Issuer Summary: The Korea Development Bank

Report date: 2026-05-18
Issuer: The Korea Development Bank / Korea Development Bank / KDB
Ticker: KDB
Relevant bond issuer: The Korea Development Bank
Primary credit focus: Korean policy finance, government linkage, Article 32 loss-compensation support, distinction from ordinary bond guarantees, industrial and restructuring exposure, debenture funding, foreign-currency market access, capital injections and sovereign linkage

1. Business Snapshot and Recent Developments

The Korea Development Bank (hereafter KDB or the Korea Development Bank) is a statutory policy-finance institution established in 1954 under The Korea Development Bank Act (KDB Act). It is neither an ordinary commercial bank nor the Korean government itself. The starting point for credit analysis is KDB’s dual nature: it is a policy-finance vehicle that connects Korean government industrial policy, financial market stabilisation, corporate restructuring, infrastructure, regional development and growth-industry promotion to the financial markets, while also being a large-scale issuer that funds itself in domestic and international bond markets.

The most important point in assessing KDB’s credit profile is not to conflate its institutional linkage with the government with the legal protection of individual bonds. KDB is 100% owned by the Korean government, and Article 32 of the KDB Act sets out a framework under which the government covers any shortfall if KDB’s annual net loss cannot be absorbed by reserves. KDB’s official IR materials show KDB’s ratings as Moody’s Aa2, S&P AA and Fitch AA-, all Stable, at the same level as Korea’s sovereign ratings. However, ordinary KDB bonds are not direct claims on the Korean government unless the relevant issuance documents explicitly state that they are government-guaranteed. In fact, for the USD3.0bn KDB notes issued under the SEC Form 424B2 filed on January 22, 2026, the documentation explicitly states that the payment of principal and interest is not guaranteed by the government.

The latest financial information reflected in this report consists of the unconsolidated financial data through end-June 2025 included in KDB’s 2025 IR Presentation, and the unaudited selected separate K-IFRS financial information for end-September 2025 and 9M25 included in the SEC Form 424B2 dated January 22, 2026. KDB’s website was confirmed to include the 2024 Annual Report, but as of May 18, 2026, the FY2025 audited Annual Report had not been confirmed. Accordingly, the 9M25 figures are treated as confirmed unaudited interim data and not as final audited FY2025 full-year figures.

There are three recent developments of particular importance. First, the KDB Act was amended in September 2025 to raise the authorised capital ceiling from KRW30tn to KRW45tn. The January 2026 SEC Form 424B2 explains that KDB’s articles of incorporation were also amended to KRW45tn in December 2025, and that authorised capital was KRW45tn as of September 30, 2025. Second, in March 2025, the government announced a plan to establish the High-Tech Strategic Industry Fund within KDB, targeting support for semiconductors, secondary batteries, bio, AI, robotics and other sectors, and indicated that government-guaranteed fund bonds would be used as a funding tool. Third, in January 2026, KDB issued USD3.0bn of SEC-registered notes. This demonstrates large-scale access to foreign-currency markets, while the same issuance documents also confirm the absence of a government guarantee.

KDB’s issuer profile can be summarised as follows.

2. Policy Mandate and Government Linkage

Article 1 of the KDB Act defines KDB’s purpose as supplying and managing funds needed for industrial development, social infrastructure, regional development, financial market stabilisation, sustainable growth and related objectives, and thereby contributing to the sound development of the financial industry and the national economy. This shows that KDB is not a private bank that allocates assets solely based on profitability, but a financial institution that implements government policy objectives.

Article 18 broadly permits KDB to provide funding for industrial development, SME promotion, social infrastructure and regional development, energy and resources development, overseas expansion, corporate restructuring, new growth industries and related areas. Its tools include loans, securities underwriting and investment, debt guarantees, the issuance of Industrial Finance Bonds and other securities, borrowings from the government, Bank of Korea and financial institutions, foreign-currency borrowings, and domestic and foreign-exchange operations. This breadth is also what makes KDB’s credit risk difficult to analyse. KDB does not merely provide low-risk public finance; it supplies capital, credit and guarantees to industries, restructuring situations and growth sectors deemed necessary for policy purposes.

