South Korean banks are expanding their global investment banking (IB) business one after another to diversify their revenue streams with their profits forecast to decline due to government regulations on lending and an economic downturn.
For example, KB Kookmin Bank opened its IB unit in London last month. The purpose of the unit is to expand the bank’s IB business and seek future growth opportunities based on partnerships with local financial institutions.
Likewise, Hana Bank recently opened its IB desk in Australia in order to focus on SOC projects based on public-private partnerships. The desk is going to concentrate on road and railroad construction projects there. It is planning to examine coking coal development, power plant construction and smelting factory construction projects, too.
Woori Bank, which set up an IB desk in Australia ahead of Hana Bank, recently launched an IB team at Bank Woori Saudara, which is its local corporation in Indonesia. The idea is to shift the focus of its local business from retail banking to IB. Indonesia, home to the world’s fourth-largest population, is expected to present huge corporate finance opportunities in the form of real estate development, infrastructure financing, etc.
The banks’ push for IB is intended to diversify revenue streams. “Even a small number of large deals means a very large fee income,” one of the banks explained, adding, “The trend is likely to continue in that IB expansion can lead to profit source diversification by means of M&A, financial arrangement and IPOs.”