Filed Pursuant to Rule 424(b)(5)

Registration No. 333-246071

 

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 16, 2022   PRELIMINARY PROSPECTUS SUPPLEMENT (To Prospectus Dated July 2, 2021)

 

The Korea Development Bank

US$                     % Notes due 20            

US$                     % Notes due 20            

US$                     % Green Notes due 20            

Our US$                     aggregate principal amount of notes due 20                     (the “20                     Notes”) will bear interest at a rate of                     % per annum, 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 green notes due 20                     (the “20                     Notes”, and together with the 20                     Notes and the 20                     Notes, the “Notes”) will bear interest at a rate of                     % per annum. Interest on the Notes is payable semi-annually in arrears on                      and                      of each year, in each case beginning on                     , 2022. The 20                     Notes will mature on                     , 20                    , the 20                     Notes will mature on                     , 20                     and the 20                     Notes will mature on                     , 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 notes 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

20             Notes

Per Note

Total

Per Note

Total

Per Note

Total

Public offering price

%

US$

%

US$

%

US$

Underwriting discount

%

US$

%

US$

%

US$

Proceeds to us (before deduction of expenses)

%

US$

%

US$

%

US$

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including                     , 2022.

 

Approvals in-principle have been received from 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.

We expect to make delivery of the Notes to investors through the book-entry facilities of The Depository Trust Company on or about                     , 2022.

 

 

Joint Bookrunners and Lead Managers

 

BNP PARIBAS

BofA Securities

HSBC

J.P. Morgan

KDB Asia

Société Générale Corporate & Investment Banking

UBS

Co-Manager

KEXIM Asia Limited

 

Prospectus Supplement Dated                     , 2022

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-5
Use of Proceeds			S-7
Recent Developments			S-9
Description of the Notes			S-153
Clearance and Settlement			S-155
Taxation			S-158
Underwriting			S-159
Legal Matters			S-165
Official Statements and Documents			S-165
General Information			S-165

 

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			24
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			170
Land and History			170
Government and Politics			172
The Economy			175
Principal Sectors of the Economy			184
The Financial System			191
Monetary Policy			196
Balance of Payments and Foreign Trade			200
Government Finance			208
Debt			210
Tables and Supplementary Information			213

 

S-1

		Page
DESCRIPTION OF THE SECURITIES			216
Description of Debt Securities			216
Description of Warrants			223
Terms Applicable to Debt Securities and Warrants			223
Description of Guarantees to be Issued by Us			224
Description of Guarantees to be Issued by The Republic of Korea			225
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS			226
TAXATION			227
Korean Taxation			227
U.S. Federal Income Tax Considerations			229
PLAN OF DISTRIBUTION			237
LEGAL MATTERS			238
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES			238
OFFICIAL STATEMENTS AND DOCUMENTS			238
EXPERTS			238
FORWARD-LOOKING STATEMENTS			239
FURTHER INFORMATION			241

 

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, 2020, June 30, 2021 and September 30, 2021 and for the six months ended June 30, 2020 and 2021 and the nine months ended September 30, 2020 and 2021 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.

 

Additional Information

 

The information in this prospectus supplement is in addition to the information contained in our prospectus dated July 2, 2021. 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. 333-246071, 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 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.”

 

S-3

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

 

The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (“FSMA”) and any rules or regulations made under the Insurance Distribution Directive, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA.

 

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.

 

S-4

 

S-5

 

S-6

USE OF PROCEEDS

 

The 20                     Notes

 

Use of Proceeds from the Sale of the 20                     Notes

 

The net proceeds from the issue of the 20                     Notes, after deducting the underwriting discount but not estimated expenses, will be US$                    . An amount equal to the net proceeds of the 20                     Notes (the “Green Bond Proceeds”) will be allocated toward the financing and/or refinancing of new and/or existing projects from the Eligible Green Categories (the “Eligible Green Projects”) as set forth in the KDB Sustainable Bond Framework, for which we have obtained a second party opinion from Sustainalytics, an external consultant, in June 2019 (the “Second Party Opinion”). In particular, we intend to allocate the Green Bond Proceeds on a preferential basis to green projects that significantly contribute to achieving carbon neutrality (such as renewable energy and/or clean transportation projects), which fall under the Eligible Green Categories as defined in the KDB Sustainable Bond Framework. The KDB Sustainable Bond Framework and the Second Party Opinion are publicly available on the following website: https://www.kdb.co.kr/index.jsp.

 

Project Evaluation and Selection Process

 

We will use our existing project evaluation and selection process to select Eligible Green Projects by evaluating their financial viability and environmental and social impact. In this process, the ESG-New Deal Planning Department and the Credit Review Division, among others, will be responsible for conducting due diligence, project approval review, and technical monitoring in respect of environment and social risk management and supervising mitigation activities throughout the project life cycle.

 

Management of the Green Bond Proceeds

 

The Green Bond Proceeds will be allocated and managed by the Treasury Department based on an internal management system that will track the allocation of proceeds to selected Eligible Green Projects within its internal management system, including brief descriptions of the projects, the regions in which the projects are located and the amount of proceeds allocated to the projects. Pending allocation, the Green Bond Proceeds may be invested in cash, cash equivalents and/or marketable securities, in accordance with our cash management policies.

