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Best domestic bank: Shinhan Bank
Shinhan Bank, South Korea’s largest lender by assets and market capitalization, stands head and shoulders above the crowd. Its financials speak to the strength of the Seoul-based lender, which posted a bigger profit than any of its peers in 2016, for the seventh year in a row, thanks to a sharp rise in interest and non-interest income.
It also retained its top ranking in asset quality for the third straight year and boasts the lowest NPL ratio of any first-tier Korean lender, at just 0.65%.
Shinhan’s consistent outperformance continued into 2017, with the lender reporting net income of Won1.89 trillion ($1.7 billion) in the first half and net income of Won892 million in the third quarter, up 25.1% year on year.
Executives at rival banks grudgingly agree that it is the bank to beat in Asia’s third-largest economy. But it is Shinhan’s ability to take the long view that really stands out in an often insular sector.
That long-term approach was aided by a smooth succession at the start of 2017, with former Shinhan Bank CEO Cho Yong-byoung moving up to become chairman of the parent Shinhan Financial Group, while former head of Shinhan Card Wi Sung-ho became chief executive of the bank.
Many Korean lenders are looking overseas for fresh sources of growth and opportunity, but none more so than Shinhan, which operates through 150 channels in 20 countries. It recently opened branches in Sydney and Yangon, and purchased two local banks in Indonesia.
In April 2017, it bought ANZ’s retail business in Vietnam, gaining access to one of the region’s most vibrant emerging markets. It’s also one of the best domestic exponents of digital banking, recently launching a fintech startup programme, Future’s Lab, as well as digital kiosks with palm-print identification technology, and a burgeoning mobile banking platform, Sunny Bank.
In November 2017, Shinhan said it was planning to launch a bitcoin vault service, citing strong demand for cryptocurrencies in one of the world’s most wired nations.
Best corporate and investment bank: Credit Suisse
Credit Suisse is consistently at or near the top of the tree in Korea’s fiercely competitive investment banking world. The Swiss firm reported more net income than any other foreign securities firm in 2016, according to data from the financial regulator.
In the capital markets, it was one of three global coordinators and bookrunners on the $878 million IPO of Lotte Chemical Titan, a subsidiary of Korea-based Lotte Chemical, on the Bursa Malaysia.
That deal, which took place in July 2017, marked the largest chemicals stock sale by a corporate in Asia since 2010, and the most valuable listing in Malaysia in nearly five years. In April 2017, it was named sole bookrunner on the sale of a $171 million block of shares in internet company Kakao by video game developer Wemade Entertainment.
ChunKee Lee, chief executive for Korea at Credit Suisse, points to a “number of opportunities” set to open up in future as Korea’s main conglomerates, or chaebol, begin the long process of selling off non-core units and streamlining their business models.
Best bank for SMEs: Industrial Bank of Korea
There are banks that excel at offering a solid range of financial services to small and medium-sized enterprises. And then there are actual SME banks, which exist primarily to serve the needs of buzzing young firms, the lifeblood of any economy.
Industrial Bank of Korea (IBK) is one such financial institution. Formed in the turbulent year of 1961 with just Won200 million ($185,000) in paid-in capital, expressly to finance the needs of small businesses, it soon become a household name and a vital financial bedrock of the fragile young economy.
For more than 50 years it has quietly but steadfastly expanded its reach and its range, coming to offer a full suite of corporate and retail services to its 16 million customers.
The lender posted pre-tax profit of Won519 billion in 2016, an annualized increase of 15%, on net interest income of Won1.15 trillion. But it is in loan disbursals to SMEs, which account for 27% of all lending, that IBK really shines. Its stated aim is to be “one of the world’s top financial groups” thanks to its “distinctive SME-oriented model”.
Total outstanding lending to the bank’s roster of 1.3 million smaller firms rose 6.6% year on year in the first quarter of 2017, to Won134.4 trillion.
Newly launched products catering to SMEs include the i-One Small Business Loan, a loan facility that small business owners can apply for entirely online; a digital support programme to help corporates of all sizes get online; and loan products to support sustainable business ventures and the construction of smart factories.
Best bank for CSR: Hana Financial Group
Few financial institutions in Asia can surely be as focused on corporate and social responsibility as Hana Financial Group, parent of top-tier domestic lender KEB Hana Bank.
Its standalone CSR report, now in its 11th year – many lenders still opt to fold any engagements with society into their annual financials – is not shy about defining what the group is all about.
Last year, in its 2016 report, Hana said its clear mission and vision was to create the right balance between corporate growth and social responsibility. Everything it does, the group says, is designed to adhere to the United Nations’ 17 sustainable development goals.
