Total risk exposure is 20.3868 trillion won.
Losses expected to increase due to real estate downturn
Sold more than KRW 1 trillion in funds related to the financial sector
It was revealed that the five major financial holding companies (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) suffered losses exceeding 1 trillion won while investing in overseas real estate. There are concerns that the amount of loss will increase further as the overseas real estate market shows no signs of recovery for the time being.
According to the office of Democratic Party lawmaker Yang Kyung-sook on the 18th, the total overseas real estate risk exposure of the five major financial holding companies amounts to 20.3868 trillion won. Excluding loans (KRW 9.9422 trillion), the current valuation of the KRW 10.4446 trillion invested by financial holding companies in overseas real estate in the form of beneficiary certificates and funds is KRW 9.3444 trillion (appraised return -10.53%). It decreased by more than 1.1 trillion won from the original amount.
KB Kookmin had the largest investment size by financial holding company, excluding loans, at 2.8039 trillion won (126 cases). One had the lowest evaluation rate of return at -12.22%. There have been many failed cases of investing in commercial real estate in North America. KB Securities invested 17.968 billion won in the form of beneficiary certificates in a commercial building in New Jersey, USA. The current assessed amount is only 1.075 billion won (-94.02%).
Shinhan Investment & Securities invested 21.8872 billion won in beneficiary certificates with a portfolio of 30 hotels across the United States, and the current valuation is 1.67 billion won (-92.34%). Hana Non-life Insurance and Nonghyup Life Insurance invested 11.42444 billion won and 57.1 billion won, respectively, in 20 Times Square in Manhattan, New York, but the current valuation is both 0 won (-100%).
The problem is that the outlook for overseas real estate is not bright, so the amount of loss may increase. The Center for International Finance said in a recent report, “Further adjustments in the U.S. commercial real estate market are expected until the U.S. monetary policy transition takes effect. “The office vacancy rate is expected to peak at 19.8% this year.” General investor losses are also a concern. Banks, securities companies, etc. sold 1.0163 trillion won in funds that use overseas real estate as underlying assets to institutional and general investors. Of these, 406.6 billion won (198 billion won in the first half, 208.6 billion won in the second half) will mature this year.
In response to concerns that the failure of overseas real estate investment may lead to a second Hong Kong H Index (HSCEI) stock-linked securities (ELS) incident, Financial Services Commission Chairman Kim Joo-hyun recently said, “Overseas real estate fund maturities are spread out over several years.” He said, “There is nothing to worry about as most investors are institutional investors and have the ability to absorb losses.”
2024-02-18 14:35:05
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