 

Reporting

 

With respect to use of the Green Bond Proceeds, we plan to include information regarding the allocation of the Green Bond Proceeds on an annual basis in an investor newsletter, which will be made available on our website. Such information will include amounts allocated to Eligible Green Projects, a brief description of select projects and, where feasible, the environmental and/or social impact of such projects on a per project or project portfolio basis. Disclosure of the allocation of the Green Bond Proceeds and impact reporting on a per project basis will be subject to any restrictions included in the disclosure agreement with the relevant borrower.

 

Investment Considerations

 

The 20                     Notes may not be a suitable investment for all investors seeking exposure to green assets. The description of the Eligible Green Projects provided herein is for illustrative purposes only and no assurance can be provided by us or any of the Underwriters that loans to entities with these specific characteristics will be made by us during the term of the 20                     Notes.

 

There is currently no market consensus on what precise attributes are required for a particular loan or series of notes to be defined as “green,” and therefore no assurance can be provided by us or any of the Underwriters to

 

S-7

investors that selected Eligible Green Projects will meet all investor criteria or expectations regarding environmental impact or sustainability performance. Although the Eligible Green Projects will be selected in accordance with the categories recognized under the Green Bond Principles as published by the International Capital Market Association (the “ICMA Green Bond Principles”), and will be developed in accordance with relevant legislation and standards, there can be no guarantee that the loans will deliver the environmental benefits as anticipated, or that adverse environmental impact will not occur during the term of the 20                     Notes. In addition, our use of the Green Bond Proceeds may not comply with all or part of the ICMA Green Bond Principles or any relevant legislation or standards, and where any negative impact is insufficiently mitigated, any loans extended may become controversial and may be criticized by activist groups or other stakeholders. For example, we currently maintain, and may continue to extend, certain financings for borrowers related to the coal industry in the ordinary course of our business. For the avoidance of doubt, any projects related to the development, construction or production/transmission of energy from fossil fuels such as coal are excluded from the “renewable energy” category of Eligible Green Categories, as set forth in the KDB Sustainable Bond Framework.

 

In addition, although we have agreed to certain reporting and use of proceeds obligations in connection with certain environmental criteria, our failure to comply with such obligations will not constitute a breach or an event of default under the 20                     Notes. Any failure by us to use an amount equivalent to the net proceeds from the issuance of the 20                     Notes on Eligible Green Projects or to meet or continue to meet the investment requirements of certain environmentally-focused investors with respect to the 20                     Notes may affect the value of the 20                     Notes and may have consequences for certain investors with portfolio mandates to invest in green assets.

 

No assurance can be provided by us or any of the Underwriters that the 20                     Notes will fulfill the criteria required to qualify as green bonds. Separately, no assurance can be provided by the Underwriters that the Green Bond Proceeds will be used for Eligible Green Projects. Each potential purchaser of the 20                     Notes should determine for itself the relevance of the information contained in this prospectus supplement and the accompanying prospectus regarding the use of the net proceeds from the issuance of the 20                     Notes and its purchase of the 20                     Notes should be based upon such investigation as it deems necessary. Neither the KDB Sustainable Bond Framework nor the Second Party Opinion is incorporated into, or forms part of, this prospectus supplement or the accompanying prospectus.

 

The 20                     Notes and the 20                     Notes

 

The aggregate amount of the net proceeds from the issue of the 20                     Notes and the 20                     Notes, after deducting the underwriting discount but not estimated expenses, will be US$                    . We will use the net proceeds from the sale of the 20                     Notes and the 20                     Notes for our general operations, including extending 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 2, 2021. 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, 2021, we had W167,372.2 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 W275,830.0 billion and total equity of W39,758.9 billion, as compared to W159,083.6 billion of loans outstanding, W251,852.0 billion of total assets and W30,382.5 billion of total equity as of December 31, 2020. For the six months ended June 30, 2021, we recorded interest income of W1,993.3 billion, interest expense of W1,206.3 billion and net income of W2,377.6 billion, as compared to W2,353.1 billion of interest income, W1,771.8 billion of interest expense and W369.3 billion of net income for the six months ended June 30, 2020. See “—Selected Financial Statement Data.”

 

Capitalization

 

As of September 30, 2021, our authorized capital was W30,000 billion and our capitalization was as follows:

 

		September 30, 2021(1)
		(billions of won)
		(unaudited)
Long-term debt(2)(3):
Won currency borrowings			3,852.6
Industrial finance bonds			86,895.0
Foreign currency borrowings			505.7
Total long-term debt			91,253.3
Capital:
Paid-in capital			21,886.6
Capital surplus			2,479.0
Retained earnings(4)			7,732.1
Accumulated other comprehensive income			6,335.1
Total capital			38,432.7
Total capitalization			129,686.0

 

(1)	Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since September 30, 2021.

(2)	We have translated borrowings in foreign currencies into Won at the rate of W1,184.90 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on September 30, 2021.

 

S-9

(3)	As of September 30, 2021, we had confirmed acceptances and guarantees totaling W7,449.6 billion under outstanding guarantees issued on behalf of our clients.

(4)

Includes planned regulatory reserve for credit losses of W482.9 billion as of September 30, 2021. 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

 

The Government contributed W510.0 billion and W610.8 billion in cash to our capital in January and May 2021. As of September 30, 2021, our paid-in capital was W21,886.6 billion compared to W20,765.7 billion as of December 31, 2020.

