During a time of financial hardship and uncertainties in 2009, IBK accounted for 58.1% of the net loan growth to Korea’s entire SME sector. In 2010, IBK continued to back its commitment to SMEs with action, recording a 20.71% share of all SME loans and boosting its reputation as an SME-specialized financial institution. The Bank strived for organic growth by developing and improving new products, raising service levels for highyield customers, preemptively managing risks and strengthening non-price competitiveness. Based on its years of experience and well-developed expertise in SME banking, IBK has attracted a more diverse range of clients, including large corporations and public institutions. As a result, it has led the market by recording a net increase of KRW 9,297.2 billion in corporate loans.
In 2010, IBK’s SME loan totaled KRW 93,100 billion, proving the level of its commitment to support SMEs in their recovery from the global financial crisis. It also strengthened its non-price competitiveness by developing new products and services that had been optimized for respective growth stages of companies, rather than merely extending undifferentiated loans. One area of notable success among the Bank’s new growth drivers was a 16.6% increase in the volume of consulting services for corporate clients on matters including management, succession and taxation, which helped to entrench IBK as a consulting brand with unparalleled expertise in SME banking. Another value-added service it provided was to match specialized technical staff with corresponding SMEs and to support SMEs in attracting potential overseas buyers. Additional programs include assisting with job training of the employees of its clients, which serves the double purpose of improving the client’s business performance and ensuring their continuing loyalty to IBK.
IBK explored ways to actively respond to the government’s policy to foster the growth of medium-sized companies, as part of its efforts to expand its customer base by attracting and managing the high-yield customers. Moreover, through a program known as ‘Export Small Giants Plus +500 Program,’ which aims to provide financing for export promotion in an agreement with Korea Trade-Investment Promotion Agency, the Bank improved its loan portfolio and promoted export growth within the SME sector.
In order to avert potential management crises that are developing among its SME borrowers, IBK developed the ‘family doctor’ concept of client management, and is currently operating it as a client service. This is a mutually beneficial win-win program that strengthens the Bank’s competitiveness and asset soundness by conducting timely reviews of the management status of its corporate clients. The family doctor service continues to be an effective means of helping its customers to succeed while supporting the Bank’s sustainable growth prospects.
IBK makes every effort to be a reliable partner for growth of local SMEs. As of the end of 2010, IBK had signed agreements with 76 local governments progressing loans to SMEs worth KRW 3,102 billion. Accordingly, comprehensive support is being offered to promising local SMEs through prioritized financial support, preferential interest rates and management support. Another way that IBK has synergistically improved its support channels for SMEs is by cooperating with the Small & Medium Business Corporation, and by opening 27 local inspection centers, including centers in Honam, Chungcheong, Busan and Daegu, thereby putting a greater focus on the needs of local SMEs and expanding its infrastructure to support them.
On the other end of the spectrum, IBK has attracted more large enterprises and institutions to broaden the Bank’s base of corporate clientele. As of the end of November 2010, its loan volume to large enterprises amounted to KRW 1,881.8 billion. Among its notable successes in the past year, IBK became the main bank for Hansung University and Dong-A Medical Center, and regained its position as a treasury bank for the Suwon and Mokpo metropolitan governments, thus adding the members of those institutional customers to its retail banking customer base.
IBK fulfilled its mandate to be a partner for the success of SMEs by increasing the supply of funding to the SME sector in a time of difficulty. Despite having a comparatively higher proportion of SME loans than the commercial banks, its soundness indicators have remained stable thanks to preemptive risk management and accurate client credit evaluation systems.
The Bank re-established more stringent early warning systems in May 2010, to implement sounder management of the Bank’s SME loan book. The previous four levels of ‘normal,’ ‘substandard,’ ‘doubtful’ and ‘estimated loss’ were expanded to five levels, with ‘precautionary’ interposed between ‘normal’ and ‘substandard.’ A scoring model was added to the existing filtering model to manage the classification process more systematically, based on the total scores of weak categories. The number of items for review was increased significantly from 91 to 223,thus greatly improving the Bank’s ability to recognize early signs of potential defaults before they occur. It has also minimized losses on loan assets resulting from corporate insolvencies, while expanding its support for financially sound high-yield customers.
IBK will continue upgrading its early warning system to maintain the highest level of asset soundness, thereby safeguarding the Bank’s solid financial structure and ensuring its ability to expand support for SMEs in times of economic hardships.
IBK launched 17 new products in 2010, which collectively recorded sales of KRW 1,501.1 billion. Some examples include the Corporate Compound Rate Bankbook, which helps companies manage their finances effectively during periods of low interest rates, and IBK Facility Loan, an integrated loan product to finance facility investment. The Bank looks forward to continually developing and introducing ever more wide-ranging products that increase customers’ satisfaction as well as its work efficiency.
Another distinctively successful new product is IBK’s B2B Factoring, which introduced e-payment and lower processing fees to make it more economical and convenient for clients to convert their trade notes into cash. Previously, note holders had to sign individual agreements with the bank for each note. Based on such advantages, the product won the Grand Prize at the 15th Maeil Business News Financial Product Awards in 2010, following its winning of the Excellence Prize in 2009 at the Excellent Financial Product Launch, presented by the Financial Supervisory Service. The amount of contracts signed through the product reached KRW 10 trillion in less than a year after the launch of the product in April 2009.
