branches Operating Performance (Preliminary)" announced by the Financial Supervisory Service on the 15th, the net income of 36 foreign bank branches last year was 1.151 trillion won, an increase of 28.6% (255.7 billion won) compared to the previous year (895.3 billion won).

By segment, interest income recorded 1.4834 trillion won, up 49.2% (489.1 billion won) from the previous year (994.3 billion won). Domestic interest income (1.7528 trillion won) decreased by 4.1% compared to the previous year (1.8274 trillion won), but losses from head office transactions (transactions between domestic branches and foreign headquarters) were reduced.

Last year, securities gains turned to a deficit of 218.6 billion won, a 229.9% (386.8 billion won) decrease compared to the previous year (168.2 billion won). This was due to a significant decrease in valuation gains following the rise in 10-year government bond yields, resulting in a loss compared to the previous year.

On the other hand, foreign exchange and derivative gains increased by 19.6% (219.6 billion won) from the previous year (1.121 trillion won) to 1.3406 trillion won. Foreign exchange gains increased significantly (5.1586 trillion won) due to the impact of exchange rate declines, but derivatives suffered large losses (-2.5816 trillion won).

The total assets of foreign bank branches last year were 330.1 trillion won, an 8.1% increase from the previous year (305.2 trillion won).

During the same period, liabilities increased from 286.8 trillion won to 310.3 trillion won, and equity capital rose from 18.3 trillion won to 19.8 trillion won.

A Financial Supervisory Service official said, "Due to increased exchange rate volatility and other factors, foreign exchange and derivative transactions expanded, resulting in increases in total assets, total liabilities, and net income. However, major profits and losses have changed sharply, making the financial market vulnerable to volatility." He added, "We will thoroughly conduct continuous monitoring of vulnerable areas in foreign bank branches' funding and operations, as well as changes in profit structures, in preparation for the possibility of increased volatility in domestic and international financial markets."