KDB Chooses IPO

State-owned financial group to sell at least 10 pct. of its government stakes in the stock market

Chairman Kang Man-soo of KDB Financial Group said recently that the financial group will sell 10 percent of the 100 percent stake owned by the government and the Korea Investment Corp. (KIC) through the stock market this year.
KDB Financial's plan has already won the approval of the financial authorities including the Ministry of Strategy and Finance and the Financial Service Commission (FSC) as the first step for the privatization of the financial group, including the Korea Development Bank, through the initial public offering.
Chairman Kang at a New Year media briefing session held in Yeouido, Seoul, on Jan. 5, said he will strive to complete the IPO during the fourth quarter of this year at the latest, as the government has already decided to privatize the financial group. He said he hopes to take care of at least 10 percent of the 100 percent stake owned by the government and KIC in the financial group, which also includes Daewoo Construction.
Chairman Kim Seok-dong of the FSC also told reporters at a press briefing on Jan. 4 that KDB and KIC have already started working on the IPO, while the government plans to sell 10 percent of its holdings in KDB financial this year, 30 percent next year, and the balance in 2014.
The government stake in KDB Financial amounts to 9.7 percent, while KIC holds the remaining 90.3 percent. More than 10 percent of the government's stake should be divested in the IPO with more than 20 percent of the total to be sold to individual investors.
KDB Financial Holdings' market value is estimated at 18.7 trillion won and assuming PBR is 1 at the current market price, the 10 percent stake would bring in 1.8 trillion won. But it is not clear how the market will evaluate KDB Financial's per share PBR, as most nationwide commercial banks' PBR stays within a range of 0.5 to 0.75, below the real asset value of those banks, an indication of how KDB Financial's PBR could turn out during its IPO.
Chairman Kang is confident that the sale of the 10 percent stake held by the government will be no problem with only domestic investors, who can buy up to 30 percent of KDB shares. He hopes that the PBR for KDB shares will come close to matching its real market value, if not, the government will take appropriate measures.
The IPO for KDB Financial was originally to be conducted after the group took over Woori Financial Group, whose majority stakes are held by the government, as a step toward its privatization. But KDB Financial had to hold off on the IPO instead due to the refusal of the National Assembly.
The government has been hustling to have KDB Financial go the route of an IPO early this year in order to complete the privatization of the state-owned financial group, since this is the last year for the current administration and it doesn't want to delay the privatization any further, not knowing whether the next government will stop it.
Kang also said KDB will do its job of helping SMEs to the fullest like the old saying, "It will not take back the umbrellas from them, but lend them new ones this year," in line with the government policy to create jobs.
He said KDB will extend the repayment periods for not only installment loans for SMEs, as it did to those for their operation fund loans.
KDB will also make daring loans to youths who want to start their own businesses, despite the risks involved due to their inexperience, he said. nw

Chairman Kang Man-soo of KDB Financial Group.

A view of the Korea Development Bank Headquarters building in Yeouido, Seoul.