Foreign banks are struggling in Korea amid increasing predominance by domestic names and more may opt to pull out of the market.

According to the Financial Supervisory Service (FSS), the combined net income of 37 foreign banks operating branches in Korea reached 803.4 billion won ($720 million) last year, falling to below 1 trillion won for the first time in two years. In 2014, their combined net profit had reached 1.05 trillion won and 1.19 trillion won in the following year.

By bank, the local branches of all top five foreign banks by profit saw an on-year decline in their bottom line last year. The net profit of JP Morgan Chase & Co. came to 164.2 billion won in 2016 - a decline from 194.3 billion won in 2015 - while that of Hongkong and Shanghai Banking Corporation (HSBC) Holdings went down to 122.6 billion won from 137.9 billion won over the same period. FSS data also showed that net income of Mitsubishi Tokyo UFJ Ltd. and Mizuho Bank Ltd. each fell to below 100 billion won - 97.4 billion won and 84.3 billion won, respectively. In particular, the downward trend was more noticeable for local branches of Chinese banks that had benefitted from their own currency. The Industrial and Commercial Bank of China Ltd. (ICBC) saw its net income almost halve from 94 billion won in 2015 to 49.2 billion won last year.

The tough business environment has forced more foreign banks to close down branches in the Korean market. According to FSS, United Kingdom-based Goldman Sachs International Bank, Barclays Bank PLC, and Royal Bank of Scotland PLC, Spain-based Banco Bilbao Vizcaya Argentaria (BBVA) SA, and Union Bank of Switzerland (UBS) have already shut down their branches or have plans to do so.

Meanwhile, FSS data showed that HSBC has the largest amount of asset among foreign bank branches in Korea with 26.3 trillion won as of end of last year, followed by JP Morgan Chase with 23.6 trillion won, Mizuho Bank with 23.5 trillion won, China Construction Bank Corporation with 17.3 trillion won, and BNP Paribas with 15.2 trillion won.

By Noh Seung-hwan

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