The banking sector is selling off a large number of idle branches that have become vacant due to the consolidation of branches. This is interpreted as an attempt to undergo a real estate diet amid concerns about a prolonged economic downturn.
According to the financial sector on 28th, the Industrial Bank of Korea has recently decided to sell its IT branch in Seongnam, the Suji branch in Yongin, the Trump World branch in Daegu, and the branch in Mokpo, Jeonnam. All are branches that have become vacant due to branch consolidations. The total sale amounts to 11 billion won.
Woori Bank is also in the process of selling seven idle properties. The targets for sale include branches in Guui-dong, Dangsan-dong, Dongnimmun, Bomun-dong, Mangwoo-dong, Yeouido Buk, and Guro-dong in Seoul. Last November, Woori Bank sold six branches, including in Samsung Central Station in Seoul, Gasan Venture, Mokdong Nam, the Financial Center in Yeongtong, the Shinseong Shopping branch in Incheon, and the Yongho-dong branch in Busan. Reactions in the financial sector indicate that selling properties located in the central part of Seoul is unusual.
Shinhan Bank is also in the process of selling its Mangwoo-dong branch in Seoul and a branch in Jeju. In the case of the Mangwoo branch, it will sell through a sale and leaseback method after the sale. This is a way to convert owned properties into cash.
KB Kookmin Bank sold branches in Daegu Gangbuk, Beomeum-dong, Bokhyeon-dong, Nonsan in Chungnam, Yeosu in Jeonnam, Shin Haeundae in Busan, and Seoknam-dong in Incheon last year. The total amount of idle properties released by commercial banks is estimated to reach 100 billion won.
Banks primarily operate branches through leasing, but they often purchase entire commercial buildings and then establish branches as a means of diversifying their asset portfolios. The number of such idle properties is increasing as banks have been steadily consolidating branches in recent years.
As of the end of last year, the number of offline branches of 17 domestic banks was 5,628, a decrease of 1,080 compared to the end of 2019, which had 6,708.
Typically, idle properties in areas with high real estate prices, such as Seoul, Gyeonggi, and metropolitan cities, are often repurposed as facilities for customers. In particular, branches located in Seoul are often retained instead of sold, taking into account their potential for value appreciation.
However, banks have recently begun to sell idle properties in Seoul as well. They have determined it is better to hold cash instead of real estate in preparation for a prolonged economic downturn.
A banking sector official noted, “Selling idle properties results in short-term non-operating gains on the financial statements, which can increase net profit, and it can also reduce real estate management costs. However, idle properties located in older city areas are not selling well due to the continued downturn in the regional real estate market.”