South Korean Financial Groups Feel the Impact of Downturn in US Commercial Property Market

The recent downturn in the US commercial property market has sent shockwaves around the world, affecting financial institutions in New York, Japan, Europe, and now South Korea. South Korean financial conglomerates have already confirmed losses of approximately 1 trillion won ($750 billion), adding to the growing tally of global financial institutions impacted by the market decline.

Data compiled by Rep. Yang Kyung-sook of the Democratic Party of Korea reveals that the five major Korean financial companies have a total of 20.39 trillion won in overseas commercial real estate exposures. This figure includes the investments made by the companies themselves and excludes overseas real estate funds sold to customers.

Hana Financial Group has the largest exposure at 6.25 trillion won, followed by KB Financial Group at 5.65 trillion won, Shinhan Financial Group at 4 trillion won, NongHyup Financial Group at 2.35 trillion won, and Woori Financial Group at 2.14 trillion won.

According to the data, the original investment principle of 10.44 trillion won made through alternative investments by the five firms is now valued at 9.34 trillion won, reflecting a 10.5 percent loss. The investment amount exclusive of loans is highest for KB at 2.8 trillion won, followed by Shinhan at 2.78 trillion won, Hana at 2.61 trillion won, and NongHyup at 1.81 trillion won.

The impact of the downturn is evident in the evaluated return rates on investments. Hana has performed the worst so far, with a return rate of minus 12.22 percent. KB and NongHyup also experienced return rates lower than minus 10 percent.

About 56 percent, or approximately 11.4 trillion won, of the total invested by South Korean financial conglomerates is spread out in North America, the region hardest hit by the commercial property decline.

The global commercial property sector has faced intense pressure in recent years due to surging interest rates. It has resulted in an 11 percent price tumble in the US, the world’s largest commercial property market, since March 2022. The impact of plummeting property values is now reaching banks worldwide, raising concerns about the resilience of the financial industry.

South Korea’s local financial watchdog has responded to this situation by intensifying oversight of the financial sector and scrutinizing individual investments made by local financial firms. The comprehensive amount of alternative investment made through overseas real estate by local financial companies exceeded 55 trillion won as of June, according to the Financial Supervisory Service. As concerns mounted, the Financial Services Commission sought to reassure the public that the impact of losses from overseas property investment would be “limited,” representing less than 1 percent of the entire assets owned by local financial companies.



最大の露出額は6.25兆ウォンのHana Financial Groupで、次いで5.65兆ウォンのKB Financial Group、4兆ウォンのShinhan Financial Group、2.35兆ウォンのNongHyup Financial Group、2.14兆ウォンのWoori Financial Groupと続きます。