Looking at the Overseas Performance of the Four Major Banks in the First Half of the Year... China 'Rebound', Southeast Asia 'Holding Up Well'

Net Profit of Four Major Banks' Chinese Subsidiaries Surges 146% Year-on-Year

As the financial sector rushes to expand overseas to pioneer new blue oceans, major commercial banks have shown remarkable performance improvements in China during the first half of this year. Although there are variations by country in the recently focused Southeast Asian market, overall performance has been solid.

According to the Financial Supervisory Service's electronic disclosure system on the 17th, the net profit of the Chinese subsidiaries of the four major commercial banks (KB Kookmin, Shinhan, Hana, Woori) in the first half of the year was approximately 100.1 billion KRW. This represents a 146% increase compared to the same period last year (40.7 billion KRW).

Looking at each bank, KB Kookmin Bank's Chinese subsidiary recorded a loss of 9.6 billion KRW in the first half of last year but turned to a net profit of 23.1 billion KRW this year. Shinhan Bank's first-half net profit increased by 13% from 26.8 billion KRW to 30.2 billion KRW. Hana Bank (China) Limited's first-half net profit surged 172% to 17.6 billion KRW from 6.4 billion KRW in the same period last year. Woori Bank China also posted a net profit of 29.2 billion KRW in the first half of this year, up 170% compared to the same period last year.

This performance rebound is interpreted as the reopening effect following the Chinese government's withdrawal of the 'zero-COVID' policy and resumption of economic activities. It also includes the base effect from last year's COVID-19 lockdown policies in China. A bank official explained, "The reversal of provisions accumulated through efforts to strengthen soundness management at the Chinese subsidiaries last year, after the cleanup of non-performing loans, also contributed to the profit."

However, the economic downturn in China in the second half of the year remains a variable. After the Chinese government released key economic indicators such as retail sales, industrial production, and investment for July on the 15th, concerns about a deepening recession both inside and outside China have increased, raising uncertainty for banks going forward.

In the Southeast Asian region, where commercial banks have recently been focusing their efforts, there were differences by country, but the overall atmosphere was positive. In the case of Shinhan Bank, Shinhan Cambodia Bank and Shinhan Indonesia Bank saw their half-year net profits decline by 60.1% and 67.2% respectively to 5.1 billion KRW and 1.9 billion KRW, showing some weakness. However, Shinhan Vietnam Bank increased by 46.1% to 126 billion KRW, resulting in an overall net increase.

Shinhan Vietnam Bank is considered the core of Shinhan Bank's overseas business, ranking first among foreign banks operating locally. Although not part of Southeast Asia, Japan's SBJ Bank, the origin of Shinhan Bank, also demonstrated solid strength with a net profit of 61.2 billion KRW, up 18.3%.

Woori Bank's subsidiaries in Cambodia (Cambodia Woori Bank), Myanmar (Woori Finance Myanmar), and the Philippines (Woori Wells Bank Philippines) showed slight declines in performance, but growth in the Indonesian and Vietnamese subsidiaries offset these losses. Indonesia Woori Sodara Bank posted a 45.7% increase to 34.4 billion KRW, and Woori Vietnam Bank recorded a 37.1% rise to 30.3 billion KRW in net profit.

For Hana Bank, the net profit of its star subsidiary, Vietnam Development Bank (BIDV), dropped 67.7% to 222.9 billion KRW. Hana Bank holds a 15% stake in BIDV. Hana Bank's Indonesian subsidiary, PT Bank KEB Hana, eased the disappointment with a 16.8% increase in net profit to 19.4 billion KRW.

KB Kookmin Bank's Indonesian subsidiary, which had been in the red for years, succeeded in turning a profit. Cambodia-based subsidiary Prasac Microfinance saw a 35.2% decrease to 78.7 billion KRW, and KB Cambodia Bank fell 77.6% to 1.8 billion KRW, but Indonesia's KB Bukopin Bank turned a profit with a net income of 8.4 billion KRW. Additionally, in Myanmar, where political instability continues, KB Microfinance Myanmar and KB Myanmar Bank each turned profitable.

However, regarding KB Bukopin Bank's turnaround to profitability, there is an interpretation that one-off factors such as large provisions set last year and the sale of non-performing loans had a significant impact. In fact, in this report, SMMK PTE, a special purpose company (SPC) related to the sale of non-performing loans by KB Bukopin Bank, recorded a net loss of 69.7 billion KRW for the half-year period.