An Investor Who Sees Future

Hoseong Savings Bank, Gyeonggi Province Branch 2.

Before the business started, Branch Manager Park Jun-sang gathered the staff for a morning meeting.

"As you all know, our branch is lagging significantly in bond sales compared to other branches. What would happen if the sales performance of our branch, which has history and tradition, falls behind a newly established branch that opened last year? If sales are poor, remember that it negatively affects everyone's performance evaluations. The more we sell, the better the bonuses, our branch gets recognized as an excellent branch, and promotions happen faster…"

Once he started speaking, it seemed like he wouldn't stop. The ongoing nagging made the staff's expressions grow increasingly grim.

After delivering a lengthy speech, Manager Park pointed to a staff member.

"Kim Mi-young, please come forward."

A woman in her mid-twenties stepped forward.

"Here, Kim Mi-young achieved the top sales performance last month! Let's give her a round of applause!"

Clap, clap, clap!

The staff clapped unanimously, and she shyly bowed her head.

This time, he called out another staff member.

"Ha Eun-ji."

"Yes."

A woman in her mid-thirties with glasses raised her head sharply.

"Ha Eun-ji, your sales performance is last. What on earth are you doing at the counter? Stop using your phone during work hours and think about how to sell good products to customers. Do you think the bank pays you to use your social media?"

As the branch manager pointed this out, her face turned bright red.

Ha Eun-ji spoke defensively.

"I keep encouraging people, but everyone says they don't know much about bonds and aren't interested."

Manager Park responded with frustration.

"So don't waste time explaining what bonds or subordinated bonds are; just promote it as a product that offers high interest rates. The interest rate is a whopping 5.6%! In today's world, you won't find a product offering this kind of interest anywhere else!"

'Of course, it's not a deposit; it's a subordinated bond.'

Ha-eunji held back her desire to speak out.

"I'm sure you're aware that several banks are restructuring and offering voluntary retirements. It's not impossible for us to end up in the same situation, so everyone, stay alert."

The expressions on the employees' faces darkened further.

However, Branch Manager Park Jun-sang remained unfazed and raised his hand.

"Alright, then let's kick off today with energy! We're partners in this together!"

As he led the chant, the employees raised their hands in unison and shouted, "Hoseong Savings Bank!"

***

9 AM.

The business day began. Being a local savings bank, most of the customers were familiar faces rather than new ones.

"Number 3, please!"

A hunched-back grandmother with white hair approached the counter, holding her ticket.

Ha-eunji bowed her head and greeted her.

"You're here, Grandma Kim."

"Oh my, has my Eunji been well all this time?"

Kim Soon-rye was a loyal customer who had been using the same branch for decades. She often shared the story of how she came carrying her baby on her back when the branch first opened, eager to receive a free ramen and toilet paper when she opened her account.

"What brings you in today?"

Kim Soon-rye proudly replied, "The savings account I opened before has matured!"

Ha-eunji feigned surprise, even though she already knew.

"Oh my, is it already time for that? You told me back then that you'd be dead before the maturity date, so what savings account?"

"That was just talk! It's not like the old lady dying is a new thing, is it?"

"I told you so; you did well to open that account back then, didn't you?"

"Yes, yes. What would I have done if I hadn't listened to you, Eunji?"

"Please hand me your passbook, seal, and ID."

Kim Soon-rye carefully pulled out her passbook from her heavily wrapped waist.

"Here you go. I brought the one for my husband as well, so can you check how much it is?"

Ha-eunji quickly typed on her keyboard.

"If we combine both accounts, the total including interest comes to 86,436,350 won."

Upon hearing the amount, Kim Soon-rye beamed with joy.

"Oh my! At this rate, I might just make it to 100 million before I die!"

"It's matured, so you can come by anytime. How can I assist you?"

"I was thinking of rolling this into a deposit and setting up a separate savings account. Are there any good deposit products available?"

Ha-eunji handed over the product brochure that she had placed in the most visible spot.

"There's a product with a very attractive interest rate. It's a subordinated bond…"

Kim Soon-rye waved her hand dismissively.

"I don't understand those things. I'm just going to deposit my money. I told you before, my husband lost everything in stocks during the IMF crisis and even accumulated debt. I won't even look at those options. A deposit is the best."

Ha-eunji considered closing the brochure but recalled the branch manager's nagging from that morning. If she didn't make a sale today, the same thing would happen tomorrow morning.

She hesitantly changed her approach.

"This product is almost the same as a deposit but offers a much higher interest rate."

