Large Savings Banks Increase Salaries and Bonuses Based on Performance
Small Firms Freeze or Cut Bonuses Amid Belt-Tightening
Increased Secondary Financial Sector Deposits and Loans Seem to Flow to Major Banks
[Asia Economy Reporter Song Seung-seop] Last year, while large savings banks saw a significant increase in bonuses and salaries, small and medium-sized savings banks tightened their belts with salary freezes, revealing a deepening polarization within the industry due to the impact of COVID-19.
According to the savings bank industry on the 5th, SBI Savings Bank recently paid a total performance bonus of 12.29 billion KRW to its employees, a 13% (1.43 billion KRW) increase from the previous year's 10.86 billion KRW. Total compensation, including bonuses, grew from 43.05 billion KRW to 48.83 billion KRW, and the average compensation per employee rose by about 4 million KRW to 82 million KRW.
JT Savings Bank also saw its total compensation increase by about 2 billion KRW to 14.9 billion KRW last year. The average compensation per employee rose from 55 million KRW to 63 million KRW. Total compensation paid to department manager-level employees increased by 320 million KRW to 1.31 billion KRW, while assistant manager and staff-level employees recorded 5.16 billion KRW (an increase of 590 million KRW) and 1.95 billion KRW (an increase of 420 million KRW), respectively.
Large savings banks preparing to disclose related statistics do not deny the pay raises due to improved performance. A savings bank official said, "We will know once the management disclosure is released, but I understand that performance records were broken," adding, "Since we exceeded targets, salaries and bonuses were higher." Another industry insider also said, "Performance improved, and although slight, salary and bonus increases were implemented."
It was also found that many companies achieved the performance targets they set internally. While a certain portion of excess profits is not necessarily paid as bonuses, industry insiders say it likely influenced the increases.
Small and Medium Savings Banks Freeze Salaries and Cut Bonuses
On the other hand, small and medium-sized savings banks generally cut or did not pay bonuses at all. Savings Bank A, ranked low in asset size, saw employee performance bonuses decrease from about 1 billion KRW in 2019 to 880 million KRW. Due to a wage system linked to management performance, the average salary per employee was frozen at 50 million KRW.
During the same period, Savings Bank B's bonuses were halved from 636 million KRW to 311 million KRW. The total bonuses for head office managers, who previously received 470 million KRW, dropped to 266 million KRW, and for manager and assistant manager-level employees, who previously earned about 52 million KRW, bonuses shrank drastically to 9 million KRW. Employees at the supervisor and staff levels did not receive any bonuses.
Before and after COVID-19, customers and loan/deposit amounts in the savings bank sector mostly concentrated in large companies. According to the Bank of Korea's economic statistics system, last year, the loan and deposit scale of savings banks rapidly grew by about 12 to 13 trillion KRW compared to the previous year, reaching 77.4574 trillion KRW and 79.1764 trillion KRW, respectively. However, most of this was concentrated in Seoul and the metropolitan area, where large savings banks are located. Regarding loan balances, 83.9% belonged to the metropolitan area, and 58.4% to Seoul.
Some local areas with many small regional companies showed signs of shrinking scale. While loan amounts in Seoul increased sharply every year, local regions recorded consecutive declines. Last year, Jeonnam (-37.9%), Gyeongbuk (-12.3%), and Gyeongnam (-21.8%) saw their loan scales sharply decrease compared to the previous year. This has led to analyses suggesting that the sector-wide boom in the secondary financial market was not enjoyed evenly, widening the gap within the industry.
Experts analyze that large asset companies are based in Seoul, where human and physical resources are concentrated, and that improvements in convenience such as app upgrades had a significant impact. Professor Sung Tae-yoon of Yonsei University's Department of Economics explained, "People pushed out by tightened loan regulations in the banking sector, facing increased credit risk, likely found it difficult to approach small savings banks," adding, "They mainly visited large savings banks with high accessibility and recognition."
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