Filed Pursuant to Rule 424(b)(5)
Registration No. 333-265886

 

The information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. This preliminary prospectus supplement and the accompanying prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED FEBRUARY 1, 2024   PRELIMINARY PROSPECTUS SUPPLEMENT (To Prospectus Dated July 25, 2023)

 

The Korea Development Bank

US$           % Notes due 20     

US$           % Notes due 20     

Our US$      aggregate principal amount of notes due 20      (the “20      Notes”) will bear interest at a rate of      % per annum and our US$      aggregate principal amount of notes due 20      (the “20      Notes,” and together with the 20      Notes, the “Notes”) will bear interest at a rate of      % per annum. Interest on the Notes is payable semi-annually in arrear on February       and August       of each year, beginning on August      , 2024. The 20      Notes will mature on February      , 20     , and the 20      Notes will mature on February      , 20     .

The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company, as depositary.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government (as defined herein).

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

20     Notes

20     Notes

Per Note

Total

Per Note

Total

Public offering price

%

US$

%

US$

Underwriting discount

%

US$

%

US$

Proceeds to us (before deduction of expenses)

%

US$

%

US$

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including February      , 2024.

 

Applications will be made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us or the Notes. Currently, there is no public market for the Notes. In addition, application for listing of the Notes will be made to the Euro MTF market of the Luxembourg Stock Exchange.

We expect to make delivery of the Notes to investors through the book-entry facilities of The Depositary Trust Company on or about February      , 2024.

 

 

Joint Bookrunners and Lead Managers

 

Citigroup

HSBC

ING

KB Securities

KDB Asia

MUFG

Société Générale Corporate & Investment Banking

 

 

Prospectus Supplement Dated February      , 2024

You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer to sell these securities in any state or jurisdiction where the offer or sale is not permitted.

 

 

 

TABLE OF CONTENTS

 

Prospectus Supplement

 

		Page
Summary of the Offering			S-6
Use of Proceeds			S-8
Recent Developments			S-9
Description of the Notes			S-163
Clearance and Settlement			S-165
Taxation			S-168
Underwriting			S-169
Legal Matters			S-175
Official Statements and Documents			S-175
General Information			S-175

 

Prospectus

 

		Page
CERTAIN DEFINED TERMS AND CONVENTIONS			1
USE OF PROCEEDS			2
THE KOREA DEVELOPMENT BANK			3
Overview			3
Capitalization			5
Business			6
Selected Financial Statement Data			8
Operations			15
Sources of Funds			22
Debt			23
Overseas Operations			25
Property			26
Directors and Management; Employees			26
Tables and Supplementary Information			26
Financial Statements and the Auditors			33
THE REPUBLIC OF KOREA			172
Land and History			172
Government and Politics			174
The Economy			177
Principal Sectors of the Economy			186
The Financial System			193
Monetary Policy			198
Balance of Payments and Foreign Trade			202
Government Finance			210
Debt			212
Tables and Supplementary Information			214

 

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		Page
DESCRIPTION OF THE SECURITIES			217
Description of Debt Securities			217
Description of Warrants			224
Terms Applicable to Debt Securities and Warrants			224
Description of Guarantees to be Issued by Us			225
Description of Guarantees to be Issued by The Republic of Korea			226
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS			227
TAXATION			228
Korean Taxation			228
U.S. Federal Income Tax Considerations			230
PLAN OF DISTRIBUTION			239
LEGAL MATTERS			240
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES			240
OFFICIAL STATEMENTS AND DOCUMENTS			240
EXPERTS			240
FORWARD-LOOKING STATEMENTS			241
FURTHER INFORMATION			243

 

S-2

Certain Defined Terms

 

All references to “we” or “us” mean The Korea Development Bank. All references to “Korea” or the “Republic” contained in this prospectus supplement mean The Republic of Korea. All references to the “Government” mean the government of Korea. Terms used but not defined in this prospectus supplement shall have the same meanings given to them in the accompanying prospectus.

 

Our separate financial information as of December 31, 2022, June 30, 2023 and September 30, 2023 and for the six months ended June 30, 2022 and 2023 and the nine months ended September 30, 2022 and 2023 included in this prospectus supplement has been prepared in accordance with International Financial Reporting Standards as adopted in Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus supplement to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

 

In this prospectus supplement and the accompanying prospectus, where information has been provided in units of thousands, millions or billions, such amounts have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. Any discrepancy between the stated total amount and the actual sum of the itemized amounts listed in a table is due to rounding.

 

IMPORTANT NOTICES

 

UK MiFIR product governance / Professional investors and ECPs only target market — Solely for the purposes of the manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties, as defined in the FCA Handbook Conduct of Business Sourcebook, and professional clients, each as defined in Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“UK MiFIR”); and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturer’s target market assessment; however, a distributor subject to the FCA Handbook Product Intervention and Product Governance Sourcebook (the “UK MiFIR Product Governance Rules”) is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer’s target market assessment) and determining appropriate distribution channels.

 

Additional Information

 

The information in this prospectus supplement is in addition to the information contained in our prospectus dated July 25, 2023. The accompanying prospectus contains information regarding us and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea and the Notes in registration statement no. 333-265886, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.

 

We are Responsible for the Accuracy of the Information in this Document

 

We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports

 

S-3

contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us or the Notes.

 

Not an Offer if Prohibited by Law

 

The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and should not be used to make an offer, in any state or country which prohibits the offering.

 

The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see “Underwriting—Foreign Selling Restrictions.”

 

Information Presented Accurate as of Date of Document

 

This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. We have authorized no one to provide you with different information.

 

You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.

 

IMPORTANT NOTICE TO PROSPECTIVE INVESTORS

 

Prospective investors should be aware that certain intermediaries in the context of this offering of the Notes, including certain underwriters, are “capital market intermediaries” (“CMIs”) subject to Paragraph 21 of the SFC Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission of Hong Kong (the “SFC Code”). This notice to prospective investors is a summary of certain obligations the SFC Code imposes on such CMIs, which require the attention and cooperation of prospective investors. Certain CMIs may also be acting as “overall coordinators” (“OCs”) for this offering and are subject to additional requirements under the SFC Code. Prospective investors who are the directors, employees or major shareholders of The Korea Development Bank (the “Issuer”), a CMI or its group companies would be considered under the SFC Code as having an association (“Association”) with the Issuer, the CMI or the relevant group company. Prospective investors associated with the Issuer or any CMI (including its group companies) should specifically disclose this when placing an order for the Notes and should disclose, at the same time, if such orders may negatively impact the price discovery process in relation to this offering.

