Woori, KEB Hana banks in Russia report earnings surge despite war

Woori Bank and Hana Bank [Photo by Park Hyung-ki]

Woori Bank and KEB Hana Bank, two of the biggest lenders in Korea, have seen their profits surge from their operations in Russia despite manufacturing companies halting production or withdrawing from the country due to the prolonged war with Ukraine.

According to sources on Monday, Woori Bank’s Russian unit recorded an operating profit of 36 billion won ($27 million) and a net profit of 12 billion won last year. The figures represent a significant increase of 176 percent and 140 percent, respectively, compared to 13 billion won and 5 billion won in 2021.

Woori Bank’s Russian unit reported a total asset of 786 billion won at the end of last year, up by over 50 percent from 522 billion won in 2021.

Similarly, KEB Hana Bank, another Korean bank in Russia, posted an operating profit of 16.3 billion won, up by 158 percent from the previous year’s 6.3 billion won. Its net profit also surged by 148 percent to 13.9 billion won from 5.6 billion won in the same period.

KEB Hana Bank’s total assets in Russia grew by 66 percent to 1.21 trillion won from 725.6 billion won.

Woori Bank was the first Korean bank to establish a Russian subsidiary in January 2008. KEB Hana Bank opened its Russian operation in September 2014.

The banks were expected to benefit from the expanding presence of Korean companies in Russia in such sectors as car and electronics companies, but the war has dimmed their prospects. Despite the concerns, however, the South Korean banks there saw an unusual surge in profits last year.

When Russian banks were targeted by U.S. sanctions following the outbreak of the war, many Korean companies funneled funds into the two banks in Russia.

When the Russian central bank raised its key interest rate significantly, the banks’ operating profits surged. Russia’s benchmark interest rate began to rise in the second half of 2021 and reached 20 percent in February last year before currently hovering around 7 percent.

In response to the prolonged war, Korean banks are focusing on risk management rather than asset expansion in Russia.