"How much higher?"

"Our bank's highest rate right now is 3.1%, but this product offers a whopping 5.6%. Everyone is going for this one."

Upon hearing that, Kim Soon-rye's eyes widened.

"Oh my! Is it really that much?"

In her younger days, a 10% interest rate was normal, and just after the IMF crisis, rates even reached 20%. But those were all in the past. Nowadays, it's hard to find banks offering 3%.

"It can't just be a higher interest rate for no reason."

"That's what makes it a good product."

With continued persuasion, Kim Soon-rye's resolve began to waver.

The final statement was decisive.

"Would I really recommend a bad product to you mother? I'm just trying to help you get more for money."

"Of course, of course. I know you're thinking of me."

Kim Soon-rye made her decision.

"Should I get one for myself and one for my husband?"

Savings banks protect up to 50 million won per person, including principal and interest, but bonds are not covered by deposit insurance. Therefore, diversifying names would be pointless.

Ha Eun-ji didn't bother explaining that fact.

"Our bank won't have any problems within three years."

"Of course. I'll take care of that for you."

She quickly divided the 43 million won into two accounts to purchase bonds. Even though they were family, opening an account in someone else's name is illegal, so by the rules, the person must come in person. But if that happened, there was a risk they might change their mind. After all, they knew each other well.

The subordinated bonds were issued similarly to a bankbook, with dates and amounts printed just the same. The only difference was a small label that said "subordinated bond" on one side.

"Since it totals 86 million won, after deducting the interest income tax, you'll earn about 4.07 million won a year, roughly 1 million won each quarter. You won't be able to withdraw the principal for three years, but the interest can be accessed whenever you wish."

Kim Soon-rye couldn't hide her joy upon hearing the interest.

"1 million won every three months? I'll hit 100 million in no time."

"Absolutely."

As Kim Soon-rye stood up and thanked her, firmly holding her hand, Ha Eun-ji felt a sense of pride watching her grandmother's happy expression.

"Customer number 25!"

This time, a neatly dressed elderly gentleman with a top hat sat down.

"Ahem, I've come into some money recently and wanted to make a deposit. If I put in 50 million won, how much interest will I earn?"

She beamed and replied,

"Yes, sir. Deposits are good, but we have a special product issued by our bank this time…"

***

*Hoseong Savings Bank Chairman Min Jeong-joo*

He held a management philosophy that one should row the boat when the tide rises. Until now, the waters had not risen enough to row, but conditions changed when his nephew's father-in-law entered politics.

Park Si-hyeong, during his term as the governor of Gyeonggi Province, launched various projects simultaneously. Since Gyeonggi Province didn't have the budget to invest in all these projects, they were all conducted as private initiatives. At this time, Hoseong Savings Bank participated as a financial investor, receiving various privileges.

Roads were built throughout Gyeonggi Province, tunnels were dug, and light rail systems were introduced.

If a company invests, it naturally expects to profit. The roads, tunnels, and light rail built as private initiatives were all tolled, not free.

Whether public or privately built roads, as long as the tolls are reasonable, what difference does it make? However, these tolls were exorbitantly high.

High tolls lead to fewer users and, consequently, decreased revenue. Yet, this was not an issue.

Park Si-hyeong guaranteed private operators a minimum income for several decades, and any shortfall was covered by taxpayer money.

Regardless of whether actual profits materialized, investors pocketed money every year. It was a business model that was fundamentally risk-free.

Later, Park Si-hyeong was elected president after his term as governor.

At this point, it was as if the tide had not only come in but a favorable wind was blowing as well. Thanks to this, Hoseong Savings Bank could grow aggressively by expanding its branch network.

Min Jeong-joo was confident that, within this year, they could surpass IBS Savings Bank to take the top spot.

However, despite this ambition, they were currently struggling with cash shortages. The reason was that they continued to extend the maturity of loans given to special purpose corporations without recovering the funds.

To secure long-term funding, they offered higher interest rates than other savings banks to attract long-term deposits and issued subordinate bonds. However, the funds did not accumulate as quickly as expected.

"Should I increase the bond sales targets assigned to each branch?"

As Min Jeong-joo pondered the solution, an unexpected report came in.

"OTK Company has proposed to deposit money in our bank?"

Executive Shin Hyun nodded.

"Yes, they have made a formal inquiry."

"How much?"

"First, they mentioned 200 billion, but it seems that depending on the situation, even more is possible."

"Ugh…"

At this point, it wouldn't be an exaggeration to say that it was the maximum deposit amount for a savings bank.

