KB Kookmin Bank readies another rescue fund for Indonesian unit KB Bukopin

South Korea’s KB Kookmin Bank is mulling another 1 trillion won ($697 million) injection in its Indonesian unit Bank KB Bukopin which would be its fourth capital increase since acquisition in 2018.

KB Kookmin Bank is expected to make a final decision on the recapitalization scheme for Bank KB Bukopin at a board meeting on Oct. 11, according to industry sources on Monday.

The capital increase to clean up bad debt would be in the scale of from 600 billion won to 1 trillion won, the sources said.

It would be the fourth time for the Korean parent bank to raise capital to normalize its Indonesian subsidiary’s business. It had assumed rights offering worth 560 billion won in last December.

KB Kookmin Bank is the largest shareholder of Bank KB Bukopin with a 67 percent stake. It acquired a 22 percent stake for 116.4 billion won in 2018 then increased its holdings through two bouts of share purchases in 2020. The Korean bank so far has injected 810 billion won into the Indonesian commercial lender.

Bank KB Bukopin’s nonperforming loan (NPL) ratio has exceeded 10 percent. NPL ratio measures the amount of nonperforming loans in a bank's loan portfolio to the total amount of outstanding loans the bank holds. KB Kookmin Bank hopes to bring down the Indonesian bank’s NPL ratio to below 4 percent through recapitalization.

The repeated capital injection raises concerns about woes of the Indonesian bank spilling over to the Korean parent.

KB Kookmin Bank has been asked by the Indonesian financial authority to recapitalize the Indian bank.

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