 

Selected Financial Statement Data

 

Recent Developments

 

As of September 30, 2021, we had W173,623.1 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 W282,252.9 billion and total equity of W38,432.7 billion, as compared to W159,083.6 billion of loans outstanding, W251,852.0 billion of total assets and W30,382.5 billion of total equity as of December 31, 2020. For the nine months ended September 30, 2021, we recorded interest income of W3,012.2 billion, interest expense of W1,812.1 billion and net income of W2,843.9 billion, as compared to W3,434.4 billion of interest income, W2,497.1 billion of interest expense and W456.5 billion of net income for the nine months ended September 30, 2020.

 

The following tables present our selected separate financial information for the nine months ended September 30, 2020 and 2021 and as of December 31, 2020 and September 30, 2021, which has been derived from our unaudited separate financial statements as of December 31, 2020 and September 30, 2021 and for the nine months ended September 30, 2021 and 2020 prepared in accordance with K-IFRS.

 

Separate K-IFRS Financial Statement Data

 

		Nine Months Ended September 30,
		2020				2021
		(billions of Won) (unaudited)
Income Statement Data
Total Interest Income			3,434.4				3,012.2
Total Interest Expenses			2,497.1				1,812.1
Net Interest Income			937.3				1,200.1
Operating Income			985.6				3,203.6
Income before Income Tax			583.1				3,644.4
Income Tax Expense			126.7				800.5
Net Income			456.5				2,843.9

 

S-10

		As of December 31, 2020				As of September 30, 2021
		(billions of Won) (unaudited)
Statements of Financial Position Data
Total Loans(1)			159,083.6				173,623.1
Total Borrowings(2)			204,780.7				221,299.1
Total Assets			251,852.0				282,252.9
Total Liabilities			221,469.5				243,820.2
Equity			30,382.5				38,432.7

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, 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, 2021

 

For the nine months ended September 30, 2021, we had net income of W2,843.9 billion compared to net income of W456.5 billion in the corresponding period of 2020, on a separate K-IFRS basis. The principal factors for such increase in net income included:

 

•

a net gain on disposal of loans measured at fair value through profit or loss of W1,850.3 billion in the nine months ended September 30, 2021 compared to a net loss on disposal of such loans of W17.5 billion in the corresponding period of 2020, primarily as a result of gains recognized in connection with the exercise of our right to convert our convertible bonds issued by HMM Company Limited into common shares, which took place in June 2021;

 

•

a reversal of impairment loss on investments in subsidiaries and associates of W466.8 billion in the nine months ended September 30, 2021, primarily due to a reversal of impairment losses recognized in connection with the upcoming sale of our stake in Daewoo Engineering & Construction, compared to an impairment loss on such investments of W155.1 billion in the corresponding period of 2020;

 

•

an increase in dividend income to W1,037.8 billion in the nine months ended September 30, 2021 from W543.0 billion in the corresponding period of 2020, primarily due to an increase in dividends received from the Korea Electric Power Corporation during the nine months ended September 30, 2021 compared to the corresponding period of 2020; and

 

•

an increase in net interest income to W1,200.1 billion in the nine months ended September 30, 2021 from W937.3 billion in the corresponding period of 2020, primarily due to a decrease in interest expense to W1,812.1 billion in the nine months ended September 30, 2021 from W2,497.1 billion in the corresponding period 2020, which outpaced the decrease in interest income to W3,012.2 billion in the nine months ended September 30, 2021 from W3,434.4 billion in the corresponding period of 2020. The decreases in our interest expense and interest income primarily reflected the decrease in the general level of interest rates in Korea in the nine months ended September 30, 2021 compared to the corresponding period of 2020.

 

The above factors were partially offset by an increase in income tax expense to W800.5 billion in the nine months ended September 30, 2021 from W126.7 billion in the corresponding period of 2020, primarily due to an increase in income before income tax to W3,644.4 billion in the nine months ended September 30, 2021 from W583.1 billion in the corresponding period of 2020.

 

S-11

Loans to Financially Troubled Companies

 

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies including DSME, 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. (formerly, STX Offshore & Shipbuilding), KG Dongbu Steel Co., Ltd., Doosan Heavy Industries & Construction Co., Ltd., Hyundai Doosan Infracore Co., Ltd. (formerly, Doosan Infracore Co.), Ltd. and GM Korea Company. As of September 30, 2021, our credit extended to these companies totaled W23,483.7 billion, accounting for 8.3% of our total assets as of such date.

 

The following table provides the loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to these companies as of the dates indicated:

 

Company		As of December 31, 2020				As of September 30, 2021				Primary Reason for Change
		(billions of won)
HMM Company Limited		W	4,771.5			W	12,447.8			Increase due to an increase in the value of perpetual bonds
DSME			4,463.1				5,848.4			Increase due to an increase in refund guarantees and an increase in the value of the shares of DSME
Doosan Heavy Industries & Construction			1,644.2				1,520.9			Decrease due to redemption of loans
Daehan Shipbuilding			1,047.4				1,034.7			Decrease due to redemption of loans
KG Dongbu Steel			695.9				788.7			Increase due to an increase in foreign currency loans
HJ Shipbuilding & Construction			927.2				759.0			Decrease due to a decrease in loans
GM Korea Company			436.9				402.9			Decrease due to a decline in the value of the shares of GM Korea Company
K Shipbuilding			531.3				392.3			Decrease due to a decrease in loans
Hyundai Doosan Infracore			688.2				288.9			Decrease due to redemption of loans
Total		W	15,205.7			W	23,483.6

 

As of September 30, 2021, we established allowances of W32.3 billion for our exposure to HMM Company Limited, W785.7 billion for DSME, W14.0 billion for Doosan Heavy Industries & Construction, W386.1 billion for Daehan Shipbuilding, W3.4 billion for KG Dongbu Steel, W14.1 billion for HJ Shipbuilding & Construction, none for GM Korea, W17.7 billion for K Shipbuilding and W1.0 billion for Hyundai Doosan Infracore.