With an eye toward fostering key future growth engines, the Bank has developed various green financial products. Examples include IBK Green Loan and Solar Power Loan which offer preferential interest rates and higher loan ceilings for green industries. Staying at the forefront of market trends, IBK was the first in Korea to offer IBK Green Consulting services to domestic SMEs, providing them with greenhouse gas measurement systems and management guidelines for implementing green management practices. Since its launch in January of 2010, IBK Green Consulting has received positive reviews from many corporate clients, which has helped boost the Bank’s image as an environment-friendly company. As more and more SMEs become interested in implementing their own green management policies, IBK’s green marketing is helping to attract them to IBK. After receiving the service, many SMEs hold a ‘Low Carbon Green Management Declaration Ceremony’ and carry out green management or take orders for new green businesses.
Another way that IBK supports the green growth of Korea’s SMEs is by following a cooperation agreement to support low carbon green growth for SMEs, which it signed with the Korea Energy Management Corporation(KEMCO). Under the agreement, the Bank provides aid for companies to self-diagnose their energy consumption and produce their own greenhouse gas emission statistics. Customers have the opportunity to learn about new green technologies from ESCO companies, and receive toolkits to help them launch energy reduction projects. Through the IBK Green Consulting service, KEMCO provides free verification of greenhouse gas inventories of IBK’s customers. IBK also plans to establish a positive incentivescheme through IBK’s Green Loan Management System, which will offer financial benefits to companies that have established green corporate governance infrastructure.
IBK is at the forefront of efforts to solve the dual
problems of youth unemployment and low availability of
job applicants for growing SMEs. The reasons for this
imbalance are complex, unrealistic expectations and lack
of recruitment information for recruitment companies
and job seekers. It is nonetheless ironic that SMEs suffer
from a shortage of workers. To help resolve these issues,
IBK has launched various projects based on feedback
received from town hall meetings and SME job fairs.
IBK launched the ‘10,000-job Youth Employment Project’
in February 2009, and exceeded the project’s target for
job creation within 9 months. By December 31, 2010,
the project had helped 24,957 youths to find work. The
Bank plays a bridging role between business owners and
young job seekers in various ways, including the portal
site ‘Job World,’ employment road shows in nine regions
of the country, job camps and youth internships. The
Bank also provides financial support for youth job creation
by reducing its expenses to support the job fund. These
factors combined to earn IBK the Board of Audit and
Inspection’s commendation as an institution of excellence
for contribution to youth employment. It has also received
a presidential commendation in appreciation for its efforts
to support job growth and raise awareness about the
attractive employment opportunities available at SMEs.
IBK intends to continue working for the dual goal of
easing youth unemployment and alleviating the shortage
of workers at SMEs. Its goal for 2011 is to place 30,000
workers in new positions by improving its matchmaking
capabilities, introducing more technically-skilled persons
to the SME sector, fostering SMEs that offer decent
working conditions, prioritizing the growth of cultural
content-oriented industries and helping women job
seekers find suitable positions.
In order to fulfill its mission to facilitate win-win growth
for large enterprises and SMEs, IBK cooperated with
companies such as POSCO, Hyundai Motors, SK Group
and LG to establish a fund to provide loans to partner
SMEs recommended by the large corporate groups. From
its launch in November 2008 through to November 2010,
the fund had supplied KRW 1.52 trillion in loans to 3,497
cases. IBK is marketing this service to an expanding
number of large enterprises, and it is finding more
innovative ways to pursue such cooperative financing
programs, such as the recent opening of the IBK/LG Win-Win Growth Center.
IBK-PEF raises the value of invested companies by
directing business process improvements and optimizing
corporate structure. IBK’s private equity managers
generally take part in management decision-making after
assuming an equity position in target companies. As of
the end of 2010, the Bank managed 12 funds with total
assets of KRW 1.0542 trillion. In 2011, two more funds
totaling KRW 201 billion were launched to support the
development of software and green growth industries as
future growth drivers for the Korean economy.
Based on such systematic investment systems, IBK
provides financial support for domestic SMEs to achieve
the scale needed to become global players. As with all ourb
usiness activities, we strive for win-win transactions that
produce value for all stakeholders by generating profits for
investors and the Bank, and creating quality jobs for the
workers of our society.
In March of 2011, an amendment to the Industry Development Act was passed by the plenary meeting of Korea’s National Assembly. The purpose of the amendment was to increase support for the growth of medium-sized companies (MEs). IBK will take responsibility for spearheading the support for MEs with a goal of disbursing loans amounting to KRW 1 trillion and achieving a net increase in deposits of KRW 500 billion to secure new high-yield MEs as long-term corporate clients. MEs with a solid history of financial performance have had to confront increasing burdens once passing the SME stage of growth, and operate in an environment of stark bipolarity where SMEs and large enterprises dominate the economic landscape. The new customer target group will be classified as MEs, separately from SMEs and large enterprises, for the purposes of loan evaluation and management guidelines, thereby laying the foundation for a new paradigm in customer management by IBK.
IBK further intends to support industries such as cultural contents that are high in added value and have jobcreation capability. To that end, the Bank will develop the systematic financial support program for selection of investment targets, ideas and financing methods. The Bank will also work in cooperation with institutions like the Korea Credit Guarantee Fund and Korea Technology Finance Corporation to foster the development of sustainable new-growth industries of the future.