 

Prospective investors who do not disclose their Associations are hereby deemed not to be so associated. Where prospective investors disclose their Associations but do not disclose that such order may negatively impact the price discovery process in relation to this offering, such order is hereby deemed not to negatively impact the price discovery process in relation to this offering. Prospective investors should ensure, and by placing an order prospective investors are deemed to confirm, that orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e., two or more corresponding or identical orders placed via two or more CMIs). If a prospective investor is an asset management arm affiliated with any underwriter, such prospective investor should indicate when placing an order if it is for a fund or portfolio where the underwriter or its group company has more than a 50% interest, in which case it will be classified as a “proprietary order” and subject to appropriate handling by CMIs in accordance with the SFC Code and should disclose, at the same time, if such “proprietary order” may negatively impact the price discovery process in relation to this offering.

 

S-4

Prospective investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. If a prospective investor is otherwise affiliated with any underwriter, such that its order may be considered to be a “proprietary order” (pursuant to the SFC Code), such prospective investor should indicate to the relevant underwriter when placing such order. Prospective investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. Where prospective investors disclose such information but do not disclose that such “proprietary order” may negatively impact the price discovery process in relation to this offering, such “proprietary order” is hereby deemed not to negatively impact the price discovery process in relation to this offering.

 

Prospective investors should be aware that certain information may be disclosed by CMIs (including private banks) which is personal and/or confidential in nature to the prospective investor. By placing an order, prospective investors are deemed to have understood and consented to the collection, disclosure, use and transfer of such information by the underwriters and/or any other third parties as may be required by the SFC Code, including to the Issuer, any OCs, relevant regulators and/or any other third parties as may be required by the SFC Code, it being understood and agreed that such information shall only be used for the purpose of complying with the SFC Code, during the bookbuilding process for this offering. Failure to provide such information may result in that order being rejected.

 

S-5

 

S-6

 

S-7

USE OF PROCEEDS

 

The net proceeds from the issue of the Notes, after deducting the underwriting discount but not estimated expenses, will be US$     . We will use the net proceeds from the sale of the Notes for our general operations, including extension of foreign currency loans and repayment of our maturing debt and other obligations.

 

S-8

RECENT DEVELOPMENTS

 

This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated July 25, 2023. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.

 

THE KOREA DEVELOPMENT BANK

 

Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS (“K-IFRS”).

 

Overview

 

As of June 30, 2023, we had W192,241.0 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets of W319,300.0 billion and total equity of W38,944.4 billion, as compared to W202,032.2 billion of loans outstanding, W312,845.3 billion of total assets and W35,668.4 billion of total equity as of December 31, 2022. For the six months ended June 30, 2023, we recorded interest income of W5,573.4 billion, interest expense of W4,699.2 billion and net income of W2,814.6 billion, as compared to W2,558.1 billion of interest income, W1,659.3 billion of interest expense and W469.5 billion of net income for the six months ended June 30, 2022. See “—Selected Financial Statement Data.”

 

Capitalization

 

As of September 30, 2023, our authorized capital was W30,000 billion and our capitalization was as follows:

 

		September 30, 2023(1)
		(billions of Won)
		(unaudited)
Long-term debt(2)(3)(4):
Won currency borrowings			4,432.2
Industrial finance bonds			150,816.3
Foreign currency borrowings			4,449.6
Total long-term debt			159,698.1
Capital:
Paid-in capital			23,706.6
Capital surplus			2,469.8
Retained earnings(5)			10,028.3
Accumulated other comprehensive income			2,426.5
Total capital			38,631.1
Total capitalization			198,329.2

 

(1)	Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since September 30, 2023.

(2)	Defined as debt that has a maturity at issuance of one year or more.

 

S-9

(3)	We have translated borrowings in foreign currencies into Won at the rate of W1,344.80 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on September 27, 2023.

(4)

As of September 30, 2023, we had confirmed acceptances and guarantees totaling W11,093.2 billion under outstanding guarantees issued on behalf of our clients. See Note 39 of the notes to our unaudited separate financial statements as of September 30, 2023 and for the nine months ended September 30, 2023 and 2022 included in this prospectus supplement.

(5)

Includes planned regulatory reserve for credit losses of W212.0 billion as of September 30, 2023. If our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is shown as a separate item included in retained earnings.

 

Business

 

Government Support and Supervision

 

As of September 30, 2023, our paid-in capital was W23,706.6 billion compared to W23,151.6 billion as of December 31, 2022. In October 2023, the Government contributed W220 billion in cash to our capital.

 

Selected Financial Statement Data

 

Separate Financial Statement Data

 

Recent Developments

 

As of September 30, 2023, we had W198,318.0 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets of W316,110.9 billion and total equity of W38,631.1 billion, as compared to W202,032.2 billion of loans outstanding, W312,845.3 billion of total assets and W35,668.4 billion of total equity as of December 31, 2022. For the nine months ended September 30, 2023, we recorded interest income of W8,453.2 billion, interest expense of W7,222.9 billion and net income of W2,923.5 billion, as compared to W4,380.7 billion of interest income, W3,058.2 billion of interest expense and W354.1 billion of net loss for the nine months ended September 30, 2022.

 

The following tables present our selected separate financial information for the nine months ended September 30, 2022 and 2023 and as of December 31, 2022 and September 30, 2023, which has been derived from our unaudited separate financial statements as of December 31, 2022 and September 30, 2023 and for the nine months ended September 30, 2023 and 2022 prepared in accordance with K-IFRS.

 

S-10

Separate K-IFRS Financial Statement Data

 

		Nine Months Ended September 30,
		2022				2023
		(billions of Won) (unaudited)
Income Statement Data
Total Interest Income			4,380.7				8,453.2
Total Interest Expenses			3,058.2				7,222.9
Net Interest Income			1,322.5				1,230.3
Operating Income			885.5				2,790.6
Income (Loss) before Income Tax			(383.6	)			3,567.9
Income Tax Expense (Benefit)			(29.5	)			644.4
Net Income (Loss)			(354.1	)			2,923.5

 

		As of December 31, 2022				As of September 30, 2023
		(billions of Won) (unaudited)
Statements of Financial Position Data
Total Loans(1)			202,032.2				198,318.0
Total Borrowings(2)			253,937.5				246,618.8
Total Assets			312,845.3				316,110.9
Total Liabilities			277,176.9				277,479.8
Equity			35,668.4				38,631.1

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

(2)	Total borrowings include financial liabilities designated at fair value through profit or loss, deposits, borrowings and debentures.