 

DSME, one of the largest shipbuilding and offshore construction companies in Korea, has suffered from financial difficulties resulting from a prolonged slowdown in the global shipbuilding industry, and we have been the largest shareholder of DSME since 2015 through a series of financing arrangements. See “—Results of Operations—Loans to Financially Troubled Companies.” In March 2019, Hyundai Heavy Industries entered into an agreement with us to acquire DSME, pursuant to which we had planned to transfer all of our shares in DSME amounting to approximately W2 trillion (in the form of contributions-in-kind) to a newly established sub-holding company spun off from Hyundai Heavy Industries. However, in January 2022, the European Commission announced that it would not grant approval for the acquisition of DSME by Hyundai Heavy Industries due to anti-competition concerns for LNG carriers, and the consummation of the acquisition currently remains uncertain.

 

In the first nine months of 2021, we sold non-performing loans worth W244.2 billion to UAMCO Ltd.

 

S-12

Results of Operations

 

The following tables present our selected separate financial information as of December 31, 2020 and June 30, 2021 and for the six months ended June 30, 2020 and 2021, which has been derived from our unaudited separate financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 prepared in accordance with K-IFRS and included in this prospectus supplement.

 

Separate K-IFRS Financial Statement Data

 

		Six Months Ended June 30,
		2020				2021
		(billions of won) (unaudited)
Income Statement Data
Total Interest Income			2,353.1				1,993.3
Total Interest Expenses			1,771.8				1,206.3
Net Interest Income			581.3				786.9
Operating Income			688.9				2,362.4
Income before Income Tax			473.8				2,991.6
Income Tax Expense (Benefit)			104.5				614.0
Net Income			369.3				2,377.6

 

		As of December 31, 2020				As of June 30, 2021
		(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans(1)			159,083.6				167,372.2
Total Borrowings(2)			204,780.7				215,119.8
Total Assets			251,852.0				275,830.0
Total Liabilities			221,469.5				236,071.1
Equity			30,382.5				39,758.9

 

(1)

Gross amount, which includes loans for facility development, loans for working capital, 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. See Note 9 of the notes to our unaudited separate financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 included in this prospectus supplement.

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

 

Six Months Ended June 30, 2021

 

In the first half of 2021, we had net income of W2,377.6 billion compared to net income of W369.3 billion in the corresponding period of 2020, on a separate basis. The principal factors for the increase in net income included:

 

•

an increase in gains on disposal of loans measured at fair value through profit or loss to W1,832.6 billion in the first half of 2021 from W2.7 billion in the corresponding period of 2020, primarily due to the exercise of our right to convert our convertible bonds of HMM Company Limited into common shares, the value of which increased significantly subsequent to such conversion in in the first half of 2021;

 

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•

an increase in net interest income to W786.9 billion in the first half of 20201 from W581.3 billion in the corresponding period of 2020, primarily due to a decrease in interest expense that outpaced the decrease in interest income, which reflected a decrease in the general level of interest rates in Korea in the first half of 2021 compared to the corresponding period of 2020; and

 

•

an increase in dividend income to W642.6 billion in the first half of 2021 from W400.6 billion in the corresponding period of 2020, primarily due to an increase in dividends received from Korea Electric Power Corporation in the first half of 2021 compared to the corresponding period of 2020.

 

The above factors were partially offset by an increase in provision for credit losses to W836.1 billion in the first half of 2021 from W204.7 billion in the corresponding period of 2020, primarily due to an increase in expected credit loss in anticipation of a deterioration in the overall asset quality of our loan portfolio due to the ongoing global outbreak of the COVID-19 pandemic.

 

Allowances for Loan Losses and Loans in Arrears

 

As of June 30, 2021, we had established allowances of W4,474.3 billion for loan losses under Korean IFRS.

 

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2021, we have provided loans of W938.7 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of June 30, 2021, we had established allowances of W440.0 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, 2021(1)
				Loan Amount				Loan Loss Allowances
				(in billions of won, except percentages)
Loan Classification		Normal(2)		W	161,421.2			W	2,024.2
		Precautionary			3,238.2				879.7
		Substandard			1,563.4				731.2
		Doubtful			152.2				133.9
		Expected Loss			997.2				705.3
		Total		W	167,372.2			W	4,474.3

 

(1)

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

(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, 2021, our non-performing loans totaled W2,712.8 billion, representing 1.6% 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, 2021, our legal reserve was W1,551.2 billion, representing 0.9% of our outstanding loans as of such date.

