Despite COVID-19, Banks Show Strong Performance... Took Good Care of Employees

Kookmin Bank Introduces 'Joint Lease System' for Employee Housing Stability
Bank Sector 1.8% Wage Increase, 150~200% Level Performance Bonuses

[Asia Economy Reporter Park Sun-mi] Despite the difficulties posed by the spread of the novel coronavirus infection (COVID-19), major domestic banks, which have posted relatively strong earnings, took care of their employees through wage increases, performance bonuses, and welfare improvements. This contrasts with other industries that froze wages and eliminated performance bonuses due to the special circumstances of the COVID-19 situation.

According to the banking sector on the 22nd, most of the five major domestic banks agreed on a 1.8% wage increase, performance bonuses and encouragement payments at the level of 150-200%, and welfare improvements. Only Hana Bank's labor and management are currently negotiating wages and collective agreements. Kookmin Bank, which confirmed a 1.8% wage increase, a special bonus (performance bonus) of 200%, and a cash encouragement payment of 1.5 million KRW, also introduced a ‘joint lease system’ to stabilize employees’ housing separately.

Previously, the bank supported deposits with a ceiling on jeonse (long-term lease) prices of 170 million KRW in the Seoul area and 140 million KRW in other regions. Under the newly introduced joint lease system, based on Seoul standards, the bank supports up to 200 million KRW out of a maximum of 400 million KRW, and employees can add 200 million KRW to enter into a lease deposit contract. This welfare improvement specially reflects the reality that many employees are struggling with housing issues due to the rapid rise in jeonse prices.

Shinhan Bank provided a 1.8% wage increase and, for employees, paid 30% of the base salary in Shinhan Financial shares separately on top of 150% of the monthly base salary, along with an additional cash encouragement payment of 1.5 million KRW as a performance bonus. Woori Bank also added a welfare system that grants long-term leave and commemorative gifts to employees with 10 years of service, along with a 1.8% wage increase.

Woori Bank plans to decide on the amount of performance bonuses after the shareholders' meeting following the confirmation of last year's performance in February and pay employees in April. It is expected to be paid at a level similar to last year, when 200% of the base salary was paid as a performance bonus. NongHyup Bank raised the child-rearing allowance for disabled children from 300,000 KRW to 400,000 KRW and removed the clause limiting support to within two children, in addition to a 1.8% wage increase and a 200% performance bonus.

They also improved the domestic travel allowance system, which previously differentiated between executives and regular employees, by setting it equally across all ranks and regions. Measures were also prepared to reduce the fatigue of on-duty employees who had to arrive early and leave late to manage branch entrances. With more than 2,000 voluntary retirements expected from the five major banks from the end of last year to early this year, special retirement pay was mostly decided at the level of ‘up to three years’ wages + α’.

Financial Holding Companies Including Banks Show Strong Performance Last Year
Consensus Net Profit of Four Major Financial Holding Companies Around 11 Trillion KRW

The reason bank employees were able to secure their benefits even during the COVID-19 situation is that, unlike other industries suffering from declining performance, the banking sector performed well due to factors such as increased lending.

According to financial information provider FnGuide, the net profit of the four major financial holding companies, which have a large banking proportion, is expected to reach 11 trillion KRW last year, marking an all-time high. Shinhan Financial is projected to increase by 2.46% from 2019 to 3.4872 trillion KRW, KB Financial to rise by 5.19% to 3.4836 trillion KRW, and Hana Financial to increase by 4.95% to about 2.51 trillion KRW. Only Woori Financial is expected to see a decrease of about 25% in net profit to 1.4003 trillion KRW.

A representative from a commercial bank said, "Although the improvements in wages and welfare systems for employees this year are not large, there is a shared perception that it is quite good compared to the poor atmosphere in other industries due to the spread of COVID-19," adding, "Even if banks are in a position to provide more for employee performance, there is a restraint considering the economic climate."