DGB Launches Full-Scale Operation of Overseas Asset Management Firm... Strengthening Non-Banking Business

Capital Investment of 10 Billion Won Completed
Based on This, Fund Management Fees Received Within 2 Months
"Enjoying Stable Profits Through Local Fundraising"

Regional financial holding companies are expanding their reach overseas. Among them, DGB Financial Group, which established an asset management company that can raise funds locally to reduce risks and pursue stable profits, is gaining attention. This also reflects a shift from bank-centered holding company operations to strengthening non-bank businesses. JB Financial Group already operates an asset management company in Cambodia, while BNK Financial Group is pursuing a bank-focused strategy that requires large-scale fundraising, similar to the strategy of existing commercial banks.

According to the financial sector on the 21st, DGB Financial made a capital contribution of about 10 billion KRW to Hi Asset Management Asia (HiAMA), a Singapore-based asset management company, earlier this year. The method involved DGB Financial purchasing all the shares issued in a paid-in capital increase by HiAMA, thereby supporting the capital required for establishment. At the time of establishment at the end of last year, 1.72 billion KRW was provided, and after obtaining the local asset management license, the remaining 8.264 billion KRW was invested. A DGB Financial official stated, “Based on the capital, we will build a strong track record in line with the purpose of asset management and carry out the business.”

In January, HiAMA became the 11th subsidiary of DGB Financial, and held an opening ceremony in March. The net loss in the first quarter also decreased compared to the fourth quarter of last year. The net loss decreased from 606 million KRW to 348 million KRW. Net asset value increased from 1.1 billion KRW to 9.024 billion KRW, and operating revenue rose from zero to 91 million KRW. DGB Financial explained that although there were selling and administrative expenses during the company’s establishment process last year, the loss decreased in the first quarter due to foreign exchange gains from additional capital increases and fees received from fund management. The official start of business is the launch of new Asian funds. The business portfolio consists of 40% long-short funds (a hedging strategy that simultaneously buys and sells to seek stable profits) investing in Asian countries such as Taiwan, Hong Kong, and Japan, and 60% bond investments.

The reason DGB Financial established an asset management company in Singapore is due to the industry characteristics that allow profits without large-scale capital contributions. In the case of banks, when conducting overseas business, a large amount of capital is required for the bank’s core profit margin between deposits and loans, along with steady fundraising. On the other hand, asset management companies can generate profits by raising funds locally and managing client assets well. Other reasons include the ability to invest in many Asian countries by operating asset management in Singapore, Asia’s financial hub, and the expansion of non-bank business areas.

This overseas strategy was first implemented by JB Financial among regional financial holding companies. JB Financial’s affiliate, Jeonbuk Bank, established Phnom Penh Asset Management (PPAM) in Cambodia in 2020. This was an entry into asset management based on the growth of Phnom Penh Commercial Bank (PPCB), which was already established. PPCB ranks 18th among 59 commercial banks in Cambodia by assets (as of last year). As of the first quarter of this year, its assets were 1.4738 trillion KRW, with a net profit of 7.073 billion KRW. PPAM is operating in line with local conditions rather than explosive growth. In the first quarter of this year, its assets were 3.571 billion KRW, liabilities 39 million KRW, operating revenue 49 million KRW, and net profit 19 million KRW. Compared to net losses of 430 million KRW and 58 million KRW in 2022 and last year respectively, it shows steady growth.

In the case of BNK Financial, it has not established an asset management company overseas. Instead, it mainly operates small loan businesses through its affiliate BNK Capital. Like other financial holding companies with existing commercial banks, it is expanding its business area focused on banking. In March, its subsidiary in Kazakhstan, “MFO BNK Finance Kazakhstan,” was converted from a limited liability company to a joint-stock company. This is to change the business type from a microfinance organization (MFO) to banking. It plans to apply for preliminary approval from local authorities within the first half of this year. Since its establishment, the company has achieved profitability and continued asset growth. Compared to 58 billion KRW in assets in the first quarter of last year, assets increased by about 3.6 billion KRW to approximately 61.6 billion KRW in the first quarter of this year. Liabilities were 3.9 million KRW, capital 22.7 billion KRW, and net loss was 92 million KRW.