Hana, Woori's Russian operations enjoy high profits despite war

The Korea Times

The Korea Times

Finance

Tue, October 3, 2023 | 07:21

Companies

Hana, Woori's Russian operations enjoy high profits despite war

Posted : 2023-04-24 16:01

Updated : 2023-04-25 12:51

A Hana Bank employee arranges bundles of rubles at the bank headquarters in downtown Seoul, in this June 2022 photo. Yonhap

By Lee Yeon-woo

Domestic commercial banks that have entered the Russian market are seeing their profits soar while manufacturing companies are considering pulling out due to the ongoing war in Ukraine showing no signs of a ceasefire in sight.

Hana Bank's Russia operation reported total assets worth 1.28 trillion won ($959 million) for last year, up from 725.6 billion won in 2021. Its operating profit saw a significant surge as well, reaching 16.3 billion won last year ― a whopping 158 percent increase year-on-year.

The bank launched its Russian operation in 2014 to expand its international portfolio and support Korean corporations entering the market there.

Hana Bank was not the only bank to make significant profits in Russia last year.

According to Woori Bank, its Russia operation reported total assets worth 786 billion won last year, up from 522 billion won the year before. The bank's operating profit in Russia also surged by 176 percent compared to the previous year.

Woori in 2008 became the first Korean bank to enter Russia. It now has branches in Moscow and offices in Saint Petersburg and Vladivostok, targeting domestic corporations and Korean expatriates.

Despite expectations that Russia's invasion of Ukraine would dampen business, it has instead led to unexpected success for both banks. Capital from Korean corporations active in Russia has flowed into the banks' Russian operations, as Russian banks have become targets of U.S. sanctions.

Furthermore, the Bank of Russia has significantly raised its base rate, having a positive impact on the two Korean banks' operating profits. Russia's benchmark rate increased throughout the second half of 2021, peaking at 20 percent last year, and has since been maintained at 7 percent this year.

"The increase in assets and profits can be attributed to the rise in ruble deposits, which has led to higher operating profits," an official from Woori Bank said.

However, both banks are taking a cautious approach toward their future operations.

"Since the outbreak of the war last February, the bank has been consistently tightening its loans and bonds in compliance with regulations imposed on Russia," the Woori Bank official said.

"We are prioritizing risk management over expanding assets in our Russian operation in response to the prolonged war," an official from Hana Bank said. "We will continue to maintain our operation in support of Korean corporations, and will react accordingly with our contingency plans should the situation change."

yanu@koreatimes.co.kr