[Inside Chodong] Corporate Finance: Between Pride and Performance

Pride of Corporate Finance RMs, Overshadowed by Performance Metrics
As Productive Finance Expands, Sound Investment Must Come First

Relationship Managers (RMs) responsible for corporate finance pay more attention to the smoke rising from factory chimneys and the movement of trucks than to the numbers on their desks. When a company expands, old equipment is replaced, the workforce grows, and trucks arrive and depart more frequently—these are all signs of a company’s growth.

They say that corporate investment only has real meaning at that point. Corporate finance is more than just lending; it is a partnership that rides alongside a company during a stage of its growth. This is why RMs take pride in their work. The experience of seeing a company they discovered grow this much is what drives them back into the field with determination.

The process of selecting promising companies in need of capital is not smooth. Since each industry has different periods when sales and funding demand peak, RMs must accurately read historical performance and industry cycles. Checking factory operations and production flows in person to time investments optimally is nothing new. Long before the term “productive finance” was coined, this essential work had been quietly carried out in the field.

However, recently, as the Lee Jaemyung administration has begun to strongly promote productive finance, changes are gradually emerging on the ground. Major domestic financial holding companies have announced that from this year, they will inject more than 500 trillion won into productive finance over the next five years. This year alone, about 100 trillion won will be provided, and of that amount, 60 trillion won must be filled through corporate lending.

Given this situation, commercial banks have decided to grant key performance indicator (KPI) bonus points for new loans related to productive finance. The aim is to accelerate the implementation of productive finance. As a result, there is a clear trend in the field to prioritize industries classified as productive finance or to approach such companies more proactively. The individual sales performance of RMs becomes the branch’s achievement, and the accumulated figures translate directly into bonuses. This structure inevitably changes the choices made in the field.

The words of one RM illustrate this point: “Wouldn’t it be much better to have a 10 billion won loan recognized as 12 billion won, thanks to the bonus points?”

This structure raises concerns about distorting the priorities of capital allocation. Even among companies equally desperate for funds, industries with KPI advantages may be selected first. The result is a polarization of capital, with funds flowing predominantly to certain industries or companies that benefit most from policy incentives.

Meanwhile, news that the four major commercial banks have achieved about half of their annual productive finance targets in just the first quarter raises questions. Although the figures include not only corporate finance (investment banking) but also general loans, there is skepticism as to where nearly 30 trillion won was deployed in just three months. Furthermore, external uncertainties are at their peak due to the Middle East situation. It is a time when companies cannot easily take action and must be cautious about investment.

When it is difficult to discover promising companies and there is pressure to deliver results, screening standards tend to become more relaxed. There is a temptation to push funds into companies that are not yet ready, and there is a heightened risk that money may unintentionally flow into businesses that have little to do with innovation or growth. Loans granted under such circumstances may immediately boost ‘performance numbers,’ but over time, these may return as ‘bad debt losses’ rather than the fruits of growth.

It is crucial to create an environment where professional judgment in the field can operate properly. There needs to be a structure where not just simple performance figures, but the ‘quality of judgment’ is evaluated, and a finely tuned incentive system to support this. Only when RMs’ field judgments are respected can valuable capital find its rightful place.

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