 

Loans to Financially Troubled Companies

 

We have credit exposure (including loans, guarantees and equity investments) to a number of financially troubled Korean companies including DSME, HMM Company Limited (formerly, Hyundai Merchant Marine

 

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Co., Ltd.), HJ Shipbuilding & Construction (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding), KG Dongbu Steel Co., Ltd., Doosan Heavy Industries & Construction Co., Ltd., Hyundai Doosan Infracore Co., Ltd. (formerly, Doosan Infracore Co., Ltd.) and GM Korea Company. As of June 30, 2021, our credit extended to these companies totaled W26,349.2 billion, accounting for 9.6% of our total assets as of such date.

 

The following table provides the loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to these companies as of the dates indicated:

 

Company		As of December 31, 2020				As of June 30, 2021				Primary Reason for Change
		(billions of won)
HMM Company Limited		W	4,771.5			W	15,191.8			Increase due to increase in the value of perpetual bonds
DSME			4,463.1				5,656.8			Increase due to increase in refund guarantees and an increase in the value of the shares of DSME
Doosan Heavy Industries & Construction			1,644.2				1,332.7			Decrease due to redemption of loans
Daehan Shipbuilding			1,047.4				989.5			Decrease due to redemption of loans
HJ Shipbuilding & Construction			927.2				860.9			Decrease due to decrease in loans
KG Dongbu Steel			695.9				746.8			Increase due to an increase in usance bills
Hyundai Doosan Infracore			688.2				633.9			Decrease due to redemption of loans
K Shipbuilding			531.3				533.9			Increase due to increase in loans
GM Korea Company			436.9				402.9			Decrease due to a decline in the value of the shares of GM Korea Company
Total		W	15,205.7			W	26,349.2

 

As of June 30, 2021, we established allowances of W35.6 billion for our exposure to HMM Company Limited, W1,235.2 billion for DSME, W92.6 billion for Doosan Heavy Industries & Construction, W432.8 billion for Daehan Shipbuilding, W136.4 billion for HJ Shipbuilding & Construction Co., Ltd., W4.1 billion for KG Dongbu Steel, W1.7 billion for Hyundai Doosan Infracore, W415.3 billion for K Shipbuilding, and none for GM Korea.

 

During 2015, DSME, 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.

 

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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. In June 2021, we exercised our right to convert W300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. As a result of such conversion, our equity interest in HMM Company Limited amounted to 25.0% as of June 30, 2021.

 

In January 2019, Hanjin Heavy Industries and 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 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.

 

Dongbu Steel has also been facing financial difficulties for the past several years due to the prolonged slowdown in the Korean construction industry and in the Korean economy in general. Dongbu Steel entered into a voluntary workout agreement with its creditors, including us, in October 2015. Such agreement expired in September 2019 when KG Steel, a subsidiary of KG Group established in May 2019, became the largest shareholder of Dongbu Steel, which was subsequently re-named to KG Dongbu Steel. As of June 30, 2021, our equity interest in KG Dongbu Steel amounted to 4.0%.

 

Doosan Heavy Industries & Construction Co., Ltd. has also faced financial difficulties due to the prolonged slowdown in the Korean heavy and construction industries and in the Korean economy in general, as well as the Government’s initiative to support clean and renewable energy sources while phasing out nuclear and coal-fired plants in recent years. Doosan Heavy Industries submitted a self-rescue plan to its creditors, including us, and we agreed to provide Doosan Heavy Industries with loans amounting to W500 billion, W400 billion and W600 billion in March, April and June 2020, respectively. In August 2021, as part of the self-rescue plan, a consortium comprised of Hyundai Heavy Industries Holdings Co. and KDB Investment, our investment unit, purchased a 35.0% equity interest in Hyundai Doosan Infracore from Doosan Heavy Industries & Construction Co., Ltd. for W850 billion.

 

In the first half of 2021, we sold non-performing loans worth W244.2 billion to UAMCO 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 spread globally over the course of 2020 and 2021 to date and has led to significant global and domestic economic

 

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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 has been in significant need of 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 throughout 2020 and 2021 to date.

 

In May 2020, we injected W720 billion (consisting of W420 billion in securities collateralized by income receivables, W180 billion in perpetual bonds and W120 billion in loans) into Korean Air Lines Co., Ltd., a subsidiary of Hanjin Group and Korea’s largest airline and flagship carrier, in order to provide liquidity support. As of June 30, 2021, our loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to Korean Air Lines amounted to W1,233.9 billion, a decrease from W1,374.5 billion as of December 31, 2020.

 

In April 2020, we provided Asiana Airlines, a subsidiary of Kumho Asiana Group and the second-largest airline in Korea, with liquidity support by providing a credit line in the amount of W1.2 trillion. 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. In September 2020, we decided to inject W2.4 trillion from the Key Industry Stabilization Fund (explained further below) 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. Subsequently, 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 perpetual exchangeable bonds) into Hanjin KAL in connection with Korean Air Lines’ 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 10.7%. 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 in preparation for the Acquisition. The consummation of the Acquisition currently remains subject to a number of factors, including uncertainties regarding opposition to the Acquisition by labor unions of Korean Air Lines and Asiana Airlines, and approval of the Acquisition from antitrust authorities of a number of jurisdictions, including Korea, the United States, the European Union, China, Japan and Vietnam, which have yet to be obtained. If the Acquisition is completed, Asiana Airlines would become Korean Air Lines’ consolidated subsidiary. In June 2021, we approved an integration plan pursuant to which Korean Air Lines would merge with Asiana Airlines by 2024.

