Pepper Savings Bank's 'Betting' on Sports Promotion... What Is the Key?

Annual Cost of Running Volleyball Team at Least 6 Billion KRW
Pepper Savings Bank "Rapid Growth and Sufficient Budget"
Can They Secure 3rd Place Through Sports Marketing?

[Asia Economy Reporter Song Seung-seop] As Pepper Savings Bank moves one step closer to establishing a volleyball team, concerns are also emerging. Although the strategy aims to enhance brand value through sports marketing, the operation of the team requires enormous costs.

According to industry sources on the 16th, the Korea Volleyball Federation plans to proceed with the practical procedures for founding the team with Pepper Savings Bank. This follows the establishment of founding guidelines by representatives from each team three days ago, who then delegated negotiations to the federation. The volleyball federation's board will give final approval for the founding on the 20th if negotiations are successfully concluded.

The issue is whether Pepper Savings Bank, ranked 4th in the industry by asset size, can bear the operating costs of the team. The sports industry estimates that the annual expenses, including player salaries, will reach at least 6 billion KRW. Additionally, the federation and the existing six teams require the new team to pay a special development fund of 2 billion KRW as a condition for approval.

Last year, Pepper Savings Bank's net profit was approximately 34.8 billion KRW, the lowest among the top five savings banks (SBI, OK, Korea Investment, Pepper, Welcome). There is a significant gap compared to similarly sized Korea Investment Savings Bank (60.4 billion KRW) and Welcome Savings Bank (95.6 billion KRW). The difference is about sixfold compared to OK Savings Bank (185.1 billion KRW), which currently operates a volleyball team. Since about 15% of the net profit would need to be spent on founding the volleyball team, there are concerns that this could be an excessive expenditure.

Pepper Savings Bank: "Strong Growth and Sufficient Budget... No Problem"

Pepper Savings Bank maintains that there is no problem with the operation. They cite rapid growth and a sufficient secured budget as reasons. Pepper Savings Bank's net profit increased by 161.65% (21.5 billion KRW) compared to the previous year. Assets also grew by 30.23% (1.028 trillion KRW) in one year to 4.3198 trillion KRW. The pure branding budget secured, including TV advertising, is 5 billion KRW.

A Pepper Savings Bank official explained, "There was an internal forecast that growth would continue at a similar pace," adding, "The branding budget that was set aside can be redirected to the volleyball team and is at a manageable level."

Pepper Savings Bank's aggressive sports marketing is analyzed as a strategy to secure a solid 3rd place position. The asset gap among the 3rd to 5th ranked companies in the industry is about 100 billion KRW, which is relatively small. Having recently entered the ranking, Pepper Savings Bank is in a situation where brand awareness needs to be enhanced.

Once discussions with the federation are finalized, Pepper Savings Bank plans to begin full-scale preparations for founding the team with the goal of participating in the 2021?2022 season regular league.