We Will Follow Anywhere the Rich Go

“I am anxious about losing all of the rich customers to banks.”

Mr. P, the department manager of “A” securities corporation in Seoul, has been worried recently because over the last month, Hana Bank established a branch office for its Private Banking (PB) service, which offers special management of rich customers’ assets, in Yeouido, Seoul. Shinhan Bank has also decided to open an exclusive PB office on June 15.

P is concerned about whether or not rich customers will move to the PB services offered by banks. Bank-offered PB services promise more stable asset management than that offered by securities corporations.

In recent times, because banks have competitively moved to attract rich customers, the PB branches, which have been gathered around the Gangnam and Myungdong areas so far, are rapidly spreading out to famous rich towns such as Yeouido, Mokdong, and Dongbu Echondong.

--Jumping at middle-class families in apartment towns

In recent times, the locations where major domestic banks have established their PB exclusive branches in succession are the apartment towns where “upper” middle-class people, possessing about 500 million to one billion won worth of individual assets, live, because it is easier for the banks to attract rich customers due to the fact that people on similar financial levels tend to live together in island-like areas.

The “Yeouido PB Center” of Shinhan Bank, which is located on the 17th floor of the Good Morning Shinhan Security Building, plans to aim at the rich who possess more than a billion won worth of assets in the Yeouido area. The “Hana Gold Club” of the Yeouido branch also provides PB services to customers who have more than 500 million won.

“In Yeouido, the rich have lived there from the first; the land value has gained a large increase up to the last year. It is an ideal place for the PB market because there are many celebrities and foreign investors living in this area,” said Han Sang-uhn, the team manager of the PB support team of Shinhan Bank.

Kookmin Bank has established the eleventh branch of “Gold and Wise,” their PB exclusive office, at Mokdong in Seoul where a lot of upper middle class in their forties and fifties live. At Dongbu Echondong, the Olympic Athlete’s Town in Songpa Gu, and the Asian Games Athlete’s Town in Chamsil, domestic banks such as Kookmin, Hana and Korea Exchange Bank have set up their own PB branches.

“Those areas are categorized as semi-Gangnams that are second to the Apgujeongdong in the Gangnam area because thousands of the middle and large class apartment households of more than 50 pyoung in size are gathered together,” said Kim Dong-won, the PB team manager of the Korea Exchange Bank’s Olympic Athlete’s Town branch.

--PB offices follow where the money goes

Experts assessed that the locations of PB branches, those which are spreading out from the Gangnam and Myungdong areas to other rich neighborhoods, reflect the fact that the rich gather together in certain places.

The number of PB exclusive offices of eight domestic banks that have been established nationwide total 40. Among these, 26 offices, which are sixty percent of the total number of offices, are crowded together in the Gangnam, Seocho, and Myoungdong areas, which have 14, 5, and 5 PB offices, respectively.

In particular, the semicircular belt area that starts from Apgujeong-dong and travels through Cheongdam, Samseong, Daechi, Dokok, Yeoksam, Seocho, and finally to Bangbae-dong, has 19 PB branches representing almost every bank.

On the other hand, areas other than Seoul have only five branches altogether, which accounts for 12.5 percent of the total, with Bundang and Ilsan New Town in the Seoul metropolitan area having two and one branches respectively, and Busan having two branches.

“The reason that the numbers of PB branches show a large difference in each different areas is because the banks set their major standard of establishing a PB branch on the numbers of large depositors and tax payment in relevant areas,” said Bae Hyun-ki, the chief of financial team of the Hana Economy Research Laboratory.

He added that “as most of the banks are planning to establish more PB branches within this year to expand their branch networks, competition will be heating up. Their success and failure will be decided by their quality of service.”

Suk-Ho Shin Chang-Won Kim kyle@donga.com changkim@donga.com