Spotlight on Samsung Securities

With securities firms free to set up new biz models under new capital market law

With the passage of the Capital Markets Consolidation Act at the National Assembly in the early part of last month, the finance industry is faced with one of the most challenging times in its history and the securities industry is no exception and its activities have come under a heavy attention of the public, especially, the business circles, because the industry will be at the center of the capital market nudging aside banks, reshaping the landscape of the industry, which has been led by banks for a long time.
Drawing the most attention is Samsung Securities Co., a major affiliate of the Samsung Group, the largest conglomerate in the country because the company has already been at the forefront of turning itself around as an investment bank for a long time and it will certainly create a whirlwind in the industry when it gets the group's full support with the passage of the new capital market law.
Reflecting the situation, the stock market has been reacting sharply with the price of the securities company gaining some 30 percent since the approval of the new capital market law.
Key Samsung Securities executives said the stock brokerage will build its IB sector to be like Goldman Sachs and the private banking(PB) sector in the line of Merrill Lynch.
The securities company has already taken a big step toward that direction when it completed a deal involving Fila Korea taking over its head office in Italy, which was a tough deal because it involved a foreign affiliate in Korea, taking over its head office in M&A, a global sports wear firm in Italy.
Samsung successfully concluded the deal, making name for itself in the international financial market and writing a new page in the annals of M&As. Samsung Securities acted as the only manger of the deal that required an intricate study of laws both in Italy and Korea as an inter-border deal and the company was able to satisfy the Italian part of the deal with its complete mastery of tax laws in both countries, Korea and Italy.
The stock brokerage's expertises in M&As, IPOs and other IB businesses have been known as tops in the domestic securities market. In the area of the M&A consultancy, the company has been listed among the top 10 companies in the country since 2001, showing that the company's plan to boost its revenue from the area to 30 percent of the company's total annual revenue from the current 10 percent, by stepping up its IB businesses overseas.
The domestic capital market has gone through a rapid change from savings to investment market with changes in the paradigm of managing household savings and the rapid growth of capital market scale.
Samsung Securities is known to have prepared for the change long before and have exerted its efforts in building up the IB sector.
It is a tough job to change things around at a securities firm with its revenue mostly coming from the brokerage business. It takes time and money to secure excellent manpower, differentiated products, a stable customer base and other infrastructure.
Since President Bae Ho-won took over the top management of the company in 2004, he introduced the performance result remuneration system and declared that all employees to become a private banker to secure a stable customer base. President Bae's strategies paid off. As of the end of March last year, the company's private deposit accounts increased to 108.5 trillion won, up more than 50 percent compared to the second largest securities firm. The number of private depositors with more than 100 million won in deposits expanded from 40,000 in 2004 to 54,000 at the end of last year, up 35 percent. The securities firm has also been able to increase its profits with its fee income rising to 90.4 billion won last year from 60.8 trillion won at the end of 2005.
The industry expects a securities firm should competitive in many areas under the new capital market law including asset management, IB, and stock brokerage to lead the industry. Samsung Securities have been stepping up its drive toward that direction. Last month, it launched the private investment part and looking for investors. The company plans to beef up the personnel in the IB sector to 100 by 2010, along with a plan to improve its remuneration and risk management systems.
Furthermore, the company is willing to swing to M&A activities. President Bae said the company will consider forging strategic alliances or merger with a financial firm with complementary activities, adding that his firm is ready to lead the changes in the capital market with a prediction that the company's stature and operations will grow bigger by the day.
President Bae's Management Plan:
President Bae is known as a financial expert in Samsung Group. Since his start as an accountant in 1977 with the group. He has been the CEO for such famous Samsung financial affiliates as Samsung Investment and Trust, Samsung Life Insurance and Samsung Securities showing his long career with financial companies.
But his management focus has been on "culture"and "manpower"rather than numbers and data, sources close to the company say. His faith in hiring talented personnel is unshakable. nw

President Bae Ho-won of Samsung Securities Co.