The Korea Development Bank (KDB) may see more than 1 trillion won ($933 million) in losses for 2013, largely due to huge loan-loss reserves for financially troubled conglomerates, the chief of the bank said

2014-02-11 17:48

KDB losses may surpass W1 tril.

By Kim Rahn

The Korea Development Bank (KDB) may see more than 1 trillion won ($933 million) in losses for 2013, largely due to huge loan-loss reserves for financially troubled conglomerates, the chief of the bank said.
Hong Kyttack, CEO of the bank and chairman of the bank’s parent company, KDB Financial Group, said Tuesday the policy lender’s net losses for last year may surpass 1 trillion won, although the exact amount will come out in March.
“We had to set aside larger-than-expected loan-loss reserves as many large companies fell into financial troubles last year, including STX Group,” he said at a media briefing at the bank’s building in Seoul.
The chairman added that the bank also had losses from its stake in Daewoo Engineering & Construction (E&C).
“We acquired Daewoo E&C in 2010, and the firm’s stock price kept falling amid a slump in the construction industry. We have to write it off as losses, and the amount is huge,” Hong said, not elaborating on the amount.
KDB bought the builder’s stocks at around 15,000 won per share at that time, but it is now 7,400 won.
However, he expected some 600 billion won in net earnings this year from reduced loan-loss reserves, more interest income and stronger risk management.
Hong also denied the allegation that Daewoo E&C attempted accounting fraud to cover huge losses and KDB was aware of it.
It was alleged that Daewoo E&C has hidden some 1.4 trillion won of losses and planned to write it off by cooking accounting books for five years through 2017. The Financial Supervisory Service has been investigating the suspicion following a tip.
“It was not confirmed losses, but an estimate of possible losses the builder may see if problems occur with its future or ongoing construction projects. The KDB examined the report as well and discussed with the builder how to minimize the potential losses,” he said. “It is a scenario drawn up for risk management.”
For affiliates of STX Group, of which the KDB is the major creditor, Hong said STX Pan Ocean’s court receivership programs are well carried out, while four other subsidiaries are under debt rescheduling.
“In case of STX Offshore and Shipbuilding, the company’s executives provided insufficient and distorted information about its financial condition. So we had to re-inspect the condition and found the actual debts were larger than first known. We are redrawing new workout plans with other creditor banks,” he said.
The lender is also supporting major conglomerates’ self-help schemes to resolve liquidity shortages, including Dongbu, Hyundai and Hanjin groups.
Hong said the bank is preparing the planned re-merger with the Korea Finance Corp., which was spun off from the KDB in 2009, although the passage of the revision bill is being delayed in the National Assembly.


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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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