Yeoksam and Nonhyeon... Banks Retreating from Hot Places

Hana Bank to Consolidate 6 Branches in Gangnam Area
Expansion of Non-Face-to-Face Services and Cost Reduction Main Reasons
Untact Response... Expected Wave of Closures Until Next Year

[Asia Economy Reporter Kim Min-young] There are six Hana Bank branches in Yeoksam-dong, Gangnam-gu, Seoul. On Teheran-ro alone, there are five branches including two Private Banker (PB) Centers, and there is the Yeoksam Central Branch on Nonhyeon-ro. Hana Bank has decided to merge the Yeoksam Station Branch and Yeoksam Station Financial Center Branch in June.

Commercial banks are consecutively closing branches in the ultra-prime Gangnam area of Seoul. Although they cite "overlapping branch efficiency" as the reason, it is interpreted that the expansion of non-face-to-face services and cost reduction due to the COVID-19 pandemic have become key issues in the banking sector, leading to branch closures even in these "hot places."

According to the banking sector on the 21st, Hana Bank plans to consolidate a total of 25 branches within the first half of the year starting next month. This includes branches in Yeoksam-dong, as well as five branches in the Gangnam area such as Banpo Xi Branch in Seocho-gu, Gangnam Foreign Exchange Center Branch, Daechi Station Branch, and Eonju-ro Branch. Except for three branches in Busan, Daejeon, and Gwangju, all branches scheduled for closure are located in the metropolitan area. A Hana Bank official stated, "This is to consolidate overlapping branches resulting from the 2015 merger with the former Korea Exchange Bank."

Since the merger, Hana Bank has planned and implemented the consolidation of more than 50 branches annually from 2016 to improve efficiency. The number of Hana Bank branches, which reached 935 in 2015, the year of the merger, decreased by 211 to 724 by the end of last year. This means an average of 52.7 branches have been closed each year. Having already closed 27 branches from January to this month, Hana Bank will close a total of 52 branches in the first half of this year alone, reducing the number of branches to 672, the lowest among the four major banks.

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Kookmin Bank also closed some branches in the Gangnam area. The bank consolidated 38 branches at once in January. Branches such as Jamsil Els Branch in Songpa-gu, Bangi-dong Branch, and Korea Yakult Branch in Seocho-gu disappeared. A Kookmin Bank official said, "The consolidation was done for efficient operation."

Shinhan Bank also had two of the four branches closed in the first half of the year located in Gangnam (Shinhan PWM Gangnam-daero Center Branch and Teheran-ro Corporate Finance Center Branch). Woori Bank had two of the 13 consolidated branches in Gangnam-gu.

Within the first half of the year, the four major banks will consolidate a total of 107 branches. Shinhan, Kookmin, and Woori Banks have opened or plan to open 10 new branches, so considering this, 97 branches will disappear during the first half of the year. Among the four major banks, Kookmin Bank has the most branches with 1,017, followed by Shinhan with 875, Woori with 864, and Hana with 672, totaling 3,428 branches. This is a decrease of 496 branches (12.65%) from 3,924 at the end of 2015.

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This rapid branch consolidation is analyzed to be a decisive blow caused by the increase in non-face-to-face transactions via smartphones and the outbreak of the COVID-19 pandemic. Banks view this year and next year as the optimal time for branch efficiency. A commercial bank official said, "As the untact (non-face-to-face) economy becomes more active, bank management will inevitably establish plans to reduce branches further," adding, "Branch closures are expected to surge in the second half of this year and next year."

Lee Ryeong-hwa, a research fellow at Hana Financial Management Research Institute, diagnosed, "The surge in non-face-to-face demand due to COVID-19 is accelerating the ongoing digital transformation of banks and will ultimately lead to a business model shift causing the 'next normal.' The branch network, a strength of banks, is changing its role as a channel due to the decrease in visiting customers."

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