Min Jeong-joo called her younger brother, Min Seong-joo, after sending out Executive Director Lee Shin-hyun, and explained the situation.

"Why would they want to deposit with us?"

OTK Company is comparable to a major conglomerate. There's no reason for them to engage with a mere savings bank.

Moreover, they already have a main transaction bank, Golden Gate. Oh Hyun-joo, known as the third-largest shareholder, is the branch manager in Korea.

Min Seong-joo had a hunch.

"I heard that the Financial Supervisory Service is investigating the transactions between Golden Gate and OTK Company. Could it be that they're feeling uneasy about something?"

"Hmm, because of the FSS investigation..."

Indeed, while making money, it's impossible to know what kind of illegal activities might have occurred. If the FSS starts probing seriously, they'll definitely find something.

"Isn't it that they want to bow to our father-in-law but can't contact him directly, so they're asking us to act as a bridge?"

Kang Jin-hoo was infamous for his poor relationship with the president. In this situation, depositing 200 billion in a savings bank run by the president's in-law is quite significant.

It practically meant surrendering and yielding.

Min Jeong-joo burst into laughter.

"Haha, even the mighty Kang Jin-hoo is nothing special."

Min Seong-joo also smiled.

"He finally realized how terrifying power can be after being clueless until now."

When you think about it, it's remarkable that they've endured this long. They could have simply yielded earlier, believing that a good relationship would suffice.

In any case, if 200 billion comes in now, there won't be any liquidity concerns.

Additionally, Kang Jin-hoo is well-known in the financial sector as having the Midas touch. If it becomes known that he's doing business with Hoseong Savings Bank, the publicity effect would be tremendous.

"Couldn't we immediately rise to the top of the industry?"

"Should we meet Kang Jin-hoo?"

"Is there really a need for that? We can just have Gi-jin in Seoul meet with him."

Min Seong-joo's words made Min Jeong-joo nod in agreement.

"That sounds like a good plan."

***

Hoseong Savings Bank has a branch in Seoul through mergers and acquisitions.

The Gwanghwamun branch was larger than most banks. Perhaps thanks to a recent relocation, the interior was as neat as a new house.

Increasing the number of branches and hiring staff is an investment aimed at attracting more customers. However, it typically takes some time for investments to turn into profits.

With such a rapid expansion, one might expect a temporary decline in financial status, but there was no evidence of that in the financial statements at all.

It's quite a mystery; it feels almost like some magic is at play.

I sat in the VIP consultation room, sipping the coffee brought by a staff member. Shortly after, a man walked in. He was in his early forties, tall, with well-defined features.

He greeted me and offered his business card.

"Hello, I'm Min Gi-jin, Executive Director of Hoseong Savings Bank."

I stood up.

"Nice to meet you. I'm Kang Jin-hoo."

After exchanging greetings, we took our seats.

"I heard you inquired about deposits. How much were you thinking of depositing?"

"As I mentioned during the inquiry, I'm considering 200 billion won for now. I thought putting in too much at once might make management difficult."

It's not necessarily good for a bank to simply gather a lot of deposits.

If a bank takes in deposits beyond what it can profitably loan out, it can end up struggling to pay interest.

Min Gi-jin's eyes lit up.

"Does that mean you might be willing to deposit even more?"

I nodded.

"Of course. The amount I deposit depends entirely on Hoseong Savings Bank's management capabilities."

Then I added jokingly, "As you know, I have a lot of money."

Min Gi-jin burst into laughter at my remark.

"Ha ha, of course. It's not someone else but the representative of OTK Company."

The atmosphere was cheerful.

"I heard you issued subordinated bonds this time."

"That's right."

"I'm considering purchasing some bonds in addition to the deposits."

His face brightened.

"How much are we talking about?"

I couldn't help but smile inwardly at his reaction.

"First, could I receive a few additional documents regarding the financial status and loan situation aside from the publicly disclosed information? I'll review them and determine the range for both the deposits and the bond purchase."

TL/n -

A subordinate bond is a type of bond where the bondholders are paid after other creditors in the event the company faces financial trouble or goes bankrupt. It's like being at the back of the line for a reward; you'll only get paid if there's money left after the more senior bondholders or lenders are paid first. Because of this higher risk, subordinate bonds usually offer higher interest rates to make them more appealing to investors willing to take the chance.

Imagine you and a friend lend money to someone who might have trouble paying back. If they can't pay everyone back, your friend gets their money first, and you only get repaid if there's anything left. That's essentially how subordinate bonds work.