Bad debts force KDB to report losses of 1.9 trillion won

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Bad debts force KDB to report losses of 1.9 trillion won

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The state-run Korea Development Bank (KDB) reported on Friday that its 2015 earnings shrank to the largest level since the Asian financial crisis hit the nation in 1998.

KDB reported on its own website that it recorded a net loss of 1.895 trillion won ($1.648 billion) last year.

The main culprit of the sluggish performance was the massive funding that KDB gave to highly debt-ridden companies such as Daewoo Shipbuilding & Marine Engineering and Hyundai Merchant Marine, whose debts became insolvent.

This was the largest fall since 1998, when KDB faced a net loss of 4.889 trillion won as many of the bank’s borrowers went bankrupt. The bank saw a turnaround the following year, but again recorded a net loss of 1.39 trillion won due to mass restructuring of the Daewoo Group in 2000.

KDB recorded a net gain of 183.5 billion won in 2014, but again faced a massive loss.

“Our major borrowers, mostly shipbuilders and shippers, last year recorded net loss after saving cash in reserves as an allowance for bad debts, to prepare for possible cases where the borrowers can’t pay back the debt,” a KDB representative said. “We also had to carry out a debt-equity swap for our borrowers to help restructuring.”

Last year, KDB saved nearly 4.23 trillion won in bad debt reserve, nearly double the amount of 2.47 trillion won it kept in 2014.

The volume of non-performing loans, or bad debt, also doubled during the same period, from 3.78 trillion won in 2014 to 7.32 trillion won last year. The non-performing loans accounted for nearly 5.68 percent of KDB’s total lending last year, which also doubled from 2.49 percent in 2014.


BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]

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