FSC upgrades ratings for KDB and Eximbank

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FSC upgrades ratings for KDB and Eximbank


The two state-owned financial institutions Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank) that were mired in the controversy surrounding Daewoo Shipbuilding and Marine Engineering (DSME) last year have seen their evaluation bump up.

According to the Financial Services Commission on Monday, KDB and Eximbank both saw their ratings for 2016 move up from a C grade in 2015 to a B. This is a huge improvement, particularly for KDB, whose ratings dropped two notches down from an A in 2014, largely due to its investment in DSME. Eximbank saw its grade drop from B to C during the same period.

The FSC grades institutions on six levels from A to E with A being the highest. The head of the institution receives a bonus that is 100 percent of his or her annual salary at the highest grade. The employees get 180 percent of their monthly wage.

The CEO of the second-grade B institutions gets a bonus that’s 70 percent of his or her annual salary and the employees get 150 percent of their monthly wage.

The FSC noted that the two state banks’ grades were moved up largely thanks to the improvement in DSME’s performance. Both banks are creditors of DSME and KDB is not only the main creditor but also the largest stakeholder.

The shipbuilder, which was suspended on the stock market in September last year for falsifying 5 trillion won ($4.5 billion) on its books, has been enjoying a healthy comeback.

Market experts are estimating DSME will report its best performance in the first half with operating profits around 700 to 800 billion won. In the first three months of this year DSME reported an operating profit of 223.2 billion won, which was the first turnaround in four years from red to black. That figure is expected to more than double in the second quarter largely thanks to the improving global market. Some even projected the company’s operating profit to reach 1 trillion won, which would be an all-time record.

But the FSC said the raise in the grades largely resulted from the banks’ efforts in cutting back costs, which included high ranking officials giving up on their bonuses and corporate restructuring.

Additionally KDB received high marks for its efforts in creating jobs.

The bank in the first half has given financial support to companies that contributed to creating jobs and has exceeded its initial target of 1.1 trillion won to 2.2 trillion won.

Among the state-run financial institutions, the Industrial Bank of Korea (IBK) was the only one to receive the top A grade. Not only did IBK have a BIS capital ratio but it was also recognized for its efforts in increasing financial aid to SMEs. IBK has held the highest position among the financial institutions with grade A for three consecutive years.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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