[Regional Banks' Counterattack]②Capital Region Loan Share Up 4.7%p in 5 Years...Targeting Cracks in Oligopoly Banking Sector

About 5 Years, Capital Region Goddess Share Increased by 5%P
Scale JB - Growth Rate is DGB

[Asia Economy Reporters Jehoon Yoo, Hyunji Kwon] The proportion of loans by major regional banks in South Korea to the Seoul metropolitan area continues to rise. This trend is attributed to the banks seeking new growth channels in the metropolitan area amid economic downturns and population declines in the provinces.

According to the financial sector on the 16th, as of the end of last year, the share of Seoul metropolitan area (Seoul, Incheon, Gyeonggi) loans in the total KRW loans of the three major regional financial holding companies (BNK, JB, DGB) was 14.6%. This marks an increase of about 4.7 percentage points compared to 9.9% in 2018, five years ago.

Three Major Regional Banks’ Seoul Metropolitan Loan Share Rises 4.7%P Over Five Years

In terms of absolute scale, JB Financial Group (Jeonbuk and Gwangju Banks) led. The Seoul metropolitan loan share of Jeonbuk and Gwangju Banks was 28.2%, significantly ahead of BNK Financial Group (Busan and Gyeongnam Banks, 8.4%) and DGB Financial Group (Daegu Bank, 15.8%). The loan balance also stood at KRW 10.8343 trillion, surpassing BNK’s KRW 7.7766 trillion and DGB’s KRW 7.9851 trillion.

However, in terms of growth over the past five years, DGB and BNK stood out. DGB, which introduced the Professional Relationship Manager (PRM) system and pursued aggressive operations in the metropolitan area, recorded a 279.9% growth rate in metropolitan loans over the last five years. BNK Financial Group also showed a steep growth rate of 202.8%. JB showed a stagnant trend with 23.23% growth.

A representative from a regional bank said, “JB Financial Group’s prominence in scale is due to its regional base in Honam, which has a relatively weak industrial foundation and frequent population migration to other regions, especially the metropolitan area, leading to an early focus on metropolitan operations.” He added, “Recently, banks such as Daegu, Gyeongnam, and Busan are also actively expanding their scale by targeting niche markets for corporate loans in the metropolitan area.”

Reducing Branches Nationwide... But ‘Cautious’ in the Metropolitan Area

What about the status of branches, a key indicator of metropolitan area expansion? The number of metropolitan area branches of the three major regional financial groups decreased by 14.8%, from 74 in 2018 to 63 at the end of last year. Considering that the total number of branches nationwide for the three groups decreased by about 14.2% over the past five years, this difference is not significant.

However, this decrease in metropolitan branches was largely influenced by JB Financial Group, which expanded rapidly. Jeonbuk Bank’s metropolitan branches decreased from 16 to 14 during the same period, and Gwangju Bank’s branches dropped from 31 to 20. A Gwangju Bank official explained, “We have expanded small-scale branches with 2-3 staff members, considering the metropolitan area’s expatriate population and mid-interest loan demand,” adding, “This is part of branch efficiency optimization.”

On the other hand, other financial companies that have actively entered the metropolitan area are expanding their branch networks despite the rise of digital banking. BNK and DGB each increased their metropolitan branches by one over the past five years. DGB Financial Group opened the Seongnam Financial Center, a corporate business-specialized branch, in Seongnam, Gyeonggi Province, early this year, and Busan Bank opened a branch in Pyeongtaek last year. The eastern and southern Gyeonggi regions where these branches are located are also areas densely populated with large and small-to-medium enterprises. A regional financial company official said, “Although not counted as branches, center-level organizations specializing in corporate business are also being operated.”

Besides branches, related personnel and organizations are gradually expanding. Busan Bank established a metropolitan sales center in 2021 to expand its sales network, and Gyeongnam Bank has set up a metropolitan sales headquarters and operates a Corporate Relationship Manager (RM) system. Gwangju Bank has established a ‘Metropolitan Strategy Department’ responsible for metropolitan sales strategies and operates a Credit Review Department 2 dedicated to loan approvals in the metropolitan area.

A financial sector official said, “As the economic downturn in the provinces accelerates, regional banks have no choice but to turn their attention to the metropolitan area and overseas markets,” adding, “With the recent emergence of internet-only banks in the banking industry, competition among operators for the remaining market is expected to intensify further.”