KDB chief rebuts criticism about its dependence on government

The head of the state-run policy bank Korea Development Bank on Wednesday vehemently defended the bank’s fiscal soundness, comparing it to that of the Export-Import Bank of Korea.

His comments came amid growing criticism that state-run banks overly depend on the government’s financial support whenever their financing for indebted firms such as shippers and shipbuilders becomes difficult.

“While we have received a total of 3.8 trillion won ($3.31 billion) from the government for the past decade, most of them were related to policy financing, and almost none of them was spent for improving our own fiscal structure,” Lee Dong-geol, chairman and CEO of the KDB, said at a press conference in Seoul.

“The Exim Bank received more than 7 trillion won government support and some of them were spent to improve their BIS ratio.”

Lee stressed that the KDB’s BIS capital ratio, a global standard gauging a lender’s capital health, rose to 15.57 percent in 2016 from 14.1 percent in 2015.

However, he admitted the bank’s default rate, or the ratio of loans overdue more than three months to the total loans, deteriorated to 1.52 percent last year from 0.94 percent a year earlier, mainly due to overdue debt of 600 billion won from soon-to-be liquidated Hanjin Shipping and 400 billion won from STX Heavy Industries.

As the main creditor of the financially-troubled Daewoo Shipbuilding & Marine Engineering, the KDB will make its best effort to help the shipbuilder secure cash, he said.

“About DSME, I cannot elaborate in detail what to do about it but we have a principle that we cannot support any additional taxpayer’s money to help it further,” Lee said. The KDB recently said it did not have any plan for a debt swap to support DSME.

As for selling of KDB Capital, an equipment leasing and venture capital firm 100 percent owned by the policy bank, Lee said he would rather focus on raising the corporate value of the company than on rushing to sell it.

Since 2015, the KDB has failed two attempted sales of KDB Capital due to a wide gap between KDB’s expectation for its price and the actual market price.

“We expect to receive more than 700 billion won for KDB Capital but the current market situation makes it difficult to do so. More urgent is to make it more attractive on the market,” said Lee, who was CEO of Shinhan Capital during 2002-2006.

Lee vowed to increase project financing in the global market and find more opportunities in Greater China in 2017.

According to his management plan, the KDB plans to increase its annual corporate financing to 62.5 trillion won in 2017, up by 1.5 trillion won from 61 trillion won in 2016.

The bank also said it will enhance support for newly growing industries and mid-sized firms by raising annual finance to 20 trillion won for newly growing industries and to 29 trillion won for mid-sized firms, respectively, in 2017.

By Kim Yoon-mi (yoonmi@heraldcorp.com)