Global Markets & Treasury

Global Markets

  • IBK is strengthening its presence in Asian countries like China, Vietnam, India and the Philippines where Korean firms are making active inroads into the local markets, in an effort to offer real support to SMEs that are expanding their overseas operations.
Performance in 2017
  • IBK’s overseas network spans 27 branches and representative offices. We have 1 subsidiary in China with 16 branches, 8 overseas branches in New York, Tokyo, Hong Kong, London, Ho chi minh, Hanoi, New Delhi, Manila, office in Yangon, Phnom Penh and Jakarta. In 2017, we initiated takeover of local Indonesian banks and opening of a Phnom Penh branch in Cambodia. We are also working to set up a subsidiary in Vietnam and submitted application for approval to local financial authorities in July.
  • In regions where SME presence is low or where direct financial assistance is prohibited due to market entry restrictions, we offer support by signing strategic MOUs with local banks. Our MOU partners include ANZ in Australia, UniCredit in Italy and Santander in Spain, and we signed a MOU with CIBC in Canada in 2017.
  • IBK affiliates are strengthening cooperation to better serve companies whose needs for local financing services are diversifying. Working-level members from all Group affiliates attend 「IBK Group level Overseas Business Council Meetings」 to set up strategies and action plans for overseas operations. Going forward, we plan to set up integrated branches that offer onestop services covering banking, securities, insurance and lease in Vietnam, Indonesia and Cambodia.
Plans for 2018
  • IBK will continue to go global and expand our business internationally under the vision of emerging as Asia’s No.1 bank in SME financing.
  • Our plan is to build a foundation to lead the market by expanding our global network up to 70 branches in 13 countries. In particular, we will focus on Asia to create the “IBK Asia Financial Belt.” To do so, we will diversify the methods of our overseas expansion and actively pursue M&A and establish local entities.
  • In Indonesia, we will acquire local banks with strengths in corporate banking and foreign exchange. In Vietnam, we are in the process of converting our branch into a subsidiary and opening additional networks to better support the many Korean SMEs located in industrial complexes. Over in Cambodia, our plan to convert the representative office in Phnom Penh to a branch by the latter half of 2018 is proceeding on schedule.
  • Outside Asia, we are seeking to enter regions that are emerging as next strategic bases. We plan to open an office in Eastern Europe to prepare for increased presence of Korean companies and to secure an EU outpost after Brexit. Anticipating increased trade between Korea and Russia in line with the government’s new Northern Policy, we will pursue plans to enter Russia’s Primorsky Krai (Vladivostok) region. Our mid- to longterm strategy will involve securing bases in Mexico and UAE.
  • In countries where we already operate, we will push for different strategies in developed markets and emerging markets. In the global financial centers such as Hong Kong and London, we will beef up our future profit base by enhancing investment banking, syndicated credit and capital operations. In regions where global firms are actively seeking market entrance like New Delhi and Manila, we will focus our resources on local partners.
  • Building a healthy and transparent organizational culture is also high on the agenda. In 2018, we will set up an overseas compliance department and integrated money laundering prevention mechanism to establish an internal control and compliance system that meet the high standards of advanced financial markets.
  • Moreover, we will increase cooperation among IBK Group affiliates on overseas projects and MOU partnerships. Going beyond business, we plan to expand our overseas CSR activities through knowledge sharing, scholarships and volunteering.