 

Nine Months Ended September 30, 2023

 

For the nine months ended September 30, 2023, we had net income of W2,923.5 billion compared to net loss of W354.1 billion in the corresponding period of 2022, on a separate K-IFRS basis, principally due to the following factors:

 

•

a reversal of impairment loss on investments in subsidiaries and associates of W783.3 billion in the nine months ended September 30, 2023 compared to impairment loss on such investments of W1,267.9 billion in the corresponding period of 2022, primarily due to an increase in the recoverable amount of our investment in Hanwha Ocean Co., Ltd. (formerly, DSME), resulting from an increase in the fair value of such investment following its acquisition by the Hanwha Group; and

 

•

a reversal of provisions for loan loss allowance of W621.0 billion in the nine months ended September 30, 2023 compared to provisions for loan loss allowance of W637.4 billion in the corresponding period of 2022, primarily due to a decrease in our expected credit losses resulting from a general improvement in the credit ratings of companies in the Korean shipbuilding sector, including Hanwha Ocean Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding) and Daehan Shipbuilding Co., Ltd., to which we have provided loans.

 

S-11

The above factors were partially offset by income tax expense of W644.4 billion in the nine months ended September 30, 2023 compared to income tax benefit of W29.5 billion in the corresponding period of 2022, primarily due to W3,567.9 billion of profit before income taxes in the nine months ended September 30, 2023 compared to W383.6 billion of loss before income taxes in the corresponding period of 2022.

 

Loans to Financially Troubled Companies

 

We have credit exposure to a number of financially troubled Korean companies, including Hanwha Ocean Co., Ltd., HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. and GM Korea Company. As of September 30, 2023, our credit extended to these companies totaled W19,199.6 billion, accounting for 6.1% of our total assets as of such date.

 

The following table shows the changes in credit exposure (including loans classified as substandard or below, guarantees and equity investments classified as estimated loss or below) extended to these companies as of the dates indicated:

 

Company		As of December 31, 2022				As of September 30, 2023				Primary Reason for Change
		(billions of Won)
Hanwha Ocean		W	7,954.9			W	9,639.6			Increase due to a decrease in the value of the Won against the U.S. dollar, in which a significant portion of our exposure is denominated, as well as an increase in the value of stocks
HMM Company Limited			7,265.7				6,382.4			Decrease due to a decrease in the value of perpetual bonds and recognition of impairment losses
HJ Shipbuilding & Construction			996.5				1,218.3			Increase due to the approval of new refund guarantees
Daehan Shipbuilding			859.9				928.4			Increase due to an increase in refund guarantees
K Shipbuilding			659.4				640.9			Decrease due to a decrease in refund guarantees
GM Korea Company			376.5				390.0			Increase due to a reversal of impairment loss resulting from an increase in the value of stocks
Total		W	18,112.9			W	19,199.6

 

As of September 30, 2023, we established allowances of W591.2 billion for our exposure to Hanwha Ocean, W0.7 billion for HMM Company Limited, W88.8 billion for HJ Shipbuilding & Construction, W99.6 billion for Daehan Shipbuilding, W34.0 billion for K Shipbuilding and none for GM Korea Company.

 

In July 2023, we and Korea Ocean Business Corporation jointly announced a combined sale of an aggregate of approximately 38.9% of the equity interest of HMM Company Limited through a competitive bidding process, and in December 2023, selected a consortium led by Harim Group as the preferred bidder, with plans to finalize the details of the takeover during the first half of 2024. As of the date of this prospectus supplement, our equity stake in HMM Company Limited amounted to 29.2%.

 

In January 2024, Taeyoung Engineering & Construction Co., or Taeyoung E&C, commenced workout procedures, pursuant to which its creditors, including us, agreed to temporarily defer all of its debt payment obligations until April 2024. During this time, an external consultant would evaluate Taeyoung E&C’s ability to maintain its business and repay its loans. As of December 31, 2023, our outstanding direct exposure to Taeyoung E&C amounted to approximately W158 billion.

 

S-12

In the first nine months of 2023, we sold non-performing loans worth W271.7 billion to Kiwoom F&I Co., Ltd.

 

Results of Operations

 

The following tables present our selected separate financial information as of December 31, 2022 and June 30, 2023 and for the six months ended June 30, 2023 and 2022, which has been derived from our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 prepared in accordance with K-IFRS and included in this prospectus supplement.

 

Separate K-IFRS Financial Statement Data

 

		Six Months Ended June 30,
		2022				2023
		(billions of Won) (unaudited)
Income Statement Data
Total Interest Income			2,558.1				5,573.4
Total Interest Expenses			1,659.3				4,699.2
Net Interest Income			898.9				874.2
Operating Income			522.8				2,387.0
Income before Income Tax			566.9				3,425.4
Income Tax Expense (Benefit)			97.5				610.8
Net Income			469.5				2,814.6

 

		As of December 31, 2022				As of June 30, 2023
		(billions of Won) (unaudited)
Statements of Financial Position Data
Total Loans(1)			202,032.2				192,241.0
Total Borrowings(2)			253,937.5				245,319.3
Total Assets			312,845.3				319,300.0
Total Liabilities			277,176.9				280,355.6
Equity			35,668.4				38,944.4

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan origination costs and fees. See Note 9 of the notes to our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 included in this prospectus supplement.

(2)	Total borrowings include financial liabilities designated at fair value through profit or loss, deposits, borrowings and debt issued.

