Last year’s deficit of Korea Development Bank (KDB) is likely to surpass 1 trillion won (US$939.3 million). This is due to various factors including the recent STX crisis, which will lead KDB to face heavy criticism as it has abandoned its role as a support bank for small-to-medium-sized businesses, acting instead to rescue a large corporation.
Hong Ki-taek, CEO of KDB Financial Group and KDB’s Industrial Bank of Korea, said in a meeting with reporters at KDB’s main office in Yeouido-dong on February 11, “Previously I said that the KDB deficit might run as high as 1 trillion won in the National Audit hearing last year.” He went to say, “There is a high probability that the statement will become a reality and result in a 1 trillion won deficit.”
KDB Financial Group and KDB’s Industrial Bank of Korea’s financial sheets will be released in March, with the closing of the fiscal year. It is likely that the deficit will amount to 1 trillion won (US$ 939.3 million), as predicted. KDB Industrial bank explains that the mounting deficit is a result of KDB’s role in acting as a safeguard in stabilizing financial markets in times of crises involving the likes of STX Group. In 2013, KDB Financial Group lost 433.6 billion won (US$407.4 million) as it accrued allowance for bad debt for the restructuring of the STX Group.
However, KDB Financial Group expects that this year’s result will improve. Hong said, “This year the amount of bad allowances will be reduced, and the money for marketing will be increased.” Then he said, “In the short term, about 600 billion won [US$563.7 million] net profit will be made available, if we reduce bad debit allowances by strengthening our risk management and pursue restructuring proactively.”
Hong said that KDB will watch the outcome of the planned merger of the Korea Finance Corporation and KDB’s Industrial Bank of Korea in July and act accordingly. He said, “If legislation on normalizing KDB is not approved by the National Assembly in February as planned, then we will work on getting approval after the temporary meeting of the assembly in July.” He added, “We are operating a Task Force to respond swiftly to any external factors that may arise. When the merger is decided, the acting committee of the merger comprising of the Financial Services Commission, Finance Corporation, and KDB’s Industrial Bank of Korea will be established.”
On the subject of selling the company’s subsidiaries KDB Capital, KDB Asset Management, and KDB Life Insurance, he also said that KDB will work with the government and cooperate in deciding the timing and method of the acquisition. Daewoo Securities will reportedly be exempted, since KDB considers the securities firm can play a crucial role in bringing about the synergy that is conducive to building the atmosphere and support system for the creative economy.