The South Korean banking sector has undergone a significant evolution over the past few decades, reflecting both domestic economic shifts and the necessity for global expansionIn the wake of the foreign exchange crisis of the late 1990s and ensuing credit card turmoil, many banks initially took a step back from international foraysHowever, in contemporary times—characterized by a deceleration in domestic economic growth and intensified competition among local banks—the sector is once again eyeing overseas markets as a venue for enhancing profitability.

As illustrated by recent statistics from the South Korean government, by the end of 2023, major banks such as KB Kookmin Bank, Shinhan Bank, Woori Bank, Hana Bank, and NH Nonghyup Bank collectively employed 2,465 individuals abroad, marking a 19% increase compared to three years earlierParticularly noteworthy is the experience of NH Nonghyup Bank, a relative latecomer to the international stage, which saw its overseas workforce nearly double during this period

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In stark contrast, the domestic employee numbers for these five banks fell by about 4.6%, a trend that encapsulates the growing commitment of South Korean banks to expand their footprints internationally.

By the close of 2023, these banks had established a total of 202 overseas branches in more than 40 countries and regionsOut of these, 116 branches belonged to the aforementioned five major banks, comprising 39 local subsidiaries, 63 branches, and 14 representative officesThe overseas assets held by these banks exceeded 198 trillion Korean won, accounting for approximately 8.3% of their total asset baseThis geographic diversification not only underscores their strategic pivot but also highlights the emerging relevance of global banking operations amidst local challenges.

Financial performance metrics reveal the efficacy of this overseas strategyIn 2023, the collective earnings from international operations reached 13 trillion won, effectively doubling from three years prior

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The average Transnational Index (TNI) for the five major banks stood at 15%, a slight increase from the previous yearThe TNI is a critical measure that assesses the degree of internationalization of banks, and with peers in advanced markets typically exceeding a TNI of 40%, it is clear that South Korean banks still have considerable ground to coverNonetheless, this disparity elucidates a promising trajectory for growth and expansion within the global banking arena.

Particularly revealing is Woori Bank, which proudly claims the title of being the pioneer in overseas market penetration, dating back to its establishment of a Tokyo branch in 1968. By April 2024, Woori had successfully amassed 469 branches in 24 countries, making it the South Korean bank with the most extensive international networkPlans are underway for significant investment in Southeast Asia, with a proposed $500 million boost to three firms in the region, alongside a completed $200 million capital increase in Vietnam earlier this April

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Additionally, a new branch in Poland is anticipated to further enhance the offerings of financial services catered to South Korean businesses operating abroad.

Shinhan Bank, too, has been active in its international pursuits, having set up 253 branches across 20 nations by the first quarter of this yearIts overseas net profit reached 215 billion won for that period, reflecting a robust annual growth of 35.4%. The share of overseas profit in Shinhan’s overall earnings has also risen sharply, increasing from 11.4% in Q1 2023 to 16.3%. Ambitiously, the bank aims to elevate this to 30% of total profits by 2030, indicating a strong commitment to global business practices.

In line with its progressive outlook, KB Kookmin Bank is pivoting its strategy to elevate its global business ratios by transitioning from a dual-track strategy focused primarily on developed markets and Southeast Asia to an innovative “3x3 strategy.” This strategic model delineates efforts to penetrate not only Southeast Asian and developed markets but also emerging territories, fostering diversification via collaborations or expanded equity investments with local firms.

Similarly, Hana Bank underscores a vision to enhance its global presence, with aspirations to ramp up its international profit ratio to 40% in the medium term

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This ambition is bolstered through Memoranda of Understanding (MOUs) with prominent global financial institutions, including collaborations with India’s State Bank and Saudi Arabia’s Export-Import Bank, set in motion earlier this year.

In contemplating the road ahead for South Korean banks in their overseas endeavors, leaders of the Korean Banking Association have voiced perspectives that digital technology represents a fundamental advantage for Korean financial entitiesThey argue that successful channel strategies hinge on localizing customers, assets, and employees, thereby ensuring competitive viability in terms of scale and speed in global markets.

Financial analysts echo these sentiments, advocating for South Korean banks to leverage their strengths in digital financial technologies to invigorate non-face-to-face market segmentsThis approach will not only streamline operational costs but also position these banks to secure competitive advantages in interest rate offerings