Will regional banks actively shift to nationwide operations?

An aerial view of the Daegu headquarters of DGB Daegu Bank, a regional bank that showed a willingness to take its operation nationwide, Wednesday. Yonhap

DGB Daegu Bank aims to be game changer amid banking oligopoly

By Yi Whan-woo

The country's regional commercial banks are expected to remain extremely cautious about expanding their operations from their respective regions to the whole of Korea, although the financial regulator has given them the green light if they so wish, according to industry analysts, Thursday.

DGB Daegu Bank ― one of six regional banks in the country ― said it will go nationwide immediately after the Financial Services Commission's (FSC) announcement, Wednesday. The new policy direction has been introduced as a way to tackle oligopolies within the banking industry.

Nevertheless, sources said that it will take time for DGB Daegu Bank to grow large enough to become a game changer as the FSC hopes.

“For regional banks, it may sound like a perfect opportunity for business expansion at first, but not quite so once they understand how far they lag behind their rivals in terms of size,” a public relations staff member from a regional bank said on condition of anonymity.

The employee was referring to a handful of large, Seoul-headquartered commercial banks, namely KB Kookmin, Shinhan, Hana, Woori and NH NongHyup, which collectively control the market.

The FSC has wanted to break this oligopoly by allowing new, promising competitors into the market.

The regional banks have been less competent compared with their Seoul-based competitors because regional lenders mainly operate in their cities or provinces of origin, whereas the nationwide banks run business throughout the country, hence, they naturally have a bigger pool of customers.

Consequently, the FSC said, Wednesday that regional banks can compete equally on the national level if they meet the criteria.

Headquartered in Daegu, DGB Daegu Bank was the only regional bank to show a willingness to join the competition, while five others did not express any interest. The five are BNK Busan Bank from Busan, BNK Kyongnam Bank from South Gyeongsang Province, JB Jeonbuk Bank from Jeonju, North Jeolla Province, Kwangju Bank from Gwangju and Jeju Bank from Jeju Special Self-Governing Province.

The accounts receivable were worth 51 trillion won for DGB Daegu Bank by the end of the first quarter of 2023.

The amount was less than one-fifth that of each of the Seoul-based banks in the cited period ― 327 trillion for KB Kookmin Bank, 293 trillion won for Woori Bank, 282 trillion won for Shinhan Bank, 274 trillion won for Hana Bank and 270 trillion won for NH NongHyup Bank.

“This piece of data is just one out of many examples that show how much DGB Daegu Bank will need to go to catch up with major commercial banks,” the staff member said.

Speaking on condition of anonymity, a public relations staff member from a Seoul-based bank said digital banking makes nationwide bricks and mortar operations somewhat less meaningful.

“Serving customers online is perhaps becoming more crucial than serving them in person and hopefully DGB Daegu Bank is taking into account this business trend as it is taking its operations nationwide,” he said.