Banks Burned by Lime and Optimus... Compete for the 500 Trillion 'Trust Market'

Bank Trust Assets Total 509.6996 Trillion KRW
Financial Companies Manage, Operate, and Dispose of Stocks, Bonds, Deposits, Real Estate, etc.

[Asia Economy Reporter Park Sun-mi] Due to low interest rates and an aging population, competition among banks over the trust market, which is emerging as a future growth engine, is becoming increasingly fierce. Elderly individuals with substantial assets are entrusting their money to bank trusts, which serve as a means of wealth transfer such as inheritance and comprehensive asset management services for retirement preparation. Facing a decline in net interest margin (NIM) caused by the ultra-low interest rate environment and stringent government loan regulations, banks urgently need to expand non-interest income and are actively introducing differentiated products to attract new customers.

According to the financial sector on the 27th, the trust assets under custody in the banking sector reached 509.6996 trillion KRW as of the end of August, the latest available data. This represents approximately 8% growth compared to 472.1766 trillion KRW at the end of August last year. The scale of bank trusts surpassed 500 trillion KRW for the first time in April this year and has maintained around 510 trillion KRW for five consecutive months.

Customers Expect High Returns, Banks Benefit from Expanding Non-Interest Income

Trusts mean "entrusting with confidence." When customers entrust stocks, bonds, deposits, real estate, etc., to financial institutions such as banks or securities firms, these institutions manage, operate, and dispose of the assets on their behalf. It is a type of comprehensive asset management service where customers can expect higher returns than deposits safely in the ultra-low interest rate era, and banks can expand non-interest income through fees in an environment where increasing interest income is difficult.

Bank fee income is broadly divided into ▲trusts ▲banking-related services ▲credit card agency services ▲fund sales ▲bancassurance, among others. However, due to the sharp decline in fund sales caused by private equity fund scandals such as Lime and Optimus, banks face the burden of increasing fee income in other areas. This is also the background for banks competitively entering the trust business.

As the needs of customers and banks align, competition to increase trust assets under custody in the banking sector is intensifying. Recently, lifestyle-tailored and close-contact trust products focusing on the growing elderly population are pouring out.

IBK Industrial Bank of Korea launched the flexible installment trust product "IBK Anshim Sangjo Trust" on the same day. It is a flexible installment trust product where customers can make deposits freely, with the funeral service funds held and managed by IBK, and can terminate the contract anytime without early termination fees. KB Kookmin Bank has also been selling the comprehensive solution product "KB Naesaengae (愛) Trust" since the 23rd, which provides one-stop services from asset management and daily life to inheritance. This product was launched in response to social changes such as entering a super-aged society, low birth rates, and an increase in single-person households.

Non-Face-to-Face Trust Services 'OK'

Recently, competition in non-face-to-face services has also heated up. Shinhan Bank has been offering a new non-face-to-face trust service using video calls since the 20th for 26 products including equity-linked trusts (ELT), index funds, and ETFs related to secondary batteries, bio, and healthcare. The advantage is that customers can easily subscribe through the mobile banking application SOL without visiting a branch.

The service also offers a 0.2 percentage point lower fee compared to trust products newly subscribed at branch counters, providing cost-saving benefits. Since Kookmin Bank first introduced a non-face-to-face trust service using video calls in May this year, Woori Bank, Hana Bank, and others are also working to launch non-face-to-face trust services within the year. The industry expects that as banks’ non-face-to-face trust services become full-fledged, fee competition among banks for trust products will further intensify, as banks are likely to lower fees to attract initial subscribers.

However, following the large-scale losses from overseas interest rate-linked derivative-linked funds (DLF) last year, financial authorities classified derivative-linked securities trusts (DLS) and ELTs, which are representative products of specific money trusts in the banking sector, as high-risk products and imposed limits on total sales across all banks. This has deepened the concerns of banks that need to increase trust assets under custody. A bank official said, "Due to government regulations, we bear the burden of diversifying products and improving operational efficiency in the trust competition."

This content was produced with the assistance of AI translation services.