Asiamoney best bank awards 2019: Korea
Best domestic bank: Shinhan Bank
|Ok-Dong Jin, Shinhan Bank|
South Korea’s banking sector is dominated by a handful of big players that have close relationships with the country’s conglomerates. But of these players one in particular stands out for its breadth, its consistency and its eye toward future growth.
Shinhan Bank, led by chief executive officer Ok-Dong Jin, moved quickly when the digital banking trend began in Korea, following the success of online-only banks by offering its clients a Shinhan app called SOL. More than 10 million users are on the bank’s digital platform, according to its 2018 annual report.
But the bank knows that is not enough to beat the fierce competition in Korea, and it is working to improve its app and develop technology for its clients through programmes such as its Future’s Lab, which works with promising startups.
Most banks talk a good game about going digital. Shinhan is one of the few that has a realistic plan.
Its acknowledgement of its areas of expertise – and the gaps in its offering – are what make it so strong. The bank is constantly working to give its customers more, as well as improve the areas in which it is lacking. For instance, Shinhan Financial Group won regulatory approval in early 2019 to acquire Orange Life Insurance. The company, formerly known as ING Life Insurance Korea, is one of the largest insurance groups in Korea – even bigger than Shinhan’s own life insurance business – and gives Shinhan a big boost in bancassurance.
Shinhan has also positioned itself to take advantage of growth elsewhere in Asia, an important move considering Korea’s stagnant market. The bank has a presence in 20 countries, including Vietnam, Cambodia and Myanmar.
Shinhan Bank’s parent company, Shinhan Financial Group, reported W1.914 trillion ($1.6 billion) in net income in the first six months of 2019, up 6.6% from the first half of 2018. The bank saw marginal growth, with W1.282 trillion in net income in the first half of 2019 and reported income of W2.279 trillion for all of 2018.
Best corporate and investment bank: KB Financial Group
KB Financial Group is not only one of the biggest investment banks in Korea, it is also the top player across the board. It ranks fourth among domestic investment banks, according to Dealogic, with a market share of 4%.
It is a leader in debt capital markets, and ranks first among both international and domestic banks in debt capital markets with a deal volume of more than $12.3 billion, or a 12% market share. It is fourth in the equity capital markets, with deal volume of $255 million and a 4% market share.
In 2018, KB Financial Group reported a net profit of W3.1 trillion ($2.6 billion) and total assets of W480 trillion. KB Securities was a standout part of the business with total assets of W45 trillion, up 20.6% year on year.
Not satisfied with being a key player in the Korean investment banking market, the company is looking overseas as well, and established a local subsidiary in Vietnam in 2018.
KB Financial’s corporate and investment banking business is helped by the strength of its subsidiaries, particularly its securities arm and KB Kookmin Bank. The company noted in its 2018 annual report that it is consciously identifying deals by joining business models and breaking down walls between the two companies. The group says that such cooperation generated W78.3 billion in CIB revenue in 2018.
Its efforts have not gone unnoticed. The Financial Supervisory Service, Korea’s regulator, has awarded KB Securities a customer satisfaction award 12 years in a row.
Kookmin Bank has been a consistent presence in the capital markets as well. The bank is a leader in offshore sustainability bond sales, going so far as to raise sustainability labelled dollars in a bank capital transaction in January 2019, and another in June. Such fund-raising will serve the bank well as it provides an example to its own clients of the benefits of green debt deals, and it gives the bank more green and sustainable money to put to work through loans to Korean companies, particularly the SMEs on which KB Financial likes to focus.
Best international bank: Citi
|Jin-hei Park, Citibank Korea|
Korea’s saturated market means tough competition for both the established domestic banks as well as for international banks seeking a toehold. Of the foreign banks that have succeeded in cracking the market, Citi has gone the furthest, building on more than 30 years of banking experience in Korea to operate a popular commercial bank, in addition to a wealth management business and an investment bank.
Citi was far and away the top investment bank in Korea by revenue with a 12% market share in 2019, more than twice that of NH Investment & Securities Co, in second place, according to Dealogic. Citi also ranks first among international banks for the volume of its debt capital market business, and fourth overall for M&A volume, having worked on deals such as Lotte Corp’s $1.1 billion stake sale of Lotte Card.
Under Jin-hei Park, chief executive of Citibank Korea, the US bank has kept one eye on the future at all times, moving to digitalize across the bank’s businesses. Citi has leveraged its global prowess to bring mobile banking to its Korean customers. It has cut physical bank branches, favouring online client offerings instead. The bank is even swapping its traditional corporate offices in Seoul for new ‘smart’ offices that make better use of technology and implement changes for the bank, including flexible seating and an open office plan.
