Shinhan Investment Corp. is a house that has recently been rapidly establishing its presence in the debt capital markets (DCM). Under the direction of former CEO Kim Sang-tae to strengthen the traditional institutional sector (corporate finance) competitiveness, it has settled at 4th in market share for 2023. Shinhan Investment Corp. is pursuing a strategy to secure large corporate volumes as it aims for 3rd place.
The coverage team, which is central to the DCM, is led by Kwon Yong-hyun, head of the corporate finance department 1. In particular, in 2024, Shinhan Investment Corp. contributed to representing all deals of Samsung affiliates, which were vibrantly active. The total issuance amount for the year 2024 reached 2.5 trillion won, marking the first time in 10 years that the issuance of corporate bonds by Samsung affiliates such as Samsung C&T and Hotel Shilla surpassed the 2 trillion won mark.
Born in 1975, Kwon holds a degree in business administration from Korea University and earned an MBA from Northwestern University's Kellogg School. He worked at Samsung Securities from 2009 to 2019 and is noted for his strong understanding of the financial policies of Samsung affiliates. He is also cited as a key reason Shinhan Investment Corp. could exclusively represent all of Samsung's deals in 2024. I met with Kwon at Shinhan Investment Corp.'s headquarters in Yeouido, Yeongdeungpo-gu, Seoul, on the 18th of last month. The following is a question-and-answer session with Kwon.
─You mentioned that Samsung is the most memorable deal of 2024.
"2024 was a year when deals from Samsung affiliates poured in after a long time in the DCM. I believe that the strategy of the house, which provides consistent service without chasing short-term results, paid off. Selecting the timing of issuance, optimizing the trench (maturity) structure, discovering credit stories, conducting investor relations (IR), and pricing were critical in establishing the issuance strategy."
─Is the secret of your rapid growth in the DCM market due to a business strategy focused on major large corporations like Samsung?
"The substantial support from all affiliates has been a great help under the group's grand theme of reinforcing the traditional institutional sector. Diversification of revenue sources mainly focused on the top 20 groups was critical. Shinhan Investment Corp. is at a bit of a disadvantage compared to competitors in terms of operational history or transaction experience. Therefore, we set a goal to strengthen our internal capabilities to provide various solutions beyond existing DCM. As collaboration within the group centering around Shinhan Bank accelerated, we were able to enhance our market dominance.
However, conversely, this strategy is not necessarily all good. From last year to this year, expectations for interest rate cuts and increased investor liquidity have led to good demand forecasts for credit ratings of AA and above. This means that there are not many companies with ratings below this, like BBB, in Shinhan Investment Corp.'s coverage compared to competitors. It's a double-edged sword."
─What specifically are the solutions besides the DCM?
"For example, there was the public tender offer for Shinsegae Engineering & Construction, which Shinhan Investment Corp. managed in 2024. We made efforts to provide various procurement and asset disposal solutions, such as transaction origination for IPOs (initial public offerings) of large corporations, capital increases, or public tender offers and block trades. In other words, while covering large corporations, we made significant efforts to quickly grasp the accurate demand and identify what products and financial effects are truly required, and organically provide suitable solutions within the organization."
─Synergy among group affiliates is still emphasized.
"Shinhan Bank has a stronger large corporate coverage network in that it has a broader and longer transaction history than securities firms. This aspect has been the biggest help. Additionally, from the perspective of capital and risk profiles, there is a ripple effect where securities firms can cross-sell products in which they have a competitive advantage. However, being a financial holding company, there are considerations to promote public interest rather than an absolute pursuit of revenue when making decisions."
─I hear that you are also actively recruiting external talent.
"This is likely a common issue everywhere, but bringing in diverse talent with various strengths is crucial in pursuing diversity. At the same time, we must not neglect the part of cultivating internal stars like professional baseball teams. How harmoniously we can balance recruiting external talent and developing internal staff is a significant challenge.
These days, employees value the ability to develop their career skills not only in terms of salary or title. Therefore, efforts must be made to persuade them what intangible compensation the company can provide in relation to their goals.
─Are there any points you emphasize internally to the employees?
"To understand what the client company needs most, it requires significant study about the relevant industry and company. Collaboration with the research center should also be well-coordinated, and it is important to meet clients regularly to listen to their concerns. We often emphasize this internally. Compared to the past, it seems there have been changes in this regard. Many junior bankers want diverse deal experiences, and it has been fruitful to provide opportunities to take unrelated training while supplying new deals like M&A advisory and capital increases."
─What is your outlook on the corporate bond market moving forward?
"It seems to be significantly affected by the policies currently pursued by the United States. If viewed from the perspective of fiscal policy reduction through the inauguration of a second Trump administration, the big cut of lowering the interest rate by 0.50% from what was expected before the election seems somewhat distant.
As for Korea, unless there is a dramatic cut triggered by any momentum, the prevailing view is to expect levels around 2.25% to 2.50%. With the issuance of corporate bonds amounting to 10 trillion won only in February, there is a concentration effect at the beginning of the year. This phenomenon in the first half seems likely to become more pronounced, and as we move to the second half, the spreads of individual corporate bonds by rating are expected to widen further. Overall, the entire market size is anticipated to form at a level slightly below last year.