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Foreign Banks to Cut Their Workforces
Foreign Banks to Cut Their Workforces
  • By matthew
  • January 27, 2014, 06:15
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Foreign banks have continued to reduce their operations in Korea one after another. After HSBC and UK-based Standard Chartered (SC), Citibank Korea has also decided to curtail its operations in the nation.

According to Bloomberg, John Gerspach, Chief Financial Officer (CFO) of Citigroup, revealed via a conference call with analysts on January 23 (local time) that he will make local branches adapt quickly to a city-oriented strategy through restructuring.

The CFO said, “We have already undertook partial restructuring of our business, but we hope that we will implement a major one.” He added that he will disclose costs related to business reduction at the end of this year. So far, Michael L. Corbat, Chief Executive Officer of Citigroup, has reorganized the business in a way that mainly targets rich customers in large cities worldwide. He has also downsized local offices in charge of consumer and commercial banking in some countries in order to increase profits.

The group has already reduced the number of local branches from 218 to 196 since late 2012, but additional downsizing is likely in the future, based on this announcement.

Last year, other foreign banks announced that they will reduce their operations in the country. For example, HSBC closed its retail banking and wealth management operations in July 2013, 15 years after its creation. After slashing 230 related personnel and closing 10 out of 11 local branches, the bank decided to concentrate on the corporate finance business. SC also reportedly decided to gradually close down 100 branches at the end of last year, which account for around 25% of the total 350 branches nationwide.

The downsizing can be ascribed to deteriorating profits. For instance, SC posted a net loss of 22.2 billion won (US$20.5 million), leading to deficits in the third quarter of last year. The figure for accumulated net profits was merely 107 billion won (US$98.7 million) from Q1 to Q3 2013, a 35% year-on-year drop (165.5 billion won, US$152.6 million). 

Citibank Korea recorded 27.9 billion won (US$25.7 million) in net profits in Q3 2013, a contraction of 53.3% year-on-year and down 53.4% from the previous quarter. Its revenue also decreased 15.3% year-on-year to reach 353.7 billion won (US$326.1 million), which is a 6.8% reduction from the second quarter of last year. 

With foreign banks downsizing the workforce one by one, some in the industry worry that downsized banks might pull out of the local market.