KDB takes one step closer to privatization

The Korea Development Bank, the nation`s largest state policy lender, set up a holding company yesterday, officially starting its privatization process.

The new entity -- KDB Financial Group Inc. -- will now compete with private players such as KB Financial Group, as it has handed over its role as a state policy bank to Korea Finance Corp., which was also launched yesterday.

"The (past) mission of the Korea Development Bank no longer holds as Korea has passed the stage of government-led economic development," said Kim Dong-hwan, a researcher of the Korea Institute of Finance.

Founded in 1954, the KDB has spearheaded the country`s industrialization and, more recently, the recovery from the 1997-98 Asian financial crisis.



Seeking privatization, the lender now seeks to become one of the world`s top 20 corporate & investment banks by 2020 and plans to concentrate its resources and potential on grabbing corporate and investment banking opportunities in Asia.

"Our goal is to become a corporate & investment bank that represents Korea on the global stage and ranks among the world`s top 20 financial players by 2020," Min Euoo-sung, chairman of KDB Financial Group and CEO of KDB, said in an inaugural speech yesterday.

Last week, Min said he hopes to bring forward the privatization timetable, floating shares in KDB Financial on the local bourse in 2011 and overseas the year after.

Policy banking body KoFC owns 100 percent of KDB Financial and it is obliged by law to start selling shares in the institution no later than May 2014. A timeline for full privatization is yet to be finalized.

KDB Financial is expected to aggressively push for acquisitions, as Korea`s major financial groups brace for a wave of consolidation, with the planned sales of the government`s stake in Woori Financial Group and of the Korea Exchange Bank by U.S. private equity group Lone Star.

Min said that the bank wants to secure a minimum deposit base through the acquisition of a commercial lender at home or overseas, saying it would help augment its competitiveness in the investment banking field.

KDB Financial has 1.5 trillion won ($1.3 billion) in assets and five subsidiaries - the KDB, Daewoo Securities, KDB Capital and KDB Asset Management and Korea Infrastructure Investments Asset Management.

The KDB will retain its shares in Daewoo Shipbuilding & Marine Engineering; STX Pan Ocean; Hyundai Corp. and Ssangyong Cement Industrial Co.

The Korea Finance Corp., which launched a few hours before KDB Financial yesterday, assumes the KDB`s policy function of supporting small enterprises and promising new industries. It has 28 trillion won in assets, taking more than 15 trillion won worth of equity stakes in government-controlled companies from KDB.

They include a 29.95 percent stake in the Korea Electric Power Corp., a 9.2 percent stake in the Korea Highways Corp., a 10.42 percent stake in the Korea National Housing Corp. and a 26.66 percent stake in the Korea Land Corp.

Some 1.2 trillion won worth of shares in private companies that the KDB holds after bailout programs will also be transferred to the KoFC. They include a 6.2 percent stake in Hynix Semiconductor, a 5.3 percent stake in Daewoo International, an 8.2 percent stake in SK Networks and an 11.2 percent in Hyundai Construction and Engineering.

"The KoFC will develop a new policy banking model to fit changing times. We will do more than just doling out low-interest loans, identifying new areas that require financial support and providing support to companies in the fields," Yoo Jae-han, CEO of KoFC, said in an inaugural speech yesterday.

(milaya@heraldm.com)









By Lee Sun-young