NH Investment & Securities Co. has become Korea's second mega-sized investment bank (IB) that can issue promissory notes.
The Financial Services Commission (FSC) held a Securities & Futures Commission meeting on May 23 and passed the measure to grant a license for NH Investment & Securities to engage in the short-term financing business.
When a securities company with more than 4 trillion won (US$3.7 billion) of equity capital obtains a license for the short-term financial business, it can also issue promissory notes, the key business of mega-sized IBs. It can issue a one-year promissory note with the maximum limit of 200 percent of its equity capital. Considering the fact that NH Investment & Securities has about 4.8 trillion won (US$4.43 billion) of equity capital as of the end of March, it can issue promissory notes worth nearly 10 trillion won (US$9.24 billion).
NH Investment & Securities is highly regarded particularly in terms of safety. It has the highest credit rating of “AA+” in the industry as well as strengths in corporate financing risk management as it is the bank holding securities firm. Since a promissory note doesn’t guarantee the provision of the principal and interest or apply the protection of depositor, the credit rating of the issuer matters.
In addition, NH Investment & Securities has a wide and diverse customer base. It surpassed the 100 billion won (US$92.38 million) mark in pre-tax profits for the first time in the IB sector of domestic securities companies as it has taken care of various corporate deals such as initial public offering (IPO), corporate bond and paid-in capital increase. NH Investment & Securities CEO Chung Young-chae, who have worked at the IB sector for nearly 20 years, also has a wide network.
In November 2017, NH Investment & Securities, Korea Investment & Securities, KB Securities, Mirae Asset Daewoo and Samsung Securities were designated as mega IBs in the domestic industry. Except for Korea Investment & Securities, which was granted permission to issue promissory notes as soon as it was designated as a mega-sized IB, and NH Investment & Securities, which has become the second securities firm that gained approval, however, the other three have either failed to obtain permission to issue promissory notes or are uncertain whether they can win approval.
The securities industry douts that the third securities company will appear in the near future. KB Securities voluntarily withdrew an application for a short-term financial business license in January since it committed illegal cross trading when it was Hyundai Securities before the merger. The FSS suspended the review of licensing application for the new note-issuing business for Samsung Securities due to Samsung Electronics Vice Chairman Lee Jae-yong’s trial and for Mirae Asset Daewoo on grounds of ongoing inspections regarding internal trading.