With high interest rates, bank bonuses are even higher

Employees of major banks are expected to enjoy four-month end-of-year bonuses thanks to a booming 2022.

The hefty bonuses come as the five major banking groups — KB Kookmin, Shinhan, Hana, Woori and NongHyup — reported record profits from high interest rates.

According to the analysts Sunday, Shinhan Bank recently decided on bonuses worth 361 percent of the base wage for its employees, with 300 percent given in cash and 61 percent in stock. The bonuses are 61 percent higher than last year.

KB Kookmin Bank bonuses are 280 percent of base wages. Although the rate is slightly lower than last year’s 300 percent, Kookmin will give an additional 3.40 million won ($2,732) incentive per employee.

At NongHyup, the bonuses are 400 percent of the base wage, 50 percent higher than last year.

The three groups also increased salaries for most job categories.

Hana and Woori have yet to agree with their unions on the bonuses, although they are forecast to be similar.

In 2022, Hana gave bonuses that were 300 percent the base wage, while Woori gave 300 percent bonuses with an additional 1 million won to each employee.

Local banks racked up massive profits last year thanks to higher interest rates.

From the first three quarters of 2021, Korea's five major banks reported a cumulative net income of 11.22 trillion won, up 18 percent from the same period last year. Bank lending increased following the Covid-19 outbreak, and the Bank of Korea’s raising of interest rates made lending more profitable.

According to the Financial Supervisory Service (FSS), interest revenues by local banks in the January-September period stood at a combined 40.6 trillion won, a record high, up 6.9 trillion won or 20.3 percent from a year ago.

While banks are paying employees enviable bonuses, some customers are complaining about pared-back branch services, particularly operating hours.

Since 2020, Korea’s bank branches shortened their operating hours from between 9 a.m. to 4 p.m. to 9:30 a.m. to 3:30 p.m. Even after pandemic social distancing measures were lifted, banks are refusing to return to pre-pandemic working hours. They say that hours will be discussed after Korea's indoor mask mandate is lifted.

“With recent moves to normalize the Covid-19 measures," said Chairman of the Financial Services Commission (FSC) Kim Joo-hyun recently, "restoring bank business hours will meet the public's sentiment and expectations for the banking sector.”

Meanwhile, according to insiders on Sunday, the FSC and FSS recently stepped up monitoring of lending rates at local commercial banks.

As of Jan. 3, floating-rate mortgages from the five major bank groups had interest rates of 5.27 to 8.12 percent per year. An annual mortgage rate of 8 percent was last seen during the global financial crisis in 2008.

Meanwhile, five-percent interest savings plans are disappearing after FSC Chairman Kim publicly pressured banks to refrain from raising deposit rates.

This suppressed the rise in deposit rates but failed to reverse the increasing loan rates.

“Direct intervention in interest rate levels may lead to anomalies due to market distortions,” said Sung Tae-yoon, a professor of economics at Yonsei University.

BY IM SOUNG-BIN, HA NAM-HYUN, SEO JI-EUN [seo.jieun1@joongang.co.kr]