[비즈한국] IBK (Industrial Bank of Korea)024110 is putting its all into expanding its global business. Since taking office, IBK CEO Kim Sung-tae has made the overseas sector a new axis of growth, presenting a blueprint to boost global net profit to 250 billion won. However, with the bank's overseas performance for the first half of the year falling short of expectations, prospects for achieving this goal are looking dim.
First-Half Overseas Subsidiary Net Profit Falls to 55.5 Billion Won
In April 2023, during a press conference held to mark his 100th day in office, CEO Kim Sung-tae set a goal to double global sector profits by 2025. He expressed his ambition to raise overseas business profits, which stood at 126 billion won in 2022, to the 250 billion won level within two years.
CEO Kim's goal of 250 billion won in global net profit was interpreted as a sign of his determination to fundamentally strengthen the structure of IBK's overseas business. This aligns with the broader move by the domestic banking industry to accelerate overseas market expansion due to the saturation of the domestic market and limited growth potential.
IBK also formulated a strategy to use global markets with high growth potential as a new breakthrough. In particular, there were expectations that the bank could grow quickly in overseas markets by leveraging the strengths of a state-run bank, such as government support and high credit ratings, to expand its global network.
However, the results fell short of expectations. Last year, the cumulative total net profit of IBK's overseas subsidiaries (China, Indonesia, and IBK Myanmar) was 55.5 billion won. This was only a 200 million won increase from 55.3 billion won during the same period the previous year, leading to criticism that growth has slowed. In fact, the net profit generated by these overseas subsidiaries accounts for only about 2% of the total, suggesting their presence is minimal.
The global sector profit figure presented by CEO Kim includes not only subsidiaries but also branches and representative offices. As IBK discloses subsidiary performance separately, it is difficult to determine the exact total overseas performance. However, it is known that last year's figures also fell significantly short of the target.
The number of overseas outlets also lags behind competitors. According to the "2024 Domestic Bank Overseas Outlet Management Status and Localization Index Evaluation Results" released by the Financial Supervisory Service in July, IBK had only 14 overseas outlets (including branches, subsidiaries, and representative offices) as of the end of 2024. This is the smallest scale compared to Hana Bank (35), Woori Bank (31), Shinhan Bank (27), and Kookmin Bank (16).
There are also predictions that IBK's overseas business performance this year will be weaker than last year. This is because the performance of overseas subsidiaries in the first half of the year showed a clear downward trend compared to the same period the previous year. While the cumulative net profit of overseas subsidiaries was 29.4 billion won in the first half of last year, it dropped to just 24.4 billion won during the same period this year.
In particular, the sluggishness of the China subsidiary is notable. In the first half of this year, sales were 134.9 billion won, and net profit was 13.4 billion won. Compared to the same period last year—when sales were 165.0 billion won and net profit was 18.0 billion won—sales decreased, and net profit fell by 25%. The situation is similar for the Indonesia subsidiary. Sales fell from 85.5 billion won in the first half of last year to 84.2 billion won this year, and net profit also dropped by about 4%, from 9.4 billion won to 9.0 billion won.
The only one of the three subsidiaries to show growth was the Myanmar subsidiary. Its performance, which stood at 3.7 billion won in sales and 1.9 billion won in net profit in the first half of last year, improved slightly to 5.4 billion won in sales and 2.0 billion won in net profit in the first half of this year.
An IBK official explained, "The China subsidiary saw a decline in net profit due to the government's continued cuts to the Loan Prime Rate (LPR), U.S.-China tariff conflicts, and the trend of South Korean companies shifting away from China. The Indonesia subsidiary also saw a slight decrease in net profit as the local real economy contracted due to the fallout from global economic uncertainty."
They added, "The China subsidiary will further strengthen local operations and accelerate digital innovation to secure new growth drivers, while the Indonesia subsidiary plans to increase operating profit through continuous expansion of interest-earning assets and proactive soundness management."
3 Months Left in Term, Accelerating Establishment of Vietnam Subsidiary
Due to the sluggish overseas performance, observations that achieving CEO Kim's 250 billion won goal is practically impossible are spreading. This situation is bound to affect the future of CEO Kim, whose term expires in January next year.
The industry is skeptical about his chances of reappointment. Only two former IBK CEOs have succeeded in serving consecutive terms, and a controversy over poor internal controls arose during his tenure due to an 88.2 billion won illicit loan scandal. Combined with the difficulty in meeting overseas business goals, the outlook for his reappointment has become even more uncertain.
CEO Kim appears to be actively pursuing global business expansion until the end of his term. In particular, he is personally overseeing the establishment of a local subsidiary in Vietnam to accelerate penetration into the Southeast Asian market. Last month, CEO Kim met with Vietnamese Deputy Prime Minister Ho Duc Phoc to explain the plans for the local bank subsidiary. As Deputy PM Ho Duc Phoc expressed official support, there are expectations that the establishment process will gain momentum. Previously, in May, IBK received a Confirmation Letter (C/L) from the State Bank of Vietnam (SBV) approving the start of the local subsidiary establishment process, entering the full-scale conversion process.
At the same time, the bank is focusing on exploring the European market. Following the opening of an office in 2023, it became the first Korean bank to receive approval to establish a subsidiary in Poland last year. The business license approval process is currently underway, and it is reported that the license could be obtained within the second half of this year.
An IBK official said, "The supply chain reorganization triggered by COVID-19 and geopolitical disputes has solidified into a country-centered regional bloc structure due to U.S.-China trade confrontations and tariff policies. Consequently, the withdrawal, relocation, and diversification of expansion regions by overseas companies have affected our bank's global strategy. Despite these difficulties, we will complete the establishment of our Polish and Vietnamese subsidiaries without a hitch and achieve a global net profit of 250 billion won in the mid-to-long term."