Korean Banks' Profitability Way below That of Global Top Banks
Korean Banks' Profitability Way below That of Global Top Banks
  • by Korea IT Times(info@koreaittimes.com)
  • 승인 2014.09.29 19:31
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SEOUL, KOREA - A study said the profitability of Korean banks is less than a half of that for global top-50 banks. Nonetheless, the annual pay of Korean bank CEOs is about triple that of Japanese counterparts.

Korea Institute of Finance research fellow Kim Woo-jin said this in a report "What Makes Global Top-50 Banks Different from Others" According to British magazine The Banker, the top two banks in the world as of the end of 2013 were ICBC and China Construction Bank in terms of tier 1 capital, or core capital that includes equity capital and disclosed reserves. No Korean bank was ranked on the top-50 li

The profitability of domestic banks was much lower than that for the top-50 global banks. The average return on assets and return on equity for Korean banks were 0.37 percent and 4.91 percent while those for the top-50 banks were 0.9 percent and 9.7 percent, respectively. The profitability of the top-50 banks improved 10.3 percent last year while that for domestic banks fell 28.6 percent.
 
The researcher also said that as many as 60 percent of the global top-50 banks were not holding companies, indicating that turning to a holding company structure is not a requirement to become big.
 
Despite the low profitability, however, the domestic banks pay their top executives three times higher compensation than that to Japanese CEOs. For example, Takamune Okihara, chief executive of Bank of Tokyo-Mitsubishi UFJ, earned last year 121 million yen (US$1.10 million) including the basic pay, performance pay, and stock option. Bank of Tokyo-Mitsubishi UFJ president Nobuyuki Hirano was paid 125 million yen ($1.14 million). 
 
In contrast, Shinhan Financial Group chairman Han Dong-woo earned 2.82 billion won ($2.69 million) last year including the 1.4-billion-won performance pay. The same group's Shinhan Bank president Suh Jin-won was also paid 2.89 billion won ($2.76 million), despite the fact that Korean banks have only a tenth of assets and net profit than the Japanese counterparts.



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