KB Securities raises 1 trillion won in capital push to become 4th IMA operator

KB Securities is accelerating its push into the integrated management account (IMA) business after approving a fresh 1 trillion won ($647 million) capital raise. Combined with a 700 billion won rights offering earlier this year, the latest injection will bring the brokerage's equity above the 8 trillion won threshold required for IMA eligibility. The firm plans to use the expanded capital base to sharpen its investment banking and promissory note operations while laying the groundwork for future growth businesses.

KB Securities held a board meeting Friday and approved a 1 trillion won rights offering for existing shareholders. The firm will issue 56,753,688 new common shares at 17,620 won each, raising a total of 999.9 billion won. The record date for the new share allotment is July 13, with the existing shareholder subscription period set for July 22 and payment due July 23.

KB Securities is an unlisted subsidiary wholly owned by KB Financial Group. The offering will not be open to outside investors — KB Financial Group will subscribe to all newly issued shares.

KB Financial Group carried out a 700 billion won rights offering in KB Securities in February. Once the latest raise is completed, the total capital KB Financial Group will have injected into KB Securities this year will reach 1.7 trillion won.

Upon completion of payment, KB Securities will clear the 8 trillion won equity threshold that is the key requirement for entering the IMA business. The brokerage's standalone equity stood at 7.64 trillion won at the end of the first quarter. Adding the 1 trillion won proceeds would bring combined equity to 8.64 trillion won on a simple-sum basis.

IMA is a comprehensive investment service in which a brokerage pools customer funds and deploys them into corporate finance, venture capital and other investments, returning the gains to customers. Because the brokerage bears the obligation to repay principal at maturity, IMA is considered a defining business for a mega-IB's fundraising and corporate finance capabilities.

Three comprehensive financial investment business operators currently meet the 8 trillion won equity threshold for IMA operations: Mirae Asset Securities, Korea Investment & Securities and NH Investment & Securities. With this capital raise, KB Securities will have the equity required to enter the race to become the fourth IMA operator. Clearing the 8 trillion won mark alone does not automatically qualify a firm for IMA operations, however. The brokerage must also obtain a comprehensive financial investment business operator designation from financial regulators and satisfy additional requirements covering internal controls, conflict-of-interest prevention frameworks, and staffing and physical infrastructure.

KB Securities plans to use the capital raise as a springboard to accelerate internal preparations for the IMA business. The additional capital will also be channeled into strengthening existing core operations, including investment banking, bond trading and treasury management. The firm intends to expand the supply of growth capital and venture funding for companies through its promissory note business, while upgrading customer-focused services such as wealth management, retirement pension and digital platforms.

Capital raises are mounting across the brokerage industry as firms compete to build mega-IB capabilities and break into future growth businesses such as IMA. NH Investment & Securities this month approved a 400 billion won third-party allotment targeting its largest shareholder, NH NongHyup Financial Group. Woori Investment & Securities received 1 trillion won from Woori Financial Group in May, lifting its equity to 2.2 trillion won. Hanyang Securities is also pursuing a 50 billion won rights offering to fund new businesses — including over-the-counter derivatives — and strengthen its financial soundness following its acquisition by KCGI.

KB Securities co-CEOs Kang Jin-du and Lee Hong-gu said the raise was "a strategic decision under our management philosophy of 'transformation and expansion' to consolidate our existing businesses and secure the foundation for future growth." They added that the firm would "fulfill its role in productive finance, build a balanced business portfolio and further cement our standing as a mega-IB on the strength of the expanded capital base."