South Korea’s top five financial companies are facing 1 trillion won losses from their 20 trillion won in foreign real estate investments, Bloomberg reported citing an opposition party lawmaker, expressing growing anxiety over the industry’s vulnerability to global declines in valuation.
According to data from Yang Kyung-sook of the Democratic Party, Hana Financial Group Inc. has the biggest exposure, having invested over 6.2 trillion won outside of the country. Yang’s data, which was initially made public by regional media sources like Yonhap, is predicated on data that the businesses gave in the middle of January.
KB Financial Group Inc. has invested 5.7 trillion won, while Shinhan Financial Group Co., Ltd. has made 4 trillion won of investments. The remaining two companies in the top five holdings foreign real estate are Woori Financial Group Inc. and Nonghyup Financial Group Inc.
Notably, due to losses on loans related to real estate, a branch of one of the largest credit unions in Korea was closed last year, and investors in credit are keeping an eye out for any indications of trouble.
Earlier this year, Tokyo-based Aozora Bank Ltd. shocked the market by setting aside sizable provisions for bad loans despite assuring investors that it was well-prepared, underscoring the possibility that the U.S. commercial real estate downturn would cause problems in Korea.
According to the Korea Herald and other Korean media reports, the five firms’ initial investment of 10.44 trillion won, which was spent on alternative investments like beneficiary certificates and funds, is now valued at 9.34 trillion won, representing a 10.5 per cent loss.
