Banks are rapidly downsizing as they adapt to the rise of digital banking. They are reducing the number of branches and restructuring their networks to focus on smaller outlets while selling off underutilized real estate to bolster their capital.
According to the Financial Supervisory Service, as of the end of June, the total number of branches for KB Kookmin, Shinhan, Hana, and Woori banks was 2,702, an increase of 11 from 2,691 in June of last year. However, the number of branches for these four banks decreased from 2,252 in June 2022 to 2,201 in June 2023, a drop of 51 (2.3%), while the number of smaller outlets rose from 439 to 501, an increase of 62 (14.1%).
Smaller outlets are facilities that handle relatively simple tasks, such as account openings, and are less costly to operate. By increasing the number of these smaller outlets, banks are managing to cope with regulatory pressures to maintain branch numbers.
Banks are also accelerating the sale of their real estate holdings. Kookmin Bank initiated the sale of nine idle properties nationwide last month, including five in Seoul, such as the Yangpyeong Comprehensive Financial Center, as well as two in Gyeonggi Province, one in Daegu, and one in Daejeon.
Shinhan Bank is also in the process of selling its Myeongdong 'Shinhan Expace' branch and a staff dormitory in Seongsu-dong, which have been in operation for about 40 years.
Woori Financial Group has selected Gravity Asset Management as the preferred negotiator for the sale of the 'Woori Financial Digital Tower' in Myeongdong and is currently in negotiations. Woori Bank also put 14 branches, including the Galleria Palace branch in Jamsil, the Haeundae Centum Park branch in Busan, and the Suwon Financial Center, up for auction on August 11.
The trend of banks reducing branches and selling valuable real estate is seen as a move to streamline unnecessary assets and enhance financial stability. Selling idle properties can reduce fixed costs such as maintenance and management fees while also improving the Common Equity Tier 1 (CET1) capital ratio through asset optimization.
The growing importance of capital expansion, driven by increased shareholder returns, is also cited as a reason for banks to pursue efficiency. To support dividends and share buybacks, managing capital ratios is crucial, necessitating the disposal of underperforming assets to utilize limited capital effectively. Additionally, with lending regulations constraining profit growth, securing funds for productive finance has become increasingly important.
A financial industry official stated, "As digital operations expand and the need for capital management grows, banks are moving towards operational efficiency. The trend of selling real estate to utilize capital and liquidity effectively is likely to continue."
* This article has been translated by AI.
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