Treasury

  • As of the end of 2017, IBK’s total funding stood at KRW 232.4 trillion including KRW, 108.9 trillion in deposits, KRW 90.1 trillion in bonds, and KRW 25.1 trillion in borrowings.
  • IBK Trading Department
Performance in 2017
  • In 2017, IBK strengthened its funding structure by recording net growth of KRW 3.4 trillion in bonds and borrowings and KRW 8.1 trillion in deposits. In particular, the increase in deposits centered on low-cost core deposits (KRW 6 trillion).
  • In the debt capital market, we varied maturities of SMIF bonds for stable liquidity management and diversified funding sources with structured SMIF bonds to reduce risk and funding costs. Despite an unfavorable market for contingent convertible bonds, our aggressive investor relations activities and strengthened market monitoring led to successful issuance of USD 300 million in FX hybrid bonds, KRW 300 billion in Korean currency hybrid bonds and KRW 400 billion in subordinated bonds. As a result, we were able to reduce funding costs and improve the BIS ratio by 0.66% percent over the previous year.
  • We also added to our profitability and competitiveness through the development of an installment-type bond product using SMIF bonds, a first for Korea’s banking industry. We continued to operate the Interest Rate Consulting and Interest Rate Desk programs so that branches can better serve customers.
  • In terms of foreign-currency funding, we focused on cost reduction rather than on procuring new funds. We paid back high-interest borrowings that came to maturity by utilizing domestic foreign-currency deposits, which grew substantially (USD 6.39 billion at the end of 2016 → USD 10.21 billion at the end of 2017). We also maintained stable foreign currency liquidity by operating a team to monitor market conditions and drawing up a contingency plan for foreign currency liquidity to prepare for greater volatility in international financial markets.
Plans for 2018
  • Internal and external financial market uncertainties are expected to intensify in 2018 due to economic policies of advanced countries and geopolitical risks. IBK plans to expand core deposits and low-cost market funding to boost profitability and stability.
  • Another challenge in 2018 will be meeting increasingly stringent Basel III liquidity coverage ratio (LCR) regulations (KRW LCR +10%p, FX LCR +20%p). We will address this issue by increasing the amount of highly liquid assets and diversifying asset management vehicles and maturities. We will also set up a monitoring system to manage the NSFR (net stable funding ratio)
  • One of IBK’s core strengths is the exclusive right to issue SMIF (Small- and Medium-sized Industry Financing) bonds which allows for lower-cost funding compared to our competitors. We plan to use this forte to enhance investor relations and secure funds in the capital markets by diversifying maturity dates. We will also continue efforts to offer more product choices like SMIF bonds and IBK bond installment deposits as a way to enhance the quality of SMIF bonds and offer competitive funding to promising SMEs.
  • Foreign currency funding costs are expected to rise due to policy rate hikes in the US. We will try to minimize the impact by substituting low-cost foreign currency deposits for high-interest foreign currency borrowings. We also plan to diversify our funding currencies away from US dollars, and to alter our funding methods to include social bonds. We will also secure a yen-based committed credit line to prepare for a possible global liquidity crunch. In addition, we will continue to support the capital needs of our offshore branches to expand overseas operations.
  • Other plans for the coming year include improving fundraising capabilities through regular IR activities and talent nurturing. This will allow IBK to secure sufficient funds to support SMEs and fulfill our policy financing role.
  • IBK Trading Department
  • IBK Trading Department

Online FX Trading Service

  • IBK is leading the way in Korea’s non-face-to-face FX market with its ‘IBK Internet FX/FX future’ system launched in December 2011 and ‘IBK mobile FX/FX futures’ app introduced in June 2016.
Performance in 2017
  • IBK’s ‘Internet FX/FX futures’ system allows customers to carry out FX trades in the spot and futures markets via the Internet, removing the need to visit a branch or submit formal documents. Our mobile app provides exchange rates based on market rates on real-time basis so that customers can conduct transactions without spatial constraints.
  • Despite declining volume in the domestic FX futures market, IBK’s FX futures transactions and profits in 2017 increased by 18.2% and 19.8%, respectively, over the previous year. The rise was largely due to IBK’s continued FX risk management consulting service and marketing activities. Of the total FX transaction volume at IBK, the non-face-to face (Internet and mobile) share increased to 32.9% (up 6.6% year-onyear) for spot and to 4.3% for futures (up 0.5%). Accordingly, the related workload at branches decreased significantly
  • In July 2017, we added CNY to currencies than can be traded through our online and mobile platform. Customer convenience was further enhanced by raising the maximum amount that can be traded to USD 1 million from USD 500,000 and allowing customers to sign up online for transactions. Meanwhile, our twicea- day text messaging and email service is providing a wealth of real-time financial market information.
Plans for 2018
  • We will improve customer convenience and service quality by boosting competitiveness of the non-faceto- face channel. We plan to extend online/mobile FX transaction hours and add a product recommendation function based on big data to reflect customers’ FX trade patterns and help them hedge against related risks.
  • Amid increasing uncertainties in the financial markets and growing FX volatility, we believe that IBK Internet/ Mobile-based FX/FX Futures will become a signature FX product, bringing increased non-interest income for the bank and enhancing convenience for our customers.