Best Domestic Commercial Bank: Housing & Commercial Bank
At one end of Korea's banking sector you have total basket cases, and at the other you have, well, Housing & Commercial Bank. H&CB is a bank whose financials speak volumes. Its operating income rose 258% due to increases in interest income (46%) and fee income (42%). After introducing a new credit scoring system, loan growth was up 30% - mostly in the consumer sector. As at the end of March its return on equity was 24.22%, while its main lending is to consumers and small and medium-sized enterprises.
H&CB's biggest exposure is to LG, to which it has $700 million outstanding.
Given the bank's quality, it has been the biggest beneficiary of the flight to quality, which has been exacerbated by the government's decision to roll back the Korean deposit insurance scheme in 2001. The bank's substandard loan ratio has fallen from 7.36% to 6.09% and the bank expects it will be 4% by year end. Part of the reason for the fall was the bank's sale of W233 billion ($208.7 million) of bad loans as asset-backed securities.
All analysts have H&CB as a buy at a price below W25,000, and most project more than 50% upside on the stock price. It has the highest share price among Korean banks - a metric that is very relevant in Korea where beneath certain levels you are forbidden by law from raising new equity.
The bank's goal is to be a world-class retail bank by 2004, and the banker of choice to small and medium-sized enterprises.
Currently, it is banker to a third of the Korean population, while new efficiency levels are being met because employees now receive 30% of their salaries based on their performance. Little wonder investors love this bank. It also has one of the best investor relations departments of any bank in Asia.
Best Domestic Investment Bank: Samsung Securities
The Samsung name denotes the highest quality management in the Korean context. And the same is true insofar as investment banks are concerned. Samsung Securities is a top-notch firm, and has taken a conscious decision to employ professionals who have experience with international firms, such as capital markets head DY Park, who cut his teeth with Morgan Stanley and is a superb operator.
Samsung Securities has 91 branches, which ensures wide distribution, and has a 10.21% share of stockbroking - with 71.91% of its total transactions carried out over the net.
So far this year, the firm has done six Kosdaq equity offerings, including the W75 billion deal for Korea Information Technology and W68 billion issue for LG Home Shopping. It is also a leading adviser - and not only to the Samsung Group. For example, it was mandated as financial adviser to the Korean Asset Management Corp on its planned securitization of non-performing loans.
Samsung Securities' expertise in fixed income is phenomenal. Korea is the biggest debt market in non-Japan Asia, and therefore, by definition, Samsung Securities has one of the most significant fixed income businesses in the whole of Asia. It has done straight corporate bonds for the likes of Pohang Iron & Steel (W150 billion) as well as a host of asset-backed securities for names such as Seoul Guarantee Insurance and Kookmin Bank. Indeed between July 1999 and July 2000 Samsung Securities raised the equivalent of $7.8 billion for its clients in corporate bonds, quasi-government issues, and asset-backed securities.
Best Foreign Commercial Bank: Citibank
With the largest number of branches of any foreign bank (11) and three times the assets of its nearest competitors (Deutsche, HSBC), Citibank is also the most profitable of foreign banks - by quite a margin. In 1999 its profit soared from W111 billion to W131 billion. The next most profitable bank was Deutsche, which earned W43 billion. It is a mark of Citibank's strength in Seoul that when German group Allianz tendered the custody business of its local arm, Allianz-First Life Insurance, in December, it was awarded to Citibank and not, as is often the case, a German bank.
In November Citibank completed the first onshore foreign currency syndication since the Asian crisis - for Chaeil Jaedang. Innovation has always been a hallmark of Citibank, and, after joining forces with Salomon Smith Barney, it is in a better position than ever to meet its clients' every need. Whether this is placing a W40 billion asset-backed security for Korea Exchange Bank (as it did in December) or co-managing a W200 billion issue for Posco, every financing need can be met.
Best Foreign Investment Bank: Merrill Lynch
Merrill Lynch has gone from strength to strength in Korea, where it has a commanding position in trading Korean stocks on behalf of foreign institutional investors. In the first quarter alone, its turnover was $4.9 billion.
Merrill is an adviser of choice, too. In December it advised Posco on the sale of the Shinseqi Telecom stake to SK Telecom, a transaction valued at $2.7 billion. It was also the bookrunner on the Posco equity offering last July.
Merrill is a driving force in the capital markets, having done deals for Industrial Bank of Korea ($350 million), and floating-rate notes for KDB and Hanvit Bank.