KB Kookmin Bank places Korean manager, to make third funding in Indonesian unit

South Korean leading commercial bank KB Kookmin Bank is bolstering capital of up to 300 billion won ($264.2 million) in a third funding to its Indonesian unit Bank KB Bukopin and dispatch Korean manager to restore the mid-sized bank from the blow of Covid-19.

KB Kookmin Bank will hold an ad hoc board meeting possibly this month to approve a recapitalization scheme of 200 billion won to 300 billion won for Bank KB Bukopin this year.

The bank has funded the bank twice last year, pushing its stake up to 67 percent from 22 percent when it made its first investment in 2018. The spending so far had been around 400 billion won.

Although the Indonesian law limits foreign entity’s stake ownership in local financial entity to 40 percent, an exception was given due to liquidity woes of the bank.

Bank BK Bukopin will issue new shares to KB Kookmin Bank, according to a public disclosure. Up to a total of 35.2 billion new shares will be sold, at 10 percent discount from the average of Bukopin stock price over the last month.

Shares of BK Bukopin, listed at Indonesia Stock Exchange, closed at 422 rupiah ($0.03) on Wednesday, down 5.38 percent from the previous session. The stock’s price has jumped 139.4 percent over the period from June 30, 2020 to June 7, 2021 amid anticipations for business normalization.

KB Kookmin Bank is sending Choi Chang-soo, executive vice president who has led to bank’s overseas expansion projects, as head of Bank KB Bukopin. Choi started his new office on Wednesday after gaining shareholders’ approval at a general meeting held last Thursday.

Bank KB Bukopin is weighed down by distressed debts. Its equity capital currently hovers around 800 billion won. Established in 1970, the bank has a network of 453 outlets across Indonesia.

KB Kookmin Bank has hoped to groom Bank KB Bukopin, along with its other operations in Cambodia and Myanmar, as the stepping stone for its growth in Southeast Asia and greater overseas markets.

The Korean lender raked in a mere 1.4 billion won in net profit from its operations in Southeast Asia in the first quarter 2020 but the profit from the region jumped to 10.2 billion won in a year after reflecting income from Bank KB Bukopin.

The Korean bank earned 15.0 billion won in net profit from its global operations including Southeast Asia in the first quarter this year. That is only 2.2 percent of the bank’s entire net profit of 688.6 billion won.

On Thursday, shares of KB Financial Group Inc, parent of KB Kookmin Bank, rose 1.08 percent to close at 56,100 won in Seoul. KB Kookmin Bank is not listed.

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