[Asia Exclusive] CEO Lee Hyun "Thanks to Donghak Ants, 'Kiwoom' Grows Big... Blueprint for a Comprehensive Financial Company"

Lee Hyun, CEO of Kiwoom Securities
Number One in Individual Stock Market Share for 15 Years
Diversifying Business and Balancing Profits Across Sales Divisions

"As smart individual investors emerge in the stock market, we are entering a new era of change. Although market volatility is increasing, Kiwoom Securities will strive to become a comprehensive financial company capable of maintaining stable growth amid this environment."

On the 14th, Lee Hyun, CEO of Kiwoom Securities, emphasized in an interview with Asia Economy that "individuals' investment demand for risk assets will continue to increase in the second half of the year," adding, "We will continue to provide customer-centric platforms and services." He also explained, "In addition to the retail sector, we plan to generate balanced profits in the securities industry's core areas such as the IB division, wholesale, and investment management, and focus on launching new businesses for profit diversification in the mid to long term."

Lee Hyun, CEO of Kiwoom Securities, said in an interview with Asia Economy on the 14th, "We are paying close attention to the surge in individual investors in the stock market this year." While the explosive increase in individual investors since the outbreak of COVID-19 has led to a sharp rise in earnings, there are concerns that a revenue structure overly dependent on the growth of individual investors could increase future earnings volatility.

Kiwoom Securities, which has held the number one position in individual stock market share for 15 consecutive years since 2005, posted record quarterly results in Q2 with operating profit and net profit increasing by 381% and 296% year-on-year to 314 billion KRW and 219.9 billion KRW, respectively. The unexpected stock market boom also caused a surge in new accounts at Kiwoom Securities. The average daily market trading value in Q2 more than doubled compared to the same period last year, and in July and August, it increased by an additional 13% to reach 30.2 trillion KRW. Corresponding to this expanded scale, new accounts have continued to rise, with over 2 million new accounts opened at Kiwoom Securities since the beginning of this year.

Q2 Operating Profit Up 381% - Record Quarterly Performance
Benefits from Brokerage Trading Expected to Settle Long-Term, Not Short-Term

The retail division is expected to maintain its solid performance in the second half of the year. With the low interest rate environment, abundant market liquidity, and increased individual demand for risk assets, capital inflows into the stock market are expected to continue. CEO Lee said, "Considering the recent rise in BBIG (Bio, Battery, Internet, Game) sectors and the significant changes in market capitalization rankings, the growth potential of major domestic industries suggests a bright outlook for the Korean stock market going forward." He added, "The benefits from brokerage trading will not be short-term but are likely to settle gradually as a trend."

Lee also attributed new meaning to individual investors in the 'post-COVID' era, which differs from before. He explained, "After COVID-19, the spread of non-face-to-face culture has led to an age group proficient in using trading platforms showing active interest in the stock market, which is a change from the past." He diagnosed this as a factor that expanded the population of direct investors.

He continued, "Starting this year, we are entering a new era where individuals' direct investments will continue for a long time," emphasizing, "We will focus on actively promoting Kiwoom Securities' strengths in providing customer-centric platforms and services to our clients."

Following the so-called 'Donghak Ants' (domestic individual investors), the rapid increase in 'Seohak Ants'?individual investors directly purchasing overseas stocks?is also a point of interest. Kiwoom Securities is experiencing rapid growth not only in domestic but also in overseas stock brokerage. In the first half of this year, it earned over 22.3 billion KRW in overseas stock brokerage commissions, more than ten times the 1.818 billion KRW earned in the first half of last year. This is attributed to both new customers and existing domestic stock trading clients continuing to use Kiwoom Securities' trading system for overseas stock transactions. The ability to reduce customer churn even in a rapidly changing market is credited to various services and systems thoroughly tailored to customer needs.

