The substantial losses incurred in equity-linked securities (ELS) tied to Hong Kong‘s stock index have spurred South Korea’s banking sector to explore lower-risk products by ramping up efforts to increase the sales of low-risk, low-return equity-linked bonds (ELBs).

Equity-linked bonds, or ELBs, are similar to ELSs in that they are tied to underlying stock indices and yield higher returns than interest income from savings accounts. But unlike ELSs, the bond-tied securities are principal-protected notes and ensure greater safety of principal for customers.

According to sources familiar with the matter on Wednesday, Korean commercial banks are strategically adjusting their non-interest income products to prioritize safer options, even if they offer slightly lower returns than higher-risk derivatives.

KB Kookmin Bank revised its non-interest product portfolio to emphasize bonds and assets rather than ELSs, Shinhan Bank resumed ELB sales in February 2024, and Hana Bank is likely to promote products related to bonds issued by the United States.

The banks‘ move away from ELS sales is driving a shift toward professional wealth management products, departing from the sector’s previous emphasis on product sales by ordinary bank tellers. Their professional management strategies aim to mitigate consumer complaints by delivering asset management tips by experts.

KB Kookmin Bank is poised to expand its professional advisory services after it became the first commercial bank to conduct financial advisory in 2023. For its part, Woori Bank has created specialized teams comprising professional experts in four areas: real estate, investment strategy, asset management, and taxation, with the bank to open 20 new branches featuring these specialized teams by 2026.

Commercial banks are additionally turning to tailored services for the super-rich and younger billionaires. Hana Bank will add branches that are dedicated to younger customers, known as Digital PB Centers, which offer digital wealth management services.

By Park In-hye and Han Yubin

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]