Korea Development Bank Financial Group Chairman Min Euoo-sung, fifth from left, claps at an event celebrating the launch of the holding company at its head office in Yeouido, Seoul. Also present at the Oct. 28 event were Korea Finance Corp. head Ryu Jaehan, third from left, and Financial Services Commission Chairman Chin Dong-soo, sixth from left. / Courtesy of KDB Financial Group

This is the sixth and last in a six-part series of articles on the rise and fall of economic and business empires following the global financial crisis triggered by the bankruptcy of Lehman Brothers. ― ED.

By Kim Tae-gyu
Staff Reporter

In achieving Korea's much-hailed economic growth over the past few decades, local financial outfits have taken a back seat of passively backing up the country's exporters.

However, the state-run Korea Development Bank (KDB) is set to "export finance,'' or entering overseas markets, to help Asia's fourth-largest economy chalk up new growth engines in the non-manufacturing sector.

With such grandiose goals in mind, the bank set up a holding company ― KDB Financial Group ― late last month, which has five subsidiaries with aggregate assets of around 175 trillion won.

``On the strength of the chemistry among the five affiliates, we aim to emerge as one of the world's top 20 corporate and investment banks by 2020,'' KDB Financial Group Chairman Min Euoo-sung told reporters at the launch of the group.

``To that end, we may leverage mergers and acquisitions (M&A) to sharpen our competitiveness. Plus, we will tap into global markets, after racking up successes in Asia,'' he said.

Phased Plans

KDB Financial Group has drawn up two-phase plans in accomplishing its ambitious mission of becoming one of the top 20 corporate and investment banks in the world ― the first step is to make its presence felt in Asia.

By 2012, the Seoul-based entity aims to build up a financial network in neighboring countries to become a pan-Asian player.

``We have a knack in project financing, private equity fund or corporate restructuring envied by other Asian countries,'' Min said. Project financing refers to a new way of securing funds for a particular project such as railways or toll roads.

``Based on the competitive edge, we may knock on the doors of Southeast Asian countries, which regard Korea as their role model. We see big opportunities there,'' he said.

Along the same line, Min said that the group is mulling over acquiring a Southeast Asian bank rather than taking over the Korea Exchange Bank here.

Thus far, the market consensus has been that the KDB would try to snap up the bank in Seoul. But Min made it clear that the battle field of the lender was not Korea but global markets.

After taking a root in Asian markets, the KDB hopes to wade into centers of the global financial industries such as the United States or the United Kingdom.

``Beginning 2013, we plan to make a foray into non-Asian areas such as Europe or America while establishing strongholds in New York or London,'' Min said.

``To achieve the goal, we will come up with various tactics. We may acquire financial institutions in targeted nations or will mint a strategic alliance with global investment banks,'' he said.

East Asian Rivalry

KDB Financial thinks China and Japan are currently pulling out all the stops to become the pacesetter in the Asian financial sector, and that Korea should not lag behind in the three-way competition.

``Chinese and Japanese banks have made inroads into overseas markets over the past few years. They want to emerge as an Asian leader through the economic turmoil,'' Min said.

``Should we fall behind, I am afraid that Korea could lose the initiative in Asian markets. This is a time for the country to make efforts to run ahead of the pack,'' he said.

Midway through last September when Lehman Brothers collapsed producing the unprecedented financial meltdown, Nomura Holdings moved fast to snap up the entire Asian operations of Lehman for $225 million.

The primary Japanese brokerage group also swallowed Lehman's European unit for only $2.

Earlier this year, another Japanese player Sumitomo Mitsui Financial Group bought Nikko Cordial Securities from Citigroup.

Chinese organizations have been more aggressive in initiating the buying spree of foreign outfits even before the financial tsunami swept the world.

In Oct. 2007, the Industrial and Commercial Bank of China purchased a 20-percent stake in Standard Bank, South Africa's foremost lender by assets and earnings, for $5.5 billion.

China Investment Corp., an investment arm of the Chinese government, spent $5 billion to get equity units of Morgan Stanley, which convert into as much as 9.9 percent common stock of the U.S. investment bank.

``We will not attempt to compete in the saturated domestic market. Instead, we will fix our eyes on Asian markets. Various strategies will be employed including M&A,'' Min said.

History of KDB

While the KDB endeavors to represent Korea in the Asian banking wars, there lurks the pride of its employees.

And the bank seems to deserve such an attitude as it has played a pivotal role in the development of Korea Inc. over the past 55 years since its foundation in 1954.

``The KDB has fulfilled its role as a state-owned bank by spearheading the nation's industrial economic development for over five decades. The bank has driven remarkable growth throughout the course of the industrialization of Korea,'' Min said.

``In particular, we made a significant contribution to the country's recovery in the Asian financial crisis by taking the lead in restructuring ailing companies. More recently, we have exerted our efforts into nurturing innovative small-sized companies and venture firms, assisting balanced national development, and expanding future growth engines,'' he said.

Rather than focusing on merely investment or payment guarantees, the development bank has masterminded project financing on social infrastructures, global financing, inter-Korean cooperation and corporate restructuring.

The KDB has also funneled funds into promising companies, which eventually evolved into iconic manufacturers.

In addition, the bank played a key role during the economic downturn.

In the aftermath of the Asian currency crisis, the KDB brought about $10 billion into the country, thus preventing the financial and industrial system from collapsing.

When the country's corporate bond market was jolted due to the failure of the Daewoo Group in 1999, the KDB infused fresh air into the moribund market by quickly purchasing the bonds.

When the credit card bubble burst in 2002 posing a big threat to the overall economy, the KDB stepped in to solve problems by leading in the disposal of LG Card.

However, Min reiterates that the bank will not rest on past laurels.

``To meet diversifying needs amid changes in the global financial climate, we are ready to take a major leap under the government's plan to privatize the KDB,'' Min said.

``Our ultimate goal is to transform into a global investment bank on the back of our vast experience accumulated as a corporate banking specialist. To this end, we plan to offer optimal one-stop services across various fields, including banking, securities, and capital and asset management,'' he said.

In order to catapult the KDB to become a top corporate and investment bank, the entity has streamlined its structure.

The public-financing functions of the KDB have been assumed by the Korea Finance Corp., which was spun off late last month and is held 100 percent by the Seoul administration.

After adopting the holding company system last month, the KDB will be privatized in the near future. It is planning to go public on the Seoul bourse in 2011 while floating stock on a foreign exchange the following year.

voc200@koreatimes.co.kr