IBK to revamp non-banking units to improve profitability

Industrial Bank of Korea CI

The Industrial Bank of Korea (IBK) is revamping its non-banking subsidiaries to enhance profitability and boost synergy with its banking business.

According to the IBK on Sunday, the financial institution has initiated external consulting to improve the operational and support systems of its non-banking sector.

It aims to establish an optimal operating and support framework aligned with IBK’s identity and to enhance support capabilities for its non-banking division.

According to IBK’s financial statements, its non-banking sector contributed only 12-13 percent to the entire net profit in the first quarter of this year.

KB Financial Group‘s non-banking sector, on the other hand, accounted for nearly 40 percent.

To achieve balanced growth between its banking and non-banking sectors, IBK plans to first review collaboration systems between group members, management consultation procedures, goal-setting methods, and performance evaluation techniques.

IBK will also assess inefficient management practices relative to the top five financial holding companies—KB, Shinhan, Hana, Woori, and NH—and identify any long-standing ineffective practices within the group.

The decision to undertake this revamp stems from internal assessments indicating that recent growth in subsidiaries has not been adequately supported by existing operational systems.

Since the early 2010s, IBK has been gradually establishing itself as a financial group, managing IBK Investment Co., IBK Insurance, and IBK Savings Bank Co.

An internal team managing group members, initially consisting of seven staff members in July 2014, has since been upgraded to an independent department, with the addition of a synergy promotion team last year.

However, there have been criticisms internally that despite the expanding of personnel and organizational structure, the methods for operating and supporting subsidiaries remain outdated.

“With the rapidly changing market environment and various management issues at each member company, there is a growing need to review the systems for operating and supporting the non-banking sector,” said an IBK official. The consulting will also address plans to enhance accountability among subsidiary executives.

The consulting process will begin next month and continue through October. Once the results are available, they will be reviewed in detail with group company presidents led by CEO Kim Sung-tae.

The findings will then be incorporated into next year’s business plans and budget, with potential organizational changes if necessary.

In addition to restructuring its subsidiary operations, IBK plans to diversify its revenue streams in the second half of the year as part of its management strategy.

The bank aims to balance its profits by expanding non-interest sectors, focusing on increasing market share in the card and pension businesses, and strengthening sales capabilities through its 20 wealth management centers nationwide.

By the year-end, the bank plans to also introduce new credit policies and measures to reduce overdue loans to ensure financial soundness.