President Lee Kwang-goo of Woori Bank gives his speech at his inauguration ceremony.

(Photo:Woori Bank)

"Hub and Spoke” is the first project being carried out by Woori Bank since President Lee Kwang-goo took office at the end of last year, which could be a test for the new CEO on his ability to run the entire bank.

The project is a pilot test for 60 of the bank’s 1,000 branches across the country for reducing the number of personnel at those branches, or nixing the branches themselves. The bank wants to merge from five to 10 branches depending on what those branches can do best, home loans or SME loans, with three to four personnel at the minimum.

The CEO initiated the project for two reasons: one is to make manpower more effective and have the bank focus more on SME loans, except small firms owned by individuals. What he aims at is to reduce both the branch space and personnel now that the number of people visiting the branches across the nation has been reduced and thus save expenses. The personnel removed from those branches would be assigned to take charge of credit analysis on loans to large business firms and individuals at merged branches.

Most of the branches across the country will take care of large SME loans as their main job. Small banking outlets will be set up in the areas where many SMEs are located, and those branches will also issue small loans for individuals. 

The loans provided to individuals are smaller than those given to SMEs and are simple in process, and therefore can be taken care of along with loans to small firms at those branches. But a small number of branches that deal with individual loans should get help from regional hub branches when they issue loans to SMEs. Woori Bank officials said the change will be completed within the first half of the year. The bank has allocated 2.5 trillion won more in loans to SMEs under such changes in the location of the branches and other outlets based on the Hub and Spoke Project. The bank’s loans to SMEs last year fell by 328 billion won compared to the preceding year, despite the government urging it to expand those loans. The bank plans to expand the SME loans this year.

Nationwide commercial banks such as Shinhan, Korea Exchange Bank, Hana, Kookmin and NH Bank have all expanded their allocations for SME loans, all told by 13 trillion won, which is way more than the 4.5 trillion won increased last year over the preceding year. The reason is that the banks feel the SMEs can be a new growth engine for them. KEB plans to expand its SME loans by 2 trillion won, Shinhan by 2.3 trillion won and Hana Ban and NH Bank by 2 trillion won each, to name some with large companies securing loans at the financial market directly avoiding banks, and household and individual loans have been expanded so much that default risk has grown.