Kookmin Bank builts a community library in Indonesia in December 2023 (Courtesy of Kookmin Bank)
KB Bukopin, the Indonesian banking arm of South Korea’s Koomin Bank, has extended its losing streak through the first quarter of this year, weighed by heavy loan-loss reserves linked to small business owners grappling with the sluggish tourism industry after the COVID-19 outbreak.
Now the Indonesian unit, rebranded as KB Bank, is gearing up for a turnaround next year. It is endeavoring to broaden its customer base to corporate clients by digitalizing its business to improve efficiency and accuracy of its operation.
The Indonesian banking arm reported a net loss of 53 billion won ($39 million) in the January-March quarter. A Kookmin Bank official said the losses were caused in large part by writing down the value of non-performing loans under tighter standards.
Excluding provisioning costs against loan losses, KB Bank’s first-quarter revenue rose 9.4% to 130.4 billion won from the year prior.
In 2022, its net loss reached 802.1 billion, almost 20-fold surge from a 43.4 trillion won loss in 2020.
(Graphics by Sunny Park)
In 2018, Kookmin secured a 22% stake in the Indonesian bank for 116.4 billion won to become its second-largest shareholder for global expansion.
It has increased its ownership to a 67% stake in the lender with an additional investment 300 billion won in 2020.
To secure the majority stake, it received special approval from Indonesian financial authorities given that Indonesia puts a limit on foreign ownership of a local bank to 40%.
Since the purchase of a 22% stake in KB Bukopin in 2018, Kookmin Bank has poured about 1.5 trillion won into the Indonesian arm to increase its stake and keep it afloat. That is equivalent to nearly half of Kookmin’s net profit of 3.3 trillion won in 2023.
In 2021, South Korea’s largest lender had injected 393.5 billion won into the Indonesian unit and an additional 709.0 billion won in 2023 to buy its new shares.
Leaders of South Korea’s banks gathered in Indonesia to discuss business expansion in the country
As part of harsh self-rescue efforts, KB Bank has shut down more than half of its branches and cut workforce through redundancy and early retirement. It operates 172 branches as of March this year, down from 435 in 2021. Its employee count shrank by 45% to 2,695.
The restructuring efforts were in stark contrast to Woori Bank’s aggressive expansion in the Southeast Asian country.
Bank Woori Saudara, an Indonesian arm of South Korea’s Woori Bank, posts around 60 billion won in net profit annually. Its branch number climbed to 160 as of the end of last year, up 34.5% from 119 in 2014 when the South Korean bank secured its control.
To reinforce its Indonesian business, KB Bank will expand collaboration with sister companies under KB Financial Group, including KB Securities Co. and Kookmin Card Co. that have also built footholds in Indonesia.
By Bo-Hyung Kim and Eui-Jin Jeong
kph21c@hankyung.com
Yeonhee Kim edited this article
