Korea Investment Goes Hybrid in Global Marketing
By Lee Hyo-sik
Staff Reporter
Korea Investment & Securities, one of the nation's leading brokerage houses, is seeking to solidify its dominant market position here and expand overseas presence to emerge as one of Asia's top five investment banks by 2014.
It aims to increase the size of assets it manages to 100 trillion won and achieve one trillion won net profit by making the best use of its hybrid business model combining both investment banking and asset management.
By making inroads into foreign markets to secure new customers and sources of new income, the securities firm plans to double the size of its assets under management (AUM) and net profit to 200 trillion won and two trillion won by 2020.
``We suffered a temporary setback in the aftermath of the global financial crisis. But we have quickly recovered our strength over the past few quarters and become one of the most profitable financial services companies. We will make more effort to better serve our customers by generating sustainable investment returns for them,'' company CEO Ryu Sang-ho said.
The CEO said Korea Investment will diversify its business portfolio and find new growth fields in a bid to emerge as a main player in Korea's rapidly growing capital market and expand its market dominance. ``We used to heavily rely on the traditional revenue streams from equities transactions. But over the past few years, we diversified our business portfolio, focusing more on investment banking and other more lucrative and promising financial services businesses.''
Ryu then said the company has set up the investment bank-asset management (IB-AM) model to make a full-fledged foray into the two highly profitable segments, adding it has been using the model as a strategic tool to turn the two areas into new growth engines.
``We are looking to boost profits by 20 percent this year from 2009, the largest among industry players. To help achieve the goal, we will continue to enlarge our existing operations in New York and other advanced economies. From now on, we will place greater priority on Vietnam and other emerging economies to take advantage of their high financial market growth,'' he stressed.
Korea Investment & Securities was established in 1974 as the country's first investment trust company. After taking over Dongwon Security in 2005, it became one of the nation's leading brokerage houses with nearly 120 branches across the country and four overseas subsidiaries, employing 2,500 workers.
Despite the international financial market meltdown in late 2008, the securities firm has never stopped working to boost its bottom line and expand the size of its traditional brokerage-based businesses and investment banking services, including supervising the initial public offering (IPO).
To ride out the unprecedented economic downturn, the company focused on fees in 2009 and tried to attract investment from retail investors. It became the nation's second largest offline brokerage service provider in December 2009, up from the sixth the previous year.
The securities firm also remained top in four investment banking areas last year ― IPOs, corporate bonds, equity linked warrant and real estate financing. In particular, it has been named sales manager of the soon-to-be listed Samsung Securities whose market capitalization will likely exceed 10 trillion won.
To secure new sources of income and boost bottom line, Korea Investment has also advanced into foreign exchange trading and other derivatives products.
Through aggressive marketing efforts and the strengthening of risk management, it has been able to attract more assets from retail and institutional customers. Its AUM increased to 24.9 trillion won in December last year, up sharply from 17.2 trillion won a year earlier.
The company also posted better-than-expected net earnings of 190 billion from April 2009 through December, a sharp turnaround from a 108 billion won net loss from April 2008 through March 2009.
``Despite unfavorable conditions at home and abroad after the global financial crisis, we have been able to achieve sustainable growth over the past year, thanks to our well-balanced business portfolio and strengthened risk management,'' CEO Ryu said.
The brokerage house has introduced a ``Risk Adjusted Performance Measurement (RAPM)'' system and established the post of chief risk officer (CRO) to bolster risk management of its investment products and organizational structure.
As a result, its net capital ratio (NCR), a barometer of financial soundness, rose to 582.4 percent in December from 510.5 in March 2008.
In a bid to boost its wealth management business, Korea Investment introduced a ``I'M YOU'' service on March 2, through which retail customers receive tailored financial services in accordance with their risk tolerance and other investment tendencies.
``Through our unique wealth management program, individuals will be introduced to a range of financial products and services meeting their investment tastes. We will further develop I'M YOU into a comprehensive customer wealth management system,'' the CEO said.
Meanwhile, the company is increasingly turning its eyes to overseas markets in order to find new sources of growth and emerge as a globally leading financial player.
It is currently operating four subsidiaries in New York, London, Hong Kong and Singapore, serving mostly institutional investors there for brokerage and investment banking-related services.
To take advantage of rapidly growing emerging markets, the securities firm has been working to expand its presence in Vietnam, China and the Middle East.
The firm currently operates an office Vietnam and is looking to take over a local securities firm to provide retail and institutional investors there with not only conventional brokerage-related services, but also wealth management services.
Korea Investment is also seeking to expand presence in China by setting up a consultancy in Beijing in the first half of 2010. It is considering establishing a joint venture with a local securities firm in the world's fastest growing economy.
To attract oil money, the company is paying greater attention to the Islamic financing, employing an expert in the principles of Islamic Law, Sharia, in April 2008. When it is legally allowed for Korean firms to issue Sukuk, an Islamic equivalent of bonds, Korea Investment plans to become the first domestic financial company to do so.
``We will mobilize all our resources to establish a strong foothold in Asia and the Middle East for the time being. But we will eventually advance into Europe and other developed markets to become a global financial services company,'' Ryu stressed.