Korea eyes $1.5 bn injection in KDB to boost chip, battery sectors

South Korea may inject some 2 trillion won ($1.5 billion) into Korea Development Bank (KDB) by the end of this month to support the state-run bank's financing plans focused on the chip and secondary battery industries, according to the government on Monday.

KDB and other state-owned financial institutes such as Industrial Bank of Korea (IBK) and Korea Credit Guarantee Fund (KODIT) are planning to provide 212 trillion won this year to industries and businesses that have close relations with the country's economy. 

The 2 trillion won funding will be made via in-kind contributions with stocks of state-run companies, such as Korea Land and Housing Corp.

KDB’s financial soundness is expected to improve through the funding. The Bank for International Settlements (BIS) capital adequacy ratio for KDB is forecast to rise from 13.66% as of the end of last September to more than 14%, the minimum percentage recommended by Korean authorities for financial health.

The bank's lending capacity would also increase by 20 trillion won as it lends about 10 times its capital. 

KDB's BIS capital adequacy ratio has fallen due to loss-making Korea Electric Power Corp. (KEPCO), in which the bank owns a 32.9% stake, market insiders say. The company has posted operating losses since 2021, logging a 4.57 trillion won deficit last year.

Korea's top ocean carrier HMM Co. is also weighing on the bank's financial soundness. According to KDB, its BIS capital adequacy ratio drops 0.07 percentage points for every 11,000-won decline in HMM's stock price.

KDB and Korea Ocean Business Corp. own a combined 57.9% stake in HMM. The $5 billion deal to buy the ocean carrier fell through last month as poultry processor Harim Co. walked away after failing to narrow differences with HMM's two largest shareholders on its management.


Write to Hanjong Choi at onebell@hankyung.com


Jihyun Kim edited this article.