[Asia Exclusive] Son Byunghwan, Bank President: "The Way for Banks to Survive in the Era of Low Interest Rates and Low Growth Is..."

Son Byung-hwan, President of NongHyup Bank, Identifies Profitability Decline and Competition with Big Tech as Threats to Banking Sector
Focus on Accelerating Digital Finance Innovation
"Must Prioritize Securing New Growth Engines, Strengthening Risk Management, and Practicing ESG Management"

[Asia Economy Reporter Park Sun-mi] "Due to the expectation that the low interest rate and low growth trend will be prolonged because of the novel coronavirus infection (COVID-19), there is a concern that the fundamental profitability of the banking sector will deteriorate. Regulatory reforms for financial innovation and the advancement of digital technology will further intensify competition between big tech companies and existing financial institutions."

Son Byung-hwan, President of NH Nonghyup Bank, cited the deterioration of profitability due to the prolonged low interest rate and low growth trend and competition with big tech as the biggest threats to the banking sector in an interview with Asia Economy. This is also why Nonghyup Bank has determined that next year it must focus on securing new growth engines, strengthening risk management, and practicing Environmental, Social, and Governance (ESG) management.

President Son said, "There is a concern that banks' profitability will decline due to the low growth and low interest rate trend. In response, we plan to strengthen asset management (WM) capabilities, expand fee-based businesses such as investment banking (IB) and overseas operations, and diversify revenue sources. Also, to prepare for the delayed recovery of the real economy and uncertain management environment, we will strengthen proactive non-performing loan prevention activities and significantly expand ESG-related investments for sustainable management."

Nonghyup Bank's strategic goal for 2021 is set as 'Beyond Bank, leap to a customer-centered comprehensive financial platform company.' President Son explained, "The term 'comprehensive financial platform company' here means building a comprehensive financial service system that covers not only individual customers but also corporate clients from the customer's perspective. Internally, it reflects the will to expand the business beyond traditional banking into fintech and IT sectors, leading change and innovation to realize a sustainable 100-year Nonghyup."

Asked President Son Byung-hwan
About Nonghyup Bank in 2021...

- The banking sector will face a challenging environment again next year. What breakthrough plans does Nonghyup Bank have?

▲ Nonghyup Bank will focus on securing new growth engines, strengthening risk management, and practicing ESG management. To secure new growth engines, we will strengthen WM capabilities, expand fee-based businesses such as IB and overseas operations, and diversify revenue sources. We will also strengthen proactive non-performing loan prevention activities to prepare for the delayed recovery of the real economy and uncertain management environment.

We have already provisioned loan loss reserves reflecting the 2020 economic outlook to enhance our ability to absorb future losses. However, COVID-19-related policy products are classified as exceptions, and we plan to continue providing prompt and active financial support to companies experiencing temporary difficulties. We will also pursue sustainable growth through ESG management practices. In connection with NH Nonghyup Financial Group's ESG management strategy, we plan to significantly expand related investments. Additionally, as a specialized bank for agriculture and public finance, we aim to secure unrivaled competitiveness and strengthen our position as the top bank in social contribution.

- What areas do you expect to improve significantly next year compared to this year?

▲ Nonghyup Bank will focus on accelerating digital financial innovation. We will introduce marketing processes based on big data to secure business competitiveness and take the lead in recommending customized products and benefits that meet customer needs by combining information from NH Card, finance, economy, and distribution sectors. We will also expand partnerships with big tech and fintech companies to discover win-win business models through system linkage such as open banking and MyData, and strive to expand business areas. To prepare for the deterioration of interest income due to sustained low interest rates, we must also establish growth engines for non-interest businesses. In particular, we plan to expand core fee businesses by providing differentiated WM services unique to Nonghyup Bank, leveraging the strength of our nationwide offline branch network.

- Digitalization has been emphasized by you and Nonghyup Bank. Have there been any achievements?

▲ Nonghyup Bank made digital transformation (DT) a core strategy this year. We spent the year providing customers with more convenient financial life and benefits and internally laying the foundation for continuous DT promotion. These efforts have been well received, resulting in visible achievements such as a net increase of 1.4 million All One Bank subscribers compared to the end of last year and a 45% increase in non-face-to-face product sales as of the end of November this year.

We are also focusing on strengthening digital infrastructure to build a foundation for continuous DT for customers. We have recruited external digital experts as the bank's Chief Data Officer (CDO) to enhance expertise and strengthened dedicated AI and data teams to improve the organization's digital capabilities. In particular, by operating eight agile cells, we have achieved improvements in customer experience as well as work efficiency. In preparation for the MyData era, we are building a system to provide optimized hyper-personalized services for each customer, and we are also preparing a large-scale overhaul of Nonghyup Bank's information system for effective use of vast data in the future. Along with promoting digital transformation, we plan to improve customers' digital accessibility by setting up video consultation counters and deploying high-function automated devices to minimize digital exclusion.

- Nonghyup Bank is evaluated as lagging behind in globalization. How can this be improved?

▲ Nonghyup Bank is a latecomer in the global sector. To narrow the gap with domestic and global banks, we are implementing a global network expansion strategy. Next year, we will expand our network by converting existing offices in Beijing, Ho Chi Minh, and New Delhi into branches, and by obtaining approval for five branches including Sydney and Hong Kong branches. Additionally, we plan to open a London office. We also plan to install the bank's first IB desk at the New York branch to expand global assets.

- Many financial regulations are being proposed. How are you preparing for them?

▲ Starting with the Financial Consumer Protection Act to be enforced in March next year, various regulations on financial companies, including the proposed three-strike-out system in the financial sector, are being strengthened. Some may think that these new regulations will make business difficult, but on the contrary, they are an opportunity for financial consumers and financial companies to grow together.

We must reduce information asymmetry between financial consumers and companies, recommend products suitable for customers, and work to eradicate incomplete sales. To prepare for the enforcement of the Financial Consumer Protection Act, Nonghyup Bank has organized and operates a TF for responding to the Act. From next year, we will operate an executive-level consultative body including heads of product and marketing departments, financial consumer protection, risk management, and compliance officers to systematically manage the entire process from investment product selection to post-management.

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