For domestic banks, overseas expansion has often been mentioned as a future growth engine and a significant tool to overcome sluggish growth and low interest margin in the saturated local market. However, the actual results of their yearslong investments appear to have fallen far short of initial expectations.

The overseas profits made by South Korean banks last year werer visibly lower than that by Japanese and Australian banks, according to a report by the Hana Institute of Finance on Monday.

Korea Exchange Bank, the No. 1 bank in terms of overseas network, took the lead with 7 percent of its total profits from overseas business. Shinhan, Woori, Hana, and KB Kookmin followed with 5.8 percent, 3.7 percent, 1.8 percent and 1.1 percent, respectively.

The corresponding figure for Japanese banks, in contrast, neared 30 percent. Australian banks, too, made 16-17 percent of their total profits in overseas markets such as the United Kingdom, United States and Asia.

The two countries were marked for their decision to focus on overseas securities markets, instead of settling with customers of the same nationality, the report said.

The total overseas assets held by Korean banks jumped 54.7 percent to 87.3 billion won ($76 million) last year from 56.5 billion won in 2010.

The increase, however, was largely attributable to a rise in deposits and loans. The amount of marketable securities fell 6.8 percent to 5 billion won from 5.4 billion won during the same period.

Also, the profits yielded by securities investment stood at $20 million, or 1 percent of the total net profit, according to the report. The corresponding figure for Japanese banks has remained in the 20 percent range since 2002.

“Korean banks that seek to expand overseas should first secure an outstanding pool of overseas securities experts, before they increase the number of branches or make further investment,” the report said.

Shinhan Bank is planning to launch a branch in the United Arab Emirates within the year. Woori Bank has recently established an Asian regional headquarters, as part of its pan to advance into the regional markets such as the Philippines and Laos. KB Kookmin Bank is scheduled to open its fifth Chinese branch in Shanghai and promote its Hanoi and Mumbai offices into direct branches.

By Bae Hyun-jung (tellme@heraldcorp.com)