In May, FinanceAsia named the winners of its annual Country Awards for Achievement. Last month, winners were given ther awards at our annual awards dinner in Hong Kong. Today, we continue presenting the rationale for our decisions with a look at the Korean market.
Best Bank: Busan Bank
Busan Bank is one again FinanceAsia’s pick for Korea’s Best Bank because of its development of a sustainable business model amid the country’s prolonged economic slowdown and the political scandal that toppled top officials and large corporations.
Last year was the first year of business for Busan Bank after its merger with BNK Financial, the parent company of Kyongnam Bank. After the merger Busan Bank has turned its biggest rival into its partner and further solidified its banking franchise in Ulsan, the country’s largest industrial hub.
Over the years, Busan has developed a sustainable business model by its deep-rooted network in southeastern Korea. Its extensive business with local households and small- and medium-sized enterprises meant it was hit less than other state-owned banks which were largely exposed to large chaebol conglomerates and troubled shipping companies, among others.
According to the Financial Supervisory Service, Busan Bank’s net interest margin of 2.27% last year was well above the industry average of 1.55%. Its 7.7% return on equity was also highest among local banks and well beyond the 5.9% industry average.
In particular, the bank’s outstanding loan continued to grow at an average rate of 5% ever year and reached W22.7 trillion ($20 billion) last year, lifting its market share in Busan to 27.3% from 26.8% a year earlier. Busan Bank’s most important event last year was a successful rights issue that strengthened its capital base to 14% from 13.49% on a total capital basis. Its tier one capital ratio has also strengthened to 10.44% from 9.93% in 2015.
Best Investment Bank: Korea Investment & Securities
Korea Investment & Securities displayed all-round investment banking capabilities among local firms that earned it FinanceAsia’s Best Investment Bank in Korea this year.
In M&A advisory, KIS scored a rare sole deal by helping pharmaceutical company Huons with its internal restructuring, which resulted in the separation of its core pharmaceutical business with its investment arm.
With KIS acting as sole financial advisor, the pharmaceutical business was subsequently listed independently on Kosdaq exchange in a deal worth $512 million in June last year.
During the award period, KIS scored second in ECM league tables among local banks and brokers. KIS advised on the country’s two largest initial public offerings – Samsung Biologics’ $2 billion IPO in October last year and Netmarble Games’ $2.3 billion flotation in March.
In DCM, KIS also came second behind KB Investment & Securities. During the period KIS printed raised $39.8 billion from 871 deals for its clients, which included some prominent names such as E-MART, CJ CheilJedang and SK Holdings.
Best DCM House: KB Investments & Securities
KB Investment & Securities led the Korean league table for debt capital markets with 1,296 deals totalling $52.5 billion during the award period, according to data from Dealogic.
That represented a whopping 183% increase in the number of deals and 304% increase in total fundraising volume compared to a year earlier.
KB Financial Group, Korea’s largest financial group by assets, continued to play an important role in driving the success of its securities arm by providing balance sheet and client relationship support.
Fundraising acitivities from the group’s affiliates, including Kookmin Bank’s $500 million covered bond and KB Financial’s own $512 million domestic bullet, also added a significant amount to KB Investment & Securities’ total fundraising volume.
The firm was also joint lead manager for Lotte Chemical’s $522 million corporate bond and Hyundai Steel’s $510 million three-year bonds.
Best ECM House: NH Investment & Securities
NH Investment & Securities was again the biggest equity dealmaker among domestic banks and brokers in 2016, printing 26 deals during the award period, according to Dealogic. Most of the fees came from underwriting Samsung Biologics’ $2 billion initial public offering, one of the few internationally-marketed deals in the award period and also FinanceAsia’s Best IPO of the year in 2016.
NH’s involvement in the Samsung Biologics IPO showed that despite active participation from foreign funds in jumbo offerings, local brokers remained important for domestic equity deals.
This is particularly important for some local names that might not be as well-known as Samsung in the international markets. Netmarble Games, the country’s leading mobile game developer, was a typical example. NH was one of the joint leads in the company’s $2.3 billion IPO earlier this year, coming ahead of its rival Korea Investment & Securities which scored a junior role.
The broker played a vital role in promoting the brand to foreign investors and eventually helped the company secure a valuation near the top of its guidance.
NH also sole-led one of the biggest deals in the secondary market, helping two individual shareholders with their sale of $163 million worth of shares in Clio Cosmetics through a post-market block trade in September last year.
Best International Bank: Citi
South Korea was severely hit by sharply declining exports in 2015. One year on, exports have rebounded but it may be too early to say the worst is over.
In 2016 South Korea’s banking industry continued to face challenges from a slowing economy, weak domestic consumption and rising levels of household debt. South Korea’s gross domestic product grew 2.7% last year, falling below the 3% mark for the second consecutive year.
Commercial banks will have to be prepared for new challenges from internet-only banks since the financial regulator has approved the establishment of K-Bank and Kakao Bank. The duo started operations in April and June respectively this year, and their impact on existing banks will be seen in the next few months.
Against this backdrop, Citibank Korea continued its migration to more profitable businesses such as wealth management, private banking and credit cards. Last year, Citi opened its largest wealth management hub in the country in Cheongdam, while adding 47,000 new credit card customers from digital channels. The bank plans to open three wealth management centres and expand its wealth management teams this year.
This was also an important year for Citibank Korea’s digital push as it launched its new mobile banking application in November and started applying straight-through processing technology for unsecured lending through its mobile platforms. It is also on course to launch digital signature service for mobile banking in the third quarter this year.
At the same time, Citi has found an optimal level to operate its retail banking business. After shutting as many as one-third of its bank branches in 2014 and 2015, the bank has kept all its branches last year and reported only a slight decrease in total number of staff compared to a year ago.
After a stellar 2015 when earnings rose 95.3%, Citibank Korea maintained profitability at almost the same level, with its non-performing loan ratio improving 15 basis points to 0.6% and tier 1 capital ratio improving from 16.35% to 17.85%, the highest of Korea’s commercial banks.
Best Investment Bank: Credit Suisse
Credit Suisse’s Korea franchise has one of the longest histories among foreign banks. Chunkee Lee, Credit Suisse’s CEO and head of Korea investment banking, started leading the business in 2002 and is the longest-serving investment banking CEO in the country.
The Swiss bank has always been one of the top foreign brokers but last year was arguably one of the bank’s best years. The bank managed to capture a decent flow of deals, ranging from corporate fundraising opportunities to merger opportunities. Credit goes to Credit Suisse for its ability to break into merger deals between large Korean chaebols, which are typically dominated by local investment banks.
Last year, Credit Suisse advised Korea Development Bank on the sale of its 43% stake in KDB Daewoo Securities to Mirae Asset Securities for $1.9 billion, the largest M&A deal in the country’s brokerage industry that subsequently led to the merger between the two giants.
The Swiss bank has advised Doosan Group on two occasions in a calendar year. In April, it advised Doosan Infracore on the $984 million sale of its machine tools business to MBK Partners. A month later it helped Doosan DST with its $605 million sale to Hanwha Techwin and created Korea’s largest privately-held defence company.
It was also a financial advisor on LG Chem’s $430 million acquisition of Dongbu Hannong, another example of facilitating mergers between two chaebols. The deal closed in April last year.
In ECM, Credit Suisse was a joint bookrunner for Samsung Biologics’ $2 billion initial public offering, the largest deal out of the country in 2016 and FinanceAsia’s Best IPO of the year.