The government linkage extends beyond ownership. Under Article 13 of the KDB Act, KDB’s Chairman & CEO is appointed by the President of Korea, while the Managing Director, Directors and Auditor are appointed by the Financial Services Commission (FSC). Article 22 requires KDB to submit its annual business plan to the FSC for approval. KDB’s IR materials also refer to FSC approval of revenue and expenditure budgets under Article 30. These provisions show that KDB’s financial and business operations are more deeply embedded in government supervision than those of an ordinary private bank.

Article 32 is central to KDB’s support framework. Annual net losses are covered by reserves, and if reserves are insufficient, the government covers the shortfall. This mechanism provides significant support to the issuer’s credit profile. As a policy-finance institution, if KDB incurs losses, the government has both the incentive and the statutory framework to provide loss absorption and capital support rather than leave KDB to be resolved in isolation.

However, Article 32 should not be described as a government guarantee of individual bonds. Article 32 is an issuer-level loss-compensation framework that applies where annual net losses exceed reserves. It is not a provision under which the Korean government unconditionally and irrevocably guarantees principal and interest payments on all KDB bonds on their payment dates. Article 19 of the KDB Act, with respect to foreign-currency liabilities, and Article 26, with respect to Industrial Finance Bonds, provide that the government may guarantee principal and interest, but in each case prior approval from the National Assembly is required. Therefore, KDB credit analysis must distinguish between the likelihood of government support and the legal guarantee status of individual bonds.

This distinction is clearly confirmed in KDB’s January 2026 SEC notes. The issuance consists of USD1.25bn 2029 notes, USD1.25bn 2031 notes and USD0.5bn 2031 floating-rate notes, but the prospectus supplement explicitly states that payment of principal and interest is not guaranteed by the government. This is an important investor confirmation point: KDB may be assessed as a credit very close to the Korean government, but that does not mean individual bonds become direct obligations of the Korean government.

3. Business Line and Exposure Assessment

KDB’s business is more accurately understood as a set of policy-finance functions than as the segments of a simple commercial bank. Its business scope spans industrial development, corporate restructuring, infrastructure, regional development, overseas expansion, new growth industries and financial market stabilisation. This business structure increases the government’s incentive to support KDB’s capital, liquidity and market access, but it also means that asset composition and profitability are influenced by policy cycles, because KDB provides funding to long-term, large-scale, restructuring-related and strategic-industry projects that private finance does not sufficiently cover.

Among recent policy themes, support for advanced strategic industries is particularly important. In March 2025, the Korean government announced a plan to establish the High-Tech Strategic Industry Fund within KDB. The target sectors are advanced strategic industries such as semiconductors, secondary batteries, bio, AI and robotics, and the stated purpose is to support ultra-long-term facilities and technology-development investment that conventional financial institutions have found difficult to provide sufficiently. Government materials explain that the fund will raise funds through government-guaranteed high-tech strategic industry fund bonds, and that KDB’s own resources will be involved in part of operating expenses and interest payments. KDB’s 2025 IR materials position the High-Tech Strategic Fund, with a maximum size of KRW75tn, and the government-led National Growth Fund, with a maximum size of KRW150tn, as growth-industry support frameworks in which KDB is the key financial contributor.

This policy expansion increases KDB’s importance, but it also requires caution in analysis. Semiconductors, secondary batteries, AI, bio and robotics are high policy-priority sectors, but they are also capital-intensive and subject to rapid technological change. The higher the policy need, the larger the credit, market and recovery risks KDB may assume.

KDB’s corporate restructuring and market-stabilisation functions also shape its risk profile. KDB is involved in stabilising major industries, large corporates and financial markets under stress, and takes risk not only through loans but also through guarantees, investments, funds and special support. The January 2026 SEC Form 424B2 states that confirmed acceptances and guarantees were KRW11.5397tn as of September 30, 2025. It also lists HMM Company Limited, HJ Shipbuilding & Construction, Daehan Shipbuilding, K Shipbuilding, GM Korea and Taeyoung E&C as large exposures classified as substandard or below among loans, guarantees and equity investments, with total credit exposure declining slightly from KRW9.966tn at end-2024 to KRW9.636tn at end-September 2025. HMM alone accounted for KRW6.676tn, showing that policy, restructuring and industrial concentration risk is not merely theoretical.

