[Alpha Biz= Paul Lee] Foreign banks operating in South Korea earned a net profit of 1.78 trillion won in 2023, marking an increase of 14.4% from the previous year.


According to the Financial Supervisory Service’s (FSS) 2024 Foreign Bank Domestic Branch Operations Performance (Provisional) report released on Thursday, the 32 foreign bank branches (excluding UBS) in Korea recorded a net profit of 1.7801 trillion won in 2023, up by 224.1 billion won compared to the previous year.


Although interest income decreased due to rising overseas funding costs, non-interest income from foreign exchange and derivative transactions expanded, boosting overall profits. UBS, however, was excluded from the analysis due to substantial losses of 453.6 billion won in 2023 resulting from its headquarters' financial difficulties.


Breaking down the results, interest income for foreign banks in Korea totaled 958.8 billion won, a decrease of 22.2% (2.728 billion won) compared to the previous year. The sustained high foreign currency funding costs amid a strong dollar and lower domestic interest rates caused a decline in the net interest margin (NIM).


Securities gains also fell by 58.5%, amounting to 427.9 billion won. The reduction in government bond prices at year-end led to a decrease in trading and evaluation profits.


However, foreign exchange and derivative profits surged by 119.1%, reaching 2.2329 trillion won. Although foreign exchange losses widened (-6.2338 trillion won) due to exchange rate fluctuations, profits from derivatives (+8.4667 trillion won) helped boost overall profits.


The FSS explained that the significant rise in the USD/KRW exchange rate, which increased to 1,470 won at the end of 2023 from 1,289.4 won at the end of 2022, contributed to the gains in derivative products.

 

 

 

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