 

In addition, the ongoing global outbreak of the COVID-19 pandemic has prompted the Government in 2020 and 2021 to date 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 provided to financially troubled companies, extension of maturity dates for existing loans and suspension of interest payment obligations for an extended period of time. Most recently, in May 2020, the Government provided for the establishment of the Key Industry Stabilization Fund, a fund amounting 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 ongoing global outbreak of 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 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.

 

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A deterioration in the financial condition of our borrowers, including those described above as well as other companies under workout, court receivership, court mediation and 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, particularly if businesses remain closed, the impact of the COVID-19 pandemic on the global economy worsens, or more of our borrowers draw on their lines of credit or seek additional loans from us to help finance their business, 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, 2021:

 

Loans⁽¹⁾

 

		June 30, 2021
		(billions of won)
Equipment Capital Loans:
Domestic currency		W	53,224.3
Foreign currency			8,570.5
			61,794.8
Working Capital Loans:
Domestic currency(2)			65,554.5
Foreign currency			10,164.9
			75,719.4
Other Loans(3)			29,858.0
Total loans		W	167,372.2

 

(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, 2021, we had W167,372.2 billion in outstanding loans, which represents a 5.2% increase from W159,083.6 billion of outstanding loans as of December 31, 2020.

 

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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, 2021				As % of June 30, 2021 Total
		(billions of won, except percentages)
Loans with remaining maturities of one year or less		W	58,634.7				42.6	%
Loans with remaining maturities of more than one year			78,879.5				57.4
Total		W	137,514.2				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, 2021:

 

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

 

		June 30, 2021				As % of June 30, 2021 Total
		(billions of won, except percentages)
Manufacturing		W	63,787.6				46.4	%
Banking and Insurance			33,340.8				24.2
Transportation			10,200.3				7.4
Public Administration			635.9				0.5
Electric, Gas and Water Supply Industry			3,839.4				2.8
Others(2)			25,710.2				18.7
Total		W	137,514.2				100.0	%
Percentage increase from December 31, 2020			4.0	%

 

(1)	Includes loans extended to affiliates.

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

 

The manufacturing sector accounted for 46.4% of our outstanding equipment capital and working capital loans as of June 30, 2021. As of June 30, 2021, loans to the auto vehicle and trailer manufacturing businesses and the chemical and chemical product manufacturing businesses accounted for 12.8% and 12.7%, respectively, of our outstanding equipment capital and working capital loans to the manufacturing sector.

 

Industrial Bank of Korea was our single largest borrower as of June 30, 2021, accounting for 5.3% of our outstanding equipment capital and working capital loans. As of June 30, 2021, our five largest borrowers and 20 largest borrowers accounted for 13.2% and 23.9%, respectively, of our outstanding equipment capital and working capital loans.

 

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The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2021 by industry sector:

 

20 Largest Borrowers by Industry Sector

 

		As % of June 30, 2021 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Banking and Insurance			54.0	%
Manufacturing			29.0
Transportation			11.5
Others(1)			5.5
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, 2021:

 

		Equipment Capital Loans								Working Capital Loans
		June 30, 2021				%				June 30, 2021				%
		(billions of won, except percentages)
Industrial fund loans		W	48,432.8				78.4	%		W	48,627.2				64.2	%
On-lending loans			2,917.3				4.7				16,002.4				21.1
Foreign currency loans			5,794.5				9.4				1,517.2				2.1
Local currency loans denominated in foreign currencies			2.6				0.0				25.5				0.1
Offshore loans in foreign currencies			2,428.3				3.9				7,753.5				10.2
Government fund loans			115.8				0.2				—				—
Overdraft			—				—				102.0				0.1
Others(1)			2,103.4				3.4				1,691.6				2.2
Total		W	61,794.8				100.0	%		W	75,719.4				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, 2021:

 

		June 30, 2021
		(billions of won)
Acceptances		W	332.4
Guarantees on local borrowings			856.9
Guarantees on foreign borrowings			5,794.7
Letters of guarantee for importers			88.7
Total		W	7,072.7

 

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Investments

 

Our equity investments increased to W42,117.3 billion as of June 30, 2021 from W38,227.6 billion as of December 31, 2020. As of June 30, 2021, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaled W19,598.3 billion, equal to 41.0% 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, 2021:

 

Equity Investments

 

		Book Value as of June 30, 2021
		(billions of won)
Electric, Gas and Water Supply Industry		W	18,010.2
Banking and Insurance			11,277.9
Transportation			5,475.0
Real Estate Business			3,777.5
Construction			1,025.0
Manufacturing			660.9
Others			1,890.8
Total		W	42,117.3

 

As of June 30, 2021, we held total equity investments, on a book value basis, of W602.8 billion in one of our five largest borrowers and W2,928.0 billion in four 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, 2021, the aggregate value of our equity investments accounted for approximately 92.5% of their aggregate cost basis.

 

Other Activities

 

As of June 30, 2021, we held in trust cash and other assets totaling W35,989.8 billion, and we generated in the first half of 2021 trust fee income equaling W63.9 billion.

