Financial Firms Cut Jobs to Save Costs
By Na Jeong-ju
Staff Reporter
Citibank Korea, the fully-owned unit of U.S. financial giant Citigroup, and Shinhan Bank, the country's second largest lender, are preparing to begin restructuring programs to reduce labor costs and improve profitability, bank officials said Sunday.
Citibank Korea recently agreed with its union to reduce the number of senior officials who have worked more than 10 years at the bank. The lender will receive voluntary applications for retirement as early as this month.
Shinhan Bank is also set to take measures to ensure more labor flexibility amid worries that it has fallen behind rival banks in terms of productivity following mergers with Chohung Bank and LG Card. Shinhan Financial Group promised to ensure job security for all employees when it took over the two firms, but growing paychecks have weighed on its efforts to cut operational costs.
``Last year, some 600 senior employees quit their jobs. Hundreds of workers may lose their jobs this year as well,'' a Shinhan unionist said. ``Negotiations between labor and management are still in progress, but they may reach an agreement on a restructuring plan by the end of this year.''
Citibank Korea will cut jobs for senior officials, while increasing positions for young bankers to cut payrolls. The reshuffle is in line with a worldwide program in Citigroup aimed at reducing losses and improving efficiency, according to Citibank Korea officials.
Shinhan Bank CEO Shin Sang-hoon recently expressed concerns about banks' falling interest margins.
``Banks may face higher credit risks if economic uncertainties grow due to high oil prices and the won's appreciation against the dollar,'' Shin said in a message to employees. ``This is the time to strengthen our risk management capabilities and improve the quality of our assets.''
Banks are finding it increasingly difficult to boost their bottom lines amid growing fund-raising costs and stiffer competition with non-banking financial institutions, according to analysts.
The average net interest margin of Korean banks, a key gauge of profitability, fell sharply this year as they raised interest rates on savings, while cutting lending rates to attract more customers, resulting in a fall in the gap between lending and deposit rates.
Nonghyup Bank is also in talks with the union to streamline its organization. The bank recently announced its mid-term business goal of becoming a leading financial services provider in Korea by 2015.
Samsung Life Insurance also said it will receive voluntary applications for retirement from employees from Nov. 13.