 

Six Months Ended June 30, 2023

 

In the first half of 2023, we had net income of W2,814.6 billion compared to net income of W469.5 billion in the corresponding period of 2022, on a separate basis. The principal factors for the increase in net income included:

 

•

a significant increase in reversal of impairment loss on investments in subsidiaries and associates to W1,044.9 billion in the first half of 2023 from W45.1 billion in the corresponding period of 2022,

 

S-13

primarily due to an increase in the recoverable amount of our investment in Hanwha Ocean Co., Ltd. (formerly, DSME), resulting from an increase in the fair value of such investment following its acquisition by the Hanwha Group;

 

•

a reversal of provisions for payment guarantees of W389.2 billion in the first half of 2023 compared to provisions for payment guarantees of W493.6 billion in the corresponding period of 2022, primarily due to increases in the credit ratings of Korean shipbuilding companies for which we guarantee payment, including Hanwha Ocean, K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding) and Daehan Shipbuilding Co., Ltd.;

 

•

a reversal of provisions for loan loss allowance of W636.7 billion in the first half of 2023 compared to provisions for loan loss allowance of W153.3 billion in the corresponding period of 2022, primarily due to a decrease in our expected credit losses resulting from an improvement in the overall asset quality of our loan portfolio, which was mainly due to the increases in the credit ratings of Korean shipbuilding companies as described above, to which we have provided loans; and

 

•

a decrease in net loss on derivatives to W129.9 billion in the first half of 2023 from W600.2 billion in the corresponding period of 2022, primarily due to a decrease in net loss on fair value hedged items resulting from fluctuations in interest rates, foreign exchange rates and the prices of stocks and derivatives.

 

The above factors were partially offset by an increase in income tax expense to W610.8 billion in the first half of 2023 from W97.5 billion in the corresponding period of 2022, primarily due to the increase in our profit before income taxes, as well as a net loss on financial liabilities measured at fair value through profit or loss of W5.9 billion in the first half of 2023 compared to a net gain of W374.4 billion in the corresponding period of 2022, primarily due to a significant decrease in our gain on the valuation of such financial liabilities.

 

Allowances for Loan Losses and Loans in Arrears

 

As of June 30, 2023, we had established allowances of W3,063.3 billion for loan losses under Korean IFRS.

 

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2023, we have provided loans of W384.8 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of June 30, 2023, we had established allowances of W246.8 billion for loan losses with respect to such companies. We cannot assure you that actual credit losses from the loans to these customers will not exceed the allowances established.

 

The following table provides information on our loan loss allowances.

 

				As of June 30, 2023(1)
				Loan   Amount				Loan Loss   Allowances
				(in billions of Won, except percentages)
Loan Classification		Normal(2)		W	190,755.6			W	2,245.0
		Precautionary			415.9				114.0
		Substandard			551.7				239.2
		Doubtful			80.6				76.7
		Expected Loss			437.2				388.4
		Total		W	192,241.0			W	3,063.3

 

(1)	These figures include loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

 

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(2)	Includes loans guaranteed by the Government. Under Korean IFRS, we establish loan loss allowances for all loans including loans guaranteed by the Government.

 

As of June 30, 2023, our non-performing loans totaled W1,069.6 billion, representing 0.6% of our outstanding loans as of such date. Non-performing loans are defined as loans that are classified as substandard or below. On June 30, 2023, our legal reserve was W2,721.9 billion, representing 1.4% of our outstanding loans as of such date.

 

Loans to Financially Troubled Companies

 

We have credit exposure to a number of financially troubled Korean companies, including Hanwha Ocean Co., Ltd., HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. and GM Korea Company. As of June 30, 2023, our credit extended to these companies totaled W19,905.5 billion, accounting for 6.2% of our total assets as of such date.

 

The following table shows the changes in credit exposure (including loans classified as substandard or below, guarantees and equity investments classified as estimated loss or below) extended to these companies as of the dates indicated:

 

Company		As of December 31, 2022				As of June 30, 2023				Primary Reason for Change
		(billions of Won)
Hanwha Ocean		W	7,954.9			W	9,781.2			Increase due to a decrease in the value of the Won against the U.S. dollar, as well as a reversal of impairment loss resulting from an increase in the value of the shares of Hanwha Ocean
HMM Company Limited			7,265.7				7,254.3			Decrease due to a decrease in the value of perpetual bonds and a recognition of impairment loss resulting from a decrease in the value of the shares of HMM Company Limited
HJ Shipbuilding & Construction			996.5				912.7			Decrease due to a decrease in refund guarantees resulting from the delivery of ships
Daehan Shipbuilding			859.9				862.0			Increase due to an increase in refund guarantees and a decrease in the value of the Won against the U.S. dollar
K Shipbuilding			659.4				705.3			Increase due to an increase in refund guarantees and a decrease in the value of the Won against the U.S. dollar
GM Korea Company			376.5				390.0			Increase due to a reversal of impairment loss resulting from an increase in the value of shares of GM Korea Company
Total		W	18,112.9			W	19,905.5

 

As of June 30, 2023, we established allowances of W683.5 billion for our exposure to Hanwha Ocean, W0.9 billion for HMM Company Limited, W45.9 billion for HJ Shipbuilding & Construction, W96.7 billion for Daehan Shipbuilding, W36.0 billion for K Shipbuilding and none for GM Korea Company.

 

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During 2015, DSME (now Hanwha Ocean Co., Ltd.), one of the largest shipbuilding and offshore construction companies in Korea, suffered from financial difficulties primarily due to significant losses incurred in connection with the construction of offshore plants resulting from a prolonged slowdown in the global shipbuilding industry. In October 2015, we announced that we, along with The Export-Import Bank of Korea, would extend additional financing of up to W4.2 trillion to DSME by the end of 2016 in the form of debt-to-equity swaps, extension of additional loans and provision of other forms of liquidity support. In this connection, in December 2015, we acquired W382.9 billion of new equity shares of DSME, which increased our equity interest in DSME from 31.5% to 49.7%, and we became its largest shareholder. In December 2016, we increased our equity interest in DSME to 79.0% through an additional debt for equity swap. In March 2017, we and The Export-Import Bank of Korea announced a second joint plan to provide an additional W2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we provided additional debt-to-equity swaps of W0.3 trillion in June 2017 and The Export-Import Bank of Korea exchanged a term loan in the amount of W1.28 trillion provided by it to DSME for perpetual bonds issued by DSME. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. Subsequently, in March 2019, Hyundai Heavy Industries entered into a definitive agreement with us to acquire DSME. However, in January 2022, the European Commission announced that it would not grant approval for such acquisition due to anti-competition concerns for LNG carriers. In December 2022, Hanwha Group entered into a definitive agreement with us to acquire a 49.3% equity stake in DSME for approximately W2 trillion, which has since received regulatory approval from all relevant jurisdictions. The acquisition closed in May 2023, upon which DSME was renamed to Hanwha Ocean Co., Ltd. As of June 30, 2023, our equity stake in Hanwha Ocean amounted to 27.6%.

