Banks cut back to survive change in environment

The banking industry is being forced to undergo major restructuring, including closing branches and staff cutbacks, as it wrestles with low interest rates and searches for new revenue sources.

As well, impending technology-based banking systems such as mobile and Internet banking and Internet banks, which are expected to be available as early as the first half of next year, will add salt to the wounds of the injured industry.

KB Kookmin Bank on Friday announced it is shutting down or merging 21 sub-branches largely due to the falling number of customers. Nine sub-branches will be merged with nearby branches.

As a result, the number of sub-branches will be reduced from the current 135 to 114. The number of full branches will remain at 1,020.

Sub-branches offer the same banking services as other larger branches but are located in less congested areas such as small neighborhoods.

The bank is also said to be reviewing the possibility of voluntary retirement. The bank in May offered voluntary retirement to 1,100 employees.

Standard Charted Korea late last month offered voluntary retirement to employees who are 40 years old and have worked for the bank for more than 10 years. About 1,200 employees are said to have applied. The final number has been rounded up to 961, about 18 percent of the total 5,300 employees.

“This ‘special’ retirement plan that is being undertaken with the agreement from the labor union is a choice that we have made to become an organization that emphasizes more efficient sales to preemptively counter this difficult situation,” Park Jong-bok, Standard Chartered Korea CEO, said.

Last year, roughly 200 employees left the company as “special” retirees.

This is the largest number of departures the company has seen in recent years.

The last time such a large number left the company was in 2011 when 800 accepted retirement.

Standard Chartered Korea has been struggling in the changing financial climate.

The bank reported a net loss of 3.5 billion won ($3 million) in the third quarter, while its net interest margin, one of the key indicators of the bank’s profitability, was 1.64 percent during the July-September period. As a result, a credit rating company, NICE Holdings, has lowered the credit rate of the bank from triple A to AA+.

It was the first time since the global crisis of 1998 that a commercial bank in Korea had its credit rating lowered.

According to the Financial Supervisory Service, net profits of Korean banks in the third quarter shrank 15.7 percent compared to a year ago to 1.4 trillion won.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]