Further to its traditional banking practices, the Bank has been expanding the scope of its investment banking profile to achieve global competitiveness. Some of the Bank’s current activities include principal investment (PI), project financing (PF), SOC financing, and private equity funds (PEF).
The IB division expanded its assets by 23.6% to KRW 6,593 billion from KRW 5,334 billion in 2007. In addition, the IB portfolio mix has been enhanced reflecting sound asset management. In 2008, SOC financing and asset securitization increased 11.2%p to 27.8% in the IB portfolio mix while M&As and real estate project financing reduced 8.6%p to 36.9%.
The Bank has successfully diversified income sources expanding its IB operations into structured financing, SOC financing, and M&As. In 2008, , IBK, along with SMBA, SBC, KODIT, KIBO, and KOVA signed an MOU to support SMEs throughout the whole M&A process. Operating "SME M&A Service Center" in its headquarters, the Bank gave advice on 107 cases and funded KRW 38 billion to support four M&A cases in 2008.
The Bank has successfully diversified income sources expanding its IB operations into structured financing, SOC financing, and M&As. In 2008, , IBK, along with SMBA, SBC, KODIT, KIBO, and KOVA signed an MOU to support SMEs throughout the whole M&A process. Operating "SME M&A Service Center" in its headquarters, the Bank gave advice on 107 cases and funded KRW 38 billion to support four M&A cases in 2008.
Through structured financing products, the Bank can securitize its assets, otherwise they should be held by maturities, diversifying away risks. IBK can materialize a great amount of fees and commissions as an issuer of asset backed securities. Advisory services on the structured financing as well as commissions derived by drawing up liquidity support agreement on structured securities are another source of noninterest income.
Furthermore, the Bank offers a differentiated product, “Industrial Complex Project Financing,” which is developed by joint investments with municipalities and construction firms reflecting practical needs of SMEs. On average, this product provides higher returns than residential real estate project financing initiatives. In 2008, IBK launched 2 projects amounting to KRW 79 billion nationwide. Currently, the Bank is planning to build up to 50 complexes by the year 2011.
Private Equity Fund (PEF) is an investment vehicle operated by a management company, with the capital funded by private placement. Its objective is to achieve material capital gains by improving the management practices of the investee businesses. Capitalizing on a database of about 170,000 SME clients, the Bank actively manages 500 feasible businesses among 5,000 investment-grade businesses pool. As of year-end 2008, total of 8 PEFs amounting to KRW 553 billion were in operation. As a result, the Bank is spearheading the SME PEF market and operates one of the largest funds and investee businesses in Korea.
Rapid growth of asset size calls for meticulous risk management. The Bank built back & middle office team in investment banking division in order to enhance disciplines of compliance, and to achieve more efficient settlement operation and follow-up management. Moreover, to maintain objectiveness and independence of credit analysis, the function was spun off from the IB division and placed under the credit approval department. In addition, an IB planning team was also mobilized to discover new business opportunities in a more efficient manner. Upholding industry leading IT infrastructure is essential for the success of IB operations. The Bank initiated development of an integrated IB system in two stages as the first move in the Korean banking industry.
Furthermore, the Bank offers a differentiated product, “Industrial Complex Project Financing,” which is developed by joint investments with municipalities and construction firms reflecting practical needs of SMEs. On average, this product provides higher returns than residential real estate project financing initiatives. In 2008, IBK launched 2 projects amounting to KRW 79 billion nationwide. Currently, the Bank is planning to build up to 50 complexes by the year 2011.
Private Equity Fund (PEF) is an investment vehicle operated by a management company, with the capital funded by private placement. Its objective is to achieve material capital gains by improving the management practices of the investee businesses. Capitalizing on a database of about 170,000 SME clients, the Bank actively manages 500 feasible businesses among 5,000 investment-grade businesses pool. As of year-end 2008, total of 8 PEFs amounting to KRW 553 billion were in operation. As a result, the Bank is spearheading the SME PEF market and operates one of the largest funds and investee businesses in Korea.
Rapid growth of asset size calls for meticulous risk management. The Bank built back & middle office team in investment banking division in order to enhance disciplines of compliance, and to achieve more efficient settlement operation and follow-up management. Moreover, to maintain objectiveness and independence of credit analysis, the function was spun off from the IB division and placed under the credit approval department. In addition, an IB planning team was also mobilized to discover new business opportunities in a more efficient manner. Upholding industry leading IT infrastructure is essential for the success of IB operations. The Bank initiated development of an integrated IB system in two stages as the first move in the Korean banking industry.
The first stage was completed by March 2008 integrating PI and PEF operations. Then real estate PF, SOC, overseas investment operations was successfully added to the system in the second half of 2008. The launch of IB system has considerably enhanced the operation effectiveness and efficiency, bringing the IB function to the next level.
IB is people business. Attracting and retaining industry experts are imperative in the success of IB operation. The Bank is taking into consideration the introduction of a competitive market and performance-driven compensation system.
IB is people business. Attracting and retaining industry experts are imperative in the success of IB operation. The Bank is taking into consideration the introduction of a competitive market and performance-driven compensation system.
