Investor That Can See The Future

Chapter 135

“What are you staring blankly at?”

When I woke up to the voice I heard, I saw Hyun-joo’s older sister drinking her coffee. The hologram that had just floated before her eyes had disappeared.

“I was thinking there might be a better way.”

I asked in a passing tone.

“Do you know about Hosung Savings Bank?”

Hyunjoo’s older sister smiled.

“Is that what you came up with?”

“Yes. What… … .”

“It’s a savings bank run by the Park Si-hyung’s son-in-law family.”

I nodded her head as if I knew and asked a question.

“Um, that’s right.”

So did it suddenly come to mind?

Hyunjoo noona explained.

Currently, Hosung Savings Bank is chaired by Min Jeong-ju, and the president is Min Seong-ju. Min Seong-joo’s son, Min Ki-jin, is Park Si-hyeong’s son-in-law.

“Can I get some data?”

Hyun-joo’s older sister put down her coffee she was drinking.

“It is true that Hosung Savings Bank received various special benefits. Because Park Si-hyung has grown significantly when he was governor of Gyeonggi-do by financing project financing and privately funded businesses. Asset size jumped from 10th to 2nd in the industry, and the number of branches increased several times.”

I remembered

“There was a favoritism.”

“It’s an issue that went through several audits, so it won’t be of much use if we try again. As you can see, in this government, that level of corruption is not even included.”

Contrary to what Hyunjoo noona thinks, I am not interested in digging into the issue of preferential treatment. But you can’t say it’s going to go bankrupt all of a sudden.

“Let’s see if there’s anything else.”

Hyunjoo nodded her head as she put her cigarette into her mouth.

“Okay. I will send you an email.”

* * *

After finishing the conversation, I returned to the OTK Company Building.

When I entered the CEO’s office, Taek-gyu was sitting on the sofa.

“Did you meet my sister well?”

“It doesn’t matter now.”

“Then what’s important?”

I just told you what happened before.

“Hosung Savings Bank Bankruptcy? Why did you see it?”

“You should find out from now on.”

When I opened the mailbox, I saw an email from my sister.

All of her material was printed. As with most savings banks, it is an unlisted company and is dominated by the owner family.

Asset size is KRW 5 trillion. With a capital of 2.6 trillion won, it is second only to IBS Savings Bank.

“What is the difference between a bank and a savings bank?”

“Huh. different.”

It’s easy to mistake them for the same thing because their job and name are similar, but strictly speaking, a savings bank is not a bank.

Commercial banks belong to the first financial sector, but savings banks belong to the second financial sector. In addition, commercial banks are strongly regulated by the Banking Act and are subject to the supervision and supervision of the Bank of Korea, whereas savings banks follow the Mutual Savings Bank Act, and various conditions are wider than those of banks.

“The original name was Mutual Credit Bank, but the law was amended so that it could be used as a savings bank.”

“Why did you change?”

“You want to look like a bank.”

In fact, many people confuse the two.

It is no exaggeration to say that Hoseong Savings Bank, which started as a regional savings bank, grew with Park Si-hyung. He made huge profits by participating in large project financing and as an FI (financial investor) in privately funded projects.

The biggest benefit is the fact that she and Park Si-hyung have an in-law relationship.

The most important thing in a savings bank is stability. Savings banks with the president’s son-in-law appeared to be much more stable than other savings banks and were able to attract many customers.

I looked through the data diligently, but couldn’t find any major problems. In this case, should you seek professional help?

I called team leader Seo Sang-won.

Moments later, a man in his 40s in a suit came in.

“I heard you found it.”

“Do you know Hoseong Savings Bank?”

Team leader Seo Sang-won nodded.

“I heard the name.”

I handed over the material I was holding.

“Please take a look here and check your financial position.”

Since working at Redstone, he has been famous for analyzing the financial accounting of mergers and acquisitions and calculating the appropriate acquisition price.