Its stated aims include creating jobs for the vulnerable; KEB Hana Bank invested Won1.5 billion ($1.4 million) in 2017 in ‘Easy Move’, a firm that builds mobility vehicles for the disabled and elderly.
Other divisions of the group seek to generate job opportunities for individuals with developmental disabilities; to support female teenagers from low-income families; and to boost national financial literacy levels.
Its external focus is just as impressive: the group opened a school in rural Nepal in February 2017, and is building libraries and computer-learning facilities in Myanmar, Vietnam and Sri Lanka.
Hana Financial Group is swimming with the tide here. Consumers in Korea, it noted in its 2016 CSR report, have become increasingly socially conscious since the global financial crisis – further encouraging the group to believe that “good corporate social responsibility leads to sustainable growth”.
Best international bank: Citi
South Korea is a tough place for foreign lenders. The market is big, but dominated by local players and burdened by onerous regulations. Global players have come and gone over the years, most notably HSBC, which pulled out of the retail market in 2013.
Citi topped the equity capital markets rankings in the 12 months to the end of October 2017, according to data from Dealogic, taking part in 11 deals worth a total of $1.86 billion. No foreign bank can compete with the all-round presence of a lender that continues to grow its onshore unsecured lending and trust business.
It may seem counterintuitive to hand an award to a bank that’s shutting down three quarters of its 133 onshore branches. But Citi is sanguine about the closures; its country chief executive and president Park Jin-Hei tells Asiamoney they allow the bank to focus on expanding its digital repertoire, which is spearheaded by an award-winning all-purpose mobile banking app, launched in December 2016.
Besides, 36 new all-purpose financial full-service banking hubs, each employing an average of 85 personnel, will each replace between three and five existing branches. “Every hub will focus far more on wealth management and digital tools, and offer the best possible advice to our clients,” Park says.
Best private bank: Samsung Securities
Korea’s private banking world has long been curiously underdeveloped, particularly given that it serves one of the world’s largest economies, not to mention one of the most aspirational and financially literate.
But a few names stand out in this arena, notably Samsung Securities, which reported an operating profit of Won2.12 billion ($1.95 million) in 2016, and whose vice-president is Jae Kyung Lee.
|Jae Kyung Lee|
The Seoul-based investment bank’s claims to be the nation’s “unmatched” leader in wealth management are hard to dispute. At the end of 2016, according to the firm’s most recent annual report, it had on its books 90,000 customers, each with personal assets of more than $100,000, adding nearly 4,000 new clients over the course of the year.
The investment house, which runs 67 domestic branches and five global offices, including in Hong Kong, Beijing and Tokyo, is expanding its service remit to adapt to the changing needs of its wealthiest clients. It operates three financial centres in the capital Seoul, offering clients expert advice in real estate, taxation, legal matters and, of course, wealth planning, while its Smart Business Unit provides a full range of online and mobile wealth management services.
And never let it be said that Korea’s banks don’t listen to grievances: Samsung Securities runs what it calls a ‘client healing service’ for any client who wants to vent their spleen about the mis-selling of financial products or dissatisfaction with any aspect of the private banking experience.
Best digital bank: Kakao Bank
Kakao Bank has become a powerful presence in its home market very quickly. In the 24 hours after the internet-only bank was launched in July 2017, 300,000 people applied for accounts, more than the number of requests most traditional lenders receive through their online channels in a year.
By the end of September, it had attracted deposits worth Won3.3 trillion ($3.05 billion), and disbursed loans worth Won2.6 trillion, according to internal data. In August alone, it accounted for 40% of all new lending in the country to retail customers.
Internet-only banking has been surprisingly slow to take off in South Korea, one of the world’s most online nations, largely because regulations prevent a non-financial firm from owning a stake of more than 4% in any lender.
Kakao Bank’s owners Kakao Corporation, a leading domestic internet firm, remain within those ownership parameters, which are expected to be relaxed in future, thanks in large part to the success of Kakao Bank and its sole online-only rival, K-Bank, led by telecoms firm KT Corporation.
K-Bank, focused on lending to retail customers and smaller enterprises, was formed a few months before Kakao Bank in 2017, but has since struggled to grow.
Kakao Bank served further notice of its long-term ambitions in September, when it raised Won500 billion, as part of a refinancing plan to bolster its lending business.
The young lender is owned 58% by Korea Investment Holdings, with smaller stakes controlled by the likes of eBay and Chinese digital firm Tencent Holdings.