Kookmin Bank Aiming for IB Leadership, Commits 10 Billion Won Investment

Launching IB Integrated Platform Development
Enhancing Work Efficiency and Sales Support
"Simultaneously Pursuing Business Diversification Strategy and Commission Revenue"

In the first quarter of this year, KB Kookmin Bank, which competed with Shinhan Bank for the leading bank position, is set to develop a system to strengthen support for investment banking (IB) operations. Through this, it is expected to enjoy revenue-generating effects such as business diversification and expansion of non-interest income to cover compensation related to Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) equity-linked securities (ELS).

According to the financial sector on the 3rd, KB Kookmin Bank recently began developing an integrated IB platform. The total project cost is 9.99135 billion KRW, approximately 10 billion KRW. The construction period is within 15 months from the contract date, and it is expected to be completed as early as the second half of next year.

The main goals of the platform construction are to improve IB work efficiency and strengthen global IB sales support. The platform is a one-stop processing system capable of handling everything from deal discovery to post-management. KB Kookmin Bank explained that all IB tasks, which were previously done manually, can now be computerized, enabling the establishment of sales strategies and soundness management using data. Related systems will also be built to support the growth of global IB assets. This will allow systematic support when promoting global IB sales. Internal control enhancement and post-management of IB assets are also expected to be further advanced.

The CIB (Corporate & Investment Banking) Sales Group, responsible for IB operations, will benefit the most from this platform development. Within the group, there are the Investment Sales Headquarters, Infrastructure Sales Headquarters, Structured Sales Headquarters, and Large Corporate Sales Headquarters, and among these, the IB divisions except for the Large Corporate Sales Headquarters will use the platform.

Organizational restructuring was also carried out to develop this platform. To digitally transform IB asset management and enable efficient and systematic management, the existing IB Management Unit was converted into the CIB Platform Department. This department will focus on developing and advancing the IB asset management system.

KB Kookmin Bank is aiming for business diversification through strengthening its global IB business. While it competes for first or second place in the domestic market, it aims to become a leading bank as an investment bank beyond a commercial bank in the global market. To this end, it has secured networks and is collaborating with 87 asset management firms including Blackstone, Carlyle, and Macquarie. As a result, according to Bloomberg data last year, it ranked first in domestic syndicated loans, asset-backed securities, and Korean bonds. It ranked second in corporate bond issuance. However, it did not rank in overseas bond issuance and IPO sectors.

This also appears to be an attempt to regain the leading bank position lost to Shinhan Bank by inducing additional profit generation such as non-interest income. When acting as a lead manager in the IB sector, fees for underwriting can be earned. If directly participating in loans, interest income can also be targeted. KB Financial Group's fee income in the first quarter of this year increased by 8.3% to 990.1 billion KRW compared to 914 billion KRW in the first quarter of last year. KB Financial explained that this was due to strong performance in the IB sector, including acquisition financing underwriting. However, KB Kookmin Bank's fee income was 300.4 billion KRW, down from 307.4 billion KRW in the first quarter of last year. KB Kookmin Bank's first-quarter net profit was 389.5 billion KRW, a 58.2% decrease from 931.5 billion KRW in the first quarter of last year due to the impact of ELS compensation (862 billion KRW). In contrast, Shinhan Bank's first-quarter net profit was 928.6 billion KRW, only 2.9 billion KRW less than the first quarter of last year despite the impact of ELS compensation (247 billion KRW).