Store Consolidation and Layoff Rumors... Turbulent Times in the Banking Sector

Kookmin Bank to Consolidate 38 Branches in January
Hana Bank to Close 24 Branches in January-February
Branch Consolidation Expected to Accelerate Amid COVID-19 and Digitalization

[Asia Economy Reporter Kim Min-young] Banks are once again intensifying their efforts to consolidate branches after a period of slowdown. Following the Moon Jae-in administration's recommendation to refrain from consolidations, the number of branch closures had significantly decreased but has sharply increased this year. With the anticipated decline in banking profitability due to the adverse effects of the novel coronavirus disease (COVID-19) and the acceleration of digitalization, branch consolidations are expected to continue.

According to the banking sector on the 11th, the four major banks?Shinhan, KB Kookmin, Hana, and Woori?consolidated a total of 71 branches from January to February this year. An additional 12 branches are scheduled to close this month and next month.

KB Kookmin Bank eliminated the most branches. In January, the bank consolidated 38 branches at once, including Jamsil Els Branch in Songpa-gu, Seoul, Gangbyeon Station Branch in Gwangjin-gu, and Busanjin Branch in Busan. A KB Kookmin Bank official stated, “The consolidation was done for efficient operations,” adding, “Existing branch staff have been relocated to consolidated branches, other branches, or headquarters, and some employees have left due to voluntary retirement or retirement age.”

Hana Bank also closed 24 branches in January and February. The bank consolidated branches mainly located in the metropolitan area, such as Samsung 1-dong Branch in Gangnam-gu, Seoul, Mokdong 14 Complex Branch in Yangcheon-gu, Sinchon Station Branch in Seodaemun-gu, Yatap Branch in Seongnam-si, and Pungdeokcheon Branch in Yongin-si. Hana Bank explained, “The consolidation was carried out to provide specialized financial services.”

Shinhan Bank and Woori Bank closed 3 and 6 branches respectively during January and February. These banks plan to close an additional 12 branches by next month, bringing the total number of closed branches to 83 by April.

On the other hand, the number of newly opened or soon-to-open branches this year across the four major banks is six. Considering both closures and openings, the net reduction is 77 branches, the largest decrease since 2017 (182 branches).

According to the Korea Federation of Banks and the Financial Supervisory Service, the net reduction in staffed branches of the four major banks was 167 in 2016, 182 in 2017, 12 in 2018, and 38 last year.

Major banks plan to continue consolidations after the second quarter, with projections that more than 100 branches could be consolidated this year. Additionally, the decrease in visitors due to COVID-19, combined with remote work and digitalization, may accelerate branch closures.

An official from a commercial bank said, “Due to the economic downturn caused by COVID-19, reduced visitors, and remote work, branch consolidation has become a major issue within banks.”

There is also a view that the “Joint Branch Closure Procedure” prepared by the banking sector has fueled consolidations. Since May 2017, after the current government took office, branch closures were strictly limited under the pretexts of “protecting elderly customers” and “maintaining jobs.” However, last year, under the leadership of the Korea Federation of Banks, a joint procedure was established, allowing banks to notify customers individually via text or phone before closing a branch and simply post notices inside and outside the branch.

Banks facing difficulties in reducing elderly staff are expected to encounter serious personnel stagnation due to branch closures. Although each bank conducts nearly 1,000 voluntary retirements annually, the “inverted pyramid” personnel structure?with significantly more managerial-level employees than younger staff?has not improved.

Some predict that large-scale voluntary retirements and restructuring will be inevitable this year. A bank official expressed concern, saying, “Rumors of personnel restructuring are circulating, creating an unsettled atmosphere within the bank,” adding, “With declining profits and the rise of non-face-to-face transactions, the company will have no choice but to reduce staff.”

This content was produced with the assistance of AI translation services.