Commercial-bank metrics such as NIM and loan-to-deposit ratio are not sufficient to analyse KDB’s business risk. KDB’s earnings are affected by policy investments, securities, foreign exchange, derivatives, credit costs, and valuation and provisioning for restructuring cases. KDB has deposits, but from an investor perspective the core issue is not a sticky retail deposit base; it is KDB’s ability to continue funding itself through a combination of Industrial Finance Bonds, debentures, domestic and international bond markets, foreign-currency borrowings and government capital support.

4. Financial Profile and Asset Quality

KDB’s financial profile should not be ignored even when government support is assumed. The credit strength of a policy-finance institution is materially reinforced by government support, but if standalone asset quality, capital ratios, funding structure and earnings generation deteriorate, this can affect the scale and timing of government support, the political burden and investor spread assessment. For KDB, unconsolidated financials and the trend in capital injections are important even when assessing the direction of supported credit strength.

According to KDB IR Presentation 2025, unconsolidated total assets expanded from KRW251.852tn at end-2020 to KRW339.221tn at end-2024 and KRW340.869tn at end-June 2025. The unaudited selected separate K-IFRS financial information in the SEC Form 424B2 further shows total assets of KRW345.045tn, total loans of KRW218.519tn, total borrowings of KRW270.172tn and equity of KRW45.651tn at end-September 2025. 9M25 net income was KRW2.250tn, exceeding KRW1.801tn in 9M24, but the increase included gains from partial disposal of Hanwha Ocean shares, a reversal of investment impairment following an increase in the value of HMM common shares, and lower derivative losses. It therefore cannot be explained purely by recurring net interest income.

On earnings, interest income and interest expense both increased materially, reflecting the higher-rate environment. Net interest income was KRW1.744tn in 2022, KRW1.562tn in 2023, KRW1.118tn in 2024 and KRW542bn in 1H25, and has not simply increased in line with asset growth. Profit for the period was KRW465bn in 2022, KRW2.509tn in 2023, KRW2.007tn in 2024 and KRW1.908tn in 1H25, indicating that KDB has remained profitable recently. However, the earnings of a policy-finance institution include net interest income, non-interest income, provisions, valuation gains and losses, and foreign-exchange and derivative effects, so changes in net income should not be read directly as an improvement or deterioration in underlying earnings capacity.

Adding the 9M25 selected financial information from the SEC Form 424B2, the latest confirmed figures are as follows.

On asset quality, the chart in KDB IR Presentation 2025 shows an NPL ratio of 2.5% in 2020, 1.7% in 2021, 0.7% in 2022, 0.8% in 2023, 0.6% in 2024 and 0.6% in 1H25. The same chart shows a coverage ratio of 121.0% in 2020, 170.1% in 2021, 365.1% in 2022, 236.7% in 2023, 275.4% in 2024 and 269.5% in 1H25. These are reported figures extracted from KDB’s disclosure materials and are not recalculated in this report. Nevertheless, at least on a disclosed basis, the NPL ratio has appeared low since 2022 and provisioning coverage appears substantial.

However, a low NPL ratio alone should not provide comfort. Because KDB is involved in corporate restructuring and strategic-industry support, large policy-related exposures that are not classified as non-performing under normal conditions may become stressed depending on the economic environment, industrial cycles, interest-rate and foreign-exchange conditions, export demand, semiconductor and secondary-battery investment cycles, and progress in shipbuilding, defence and infrastructure projects. The SEC Form 424B2 explains that 9M25 credit-loss provision reversals narrowed from KRW409.4bn in 9M24 to KRW19.9bn, and that loan loss allowance moved from a KRW70.8bn reversal in 9M24 to a KRW196.4bn provision in 9M25. Risks through guarantees and investments cannot be fully captured by loan NPLs alone.

On capital, KDB IR Presentation 2025 shows consolidated capital adequacy ratios. The 1H25 BIS capital ratio is shown as 14.8%, and the Tier 1 ratio as 13.9%. In 2024, the BIS capital ratio was 13.9% and the Tier 1 ratio was 12.9%, so both improved in 1H25. KDB has received capital injections from the government. KDB’s IR materials show capital injections of KRW1.265tn in 2022, KRW775bn in 2023, KRW2.390tn in 2024 and KRW941bn in 2025 as of November 30, 2025. This shows that KDB’s policy-finance expansion and prudential soundness are closely linked to the government’s capital policy.

