[Inside Chodong] Corporate Finance: Between Pride and Performance

Relationship Managers (RMs) in charge of corporate finance pay more attention to the smoke from factory chimneys and the movement of trucks than to the numbers on their desks. The expansion of a company, the replacement of old facilities, an increase in employees, and trucks coming and going more frequently-all these are signs that the company is growing.

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They say that corporate investment only becomes meaningful at this stage. Corporate finance goes beyond simple lending; it is a partnership that rides together through a phase of growth. This is why RMs take pride in their work. The experience of seeing a company they discovered grow this much is what motivates them to return to the challenging field time and again.

The process of selecting promising companies in need of capital is not smooth. Since the peak seasons for sales and capital demand differ by industry, it is essential to read both past performance and industry cycles accurately. It is not unusual to see RMs checking factory operations and production flows firsthand to find the optimal investment timing. This scene has been a fundamental part of their work, quietly continued in the field long before it was called 'productive finance.'

However, since the Lee Jaemyung administration began to strongly support productive finance, the atmosphere in the field has gradually started to change. Major domestic financial holding companies announced that, starting this year, they will inject more than 500 trillion won into productive finance over the next five years. This year alone, the amount is about 100 trillion won, of which 60 trillion won must be filled through corporate lending.

Given this situation, commercial banks have rushed to grant additional key performance indicator (KPI) points to new loans related to productive finance. The intention is to accelerate the pace of productive finance execution. As a result, there is a stronger tendency on the ground to prioritize industries classified as productive finance or to approach such companies more proactively. The individual sales performance of an RM becomes the performance of the branch, and the accumulated numbers translate into bonuses. This structure inevitably changes the choices made in the field.

The words of one RM illustrate this clearly: "Even with the same 10 billion won loan, isn't it much better to have it recognized as 12 billion won thanks to the extra points?"

Such a structure raises concerns about distorting the priorities of capital allocation. Even if companies are equally desperate for funds, industries with advantageous KPIs may be chosen first. The result is polarization of capital: funds flow disproportionately toward certain industries or companies that receive concentrated policy benefits.

Amid all this, the news that four commercial banks have already achieved about half of their annual productive finance targets in just the first quarter raises questions. Although the figure includes not only corporate finance (IB) but also general loans, it is questionable where nearly 30 trillion won was injected in just three months. Moreover, this is a time when external uncertainty is at its peak due to events such as the Middle East crisis. It is a period when companies cannot move easily and must be cautious with investments.

When there is pressure for performance in an environment where it is difficult to discover promising companies, screening standards tend to loosen. There is a temptation to push funds into companies that are not yet ready, and a significant risk that money could end up flowing into businesses unrelated to innovation or growth. Loans executed in this manner may immediately become impressive 'performance numbers,' but over time, they could turn into 'bad debts' instead of the fruits of growth.

It is crucial to create an environment in which the professional judgment of those in the field can function properly. What should be evaluated is not just simple performance figures but also the 'quality of judgment,' and a delicate incentive structure is needed to support this. Only when the field judgment of RMs remains intact can valuable capital find its rightful place.

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