 

In July 2016, HMM Company Limited executed a debt-to-equity swap with us and other creditors, as part of its continued restructuring led by us as its largest creditor, and affiliates of the Hyundai group reduced their shareholdings in HMM Company Limited, which resulted in us becoming the largest shareholder of HMM Company Limited. In October 2018, we injected W1 trillion in emergency aid into HMM Company Limited in order to normalize its operations by purchasing bonds with warrants and convertible bonds issued by HMM Company Limited. We also concurrently entered into an agreement to jointly manage HMM Company Limited together with Korea Ocean Business Corporation until December 2020, which was subsequently extended to January 2022. In June 2021, we exercised our right to convert W300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. Following an improvement in the financial performance of HMM Company Limited, we ended our joint management of HMM Company Limited in January 2022, upon which Korea Ocean Business Corporation became its sole manager. We and Korea Ocean Business Corporation are each pursuing the sale of our respective equity shares in HMM Company Limited. In July 2023, we and Korea Ocean Business Corporation jointly announced a combined sale of an aggregate of approximately 38.9% of the equity interest of HMM Company Limited through a competitive bidding process, and we and Korea Ocean Business Corporation are currently evaluating eligible buyer candidates. As of June 30, 2023, our equity stake in HMM Company Limited amounted to 20.7%.

 

In January 2019, HJ Shipbuilding & Construction Philippines, a subsidiary of HJ Shipbuilding & Construction at Subic Bay in the Philippines, declared bankruptcy and filed for corporate rehabilitation with a regional trial court following its failure to comply with loan obligations to its Philippine lenders. In March 2019, creditors in Korea (including us) and lenders in the Philippines agreed on, and executed, a business normalization plan including a debt-to-equity swap and capital reduction for HJ Shipbuilding & Construction, as a result of which we became the largest shareholder of HJ Shipbuilding & Construction. In September 2021, creditors of HJ Shipbuilding & Construction (including us) sold a 66.85% interest in the company to a consortium led by Dongbu Corporation.

 

K Shipbuilding has faced financial difficulties for the past several years due to prolonged slowdowns in the Korean shipbuilding and shipping industries. K Shipbuilding, which had filed for court receivership in May 2016 and executed debt-to-equity swaps with their creditors (including us) in December 2016 under a rehabilitation plan through which we increased our equity interest to 43.9% and became its largest shareholder, exited court

 

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receivership in July 2017. In November 2020, we selected a consortium consisting of KH Investment and UAMCO., Ltd. as the preferred bidder for the sale of shares of K Shipbuilding. In July 2021, the consortium acquired a 97% interest in K Shipbuilding for W250 billion. In December 2021, we terminated our creditor management of K Shipbuilding, and in December 2022, sold all of our equity stake in K Shipbuilding.

 

In the first half of 2023, we sold non-performing loans worth W271.7 billion to Kiwoom F&I Co., Ltd.

 

Our large exposure to financially troubled companies in Korea means that we are also exposed to financial difficulties experienced by our borrowers as a result of, among other things, adverse economic conditions in Korea and globally, which could disrupt the business, activities and operations of many of our borrowers, which in turn could have an adverse impact on the ability of our borrowers to meet existing payment or other obligations to us. For example, COVID-19, an infectious disease that was first reported to have been transmitted to humans in late 2019 and was declared a “pandemic” by the World Health Organization in March 2020, has since spread globally and has led to significant global and domestic economic and financial disruptions. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” The COVID-19 pandemic has had an especially direct negative impact on certain of our borrowers, among them the airline industry, which required significant liquidity following a sharp decline in aircraft traffic and a dramatic increase in the number of suspended flights due to entry restrictions imposed by many countries in response to COVID-19 during the course of the pandemic.

 

In April 2020, we provided Asiana Airlines, a subsidiary of Kumho Asiana Group and the second-largest airline in Korea, with liquidity support in the aggregate amount of approximately W1.2 trillion, in the form of the provision of a credit line and an investment in its perpetual convertible bonds. Our decision to take such measure was largely driven by a need to address Asiana Airlines’ financial difficulties resulting from the negative impact of the COVID-19 pandemic on the airline industry, although we had previously provided Asiana Airlines with liquidity support in similar amount and form in 2019 as well with the aim of enhancing its financial condition. In the fourth quarter of 2020, as the administrator of the Key Industry Stabilization Fund (explained further below), we injected W0.3 trillion from such fund into Asiana Airlines in order to normalize its operations following the cancellation of plans by a consortium led by HDC Hyundai Development to acquire Asiana Airlines. In November 2020, we signed an investment agreement with Hanjin KAL, the parent company of Korean Air Lines, to inject W800 billion (consisting of W500 billion through participation in a rights offering and W300 billion through purchase of exchangeable bonds) into Hanjin KAL in connection with Korean Air Lines’ contemplated acquisition of a 63.9% stake in Asiana Airlines through a transaction valued at W1.8 trillion (the “Acquisition”), subsequent to which we expect our equity interest in Hanjin KAL to amount to approximately 10.6%. In December 2020, Asiana Airlines’ shareholders approved a 3-to-1 share capital reduction plan, which was aimed at offsetting part of Asiana Airlines’ deficits and improving its capital structure. However, the consummation of the Acquisition currently remains subject to a number of factors, including uncertainties regarding approval of the Acquisition from antitrust authorities of a number of jurisdictions, which have yet to be obtained. If the Acquisition is completed, Asiana Airlines would become Korean Air Lines’ consolidated subsidiary.

