Busan, Gyeongnam, Daegu, and Gwangju Banks All See Profit Declines... Full Impact of COVID-19

Increase in COVID-19 Provisions and Restructuring Costs
Also Affected by Shift to Non-Face-to-Face Financial Transactions Environment

[Asia Economy Reporter Kim Hyo-jin] It has been revealed that the performance of regional banks declined one after another last year. This is a direct result of the prolonged economic recession due to the COVID-19 pandemic, increased costs related to loss provisions, and restructuring expenses.

Analysts also point out that changes in the financial environment, such as the expansion of internet-only banks fueled by the spread of non-face-to-face transaction culture, which weaken the concepts of region and main banking relationships, played a role.

According to the banking sector on the 10th, Busan Bank's net profit last year was 308.4 billion KRW, down 17.7% from the previous year, and Gyeongnam Bank recorded 164.6 billion KRW, a 9.4% decrease compared to the previous year. Gwangju Bank also saw its net profit fall by 7.5% to 160.2 billion KRW last year. Daegu Bank's net profit was 238.3 billion KRW, down 15.6%.

Jeju Bank's net profit dropped by as much as 37.3% to 17.5 billion KRW. Among regional banks, only Jeonbuk Bank recorded an increase in net profit, rising 13.4% year-on-year to 124.1 billion KRW.

The difficulties faced by regional banks are directly attributed to costs such as voluntary retirement and COVID-19 related provisions. Busan Bank spent 60.3 billion KRW on voluntary retirement costs last year, while Gyeongnam Bank spent 31.1 billion KRW, and they set aside provisions of 87.0 billion KRW and 52.6 billion KRW respectively.

Gwangju Bank also recorded a provision expense of 48.9 billion KRW, 23.0% higher than the previous year. Daegu Bank set aside 222.1 billion KRW in loan loss provisions and spent 18.6 billion KRW on honorary retirement costs.

"Sound Asset Quality... Expecting a Rebound Once COVID-19 Stabilizes"

However, these banks consider the costs to be temporary in nature, and since asset quality indicators such as non-performing loans and delinquency rates are generally sound, they believe that the indicators compiled this time are not significantly negative and expect a performance rebound once the COVID-19 situation is resolved.

Nonetheless, the rapid changes in the financial environment, such as the spread of non-face-to-face financial transactions and the entry of big tech (large information and communication companies) and fintech (financial technology) firms into the financial industry, are pointed out as challenges to be overcome in the future.

A bank official predicted, "Especially with the expansion of non-face-to-face transactions, the boundaries of regions and the concept of main banking relationships are breaking down, which will further intensify competition."

Accordingly, attention is focused on the roles and capabilities of the next leadership, including Song Jong-wook, recently confirmed for reappointment as president of Gwangju Bank, and Seo Han-guk, the first internal candidate appointed as president of Jeonbuk Bank since its establishment. The reappointment of Bin Dae-in, president of Busan Bank, and Hwang Yoon-chul, president of Gyeongnam Bank, has not yet been confirmed.

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