New IBK Securities head eyes investment banking

By Kim Da-ye

IBK Securities, a brokerage affiliate of the Industrial Bank of Korea (IBK), vowed Thursday to focus on investment banking (IB) for small and medium businesses.

Cho Kang-rae, the new president of the three-year-old brokerage house, said in his first press conference in western Seoul, “We will strengthen our IB and wholesale units, relocating human resources and hiring talent from outside. We will reduce the portion of trading.”

Investment banking divides into various roles and IBK Securities will prioritize managing initial public offerings (IPOs) of small and medium enterprises (SMEs), the long-time main customers of IBK.

To create synergy effects with its parent and sister companies, it will target existing clients of IBK, the state-owned bank specialized in lending to SMEs.

“Large conglomerates have so far led Korea’s economic growth, but we believe SMEs will be the next driving force,” Jung Joong-myung, an executive managing director of the IB unit, said.

“Those businesses now rely on borrowing from the bank, but we can help them raise money stably from the equity market.”

Jung also mentioned a possibility of setting up a “special purpose acquisition company (SPAC)” _ a paper company established to acquire another firm that goes public and invest in non-listed businesses with the funding.

He said that businesses now prefer going public in the bull market, but when the capital market faces a downturn and IPO becomes challenging, a SPAC would emerge as a good alternative.

The management acknowledged that IBK Securities’ big task is to make profits this year. In the fiscal 2010 ranging from April 2010 to this March, the firm generated 290.8 billion won in sales _ up from 170.9 billion won in sales a year ago _ but recorded an operating loss of 8.8 billion won _ down from 3.9 billion won profit the previous year. Much of the loss occurred from expansion as it opened 29 branches in the last three years.

Although management hasn’t come up with a detailed business model to turn a profit, Cho mentioned a few plans.

In expanding the branch network, Cho wants his company to slow down to ensure internal stability.

“We will identify what we can be good at and what we cannot tackle. We will concentrate on the former,” Cho said.

The chief also mentioned possible changes in its retail business that will separate online and offline customers.

The company plans to create better online content and trading commissions while trying to come up with innovative financial products for offline customers.