Best digital bank: kakaobank
|Daniel Yun and Yan Lee, kakaobank|
As traditional banks compete to lead the way in digital banking, one internet-only bank has stood out for its innovation, its presence in the market and its offerings to customers: kakaobank.
Since attracting 240,000 customers within the first 24 hours of opening, kakaobank has become the biggest mobile-first bank in South Korea. By the end of September 2019, it had 10.7 million customers.
The bank’s chief executives, Yan Lee and Daniel Yun, are masters of marketing: their app builds off the appealing mobile instant messaging app KakaoTalk, with its cute animal emoticons and millennial-friendly design, to make online banking attractive to young customers in a way that keeps them engaged and using the app.
The bank’s model has inspired traditional players to follow suit: for example, Shinhan Bank’s mobile app SOL sports a teddy bear and his purple mole friend.
Having a tech-first attitude – more than 40% of kakaobank’s staff are in IT – allows it to be more innovative than the old guard. Behind kakaobank’s cartoon mascot is serious ambition. The company reported its first net profit after the first quarter of 2019 — a year earlier than expected.
At the end of June, it reported net income of W9.6 billion ($8.1 million). The company’s simple product offering includes a checking account, debit card, loans and overseas remittances, but it will eventually offer customers more. For instance, kakaobank has partnered with Citi and others to begin offering credit cards.
By offering starter banking services to young people, kakaobank is able to tap into a market that traditional banks desperately want and need to maintain business in the long run. The vast majority of kakaobank’s customers are in their 20s and 30s. The hope is that by forming a relationship with the bank now, they may turn to it in future when they have more money and are seeking home loans, insurance and wealth management services.
Best bank for SMEs: KB Financial Group
The last year has been an interesting one for small and medium-sized enterprises in South Korea. According to the government, SMEs account for 99% of the country’s businesses, 88% of its total employment, 38% of exports and 51% of added value. In 2018, South Korea’s Financial Services Commission announced that new rules governing loan-to-deposit ratios would go into effect at the start of 2020 for the country’s banks, encouraging more lending to small businesses. With such support, SME banking has boomed.
KB Financial Group has led the way in SME lending growth. The bank’s SME loans increased by W8.9 trillion ($7.5 billion), or 10% year on year – a higher growth rate than its peers. KB Financial also made efforts to improve its loan quality control. At the end of 2018, 74.7% of the bank’s loans were given to healthy SMEs, as opposed to 70.8% the previous year.
KB Financial has also eased the paths of doing business for its SME clients. KB Star CMS, launched in June 2018, gives corporate customers access to their funds deposited at other banks. KB OneTrade, an online trade platform for automatically processing export and import documents, and KB Seller Loan, a fast-loan product for small online shop owners, were launched in the following months.
The bank now also offers a foreign money transfer service as well, an area it has tried to market to more SMEs this year.
These initiatives accompany KB Financial’s digitalization and its efforts to streamline its business activities. The bank is ambitious about its plans to use digital approaches, including apps, to give customized services to SMEs and small business owners.
With the government prioritizing SME funding, the sector is of great importance. KB Financial is well-positioned to serve these clients, and boost its own business in the process.
Best bank for CSR: Shinhan Bank
As Korea’s top domestic bank, Shinhan is in a position to lead the way for corporate social responsibility in the country. And the bank has done just that, under its motto of ‘Compassionate finance’.
Since becoming the first South Korean financial player to publish a CSR report in 2005, Shinhan has shown itself to be something of a ground-breaker.
The bank has since expanded its CSR initiatives, establishing a committee in 2015 and has been included in the Dow Jones Sustainability Index World since 2013. In 2018, it ranked first in the South Korean banking industry.
Shinhan made a bold statement by establishing an environmental- and social-risk management system in 2018, which establishes best practice by considering 12 risk industries, including forestry, mining and oil refining.
Shinhan’s efforts extend to its own fundraising. The bank sold Asia’s first dollar-denominated UN Sustainable Development Goals-linked bond in April. It went on to sell a sustainability labelled bank capital note in July, a rarity in the global market. And in October, Shinhan sold a green bond as its first euro-denominated deal.
The money raised will be put to good use: Shinhan stated in its 2018 annual report that it planned to invest W20 trillion ($16.8 billion) in green industries by 2030. The bank also said that it would reduce its greenhouse gas emissions by 20% in the same time frame.
On top of this environmental action, Shinhan has also been a vocal advocate for the social and governance parts of ESG. For instance, it has spent the last couple of years increasing female leadership at the bank, with dedicated programmes and a medium-term roadmap, such as its ‘Shinhan SHeros’ initiative that provides mentoring and leadership training for female employees.