Contrary to stellar earnings, worker productivity at South Korea’s four major commercial banks has sharply fallen last year, sending a warning signal that Korean banks would lose their competitiveness amid rapid changes in the financial industry with the emergence of online-only banks.

According to a study by Maeil Business Newspaper on Tuesday, Shinhan Bank showed the highest productivity per worker with its pre-provision earnings, measure for worker productivity, of 189 million won ($165,116) last year. It was followed by KEB Hana Bank with 143 million won, Woori Bank with 138 million won and KB Kookmin Bank with 90 million won.

The worker productivity of the four major lenders that reported a 20 percent on-year jump in combined net profit to 5.4 trillion won last year declined drastically compared with 2011 when that of Shinhan Bank had amounted to 305 million won, Hana Bank 250 million won, Woori Bank 304 million won and KB Kookmin Bank 260 million won.

Their falling productivity is also in stark contrast with foreign banks operating in Korea such as Industrial & Commercial Bank of China that recorded 500 million won in profit before loan loss provisions, Hongkong & Shanghai Banking Corp. (HSBC) with 300 million won and BNP Paribas with 200 million won.

Some industry observers blamed the failure to adopt a performance-based salary system for the sharp fall in the banks’ worker productivity. The current seniority-based wage payment costs a great deal to the banks where more than half of their employees are in management positions. This disproportionate number of executives serves as a major factor that drags down their work efficiency and productivity. The government’s efforts to introduce a merit-based wage system to reform the financial sector are losing steam amid political and social unrest caused by oust of former president Park Geun-hye and the upcoming presidential election.

Financial experts warned that commercial banks need radical and fundamental changes to survive in the intensifying competition triggered by the launch of an online-only bank that has drawn more than expected interest from bank customers.

By Noh Seung-hwan

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]