 

In addition, the COVID-19 pandemic has prompted the Government in recent years to implement various emergency aid initiatives involving Korean banks, including us, to provide liquidity assistance to a range of financially troubled companies. Such initiatives include, among others, the provision of new loans to financially troubled companies, extension of maturity dates for existing loans and suspension of interest payment obligations for an extended period of time. In May 2020, the Government provided for the establishment of the Key Industry Stabilization Fund, a fund that amounted to W40 trillion to be administered by us mainly through the issuance of industrial finance bonds, to support businesses in certain key industries that face financial difficulties resulting from the COVID-19 pandemic, such as the air transport and maritime industries. The Key Industry Stabilization Fund has supported those businesses that meet certain pre-determined criteria, including those aimed at stabilizing the job markets. Our participation in such Government-led initiatives may lead us to extend credit to financially troubled borrowers that we would not otherwise extend, or offer terms for such credit that we would not otherwise offer, in the absence of such initiatives. Furthermore, there is no guarantee that the financial

 

S-17

condition and liquidity position of our financially troubled borrowers benefiting from such initiatives will improve sufficiently for them to service their debt on a timely basis, or at all. Accordingly, increases in our exposure to financially troubled borrowers resulting from such Government-led initiatives may have a material adverse effect on our financial condition and results of operations.

 

A deterioration in the financial condition of our borrowers, including those under workout, court receivership, court mediation or other restructuring procedures, could result in a deterioration in the quality of our loan portfolio. This, in turn, could result in an increase in delinquency ratios, increased charge-offs and higher provisioning, as well as an increase in impairment losses on such loans, which could have a material adverse impact on our business, financial condition or results of operations.

 

Operations

 

Loan Operations

 

The following table sets out, by currency and category of loan, our total outstanding loans as of June 30, 2023:

 

Loans⁽¹⁾

 

		June 30, 2023
		(billions of Won)
Equipment Capital Loans:
Domestic currency		W	57,757.7
Foreign currency			11,953.0
			69,710.7
Working Capital Loans:
Domestic currency(2)			67,592.3
Foreign currency			16,436.9
			84,029.2
Other Loans(3)			38,501.1
Total loans		W	192,241.0

 

(1)	Includes loans extended to affiliates.

(2)	Includes loans on households.

(3)	Includes inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

 

As of June 30, 2023, we had W192,241.0 billion in outstanding loans, which represents a 4.8% decrease from W202,032.2 billion of outstanding loans as of December 31, 2022.

 

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Maturities of Outstanding Loans

 

The following table categorizes our outstanding equipment capital and working capital loans by their remaining maturities:

 

Outstanding Equipment Capital and Working Capital Loans by Remaining Maturities⁽¹⁾

 

		June 30, 2023				As % of June 30, 2023 Total
		(billions of Won, except percentages)
Loans with remaining maturities of one year or less		W	62,074.9				40.4	%
Loans with remaining maturities of more than one year			91,665.0				59.6
Total		W	153,739.9				100.0	%

 

(1)	Includes loans extended to affiliates.

 

Loans by Industrial Sector

 

The following table sets out the total amount of our outstanding equipment capital and working capital loans, categorized by industry sector as of June 30, 2023:

 

Outstanding Equipment Capital and Working Capital Loans by Industry Sector⁽¹⁾

 

		June 30, 2023				As % of June 30, 2023 Total
		(billions of Won, except percentages)
Manufacturing		W	71,125.7				46.3	%
Finance and Insurance			34,763.9				22.6
Transportation			10,702.7				7.0
Electric, Gas and Water Supply Industry			5,642.4				3.7
Public Administration			490.4				0.3
Others(2)			31,014.8				20.2
Total		W	153,739.9				100.0	%
Percentage increase (decrease) from December 31, 2022			(2.5	)%

 

(1)	Includes loans extended to affiliates.

(2)	Includes wholesale and retail trade, real estate and leasing, and construction.

 

Industrial Bank of Korea was our single largest borrower as of June 30, 2023, accounting for 4.0% of our outstanding equipment capital and working capital loans. As of June 30, 2023, our five largest borrowers and 20 largest borrowers accounted for 9.8% and 20.3%, respectively, of our outstanding equipment capital and working capital loans.

 

S-19

The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2023 by industry sector:

 

20 Largest Borrowers by Industry Sector

 

		As % of June 30, 2023 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Finance and Insurance			48.7	%
Manufacturing			31.1
Transportation			12.4
Others(1)			7.8
Total			100.0

 

(1)	Includes wholesale and retail trade, real estate and leasing, and construction.

 

Loans by Categories

 

The following table sets out equipment capital and working capital loans by categories as of June 30, 2023:

 

		Equipment Capital Loans								Working Capital Loans
		June 30, 2023				%				June 30, 2023				%
		(billions of Won, except percentages)
Industrial fund loans		W	51,947.4				74.5	%		W	53,495.0				63.7	%
On-lending loans			2,586.9				3.7				13,226.6				15.7
Foreign currency loans			8,065.4				11.6				1,714.4				2.0
Local currency loans denominated in foreign currencies			0.8				0.0				20.7				0.0
Offshore loans in foreign currencies			3,658.5				5.2				12,063.7				14.4
Government fund loans			84.3				0.1				0.0				0.0
Overdraft			0.0				0.0				115.3				0.1
Others(1)			3,367.4				4.8				3,393.5				4.0
Total		W	69,710.7				100.0	%		W	84,029.2				100.0	%

 

(1)	Includes loans on households and loans extended to affiliates.

 

Guarantee Operations

 

The following table shows our outstanding guarantees as of June 30, 2023:

 

		June 30, 2023
		(billions of Won)
Acceptances		W	291.8
Guarantees on local borrowings			792.3
Guarantees on foreign borrowings			9,043.5
Letters of guarantee for importers			27.9
Total		W	10,155.5

 

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Investments

 

Our equity investments increased to W43,682.0 billion as of June 30, 2023 from W41,768.4 billion as of December 31, 2022. As of June 30, 2023, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaled W20,173.8 billion, equal to 37.9% of our equity investment ceiling.

 

The following table sets out our equity investments by industry sector on a book value basis as of June 30, 2023:

 

Equity Investments

 

		Book Value as of June 30, 2023
		(billions of Won)
Electric, Gas and Water Supply Industry		W	16,998.1
Finance and Insurance			11,741.4
Transportation			2,795.8
Real Estate Business			9.2
Construction			964.3
Manufacturing			3,254.1
Others			7,919.1
Total		W	43,682.0

 

As of June 30, 2023, we held total equity investments, on a book value basis, of W593.6 billion in one of our five largest borrowers and W924.0 billion in two of our 20 largest borrowers.

