IBK reports dismal earnings in Southeast Asia Indonesian subsidiary widening losing streak since 2019

Translated by Kim So-in 공개 2021-07-29 07:53:12

이 기사는 2021년 07월 29일 07:51 더벨 유료페이지에 표출된 기사입니다.

The Industrial Bank of Korea (IBK)’s Southeast Asian business is continuing to struggle, with its Indonesian subsidiary posting losses for three consecutive years.

According to the state-run lender on Tuesday, its Indonesian branch reported a net loss of 13.1 billion won ($11.3million) for the first six months of this year, widening a losing streak since it entered the country in 2019.

IBK acquired Bank Agris and Bank Mitraniaga in 2018 and merged the two Indonesian banks and opened Bank IBK Indonesia in 2019.

IBK entered the Indonesian market to expand its presence in the overseas markets. The bank sought to gain 25% of overseas earnings and 15% of overseas assets from Indonesia by 2023. It set up a new corporate desk for both Korean firms and local firms there.

The bank also planned to open 25 more branches while Bank Agris operated 17 branches in Indonesia and Bank Mitraniaga had 13. Bank IBK Indonesia currently operates 32 branches.

But Bank IBK Indonesia is showing worse-than-expected financial performance. The bank recorded a net loss of 18.2 billion won in 2019. Its net loss increased to 39.4 billion won in 2020 mainly due to unfavorable business conditions after the outbreak of the Covid-19 pandemic.

In the first quarter of this year, Bank IBK Indonesia posted an earnings surprise. It delivered an operating profit of 1.17 billion won and a net profit of 1.21 billion won as savings deposits sharply increased. The Indonesian banking industry is believed to have strong competitiveness as it has a high loan-to-deposit margin of 4.2% and a net income margin of 4.5%.

However, the bank swung to a net loss in the second quarter as its expenses increased significantly after the Financial Services Authority of Indonesia, which had been closely monitoring the pandemic situation, asked the bank to set aside additional provisions.

Bank IBK Indonesia’s net loss increased to 14.3 billion won in the second quarter, making its net loss in the first half of this year 13.1 billion won.

IBK said it is inevitable to deliver losses due to external factors including the Covid-19. The spread of the super-contagious Delta variant is also having a negative impact on the business environment.

“It requires expenses to establish infrastructure in the early stage of entry and it takes time for business to enter a normal trajectory. But our business has not been normalized due to the outbreak of the Covid-19” said an official at IBK. “It is unavoidable to show poor performance due to external factors.”

Earlier this year, IBK opened its branch in Myanmar to establish the IBK Asia Financial Belt, a project to create a banking network that connects China and Japan with Vietnam, the Philippines, Cambodia and other ASEAN states.

However, the bank’s business there is being pressed due to escalating uncertainties following a military coup along with the pandemic. IBK’s subsidiary in Myanmar recorded a loss of 1.7 billion won in the first half of this year. (Reporting by Gyu-hee Kim)
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