 

Source of Funds

 

Borrowings from the Government

 

The following table sets out our Government borrowings as of June 30, 2021:

 

Type of Funds Borrowed		As of June 30, 2021
		(billions of won)
General purpose		W	117.0
Special purpose			4,254.5
Total		W	4,371.5

 

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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, 2021:

 

Outstanding Balance		As of June 30, 2021
		(billions of won)
Denominated in Won		W	110,087.6
Denominated in other currencies			34,524.7
Total		W	144,612.3

 

As of June 30, 2021, 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, 2021) was W156,806.0 billion, equal to 21.9% of our authorized amount under the KDB Act, which was W717,617.9 billion.

 

Foreign Currency Borrowings

 

As of June 30, 2021, the outstanding amount of our foreign currency borrowings was US$12.9 billion. Our long-term and short-term foreign currency borrowings increased to W14,562.4 billion as of June 30, 2021 from W12,795.0 billion as of December 31, 2020.

 

Deposits

 

As of June 30, 2021, demand deposits held by us totaled W1,832.3 billion and time and savings deposits held by us totaled W43,344.2 billion.

 

Debt

 

Debt Repayment Schedule

 

The following table sets out our principal repayment schedule as of June 30, 2021:

 

Debt Principal Repayment Schedule⁽¹⁾

 

Currency(2)(3)		Maturing on or before December 31,
		2021				2022				2023				2024				2025				Thereafter
		(billions of won)
Won		W	25,878.0			W	43,339.2			W	23,310.9			W	7,942.3			W	4,073.7				W9,870.7
Foreign			15,365.5				9,979.6				6,887.6				6,214.1				4,615.3				5,364.2
Total Won Equivalent		W	41,243.4			W	53,318.8			W	30,198.5			W	14,156.4			W	8,698.0				W15,234.9

 

(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, 2021, 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		Dong Gull Lee		September 10, 2023
Chief Operating Officer and Vice Chairman of the Board of Directors		Dae Hyon Choi		January 2, 2025
Auditor		Tae Hyun Joo		March 14, 2024
Independent Non-executive Directors		Han Hong Cho		June 27, 2023
		Dong Han Yook		June 28, 2022
		Yeong Ook Kim		May 25, 2023
		Kyo Deog Son		March 29, 2022
		Dong Il Jung		November 30, 2023

 

Financial Statements and the Auditors

 

Our interim separate financial statements as of June 30, 2021 and for the six months ended June 30, 2021 and 2020 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, 2021 and for the six months ended June 30, 2021 and 2020 included in this prospectus supplement.

 

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Korea Development Bank

 

Interim Separate Statements of Financial Position

 

June 30, 2021 (Unaudited) and December 31, 2020

 

(In millions of won)		Notes				June 30, 2021				December 31, 2020
Assets
Cash and due from banks			4,45,46,49			W	11,269,255				10,528,978
Securities measured at FVTPL			5,45,46,49				10,272,772				8,320,631
Securities measured at FVOCI			6,39,45,46,49				42,010,506				34,141,325
Securities measured at amortized cost			7,39,45,46,49				2,417,134				785,264
Loans measured at FVTPL			8,45,46,49				701,288				1,434,514
Loans measured at amortized cost			9,45,46,49				162,894,536				155,300,178
Derivative financial assets			10,45,46,47,49				5,146,121				8,329,376
Investments in subsidiaries and associates			11,48				28,325,984				25,553,561
Property and equipment, net			12,48				811,219				811,382
Investment property, net			13,48				81,313				81,065
Intangible assets, net			14,48				167,784				188,417
Current tax assets							1,783				3,722
Assets held for sale			16				2,207,733				1,713,347
Other assets			15,45,46,49				9,522,565				4,660,285
Total assets						W	275,829,993				251,852,045
Liabilities
Financial liabilities measured at FVTPL			17,45,46,49			W	1,892,708				1,694,957
Deposits			18,45,46,49				48,875,219				45,879,419
Borrowings			19,45,46,49				20,975,895				18,887,611
Debentures			20,45,46,49				143,375,963				138,318,728
Derivative financial liabilities			10,45,46,47,49				3,653,173				6,305,287
Net defined benefit liabilities			21				70,474				50,546
Provisions			22				1,445,904				1,515,170
Deferred tax liabilities			37				4,821,576				1,719,100
Current tax liabilities							25,104				29,691
Other liabilities			23,45,46,49				10,935,050				7,069,006
Total liabilities							236,071,066				221,469,515
Equity
Issued capital			1,24				21,886,559				20,765,729
Capital surplus			24				2,479,010				2,484,398
Accumulated other comprehensive income			24				8,142,327				2,064,371
Retained earnings			24				7,251,031				5,068,032
(Regulatory reserve for credit losses of W482,885 million as of June 30, 2021 and W1,146,038 million as of December 31, 2020, respectively)
(Required provision for (reversal of) regulatory reserve for credit losses of W76,926 million as of June 30, 2021 and W(663,153) million as of December 31, 2020, respectively)
(Planned provision for (reversal of) regulatory reserve for credit losses of W76,926 million as of June 30, 2021 and W(663,153) million as of December 31, 2020, respectively)
Total equity							39,758,927				30,382,530
Total liabilities and equity						W	275,829,993				251,852,045

 

See accompanying notes to the interim separate financial statements.

