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| The Shinhan Investment headquarters on Yeouido, Seoul / Korea Times file |
Competition has been heating up among securities firms here to become the nation's sixth "mega investment bank (IB)."
According to banking industry officials, Tuesday, local brokerages have been recently making various efforts to bulk themselves up, given that giant IBs enable their parent financial groups to raise larger funds amid the trend of low growth and low interest rates.
Shinhan Investment is the latest one that made such an effort.
The brokerage unit of Shinhan Financial Group said Monday it will increase its capital Thursday by issuing new stocks worth 660 billion won ($560.3 million).
After the issuance, the company, which has, 3.4 trillion won in equity capital, will be able to meet the 4 trillion won equity capital requirement, a prerequisite to seeking a license from the Financial Services Commission (FSC) to become a mega IB.
Shinhan Investment plans to seek the license in November, after announcing its third-quarter earnings.
If it gets the approval from the financial regulator, it will be allowed to issue a promissory note with the maximum limit of 200 percent of its equity capital. And this will significantly enhance the company's capability of raising funds.
"We were able to come up with our blueprint for a mega IB, thanks to our parent financial group's support," a Shinhan Investment official said. "By transforming our company into the nation's sixth mega IB, we will reorganize the country's capital market and play a role as our group's hub."
Since its parent company decided in May to inject 660 billion won into the brokerage, Shinhan Investment has changed its capital increase plan several times.
It initially planned to increase its capital in June, but a prolonged discussion on its future business plan forced the firm to postpone the capital increase to early August.
Against this backdrop, Hana Financial Investment has accelerated its efforts to become the nation's sixth mega IB.
On July 10, the brokerage unit of Hana Financial Group was designated as a comprehensive finance and investment business entity, which is required to have 3 trillion won in equity capital.
It increased its equity capital to 3.26 trillion won, by issuing new stocks worth 700 billion won in March 2018 and those worth 500 billion won in November.
A day after the designation, Hana Financial Investment CEO Lee Jin-kook said his company will take a step forward to be a mega IB.
Since then, some observers had expected Hana Financial Investment would become a mega IB earlier than Shinhan Investment.
Shinhan Investment, however, has been able to hold a dominant position as it prevented further postponement of its capital increase.
Hana Financial Investment has yet to unveil an additional capital increase plan.
Meritz Securities, another brokerage that has reportedly made efforts to become a mega IB, also seems to need more time to achieve its goal.
According to industry officials, the company with a 3.37 trillion won equity capital is seeking to increase the amount through a growth in its net profit, unlike other securities firms that issued new stocks.
Shinhan Investment is therefore expected to join the league of mega IBs earlier than Hana Financial Investment and Meritz Securities.
By capital, Shinhan Investment is the nation's sixth-largest brokerage after Mirae Asset Daewoo, NH Investment & Securities, Korea Investment & Securities, KB and Samsung Securities.
The five brokerages above have already managed to receive approval from the FSC for mega IB businesses.
