By Nam Hyun-woo
Local investment banks (IBs) are gearing up their effort to get incentives in state bids to nurture a domestic player who can compete in the global investment banking market.
Korea Investment Holdings, the holding company of Korea Investment & Securities, announced in a Tuesday regulatory filing that it has issued bonds worth 200 billion won ($170.47 million) and the fund would be injected into its securities unit within this month.
The holding firm said the securities unit will use the fund for its capital increase to “meet the conditions set by the government for nurturing mega-IBs in Korea.”
The plan, announced in August, is aimed at promoting a Korean IB with equity capital of more than 10 trillion won. To accomplish this, the Financial Services Commission said it will allow firms who meet certain conditions to engage in a broader range of business, especially investment banking, activities.
In the plan, securities firms with equity capital of more than 4 trillion won will be allowed to issue promissory notes and engage in foreign exchange business. With other deregulatory incentives set up for large IBs, the government will implement the plan in the second half of next year.
With the additional 200 billion won fund, Korea Investment & Securities’ equity capital is expected to stand at 3.4 trillion won. Though it is still short of the government’s standard of 4 trillion won, it is making various efforts to bulk itself up, such as purchasing a 4 percent stake of Woori Bank.
Korea Investment Holdings’ move followed Samsung Securities’ recent sale of its own shares to Samsung Life Insurance. The deal fetched some 300 billion won for the securities firm, increasing its equity capital to reach 3.8 trillion won. Also, the insurance firm’s share in the brokerage house increased from 19.16 percent to 30.1 percent.
In Korea, there are two securities firms whose equity capital surpasses 4 trillion won. A merged firm of Mirae Asset Securities and Mirae Asset Daewoo, whose merger process will be complete next month, will be the largest with 6.7 trillion won and NH Investment & Securities follows with 4.5 trillion won.
KB Securities, a merged firm consisting of Hyundai Securities and KB Investment & Securities, will have some 3.99 trillion won in equity capital when it is established in January of next year.
Smaller players are also making efforts to increase their equity capital. Meritz Securities said in its Wednesday filing that its board has agreed to acquire 100 percent stake in Meritz Capital through a stock swap.
A Meritz Securities official said the firm seeks to increase its equity capital to 3 trillion won by 2020 to meet the condition of the government’s comprehensive financial investment business nurturing scheme.
The scheme, which was announced before the mega-IB nurturing plan, permits a securities firm with equity capital of more than 3 trillion won to engage in corporate lending. After the acquisition, Meritz Securities’ equity capital has increased to 2.2 trillion won from 1.8 trillion won.