In 2011, we undertook a strategy of ‘overcoming crises through fundamentals-focused management’, in order to follow the financial regulators’ policy of constraining the expansion of credit card companies at a time of global economic downturn and increases in household debts. As a result, we achieved outstanding performances in both billings and subscribers and kept profits despite the discount fees of our card affiliates.
IBK is a corporate member of BC Card, with 4.95% of share ownership. Of BC Card’s 11 member companies, IBK has a 15.4% share of subscribers and 16.6% of billings. Billings in 2011 exceeded KRW 21 trillion for the first time since we started our card business in 1984; this can be attributed to our efforts to expand the retail customer base while still leading the corporate card market, an area of particular strength for IBK.
IBK dramatically increased its subscriber numbers by targeting high-net-worth customers and the systematic management of existing members. Valid Subscribers at end-2011 amounted to 2,926,000, up by 23.2% year-on-year, taking up 45.6% of all members.
In 2011, fees for credit card aligned stores plummeted, making the year difficult to create profit. IBK therefore launched the BC Global Brand to replace foreign credit card brands, reduced fees for foreign cards, tried to raise profitability by ending sales of unpopular products, and remodeling products operating at a deficit. In 2012, we will aim to attract high-net-worth customers by developing creative new products, increase billings through close attention to high-net-worth customers, and improve the systematic management of all customers.
The challenges of 2011 will be continued into 2012, including sluggish markets, stronger regulations and increases in delinquency rates. Accordingly, we will make our card assets sounder through quality growth based on high-net-worth members and stronger preemptive risk management; risk management will include more in-depth reviews of members and thorough monitoring.
In 2011, post-retirement life was in the spotlight with the retirement of the ‘Baby Boomer’generation in full swing, and the bancassurance market also grew strongly, centered around pension insurance.
IBK provides a wide variety of pension products through ‘IBK Insurance’, an insurance subsidiary that specializes in pension launched in 2010 to help customers prepare for a stable post-retirement life. In addition, other competitive insurance products were sold in alliance with aligned insurers. We implemented the ‘Renaissance Program’ for comprehensive business support of the whole cycle of customer needs, enabling staff in branches to get closer to customers. As a result, insurance sales fees out of non-interest income rose 1.9% year-on-year to 15.1%. We have also spearheaded the protection of customers by operating a system for limiting insurance subscriptions to ensure proper sales completions.
In 2012, we will strengthen training and business support to build a culture of sales to retail banking customers, while reducing the target goal by 13.3%. We will intensify on-site marketing support by providing wide-ranging and competitive pension and assurance products; we will also expand both the step-by-step training programs for salesmen and ‘Renaissance’ business support that will increase the capabilities of our sales reps. As a result, we will ensure that retail banking customers remain with us in the long term. Moreover, we will conduct marketing support for ‘A Truly Good Bancassurance’, to maximize customer satisfaction through comprehensive customer management and sales completions, while enhancing our system for limiting insurance subscriptions, to ensure consumer protection and the highest levels of principles-based management.
The scale of fund repurchases decreased in 2011 compared to the previous year, but generally the fund market slowed down throughout the year. Despite this, IBK has secured a stable base for growth and strengthened its market competitiveness through the sale of competitive products and the marketing of installment funds. We implemented a holistic sales support program consisting of training, seminars and marketing support, and were thus able to raise the number of trust and installment fund accounts year-on-year, the only Big Five bank to do so. As a result, our market share in trust accounts rose by 0.5%, and the number of our installment fund accounts increased by 1.9%. In addition, the Bank acquired an ‘excellence’ rating during fund ‘mystery shopping’ organized by the FSS, thanks to the staff training through various control systems for the completion of sales. For 2012, we set the annual goals of a net increase of KRW 500 billion for general beneficial certificates (excluding MMF) and the creation of 240,000 new accounts for installment funds to expand non-interest income. We will help in customers’ asset management by launching competitive products that can lead market trends, while continuing to market installment funds that will strengthen our base of retail banking customers and expand non-interest income. We will also work to avoid failures to complete sales by undertaking additional in-house checks on the sales process, while intensifying ex-post management of customers.
The retirement pension market saw outstanding growth in 2011 with accumulated benefits amounting to KRW 50 trillion and the number of companies that adopted retirement pensions increasing to 139,151. This is because of the increasing importance of a retirement pension as a means of depositing money outside of one’s company due to the reduction in the limit of allowable expenses on retained earnings (from 30% to 25%) and the end of the effective period for retirement insurance trusts on December 31st, 2010.
Moreover, as a national policy bank, IBK has provided convenient services for its customers who look for strong reliability. As of December 31st, 2011, therefore, the accumulated benefits on the Bank’s books were KRW 3,023 billion, a net annual increase of KRW 1,302 billion in 2011, to close the year with a market share of 6.1%, up 0.2%, and ranking the fifth among the 57 financial institutions that sell retirement pension products. The number of corporate subscribers also rose sharply, increasing by 15,018 to 37,093 companies by year-end, ranking IBK the first in this market and making it the most trusted financial institution in the retirement pension market.
In 2012, amendments to the Employee Retirement Benefit Security Act will take effect, strengthening the early retirement benefits and making mandatory the adoption of retirement pensions in new business entities. Taxation will also be subject to changes, such as reductions in the limits of approved losses and expenditure ratio of internal reserves, along with the increasing adoption of retirement pension plans by small companies with four employees or fewer. Total retirement pension market benefits are expected to rise to KRW 70 trillion, and the number of subscribers could increase to 4 million. Despite such remarkable performance, there are many SMEs(those with less than 300 employees) at high risk of payment delays in retirement benefits with the retirement pension adoption rate standing at merely 9.1%. This means that the protection of recipients’ rights to retirement benefits via the retirement pension system still remain quite vulnerable.
IBK will widen its targets in the retirement pension market from the existing large enterprises, public institutions and SME customers to small companies with four employees or fewer, expanding its market share by providing efficient services to all. For example, the Bank will develop a system reflecting the legal amendments resulting from the enactment of the Employee Retirement Benefit Security Act and for the convenience of our customers, introduce a diverse product line-up, providing an app exclusively for retirement pension. It will also launch the IBK Retirement Planning Research Institute that will advise on post-retirement life, issue guidance and offer customized consulting on the retirement pension system, and undertake commissions on data assessment and calculation.