South Korean banks are turning their eyes to new business targeting foreign investors as they are struggling from falling interest income amid a low rate trend at home, industry sources said Wednesday.
Kookmin Bank, the country’s No. 1 commercial bank by assets, will open a foreign direct investment center in downtown Seoul next month to give comprehensive investment consulting services and payment settlement services to foreign investors, Yonhap reported.
The FDI center is expected to help the company earn overseas remittance and foreign exchange commissions, according to the official.
Like other smaller local rivals, Kookmin Bank has traditionally focused on the retail banking business on the back of higher loan rates in the past, but it is now seeking new profit sources as South Korea’s key rate stands at a record low of 1.5% in June.
Korea Exchange Bank, the country’s sixth-largest bank that specializes in foreign exchange dealings, and No. 2 Shinhan Bank have already expanded their footing in the market.
The KEB managed $8.16 billion worth of foreign investment last year, accounting for 43% of the entire FDI inflow, while Shinhan Bank took up 17% of the foreign investment market in the first quarter.
As the central bank cut the key rate by a cumulative 1 percentage point over a year in a bid to boost the economy, the banking industry has suffered a sharp drop in interest-related income.
The net interest margin, a key gauge of profitability, of 18 local lenders reached a record low of 1.63% as of March this year, compared with 1.98% in 2009 in the aftermath of the global financial crisis.
According to government data, South Korea’s FDI market reached $19.03 billion last year, up 30% from $14.5 billion in 2013.
