Major Banks Retreat from 'Hot Places' in Gangnam Area... "This Year Is the Right Time for Branch Efficiency Optimization" (Comprehensive)

Store Efficiency Improvement Overlapped by COVID
Accelerating Branch Consolidation in Progress

[Asia Economy Reporter Kim Min-young] Commercial banks are consecutively closing branches in the ultra-prime areas of Seoul's Gangnam district. Although they cite "overlapping branch efficiency" as the reason, it is interpreted that the expansion of non-face-to-face services and cost reductions 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 by the first half of next month. This includes closing five branches in the Gangnam area: Yeoksam Station branch in Gangnam-gu, Gangnam Foreign Exchange Center branch, Daechi Station branch, Eonju-ro branch, and Banpo Xi branch in Seocho-gu, Seoul. Except for three locations in Busan, Daejeon, and Gwangju, all branches scheduled for closure are located in the metropolitan area. A Hana Bank official stated, "This is a consolidation of 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 first year of the merger, decreased by 211 to 724 by the end of last year. This means an average reduction of 52.7 branches per 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, reducing the number of branches to 672, the lowest among the four major banks.

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 closed two of the four branches it shut down in the first half of this year in Gangnam (Shinhan PWM Gangnam-daero Center branch and Teheran-ro Corporate Finance Center branch). Woori Bank had two of its 13 consolidated branches located in Gangnam-gu.

In total, the four major banks will consolidate 107 branches by the first half of the year. 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. 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 reduction of 496 branches (12.65%) from 3,924 at the end of 2015.

This rapid branch consolidation is analyzed to be driven decisively 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 as the optimal period for branch efficiency improvements. 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 a 'next normal.' The branch network, a strength of banks, is changing its role as a channel due to a decrease in visiting customers."

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