 

S-24

Korea Development Bank

 

Interim Separate Statements of Comprehensive Income

 

Six-month periods ended June 30, 2021 and 2020 (Unaudited)

 

						June 30, 2021								June 30, 2020
(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			25			W	999,352				1,993,256				1,170,560				2,353,110
Interest expense			25				(592,784	)			(1,206,346	)			(853,780	)			(1,771,847	)
Net interest income			48				406,568				786,910				316,780				581,263
Net fees and commission income			26				83,928				168,268				77,161				162,846
Dividend income			27				111,067				642,599				140,416				400,605
Net gain (loss) on securities measured at FVTPL			28				5,721				(3,887	)			44,090				67,178
Net gain (loss) on financial liabilities measured at FVTPL			29				28,477				106,104				(28,799	)			(28,499	)
Net gain (loss) on securities measured at FVOCI			30				(6,462	)			(9,890	)			33,429				52,013
Net gain (loss) on derivatives			31				(30,382	)			(131,082	)			117,034				(79,021	)
Net gain on foreign currency transaction			32				33,580				108,720				21,065				214,221
Other operating income (expense), net			33				989,810				1,900,478				(72,713	)			(124,309	)
Non-interest income, net							1,215,739				2,781,310				331,683				665,034
Provision for credit losses			34				901,759				836,089				102,828				204,697
General and administrative expenses			35,48				178,727				369,716				172,058				352,701
Operating income			48				541,821				2,362,415				373,577				688,899
Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates							132,334				126,248				(155,388	)			(165,865	)
Other non-operating income			36				448,205				508,944				863				2,540
Other non-operating expense			36				(745	)			(6,011	)			807,691				(51,781	)
Non-operating income (expense), net							579,794				629,181				653,166				(215,106	)
Profit before income taxes							1,121,615				2,991,596				1,026,743				473,793
Income tax expense			37				198,686				613,988				256,665				104,450
Profit for the period			24				922,929				2,377,608				770,078				369,343
(Profit for the period adjusted for regulatory reserve for credit losses: W1,081,638 million and W2,300,682 million for the three-month and six-month periods ended June 30, 2021, respectively; W861,829 million and W404,373 million for the three-month and six-month periods ended June 30, 2020, respectively)
Other comprehensive income for the period, net of tax			24
Items that are or may be reclassified subsequently to profit or loss:
Net gain (loss) on securities measured at FVOCI							(13,756	)			(56,026	)			285,871				173,298
Exchange differences on translation of foreign operations							(3,098	)			41,880				(16,508	)			32,160
Valuation gain on cash flow hedge							23				657				23				235
Net gain (loss) on hedges of net investments in foreign operations							2,013				(23,963	)			9,881				(19,355	)
							(14,818	)			(37,452	)			279,267				186,338
Items that will not be reclassified to profit or loss:
Net gain (loss) on securities measured at FVOCI							3,083,003				6,130,023				39,295				(142,912	)
Fair value changes on financial liabilities designated at fair value due to credit risk							(300	)			414				(6,720	)			657
							3,082,703				6,130,437				32,575				(142,255	)
							3,067,885				6,092,985				311,842				44,083
Total comprehensive income for the period						W	3,990,814				8,470,593				1,081,920				413,426
Earnings per share
Basic and diluted earnings per share (in won)			38			W	215				558				202				98

 

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, 2021 and 2020 (Unaudited)

 

(In millions of won)		Issued capital				Capital surplus				Accumulated other comprehensive income				Retained earnings				Total equity
Balance at January 1, 2020		W	18,663,099				2,494,504				(88,092	)			4,733,320				25,802,831
Profit for the period			—				—				—				369,343				369,343
Net gain on securities measured at FVOCI			—				—				95,348				(64,962	)			30,386
Exchange differences on translation of foreign operations			—				—				32,160				—				32,160
Valuation gain on cash flow hedge			—				—				235				—				235
Net loss on hedges of net investments in foreign operations			—				—				(19,355	)			—				(19,355	)
Fair value changes on financial liabilities designated at fair value due to credit risk			—				—				657				—				657
Total comprehensive income for the period			—				—				109,045				304,381				413,426
Dividends			—				—				—				(111,978	)			(111,978	)
Paid in capital increase			450,500				(2,166	)			—				—				448,334
Transaction with owners			450,500				(2,166	)			—				(111,978	)			336,356
Balance at June 30, 2020		W	19,113,599				2,492,338				20,953				4,925,723				26,552,613
Balance at January 1, 2021		W	20,765,729				2,484,398				2,064,371				5,068,032				30,382,530
Profit for the period			—				—				—				2,377,608				2,377,608
Net gain on securities measured at FVOCI			—				—				6,058,968				15,029				6,073,997
Exchange differences on translation of foreign operations			—				—				41,880				—				41,880
Valuation gain on cash flow hedge			—				—				657				—				657
Net loss on hedges of net investments in foreign operations			—				—				(23,963	)			—				(23,963	)
Fair value changes on financial liabilities designated at fair value due to credit risk			—				—				414				—				414
Total comprehensive income for the period			—				—				6,077,956				2,392,637				8,470,593
Dividends			—				—				—				(209,638	)			(209,638	)
Paid in capital increase			1,120,830				(5,388	)			—				—				1,115,442
Transaction with owners			1,120,830				(5,388	)			—				(209,638	)			905,804
Balance at June 30, 2021		W	21,886,559				2,479,010				8,142,327				7,251,031				39,758,927

 

See accompanying notes to the interim separate financial statements.

 

S-26