Monday, May 24, 2010

Interview: Mr. Lee Dong-dae, Head, Shinhan IB Group

Incorporated on September 1, 2001, Shinhan Financial Group(SFG) was the first privately established financial holding company in Korea. Since inception SFG has developed and introduced a wide range of financial products and services in Korea, and aims to deliver
comprehensive financial solutions to clients through a convenient one-portal network.
SFG currently has 11 subsidiaries offering a wide range of financial products and services, including retail banking, corporate banking, private banking, credit card, asset management, brokerage and insurance services. SFG currently serves approximately 16.1 million active
customers through approximately 17,900 employees at more than 1,390 network branches.
SFG has experienced substantial growth through several mergers and acquisitions. Most notably, the acquisition of Chohung Bank in Sept. 2003 and LG Card in March 2007 have enabled us to build up a nationwide network of branches and a broad customer base.
In addition, SFG has significantly expanded its non-banking business capacity and achieved a balanced business portfolio.In 2009, the group posted a net income of 1.3 trillion won, leading the industry for the second year in a row.
Strategically integrating the extensive competencies of Shinhan Bank in the commercial IB business and Shinhan Investment in the traditional IB business, Shinhan Financial Groups IB Division provides customized IB services catering to the diverse financial needs of corporate customers.
With 47 networks in 14 countries Shinhan IB Group has established global recognition and competence. Shinhan IB group aspires to leverage this and broaden its borders from domestic IB market to the world.
I interviewed Mr. Lee Dong-dae, Executive Vice President, Head of Investment Banking. Excerpts:

The group has shown strong growth in both the quality and range of its services since 1997, when the investment banking market in Korea was barely developed, through initiating new areas of business such as SOC financing, M&A, and ABS and continuing to expand its business.
Thanks to these efforts, Shinhan IB Group provides the best financial services to meet the diverse needs of its clients and is strengthening its position as a leader in the domestic investment banking market by providing professional IB financial services ranging from M&A financing, Ship/ Aircraft financing, Corporate Capex financing, Real Estate Financing, Infrastructure Financing, International PF, Asset Securitization, and Equity Investments
In particular, the Hong Kong IB center was established in 2006 as a part of the group?s global strategy and has provided financial advisory and arrangement services to Korean clients expanding overseas and it has successfully entered the Asian financial markets by jointly providing IB services to Chinese and Southeast Asian clients with other global investment banks.
Furthermore, Shinhan IB has looked beyond its traditional DCM business to identify and discover new sources of revenue and growth such as integrated M&A and Real Estate financial services jointly with other members of the Shinhan Financial Group, establishing infrastructure related funds, devising mezzanine products and mezzanine investments, and devising and providing integrated financial products through inter-department coordination.
“With its extensive Investment Banking experience and capabilities, Shinhan aims to lead value creation for its clients through providing advanced IB services to its clients and to strengthen its global competencies among its departments to strive further in becoming a leading Global Investment Bank.”
Speaking about the various departments of the group, he noted that the IB Business Dept. is responsible B Business Department is responsible for general planning and marketing activities of the IB Group as well as managing and assessing the bank The department is also responsible for financial advisory and arrangement for structured finance, product planning and development, and IB product marketing and large scale syndication support for institutional investors.
The Investment Banking Dept. is responsible for Syndicated Loans including M&A Financing, Capex Financing, Shipping / Aircraft Financing to meet the diverse needs of its clients. The department is also responsible for domestic and foreign direct / indirect equity / mezzanine investments.
The Project Finance Dept. provides a complete service for Project Finance including Real Estate Finance, International PF, Real Estate Funds with abundant project execution experience and knowledgeable professionals.
The HK IB center provides corporate finance advisory and investment advisory services, bond issuance services, and structured financing services for domestic and international clients utilizing the Shinhan global network to meet diverse and complex client needs.
Mr. Lee noted that the IB Group set its strategic goal for 2010 as 斗aying the foundation to become the No. IB player.In line with this goal, it has devised the following four missions;
Expanding deal sourcing and enhancing mediation role
While diversifying deal sourcing products and channels, it will mount a pre-emptive marketing campaign on selected target customers in the IB business sector. Also, the group will proactively expand pre-sales activities tailored to customer needs. It will centralize and expand the syndication business to build strategic partnerships with various institutional investors, and develop various market networks.
Maximizing profits
The group will actively reinforce our capability to develop new revenue sources by pursuing new business areas both domestic and overseas, such as SOC projects in emerging markets and overseas plant and crossborder acquisition financing. In doing so, the group will fully utilize the resources and infrastructure of the Hong Kong IB Center in order to establish a global business model and provide diverse financial solutions. At the same time, it will maximize the profitability of conventional business areas by increasing our deal arrangements in cash-generating businesses, such as M&A, real estate and structured financing.
Establishing an innovative risk management system
The group will build up a systematic preemptive risk management system by completing a checklist for new IB deals and complying with guidelines. Moreover, it will diversify the risk management capacity through organic collaboration with the middle and back offices and systematically monitor markets, industries and corporations as well as providing preemptive responses to risk factors.
Building up the strongest IB infrastructure
The group will maximize our human resources competences through customized training programs, and career road maps for competence development, as well as foster junior IB players. In addition, it will build up research capacity through cooperation with other subsidiaries of the group, including Shinhan FSB Research Institute.
Mr. Lee noted that the most significant trend in real estate market these days is that there are fewer transactions due to the short demand. This implies that real estate market is now facing an adjustment phase. However, it may cause such a burden to the economy if the price drops sharply, so the government should come out with an idea to ease the drop in prices.
As for the office market in Korea, he observed that the t he vacancy rate of Seoul City was 4.9%, which is 0.4% lower than the previous quarter. This implies that the office market is showing signs of recovery.
However, the vacancy rate of GBD (Gangnam Business District) hit 12.1%. Also, office supplies at Yongsan, SangAm, PanGyo and Bundang area are expected to increase the vacancy rate.
In the future, he observed that the mid-sized real estate and the leasable real estate will be profitable due to tax benefits and the profit expectations.
Giving his forecast on the real estate market, he said that in the residential sector, since the government keeps supplying Bogumjari apartments, it is expected that the residential market prices will fall. In the office space, even though the leasing market has still not recovered, the price of office building is still expensive due to the short supply.