 

When possible, we use the prevailing market price of a security to determine the value of our interest. However, if no readily ascertainable market value exists for our holdings, we record these investments at the cost of acquisition. With respect to our equity interests in enterprises in which we hold more than 15% of interest, we value these investments annually, with certain exceptions, on a net asset value basis when the investee company releases its financial statements. As of June 30, 2023, the aggregate value of our equity investments accounted for approximately 96.0% of their aggregate cost basis.

 

Other Activities

 

As of June 30, 2023, we held in trust cash and other assets totaling W29,083.4 billion, and we generated in the first half of 2023 trust fee income equaling W214.1 billion.

 

Source of Funds

 

Borrowings from the Government

 

The following table sets out our Government borrowings as of June 30, 2023:

 

Type of Funds Borrowed		As of June 30, 2023
		(billions of Won)
General purpose		W	85.6
Special purpose			4,780.7
Total		W	4,866.3

 

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Domestic and International Capital Markets

 

The following table sets out the outstanding balance of our industrial finance bonds as of June 30, 2023:

 

Outstanding Balance		As of June 30, 2023
		(billions of Won)
Denominated in Won		W	111,013.6
Denominated in other currencies			42,408.5
Total		W	153,422.1

 

As of June 30, 2023, the aggregate amount of our industrial finance bonds and guarantee obligations (including guarantee obligations relating to loans that had not been borrowed as of June 30, 2023) was W171,155.1 billion, equal to 21.4% of our authorized amount under the KDB Act, which was W799,213.2 billion.

 

Foreign Currency Borrowings

 

As of June 30, 2023, the outstanding amount of our foreign currency borrowings was US$15.6 billion. Our long-term and short-term foreign currency borrowings decreased to W20,539.3 billion as of June 30, 2023 from W20,820.6 billion as of December 31, 2022.

 

Deposits

 

As of June 30, 2023, demand deposits held by us totaled W1,941.3 billion and time and savings deposits held by us totaled W57,794.4 billion.

 

Debt

 

Debt Repayment Schedule

 

The following table sets out our principal repayment schedule as of June 30, 2023:

 

Debt Principal Repayment Schedule⁽¹⁾

 

		Maturing on or before December 31,
Currency(2)(3)		2023				2024				2025				2026				Thereafter
		(billions of Won)
Won		W	31,233.8			W	34,356.7			W	20,094.7			W	9,728.9			W	20,630.6
Foreign			20,797.9				12,942.4				10,354.0				7,190.7				11,662.8
Total Won Equivalent		W	52,031.7			W	47,299.1			W	30,448.7			W	16,919.6			W	32,293.4

 

(1)	Excludes bonds sold under repurchase agreements and call money.

(2)	Borrowings in foreign currencies have been translated into Won at the market average exchange rates on June 30, 2023, as announced by the Seoul Money Brokerage Services Ltd.

(3)	We categorize debt with respect to which we have entered into currency swap agreements by our repayment currency under such agreements.

 

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Directors and Management; Employees

 

Currently, the members of our Board of Directors are:

 

Position		Name		Expiration of Term
Chief Executive Officer and Chairman of the Board of Directors		Seog Hoon Kang		June 6, 2025
Chief Operating Officer and Vice Chairman of the Board of Directors		Bock Kyu Kim		March 22, 2026
Auditor		Tae Hyun Joo		March 14, 2024
Independent Non-executive Directors		Seog Hwan Lee		September 27, 2024
		Sam Mo Kang		September 27, 2024
		Yong Hi Lee		April 2, 2025
		Hee Rak Kim		January 28, 2026
		Sun Key You		January 28, 2026

 

Financial Statements and the Auditors

 

Our interim separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 appearing in this prospectus supplement were prepared in conformity with K-IFRS, as summarized in Note 2 of the notes to our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 included in this prospectus supplement.

 

S-23

Korea Development Bank

 

Interim Separate Statements of Financial Position

 

June 30, 2023 (Unaudited) and December 31, 2022

 

(In millions of won)		Notes				June 30, 2023				December 31, 2022
Assets
Cash and due from banks			4,44,45,48			W	15,363,170				11,538,806
Securities measured at FVTPL			5,44,45,48				14,381,210				11,951,906
Securities measured at FVOCI			6,38,44,45,48				36,651,891				37,684,919
Securities measured at amortized cost			7,38,44,45,48				6,708,107				6,355,884
Loans measured at FVTPL			8,44,45,48				508,887				541,811
Loans measured at amortized cost			9,44,45,48				189,190,243				198,045,603
Derivative financial assets			10,44,45,46,48				9,087,246				9,794,455
Investments in subsidiaries and associates			11,47				29,113,844				27,992,331
Property and equipment, net			12,47				813,585				812,173
Investment property, net			13,47				75,988				81,713
Intangible assets, net			14,47				99,149				118,489
Defined benefit assets			20				76,336				87,770
Current tax assets							5,579				128,218
Other assets			15,43,45,48				17,224,760				7,711,217
Total assets						W	319,299,995				312,845,295
Liabilities
Financial liabilities measured at FVTPL			16,44,45,48			W	1,607,710				1,469,724
Deposits			17,44,45,48				67,374,517				68,326,656
Borrowings			18,44,45,48				26,111,536				25,429,244
Debentures			19,44,45,48				150,225,557				158,711,896
Derivative financial liabilities			10,44,45,46,48				10,433,290				11,317,002
Provisions			21				1,065,465				1,448,030
Deferred tax liabilities			36				3,993,463				3,465,176
Current tax liabilities							39,762				15,513
Other liabilities			22,44,45,48				19,504,301				6,993,681
Total liabilities							280,355,601				277,176,922
Equity
Issued capital			1,23				23,706,559				23,151,559
Capital surplus			23				2,469,775				2,475,310
Accumulated other comprehensive income			23				2,877,526				2,819,333
Retained earnings			23				9,890,534				7,222,171
(Regulatory reserve for credit losses of W211,996 million as of June 30, 2023 and W247,253 million as of December 31, 2022, respectively)
(Required provision for (reversal of) regulatory reserve for credit losses of W55,548 million as of June 30, 2023 and W(35,257) million as of December 31, 2022, respectively)
(Planned provision for (reversal of) regulatory reserve for credit losses of W55,548 million as of June 30, 2023 and W(35,257) million as of December 31, 2022, respectively)
Total equity							38,944,394				35,668,373
Total liabilities and equity						W	319,299,995				312,845,295

 

See accompanying notes to the interim separate financial statements.

