Banks are reducing branches despite maximum profits. (Image courtesy of Yonhap)
SEOUL, Feb. 10 (Korea Bizwire) — South Korea’s major banks are rapidly closing physical branches, citing the rise of digital banking and cost-cutting measures, even as they continue to report record-high interest income. The trend, however, is sparking concerns over reduced financial accessibility for elderly customers and those unfamiliar with mobile banking.
KB Kookmin Bank announced plans to shut down 28 branches by March 2025, consolidating them with nearby locations to enhance customer service efficiency. The closures include key sites in Seoul, Gyeonggi Province, and other major cities such as Incheon, Daejeon, Ulsan, and Busan.
A spokesperson for KB Kookmin Bank defended the move, stating, “By integrating branches within a 1-kilometer radius, we aim to improve the in-person banking experience.” The bank also emphasized its expansion of “lunch-hour intensive operation” branches and extended-hour locations to mitigate service disruptions.
The downsizing trend extends beyond KB Kookmin Bank. Shinhan Bank shut down 28 branches in January 2025, with most closures stemming from a consolidation of corporate and retail banking units in shared buildings.
As a result, the total number of branches operated by South Korea’s five largest banks—KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup—has fallen from 3,927 at the end of 2023 to 3,790 as of February 2025, a net reduction of 137 locations in just over a year. By the end of March, this figure is expected to reach 165 closures.
Record Profits Undermine Cost-Saving Justifications
Despite the sharp reduction in physical locations, major banks continue to report soaring profits. The combined net income of South Korea’s four largest financial holding groups—KB, Shinhan, Hana, and Woori—reached 16.42 trillion won ($11.3 billion) in 2024. KB and Hana posted record-breaking earnings, while Shinhan’s profit, after adjusting for a one-time gain in 2023, was also the highest on record.
Interest income has risen even further, totaling 41.88 trillion won ($28.9 billion) in 2024, a 3.1% increase from the previous year. Given this financial strength, critics argue that cost-saving measures such as branch closures are unnecessary and disproportionately disadvantage consumers who rely on in-person banking.
Lee Bok-hyun, governor of the Financial Supervisory Service, warned in a November 2024 meeting that while banks focus on digital transformation and operational efficiency, the closure of physical branches is eroding financial accessibility for vulnerable populations, including the elderly, disabled individuals, and those living outside urban centers.
Potential for Further Service Reductions Amid Labor Disputes
In addition to the reduction in branch numbers, South Korean banks could see further cuts to in-person services as labor unions push for shorter working hours. The Korean Financial Industry Union (KFIU), during its annual convention on February 6, 2025, reaffirmed its demand for a 4.5-day workweek, along with reduced business hours for bank branches.
This follows previous demands in August 2024, when the union advocated for a 36-hour workweek and a later opening time for bank branches, from 9:00 a.m. to 9:30 a.m. The negotiations failed, leading to threats of a general strike.
Meanwhile, average employee salaries in the country’s five major banks have continued to rise. The average annual salary reached 112.65 million won ($77,800) in 2024, up 3.14% from the previous year.
As South Korea’s banking sector navigates shifting consumer habits and labor disputes, the reduction of physical branches remains a contentious issue. With profitability at historic highs, the industry faces mounting pressure to balance cost efficiency with ensuring accessibility for all consumers.
M. H. Lee (mhlee@koreabizwire.com)
