Knife Threat Failed to Halt Korea’s First Female Bank CEO

Facing a desperate, knife-brandishing customer, Kwon Seon Joo knew the value of staying cool under pressure more than two decades before being picked to become the first woman to head a South Korean bank.

In 1992, the now 57-year-old chief executive officer of the country’s fourth-largest lender by assets, Industrial Bank of Korea, was deputy manager of trade finance at a branch in an upscale district of Seoul. Kwon said she agreed to meet a customer presenting forged shipping documents who was demanding a loan because he risked financial ruin after exporting artificial flowers that had been rejected by the recipient. When she refused, he lifted his trouser leg to reveal something tucked in his sock: a knife.

“I was shocked at first, but deep down I was confident that I could resolve the situation with conversation,” Kwon said in an interview at IBK’s headquarters in Seoul last month. She spoke calmly with the man for more than an hour before he walked out with his demands unmet and no one harmed, she said.

Now, having been chosen in December by South Korea’s first female president, Park Geun Hye, to run the state-owned lender, Kwon intends to apply her temperament to a different challenge: making IBK one of the world’s 100 largest banks on an international ranking by assets. IBK was 105th last year on the Banker magazine’s list, which includes closely held financial firms. Her goal for her three-year term involves expanding into emerging Asia, increasing loans to small businesses, cutting costs and boosting capital.

Placing Cornerstone

“I want to be remembered as a CEO who placed the cornerstone for IBK’s future growth,” said Kwon. “We’ll grow, but not through the easy way of charging higher rates. I know it’s a challenging goal because I want to ensure growth is healthy and stable.”

To enter the top 100, IBK must overtake China Guangfa Bank Co. of Guangzhou, China, The Hague-based Bank Nederlandse Gemeenten, Dublin-based Bank of Ireland Plc, Canada’s Desjardins Group of credit unions and Singapore’s United Overseas Bank Ltd., according to the Banker’s ranking.

IBK can achieve the target by the end of 2016 by increasing assets 5 percent to 6 percent annually, more than the average 3.9 percent at global peers, Kwon said. Assets at Korean banks grew an annual 2.1 percent on average in the past five years, according to Financial Supervisory Service data.

Asian Expansion

Kwon plans to expand into India, Indonesia and Cambodia to provide financing for Korean clients doing business there. IBK eventually will seek to serve local customers, too, she said. The lender has 23 branches or offices abroad including in New York, Tokyo, Hong Kong and London and has announced plans to open two more this year.

Kwon wants to tackle declining profit by trimming expenses and luring more customers from competitors. Broadening the client base would help IBK increase deposits and secure low-cost funding to expand loans to small businesses, she said, declining to provide specific targets.

The state-owned bank is required by law to allocate at least 70 percent of its loans to small and medium-sized businesses. Kwon said she hopes increasing lending to them can help the country’s policy of encouraging technology startups, in line with President Park’s campaign promise before her election in December 2012 to achieve a more “creative economy.”

Dreams Realized

“To me, creative finance means helping small companies and startups with their own technologies and knowledge so they can grow,” Kwon said. “I want IBK to help such ventures so we can reinvigorate the economy.”

Park pledged to spend 4 trillion won ($3.7 billion) over the next three years to assist startups and venture companies and reduce the economy’s reliance on large corporations. The central bank forecasts Korean economic growth will accelerate to 3.8 percent this year, the fastest pace since 2010.

Shares of IBK rose 12 percent since the nation’s financial regulator recommended Kwon’s selection on Dec. 23, compared with the Kospi financial index’s 3.1 percent drop in the same period. IBK closed 1.9 percent higher at 13,600 won in Seoul today.

“It was the moment when my dream and the dreams of my female colleagues were finally realized,” Kwon said. “I felt a grave responsibility to do an excellent job.”

Icy Mountaintop

While women account for almost half of employees at banks in South Korea, few are executives. At the end of 2012, before Park’s inauguration, five out of 95 vice presidents or deputy presidents at the eight nationwide banks were women, according to data compiled by CEOScore, a Seoul-based research firm. The number of women in those positions, just below CEO, has doubled as of February, the data show.

Korea’s gender-equality minister, Cho Yoon Sun, said today that increasing the participation of women in the workforce is “critical” to sustaining the growth of companies and economies.

“I often say that even though spring has come to the mountain, the mountaintop is still covered with ice,” Cho said in a speech in Seoul. The Ministry of Gender Equality & Family plans to ask publicly traded companies to disclose the ratio of executives by gender to make them feel “peer pressure” to utilize more women, she said.

Among Korea’s 1,000 largest companies by sales, 10 had female CEOs as of when Park was elected, CEOScore data show. They include Lee Boo Jin, daughter of Samsung Electronics Co. Chairman Lee Kun Hee and head of Hotel Shilla Co., partly owned by Samsung companies, and Choi Eun Young of Hanjin Shipping Holdings Co., who succeeded her late husband as CEO. Two of the 10 aren’t related to families that founded the companies, according to CEOScore.

Tough Tasks

The key to boosting IBK’s earnings and capital is being able to increase loan profitability, according to Michael Na, a Seoul-based analyst at Nomura Holdings Inc. That may be a challenge given Kwon’s aversion to increasing interest rates.

“Without normalizing loan spreads by raising rates, lifting profitability and raising capital will be tough tasks for the CEO,” said Na, who has a neutral rating on the company. “It’s hard to expect a meaningful recovery in IBK’s loan margins this year as the bank continues to shoulder the burden to support small and mid-sized companies.”

The bank’s earnings fell less than those of its local peers last year. Profit slid 28 percent to 854.2 billion won as shrinking net interest margins eroded lending income, IBK announced on Feb. 7. Combined profit at 18 lenders in South Korea tumbled 46 percent to 5.1 trillion won, Financial Supervisory Service data show.

Increasing Capital

Kwon said she also wants to increase capital buffers to bring the bank in line with local peers. IBK’s capital-adequacy ratio under Basel III standards was 12.3 percent as of December, weaker than the 14.6 percent average at all 18 Korean lenders including bigger competitors Kookmin Bank, Shinhan Bank and Woori Bank, FSS data show.

Kwon joined IBK in 1978 after studying English literature at Yonsei University in Seoul. She was one of the first five women to pass the company’s entrance examination, according to a biography provided by the bank. Before Kwon, the bank along with its peers in Korea, typically only hired women for jobs such as tellers, which carry few opportunities for promotion.

Months after she was assigned to a branch in Seoul, Kwon was selected from dozens of candidates within the company to work as a secretary in the senior vice president’s office.

Standing Out

“She looked smart in her photo and came from a good school,” recalls Lee Kyung Jun, then Kwon’s boss who recruited her and later became senior vice president. “She stood out.”

Kwon wasn’t satisfied with a low-level role.

“She protested that she joined the bank to become a branch chief one day, not to serve tea and greet guests,” Lee said. “I had to persuade her that one day the experience will help her understand what executives do and how the bank works.”

Kwon took the secretarial job, and her thorough work and passion for learning new assignments always impressed her bosses, Lee said. He said he wasn’t surprised that Kwon later became IBK’s first female division head and then deputy president after his retirement from the bank in 2008.

More than 20 years after defusing the knife incident, Kwon said her communication skills will help her manage any conflicts between shareholders, the government and customers.

“I always felt I’m a person who has room to improve,” she said. “But one thing that I’m really good at is communication, and I believe that will help me meet my challenges.”