Korea Development Bank (KDB) and Industrial Bank of Korea (IBK) have embarked on a large-scale capital increase. As the role of national policy banks has been emphasized under the government of Lee Jae-myung in fostering advanced industries and supporting small and venture companies, this move is interpreted as a proactive capital procurement effort.
According to the financial sector on the 3rd, the Industrial Bank has recently decided to conduct a capital increase of 111 billion won. Following a capital increase of 388.2 billion won at the end of May, it has moved to secure additional capital within a month. The capital increase was conducted by the Industrial Bank issuing 22.2 million new shares at 5,000 won per share, with the government, including the Ministry of Economy and Finance, underwriting the issuance.
This capital increase is interpreted as funding support for the expansion of advanced industry under the Lee Jae-myung government. The government has decided to create a 'people's fund' worth 100 trillion won to cultivate a 'Korean version of NVIDIA.' First, the government, the Industrial Bank, and public pension funds will contribute to create a mother fund of 50 trillion won. Following this, additional investments from pension funds, private finance, and individual investors will be added to form a fund of '100 trillion won + α.' Given that the Industrial Bank will play a key role in the fund, a capital increase is necessary.
This capital increase is expected to raise the International Bank for Settlements (BIS) capital ratio of the Industrial Bank. As of the end of March, the BIS ratio of the Industrial Bank was 14.04%, a decrease of 0.24 percentage points compared to the same period last year. A decrease in the BIS ratio means less ability to support corporations.
The Industrial Bank also recently held a board meeting and decided to issue subordinated bonds worth 300 billion won. The funds raised through subordinated bonds are recognized as capital. As of the end of March, the BIS ratio of the Industrial Bank was 14.74%, which is lower than the average of the four major banks (17.4%).
The government plans to provide 900 billion won in financial support for small and venture corporations, with the Industrial Bank expected to play a core role. Improving the BIS ratio through capital increase is necessary to enhance the ability to support financing. The Industrial Bank has also recently issued a dollar-denominated senior bond worth $1 billion.
A source at a national policy bank stated, 'I understand that there were no major issues raised during the policy reporting of national policy banks at the Presidential Committee on Policy Planning,' and added, 'As the role of national policy banks is growing under the Lee Jae-myung government, there was an atmosphere expecting them to fulfill this role faithfully.'