Banks pruning branchesAs banks’ profits dwindle due to the anemic state of the economy and the central bank’s policy of maintaining low borrowing rates, lenders are mulling shutting or merging more branches.
Additionally, the rising use of banking services through smartphones and other mobile devices is prompting banks to consider closing more branch offices.
According to industry insiders, Woori Bank is considering merging 20 branches that are either posting losses or seeing profits shrink. Woori in recent years has been aggressively expanding the number of its branches. By the end of 2010, it had 905 nationwide. This grew to 942 in 2011 and 993 this year.
“Our plan is to reorganize our business to make it more efficient and low cost,” said a bank employee. “Other than at essential locations like Sejong City in the southern part of the country [where new government departments are being relocated], we won’t open many new branches next year.” He said the number will probably be comparable to that of this year.
KB Kookmin Bank has already started to assess which branches to either close or merge. A final decision is expected to be reached around January. This year, it opened 30 new branches and closed nine.
Hana Bank will keep the number of branches almost unchanged next year, it said, as it contemplates ways of improving efficiency in conjunction with branches of its recently acquired subsidiary Korea Exchange Bank. Hana Bank set up four new branches this year but closed six.
Shinhan Bank, which either shut down or merged around 100 of its branches in 2008, said it may postpone some of its construction projects, including a training center in North Chungcheong that the bank is investing a total of 31.8 million won ($29,290) in. It is set to be completed by 2015.
According to the Financial Supervisory Service, as of last year there are 7,574 bank branches spread across the nation. By June this year, 62 new branches opened up to increase the number to 7,636.
Internet and smartphone banking is also affecting banks’ expansion plans.
According to a recent report by the Bank of Korea, the number of people using smartphone banking services as of the third quarter grew 18 percent on-quarter to 19.8 million.
As a result, banks are considering new approaches, such as setting up branches near college campuses to attract young people or downsizing branches so they only require one or two tellers.
By Lee Ho-jeong [firstname.lastname@example.org]
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