Korea's commercial banks are accelerating their pace of moving overseas. The number of overseas offices established by major banks like Woori, Hana, and Shinhan will likely reach more than 50, a record high.
For example, Nonghyup Bank is reviewing to open its first overseas branch office this year. This is interpreted as a move to find new venues for profit in markets like Southeast Asia as profitability at home is squeezed due to low interest rates.
According to banking sources on April 12, Woori Bank will open 25 branch offices in seven foreign countries until the year's end, including ten in Indonesia, three in the United States, and five in China. Lee Gwang-gu, president of Woori Bank, said, "We will try to rev up for a big push in overseas markets as well as the domestic one."
Shinhan Bank will also open ten new offices in overseas locations this year. Following an office in Ho Chi Minh City last month, the bank plans to open three more locations in Vietnam this year. Han Dong-woo, chairman of Shinhan Financial Group, said in a general shareholders meeting last month, "I will do my best to make measurable performance in global businesses by expanding overseas aggressively." Hana Bank and Korea Exchange Bank, which will be merged soon, will also open ten more overseas locations within this year.
The main motivation for the banks to globalize their operation is it is increasingly difficult to make profit in the domestic market. In addition to excessive competition among banks, their net interest margin, the most important measure of the banks' profitability, has declined to the mid-1-percent level as the low interest rate regime has continued. A vice president of a commercial bank said, "Southeast Asian countries like Vietnam are continuing their high economic growth and we can charge high interest rates on loans."