Team leader Seo Sang-won sat down and reviewed the materials handed to him.

It was only after a long time had passed that he opened his mouth.

“We’ll have to analyze it a little more closely, but it doesn’t seem like a problem. The capital is solid and the BIS ratio is normal.”

“Is the payout ratio okay?”

“That is no problem.”

The reason you put your hard-earned money in a bank is because it pays interest. If a bank deposits 100 million won and keeps it in a safe, interest does not automatically accrue.

The bank lends the deposit received from the customer to the person in need, and pays interest to the person who made the deposit with the interest on the loan received. (The loan-to-deposit margin, the difference between the loan interest and the deposit interest, becomes the bank’s profit)

However, if you lend out all of the money you have received, you may not be able to pay the money when the customer suddenly comes to retrieve the deposit.

To prepare for such a case, the law mandates that a certain portion of customer deposits be deposited at the central bank, which is called the reserve requirement ratio.

“is that so?”

Isn’t it time to go bankrupt yet?

With that in mind, team leader Seo Sang-won stopped handing over his data.

“I see one strange thing.”

“What?”

“The deposit rate is 0.3 percent higher than other savings banks.”

This is the era of low interest rates. Banks are battling over whether to pay 0.1 percent more or less.

0.3% doesn’t seem like much, but assuming the average interest rate is 3%, it’s actually like paying an extra 10%.

Any reason to pay more interest?

“Do some research on Hosung Savings Bank. At a level where there is no talk of investigation from this side.”

Team leader Seo Sang-won nodded his head without asking why.

“Okay.”

* * *

three days later.

Team leader Seo Sang-won visited the CEO’s office again.

“As a result of the analysis, there are no problems. Rather, it is solid and stable.”

Contrary to the content, I could tell that he had noticed something in the tone of his voice.

“But?”

“I established more than 100 special purpose corporations and gave them large loans, which is a bit suspicious. Some of the entities are suspected of being offshore companies, and it is unclear what the loan was used for.”

“Is this a bad loan?”

“It is not certain. Interest rates are coming in little by little.”

“No matter how well you receive interest, it’s useless if you can’t recover the principal.”

Team leader Seo Sang-won nodded.

“And apart from this, there is one thing that worries me.”

“What?”

“Since last month, we have sequentially issued 280 billion won worth of 3-year subordinated bonds, and we are selling them to general customers at each branch.”

It is common for companies to issue bonds.

In Korea, the Korea Deposit Insurance Corporation provides protection of up to 50 million won to protect depositors. Even if the bank where you put the money goes bankrupt and there is no money left, you can get back up to 50 million won unconditionally.

Bonds, on the other hand, have higher interest rates than deposits, but are not subject to protection. In case of bankruptcy, no one guarantees payment. As the default risk increases, bonds are traded at lower prices.

In addition, subordinated bonds, as the name suggests, are ranked last.

If Hosung Savings Bank goes bankrupt, people who bought subordinated bonds will not receive a single penny.

I was puzzled and asked.

“Most people don’t even know what a subordinated bond is.”

“It seems that employees are encouraging purchases by saying that they pay double the interest on deposits.”

“… … .”

The customers of savings banks are ordinary people, among them many elderly people. Therefore, if an employee recommends that it is good, they often sign up knowing that it is.

Anyway, as long as the bank is fine until maturity, there is no problem. It would be nice to get more interest than deposits, but… … .

I felt something strange.

“If you are in a good financial position, why did you issue subordinated bonds? If you are going to sell it to customers anyway, it would be beneficial to sell deposit products.”

Why do you need to sell bonds that pay higher interest rates?

Banks make loans with the money they have deposited. Conversely, in order to return the deposited money, the loan must be withdrawn.

But what if the loan is not properly collected? So, are you not trying to sell bonds and return your deposits or convert your deposits into bonds?

Deposits can be canceled at any time, but bonds cannot be canceled until maturity. Before that, the only way the buyer can get their money back is to sell the bond to someone else.

