Focus on Int'l Operations

KDB plans to expand profits from overseas markets to reach 50 pct of total profits

Korea Development Bank, a state-owned bank set up to finance huge industrial projects in the country, recorded the H1 net profit of 1.120,3 trillion won. Its assets exceeded over 100 trillion won level at 101 trillion won in the H1 for the first time in its history. The assets included 51 trillion won in loans, 40 trillion won investments in securities and 10 trillion won in other forms of assets.
The bank's liabilities totaled 86 trillion won including 11 trillion won in deposits, 23 trillion won in loans, and 44 trillion won in industrial bonds. Its capital amounted to 8.241,9 trillion won.
The bank, which launched its operation as a development financial institution, gained various financial know-how during its history including long-term facility financing, integrated corporate financing, and consultation on corporate restructuring and has become a professional corporate financial bank.
In the 50s and 60s, KDB provided development loans for the country's major infrastructural projects such as the power industry and export-oriented companies. In the 70s and 80s, the bank provided long-term facility loans to bank roll the heavy and chemical industries and electronic industry. In the 90s, the bank played the role of an integrated financial institution providing loans to such key industries as semiconductor and high-tech industries. In the 2000s, the bank took on new role as a corporate restructuring consultant, playing a major role in the restructuring such key companies as Daewoo Motors, LG Card, and the Daeduck Techno Valley, among others. The bank spurred the development of the financial market and the real economy through its segregated banking practice from commercial banks.
The bank has limitations in its handling of personal loans, and taking demand deposits and is prohibited from operating credit cards, mutual installment savings and factoring, among others. But the bank is allowed to arrange the sale of corporate bonds and take them over.
The bank has been raising funds through the issuance of industrial bonds to secure its loan funds, unlike commercial banks which rely on deposits for their loan funds. The industrial bonds reach 80 percent of the bank's loan funds for which KDB pays more than 1 pct in costs, while commercial banks meet its loan funds up to 90 percent with deposits and bank bonds.
KDB topped all other banks in terms of assets before the 1998 financial crisis, but it has slipped to fifth. It fell to 4th when Kookmin Bank announced merger with the Korea Exchange Bank (total combined assets: 244.6 trillion won) to 96.5 trillion won for KDB. But it fell again to 5th with Shinhan Bank taking over Chohung Bank this year.
KDB projects to continue to maintain its position as the only professional corporate financial bank in the country and has been a major lender of long-term facility loans with its share of local currency facility fund reaching 17.1 percent and 31.6 percent of foreign currency facility loans.
KDB has begun to explore overseas financial markets with domestic financial markets becoming overheated as a way out. The bank's globalization scheme is paying off with the profits from its international operations taking up from 30 to 50 percent of its total profit thanks to its overseas network and know-how accumulated with international financing.
KDB has set its sights on taking a lead in providing loans to overseas projects geared to secure resources and energy. It plans to sign an MOU with China's three northeastern provinces including Liaoning, Jilin and Heilunjiang. It has been participating in the development of Korea as a financial hub in Northeast Asia and the development of North Korea.
KDB has been financing the development of future growth engines such as 6T, high-tech and parts and material and energy industries, the expansion of social overhead capital projects and balanced national growth
KDB plans to expand its wholesale banking sector to differentiae itself from other banks in the country with sustained development of its core capacities as a corporate, international and investment bank. It will lead the IB market in the country taking advantage of its experiences in mergers and acquisitions, bonds and derivative financial products. It will also strengthen its capacities for asset management and trust businesses in preparation for the capital market integration law legislation. KDB will play a leading role in the private equity fund sector, requiring a high-degree of professionalism. It will continue to operate a number of its financial affiliates such as Daewoo Securities as part of its strategy to be an integrated financial entity. nw

Gov. Kim Chang-lok of Korea Development Bank