YouTube 'Channel K' First Securities Firm with 80,000 Subscribers
Main Sponsor of Professional Baseball Team 'Kiwoom Heroes'
Rising Brand Awareness: 'Even Those Who Don't Know Stocks Know Kiwoom'

He said, "The biggest feature of overseas stock trading is providing the same level of convenience as domestic stock trading," adding, "For customers trading overseas stocks for the first time, we have designed the order screen similar to domestic stocks and simultaneously offer KRW order service and KRW quotation service." Kiwoom Securities' YouTube channel 'Channel K' is one of its differentiated strengths. Channel K began as an online securities broadcast in December 2006 and has been providing investment information via YouTube since May 2013. Recently, with the increase in 'Joorini' (stock beginners), demand for investment information has never been higher. By offering high-quality educational content and timely information delivery, Kiwoom Securities became the first securities firm to surpass 70,000 YouTube subscribers and recently exceeded 80,000.

Lee explained, "The acceleration of non-face-to-face and online trends due to the COVID-19 crisis also contributed. We focus on creating content covering a wide range from beginners to professional investors, domestic to overseas stocks, and financial investment products." He expects this to increase customer loyalty toward Kiwoom Securities.

The professional baseball team 'Kiwoom Heroes,' with which Kiwoom Securities signed a main sponsorship in November 2018, has also significantly contributed to raising brand awareness. Kiwoom Securities signed a 50 billion KRW contract with the Seoul Heroes and holds naming rights until 2023. This aims to expose the 'Kiwoom' brand to 8 million domestic baseball spectators to boost brand recognition. Although some viewed the high marketing cost as burdensome, in the first year of naming sponsorship, Kiwoom Heroes reached the Korean Series, meeting expectations.

Lee said, "Kiwoom Securities, once known only to stock traders, has become 'Kiwoom Securities known by everyone,' and with that, favorability has also increased." Kiwoom Securities has consistently ranked first or second in the securities company brand reputation index published by the Korea Corporate Reputation Research Institute since November 2018. He evaluated, "We achieved the best cost-effectiveness through baseball, a sport loved by all ages and genders. The name of our stock trading system, 'Hero's Gate' (Yeongungmun), also contributed to synergy with the Heroes team."

Volatile Market Environment - 'Mid-to-Long-Term Growth' Risk Management
Focus on Non-Performing Loan (NPL) Investment Business

Since his appointment, CEO Lee has maintained his passion for business diversification to grow the company. Since 2018, he has been committed to new business initiatives such as internet-only banks, real estate trust businesses, and mergers and acquisitions of asset management companies, but has repeatedly faced setbacks at the threshold.

He stated, "High dependence on a specific business division in the revenue portfolio means higher volatility in earnings. Since the strategic goal of financial institutions is to reduce earnings volatility, I have pursued a strategy of operating the organization efficiently and balanced without bias toward any particular division since my appointment." Last year, he reduced the retail division's revenue dependence to below 50%, balancing the rest among the securities industry's core areas: IB division, wholesale division, and investment management division. Although maintaining the same revenue balance across business divisions as last year may be difficult due to COVID-19 this year, the plan is to strengthen risk management in a volatile market and focus on diversifying the business portfolio to increase profitability in the mid-to-long term.

The current new business being pursued is the non-performing loan (NPL) investment business. By facilitating smooth and prompt disposal of NPLs, Kiwoom Securities aims to contribute to the development and stability of the financial market, strengthen the financial business portfolio within the Daou Kiwoom Group, and leap forward as a financial specialized group through synergy among financial affiliates.

Lee explained, "Since the introduction of IFRS in 2009, the NPL sale market has been activated, forming a market of around 5 trillion KRW. Looking at future market growth prospects, purchasing bank-secured NPLs is expected to create various business opportunities." Additionally, through company-wide improvements in foreign exchange business processes, they plan to enhance foreign exchange-related revenue and have established a dedicated team acting as a control tower for foreign exchange operations to discover new business opportunities related to foreign exchange.

Risk management responding to market volatility is also being strengthened. As market participants increase, the plan is to respond swiftly to unexpected risks. He said, "We are strengthening liquidity management based on market crisis recurrence scenarios. Once the next-generation system for over-the-counter derivatives is completed, we plan to establish and advance system-based operations rather than manual processes, and build a sophisticated monitoring system to support most risk management tasks related to OTC derivatives." He concluded, "We will build a Kiwoom that continues to grow."

Interview by: Jo Young-joo, Head of Capital Markets Department

Summary by: Oh Ju-yeon, reporter moon170@