The bank is not obligated to pay the money to maturity, so you can buy time for three years.

“what do you think?”

Team leader Seo Sang-won said cautiously.

“It’s like accounting fraud.”

I nodded.

I was vaguely guessing. I saw a foreshadowing that it would go bankrupt, but if there are no problems with the financial statements, there is a high possibility that it is accounting fraud.

“How big will the insolvency be?”

“You can’t tell just by looking at the data.”

“It doesn’t matter if I’m wrong, so tell me your estimate.”

Team leader Seo Sang-won thought for a moment and then said the amount.

“At least hundreds of billions.”

“A lot?”

“It could be over two trillion.”

“… … .”

I’m at a loss for words.

* * *

Everything in a company is represented by a number on paper.

In addition, corporate accounting is the basis of all corporate activities such as wages, investment, management evaluation, tax, and prospects. Therefore, the act of manipulating accounting is strictly prohibited by law, and external audits are also conducted to prevent unexpected events.

The temptation of accounting fraud is strong as it can hide insolvency and increase sales and profits just by fixing a few numbers.(Read more @ wuxiax.com)

Maybe that’s why, despite the lessons of history, if you forget it, a big thing happens every once in a while.

The Enron scandal in 2007 is a typical example, and the most recent problem is the city sea. After hiding the deficit for many years due to fraudulent accounting, when the lid was opened, it was revealed that a loss of more than 5 trillion had occurred. In order to make up for the deficit, the company has to sell its net semiconductor business.

The biggest accounting fraud in the history of Korea is the Daehoo Group. The amount of accounting fraud revealed at the time was 40 trillion won, the largest since Dangun.

Taek-gyu asked.

“So, how big is the insolvency?”

“Well.”

“Anyway, it’s about to go bankrupt.”

“I will.”

I do not know the exact size of the insolvency, but I know that it will go bankrupt.

If it’s hundreds of billions of dollars, you can get rid of it in moderation this time. If it’s a little bigger than that, you’ll be able to regenerate with support.

However, bankruptcy cannot be avoided if it exceeds 1 trillion won.

Fortunately, it is not a general bank, but a local savings bank. Even if one savings bank goes bankrupt, the national economy will not falter.

“Do you know, sir?”

“Even if you know that there is insolvency, you wouldn’t know it would be this far.”

Had I known, I would have taken action earlier.

“If this happens, wouldn’t it be a big deal for you, sir?”

“No big deal.”

It’s not anyone else, it’s a savings bank run by the son-in-law’s family. I don’t know how relevant it might be, but you can’t avoid responsibility.

“By the way, 1 or 2 trillion is not such a big amount, is it?”

Compared to the money I’ve made in the hammock, it’s just a new piece of blood.

“In absolute terms, yes. But this is the money of ordinary people.”

It is a different matter for Seosung Electronics to fly several groups due to the L6 explosion and for ordinary people to fly two groups.

Most savings bank customers are ordinary people, not corporations or high-income earners. If a problem breaks out, the local economy will be devastated and the common people will die.

“Aren’t you supposed to report it to the Financial Supervisory Service first?”

“They are also in the same vein. What would have happened if the FSS had done its job properly?”

The head of the Financial Supervisory Service or the Board of Audit and Inspection are all close aides to the President. Probably not one or two politicians related to Hoseong Savings Bank.

The presidential term is less than one year away. Even if they know that the problem is serious, they will try to manage it well so that it doesn’t explode and hand it over to the next government.

“Then what? Are you still selling subordinated bonds with excitement? That’s completely sucking the blood of common people.”

The best way is to disclose the size of Hosung Savings Bank’s bad loans right away. However, to know this, we have to check the loan funds, collateral, and recoverability one by one, but we do not have the authority to do that.

However, the supervisory authority will not come forward.

I tapped Taekyu on the shoulder and said.

“So we have to blow it up.”