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| The inside of Hana Bank's branch office in central Seoul in this 2021 file photo. Korea Times file |
By Yi Whan-woo
Jin Soo-jin, a self-employed person in her 30s, says she felt extremely disadvantaged last week when she learned of the profits that the major banking groups announced for their 2022 earnings, driven by soaring interest incomes that rose to an all-time high as opposed to her business, which continues to struggle with its loan repayments.
"It seems unfair considering the steep rate hikes delivered by the central bank are benefitting the commercial banks on the one hand, and on the other hand, are exacerbating financial distress for everyday citizens like me, who have to work harder yet are only left with debt," Jin told The Korea Times, Sunday.
She represents many borrowers who complain over the diverging fortunes between them and commercial banks, arguing that lenders' massive fortunes were not earned by themselves but rather were given as windfall profits in the wake of a rate hike.
The Bank of Korea (BOK) increased its base rate by a combined 3 percentage point hike since August 2021 to take the rate back to the pre-pandemic era. The rate stands at more than a 10-year high of 3.5 percent as of January.
With public sentiment toward the banks being so sour, data released last week by each of the four largest financial groups ― Shinhan, KB, Hana and Woori ― showed their combined net interest margin, or the difference between interest paid and interest received stood at 39.67 trillion won ($31.2 billion) in 2022. The figure was up 4.96 trillion won from a year earlier.
Accordingly, the four firms saw their combined net profits surge to an all-time high of 15.85 trillion won in 2022, overcoming the previous record of 14.54 trillion won, set a year earlier.
By company, 2022 net profit amounted to 4.64 trillion won for Shinhan, 4.41 trillion won for KB, 3.62 trillion won for Hana and 3.16 trillion won for Woori.
Being the flagship of their respective financial groups, KB Kookmin Bank, Shinhan Bank, Hana Bank and Woori Bank also face complaints from the public as they are giving out fat retirement paychecks to their employees who voluntarily quit as a part of restructuring efforts in the face of the digital banking era.
"You may call me an un-capitalist living in a capitalist society, but even so, I must say the retirement paychecks that bank employees receive are largely made possible from borrowers' toils," Jin said.
She was referring to more than the 2,200 employees of the four lenders who have been quitting since the end of December 2022, and that the retirement paycheck given to these former employees person was at least 600 million won and up to a 1 billion won maximum.
Speaking on condition of anonymity, a man in his 70s who headed a branch office of a commercial bank in his working years, said he was surprised to learn that bank employees can receive such amounts when they retire.
"I'd say it is too much, especially considering many of them are regarded as redundant workforce at a time when there is a greater reliance on digital technology in banking," he said. "In-person banking was the only banking service available when I worked, but such a 'red carpet farewell' was unthinkable in my working years."
The banks and their parent groups have been underlining the transition to non-banking sectors over years of criticism concerning raking profits on interest margins.
Nonetheless, such efforts do not appear to be very successful so far, as seen from the fact that the non-interest incomes of the four financial groups combined went down 33.8 percent year-on-year to 8.72 trillion won in 2022.
"The banking groups' underperformances in non-interest incomes shows that they greatly depended on borrowers to make money. And it gives a reason why the companies should try to share the financial burdens of the borrowers instead of overlooking their pain."
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