Local Banks Formulate Survival Strategy with 'Digital Bank' Gambit

Local banks have turned to digital banks to escape the slump in performance caused by regional economic downturns. As delinquency rates soar and performance lags behind internet-only banks, they have decided to expand loans nationwide through digital banks as a survival strategy.

Jeju Bank, a subsidiary of Shinhan Financial Group, has partnered with Douzone Bizon, which holds data on 3 million SMEs and small business owners, to propose a vision of a 'SOHO Specialized Bank' targeting the entire nation. The strategic judgment is that by capturing the non-face-to-face SME loan market two years ahead of commercial or internet-only banks, profitability can be strengthened.

The 'joint loan' launched by Gwangju Bank in partnership with Toss Bank last year is on the verge of surpassing 1 trillion won. As 'joint loans' establish themselves as a successful business model for local banks, alliances for joint loans between local banks and internet banks, such as 'Jeonbuk Bank and Kakao Bank' and 'Busan Bank and K Bank', are expanding.

According to the financial sector on the 27th, the net profit of local banks in the first quarter of this year has uniformly declined. BNK Busan Bank, the top local bank, saw its net profit plummet by 31.6% in a year, BNK Kyongnam Bank by 31.4%, Gwangju Bank by 8.6%, Jeonbuk Bank by 8.7%, and Jeju Bank by 33.2%.

In response, local banks are seeking breakthroughs in digital banks. The judgment is that expanding loans nationwide through digital platforms can grow loan assets and improve loan quality. Jeju Bank has formed a task force of about 30 people to begin the transition to a digital bank. The goal is to establish a lineup of non-face-to-face corporate financial products by the first quarter of next year at the latest, providing tailored corporate loans to SMEs and small business owners nationwide.

A Jeju Bank representative said, "Our goal is to capture the SME and SME corporate market, which will be the battleground for corporate loans in 2-3 years, 2-3 years ahead."

The joint loan supply amount launched by Gwangju Bank and Toss Bank for the first time in the financial sector last August is expected to surpass 1 trillion won next month.

gogosing@fnnews.com Park So-hyun, Lee Joo-mi reporters