The banks are busy selecting key branches and preparing sales guidelines and business strategies ahead of the resumption of sales of equity-linked securities (ELS) in September. Most banks suspended ELS sales after the loss crisis of the Hong Kong H index ELS emerged last January. With the government tightening household lending management, it has become difficult for banks to increase interest income, leading them to focus on boosting non-interest income with the resumption of ELS sales. In particular, as the recent recovery in domestic and international stock markets has led to a surge in ELS investments from investors expecting an index rise, optimism is growing.
According to the financial sector on the 18th, banks are expected to complete the selection of key branches capable of selling complex financial investment products soon and report related details to financial authorities. While financial authorities initially allowed only 5-10% of all bank branches to sell complex financial products, they have now allowed for an expansion to 30% due to concerns that this would be virtually equivalent to a sales ban. Considering that the five major banks, including KB, Shinhan, Woori, Hana, and NH Nonghyup Bank, had around 3,700 branches as of the end of June, over 1,100 branches will be eligible to sell complex financial products.
Previously, financial authorities announced measures to improve the sale of complex financial products in February to prevent incomplete sales following the Hong Kong ELS loss crisis. The main contents stipulate that complex financial products cannot be sold at regular savings and deposit counters and should only be sold at key branches. Key branches must have dedicated counseling rooms that are physically separated from other locations within the sales office and employ ELS-dedicated sales staff.
Banks expect that the previously decreased trust commission income will increase. Banks sell equity-linked trusts (ELT) that include ELS issued by securities firms as trust assets, typically charging around 1% of the evaluation amount of trust assets as brokerage fees, in addition to separate execution and management fees. This trust commission falls under non-interest income.
The total trust commission revenue of the four major banks was 785.4 billion won in 2023, a decrease of about 7% from 728.8 billion won last year. Fortunately, banks have been focusing on selling bond-type trusts, trust-type ISAs (Individual Comprehensive Asset Management Accounts), Money Market Trusts (MMT), and wills substitutes instead of ELS, and performance has been showing a recovery trend this year.
An official from a major commercial bank noted, "We plan to expand non-interest income with bancassurance (bank-sold insurance) and ELS as the two main pillars in the second half of this year," adding, "Due to falling market interest rates and the rising stock market, ELS investments have increased recently, creating a positive business environment." According to the Korea Securities Depository (KSD), the total issuance of ELS in the second quarter of this year was 52.985 trillion won, the largest amount since the fourth quarter of 2023 (75.512 trillion won).