 

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Korea Development Bank

 

Interim Separate Statements of Comprehensive Income

 

Six-month periods ended June 30, 2023 and 2022 (Unaudited)

 

						June 30, 2023								June 30, 2022
(In millions of won, except earnings per share information)		Notes				Three-month period ended				Six-month period ended				Three-month period ended				Six-month period ended
Interest income			24			W	2,811,567				5,573,406				1,400,953				2,558,130
Interest expense			24				(2,388,272	)			(4,699,190	)			(927,963	)			(1,659,255	)
Net interest income			47				423,295				874,216				472,990				898,875
Net fees and commission income			25				105,700				187,233				99,242				205,430
Dividend income			26				105,742				461,842				69,726				503,140
Net gain (loss) on securities measured at FVTPL			27				(2,942	)			162,462				(54,156	)			(86,701	)
Net gain (loss) on financial liabilities measured at FVTPL			28				86,520				(5,851	)			200,315				374,412
Net loss on securities measured at FVOCI			29				(3,915	)			(1,954	)			(3,592	)			(28,106	)
Net gain (loss) on derivatives			30				119,947				(129,930	)			(454,498	)			(600,209	)
Net gain on foreign currency transaction			31				4,464				356,892				210,748				270,570
Other operating income (expense), net			32				(103,840	)			(186,115	)			(146,948	)			(153,296	)
Non-interest income (expense), net							311,676				844,579				(79,163	)			485,240
Provision for (reversal of) credit losses			33				(890,339	)			(1,046,860	)			412,868				434,146
General and administrative expenses			34,47				179,024				378,619				177,340				427,141
Operating income (expense)			47				1,446,286				2,387,036				(196,381	)			522,828
Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates							633,270				1,044,917				(66,246	)			45,115
Other non-operating income			35				396				2,408				982				3,085
Other non-operating expense			35				(5,020	)			(8,949	)			(1,689	)			(4,101	)
Non-operating income (expense), net							628,646				1,038,376				(66,953	)			44,099
Profit (loss) before income taxes							2,074,932				3,425,412				(263,334	)			566,927
Income tax expense (benefit)			36				351,858				610,819				(50,120	)			97,477
Profit (loss) for the period			23				1,723,074				2,814,593				(213,214	)			469,450
(Profit (loss) for the period adjusted for regulatory reserve for credit losses: W1,836,500 million and W2,759,045 million for the three-month and six-month periods ended June 30, 2023, respectively; W(136,112) million and W499,632 million for the three-month and six-month periods ended June 30, 2022, respectively)
Other comprehensive income (loss) for the period, net of tax			23
Items that are or may be reclassified subsequently to profit or loss:
Net gain (loss) on securities measured at FVOCI							10,517				160,573				(242,676	)			(464,225	)
Exchange differences on translation of foreign operations							9,248				52,561				96,620				118,674
Valuation gain (loss) on cash flow hedge							179				(527	)			1,088				3,069
Net loss on hedges of net investments in foreign operations							(6,116	)			(31,012	)			(51,156	)			(66,255	)
							13,828				181,595				(196,124	)			(408,737	)
Items that will not be reclassified to profit or loss:
Net loss on securities measured at FVOCI							(284,361	)			(94,192	)			(1,145,708	)			(524,930	)
Fair value changes on financial liabilities designated at fair value due to credit risk							(5,924	)			(10,840	)			9,879				21,380
Remeasurements of defined benefit liabilities							—				143				—				—
							(290,285	)			(104,889	)			(1,135,829	)			(503,550	)
							(276,457	)			76,706				(1,331,953	)			(912,287	)
Total comprehensive income (loss) for the period						W	1,446,617				2,891,299				(1,545,167)				(442,837)
Earnings (loss) per share
Basic and diluted earnings (loss) per share (in won)			37			W	365				601				(48	)			106

 

See accompanying notes to the interim separate financial statements.

 

S-25

Korea Development Bank

 

Interim Separate Statements of Changes in Equity

 

Six-month periods ended June 30, 2023 and 2022 (Unaudited)

 

(In millions of won)		Issued capital				Capital surplus				Accumulated other comprehensive income				Retained earnings				Total equity
Balance at January 1, 2022		W	21,886,559				2,479,010				4,773,474				7,363,814				36,502,857
Profit for the period			—				—				—				469,450				469,450
Net gain (loss) on securities measured at FVOCI			—				—				(1,067,445	)			78,290				(989,155	)
Exchange differences on translation of foreign operations			—				—				118,674				—				118,674
Valuation gain on cash flow hedge			—				—				3,069				—				3,069
Net loss on hedges of net investments in foreign operations			—				—				(66,255	)			—				(66,255	)
Fair value changes on financial liabilities designated at fair value due to credit risk			—				—				21,380				—				21,380
Total comprehensive income (loss) for the period			—				—				(990,577	)			547,740				(442,837	)
Dividends			—				—				—				(833,089	)			(833,089	)
Paid in capital increase			392,000				(1,885	)			—				—				390,115
Transaction with owners			392,000				(1,885	)			—				(833,089	)			(442,974	)
Balance at June 30, 2022		W	22,278,559				2,477,125				3,782,897				7,078,465				35,617,046
Balance at January 1, 2023		W	23,151,559				2,475,310				2,819,333				7,222,171				35,668,373
Profit for the period			—				—				—				2,814,593				2,814,593
Net gain on securities measured at FVOCI			—				—				47,868				18,513				66,381
Exchange differences on translation of foreign operations			—				—				52,561				—				52,561
Valuation loss on cash flow hedge			—				—				(527	)			—				(527	)
Net loss on hedges of net investments in foreign operations			—				—				(31,012	)			—				(31,012	)
Fair value changes on financial liabilities designated at fair value due to credit risk			—				—				(10,840	)			—				(10,840	)
Remeasurements of defined benefit liabilities			—				—				143				—				143
Total comprehensive income for the period			—				—				58,193				2,833,106				2,891,299
Dividends			—				—				—				(164,743	)			(164,743	)
Paid in capital increase			555,000				(5,535	)			—				—				549,465
Transaction with owners			555,000				(5,535	)			—				(164,743	)			384,722
Balance at June 30, 2023		W	23,706,559				2,469,775				2,877,526				9,890,534				38,944,394

 

See accompanying notes to the interim separate financial statements.

 

S-26