Corporate Bonds Led by 'KB', IPOs by 'Hantu'... Securities Firms Strengthening Traditional IB Show Earnings Outlook

The annual performance rankings by division of securities firms' investment banking (IB) sectors have become clear this year. In the bond issuance market (DCM), KB Securities, a traditional powerhouse, secured first place for the 12th consecutive year, while in the initial public offering (IPO) sector, Korea Investment & Securities reclaimed the top spot after four years. Since there are no large-scale IPOs or corporate bond issuances expected in December that could cause ranking changes, no shifts in the top-tier rankings are anticipated.

According to the investment banking (IB) industry on the 3rd, from January to November this year, companies issued a total of 79.11 trillion KRW worth of general corporate bonds (excluding financial company bonds and securitized bonds, hereafter corporate bonds). Excluding government-issued national bonds, bonds issued by domestic public enterprises, financial companies, and general corporations reached a total of 275 trillion KRW. Among corporate bonds, KB Securities handled issuance transactions worth 17.84 trillion KRW, ranking first in corporate bond underwriting performance this year. It also led in bond underwriting volume with 12.18 trillion KRW. The possibility of ranking reversal in the remaining month is slim. Accordingly, KB Securities has maintained its position as the top corporate bond underwriter for 12 consecutive years without yielding to other securities firms.

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Corporate bond underwriting performance is an indicator of how smoothly the corporate finance (IB) division of a securities firm supports companies' routine fundraising activities. Although underwriting fees for corporate bonds are low at 20-30 basis points (1bp=0.01%), they serve as a foundation leading to other IB sector transactions such as rights offerings, issuance of hybrid capital securities, IPOs, acquisition financing, and project financing (PF).

Following KB Securities, NH Investment & Securities (12.51 trillion KRW underwritten) and Korea Investment & Securities (10.1 trillion KRW) held the 'big three' positions in corporate bond underwriting. Shinhan Investment Corp. (8.46 trillion KRW) was outside the rankings until 2022 but rose to 4th place last year and solidified its position for two consecutive years. SK Securities (6.85 trillion KRW underwritten) also succeeded in maintaining a top-five ranking for two consecutive years, mainly handling SK Group's corporate bonds, which have the largest issuance volume domestically. Although SK Securities' management rights transferred from SK Group to the private equity fund J&W Partners in 2018, it is still observed to maintain connections with SK Group.

Unlike the corporate bond market, the IPO market showed overall sluggishness this year. A total of 83 companies were listed on the KOSPI and KOSDAQ markets, and the total IPO underwriting amount by securities firms was only 3.78 trillion KRW. This is just a quarter of the 15.942 trillion KRW IPO underwriting amount in 2013. Notable large IPOs such as K Bank were consecutively withdrawn, resulting in a 'lean period' for two years in a row.

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By securities firm, Korea Investment & Securities (607 billion KRW underwritten) ranked first in IPO underwriting performance by managing listings such as Shiftup and The Born Korea. Korea Investment & Securities, a traditional IPO powerhouse, reclaimed the top spot for the first time in four years since 2020. In 2022, KB Securities surged ahead with the mega IPO of LG Energy Solution, and last year, Mirae Asset Securities, which managed the Doosan Robotics IPO, took first place. Mirae Asset Securities, which was first last year with 558 billion KRW, ranked second this year by underwriting IPOs such as Sanil Electric, Hyundai Hims, and Innospace. KB Securities (506 billion KRW) helped HD Hyundai Marine Solution, KB Balhae Infrastructure, and Jeil M&S enter the stock market, maintaining a top-three position. KB Securities is expected to aim for reclaiming first place next year as the lead underwriter for LG CNS's IPO, considered a major deal early next year.

An IB industry insider said, "Due to the sluggish project financing (PF) market, which was a core revenue source for securities firms' IB, securities firms that increased their capital base have collectively strengthened their operations in traditional IB sectors such as corporate bond issuance, IPOs, and rights offerings this year." The insider added, "Competition has intensified, but there is a limit to the overall market pie, so a significant increase in performance is difficult to expect." The insider also noted, "NH Investment & Securities and Samsung Securities are achieving good results in acquisition financing and tender offers."

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