Financial firms tighten belts in economic slump

Korean financial firms, hit by the economic slowdown, are tightening their belts through job cuts and asset sales to shore up their falling profitability and put their balance sheets in better shape, market watchers said Thursday.

Local brokerage houses are leading the way in reducing workforces and streamlining businesses.

The total number of employees at 63 local brokerage firms reached 42,388 at end-March this year, down 0.7 percent from three months earlier, the first decrease since the second quarter of 2009, according to the Financial Supervisory Service and the Korea Financial Investment Association.

Daily trading volume registered 5.23 trillion won on average in the first half, sinking 30 percent on-year, which damaged brokerages’ commission income, market watchers said.

Brokerages are also rushing to streamline their business operations and close down branches in order to reduce costs. Mirae Asset Financial Group, Korea’s leading mutual fund manager, recently reduced 64 divisions and 19 branches.

Other brokerages put their assets up for sale to secure cash to brace for worse business conditions and improve their financial health, market watchers said.

Meanwhile, Korean banks also shifted into an emergency mode to cope with the economic uncertainties, although they have already trimmed their workforce through voluntary retirement programs, market watchers said.

“We are trying to cut costs by reducing new recruitment and have the total workforce reduce at a natural rate,” an official from a local bank said, adding market conditions are likely to be worse in the second half.

In 2010, about 3,200 employees left Kookmin Bank, a flagship unit of Korea’s No. 2 banking group KB Financial Group Inc., and last year, 800 left SC First Bank, the Korea unit of Standard Chartered PLC.

Credit card firms are also joining the moves by other financial firms to cut costs, as lowered commission fees have forced them to cut marketing costs, sources said.

Last month, the Financial Supervisory Service, the country’s financial watchdog, rolled out a measure to lower commission rates charged to smaller merchants, in an effort to help reduce smaller stores’ financial burdens, which card firms complain will hurt their profitability. 

(Yonhap News)