The practical focus in reading KDB’s financial profile is not single-year profit, but the relationship between the pace of capital growth and the pace of risk growth. If KDB supplies further funding to advanced strategic industries, corporate restructuring and market stabilisation, loans, investments and guarantees may expand, while earnings may not necessarily increase in a stable manner. The increase in authorised capital to KRW45tn indicates the government’s intention to expand KDB’s policy-finance capacity, but it also means that future capital injections and growth in risk-weighted assets need to be monitored continuously.

5. Funding, Liquidity and Capital Structure

One of the most important financial issues in investor credit analysis of KDB is its funding structure. KDB has deposits, but for credit investors the central question is whether it can continue refinancing its large policy-finance balance sheet through debentures, Industrial Finance Bonds, domestic and international public and private bonds, bank borrowings and foreign-currency borrowings.

On the unconsolidated balance sheet at end-June 2025, Debentures were KRW164.199tn, Borrowings were KRW29.608tn and Deposits were KRW68.544tn. The SEC capitalisation table for end-September 2025 shows long-term debt consisting of Industrial finance bonds of KRW165.504tn, Won currency borrowings of KRW4.464tn, foreign currency borrowings of KRW6.839tn and total long-term debt of KRW176.807tn. One reason KDB’s credit profile is strongly linked to the Korean sovereign is that KDB is a large-scale issuer in domestic and international bond markets, and maintaining its market access is important to Korea’s policy-finance and market-stabilisation functions.

Article 23 of the KDB Act provides that KDB may issue Industrial Finance Bonds to raise funds necessary for its operations. Only KDB may issue Industrial Finance Bonds, and there are statutory limits on outstanding issuance and guarantees. The January 2026 SEC Form 424B2 explains that, as of June 30, 2025, industrial finance bonds and guarantee obligations totalled KRW184.5067tn, equivalent to 19.5% of the authorised amount under the KDB Act. This headroom demonstrates KDB’s statutory funding capacity, but actual investor risk depends not only on statutory limits but also on interest rates, foreign-currency liquidity, market conditions, hedging and the government’s support stance.

Foreign-currency funding capacity is an important strength for KDB. According to KDB IR Presentation 2025, KDB had almost achieved its USD10bn equivalent funding target for 2025 as of December 2, 2025, with total FY2025 funding of USD9.9bn, compared with USD9.1bn in FY2024. The FY2025 breakdown was USD6.3bn of public offerings, including USD4.0bn SEC registered, USD1.8bn GMTN and USD0.5bn AMTN, USD3.3bn of private placements and USD0.3bn of bank loans. KDB states that since 2024 it has strengthened investor recognition as an SSA-style issuer and intends to continue USD/EUR benchmark issuance.

KDB IR Presentation 2025 shows that, as of December 2, 2025, outstanding bonds were 73.4% KRW-denominated and 26.6% foreign-currency-denominated. Foreign-currency outstanding was USD32.4bn equivalent, with a currency breakdown of 65.2% USD, 10.3% BRL, 10.2% EUR, 2.8% AUD, 2.3% GBP and 9.1% Others. This currency diversification demonstrates the diversity of KDB’s investor base and funding channels, but also means continued dependence on foreign-currency funding, swaps, hedging, collateral, FX markets and investor demand.

On liquidity, the LCR chart in KDB IR Presentation 2025 shows monthly average LCRs remaining above regulatory requirements since 2022. However, refinancing risk cannot be assessed from the LCR alone. The principal repayment schedule as of end-June 2025 in the SEC Form 424B2 shows repayments of KRW62.756tn through end-2025, KRW32.149tn in 2026, KRW17.667tn in 2027, KRW10.445tn in 2028 and KRW16.201tn thereafter. Foreign-currency repayments are KRW12.285tn of the 2026 amount and KRW7.974tn of the 2027 amount, making foreign-currency market access and hedging conditions ongoing monitoring items.

In capital structure, government capital with common-equity characteristics, retained earnings, Tier 2 capital securities, Industrial Finance Bonds, ordinary senior bonds, foreign-currency bonds and borrowings each carry different risks. KDB’s IR materials show multiple KRW-denominated Tier 2 capital securities issuances during 2022 and 2023. For senior bond investors, Tier 2 provides loss-absorbing capacity, while any assessment of capital securities themselves requires separate confirmation of subordination, calls, coupon suspension and regulatory treatment.

6. Bondholder Structure and Legal Support

The most easily misunderstood point in KDB bond investment is the distinction between KDB’s very strong government linkage and whether an individual bond is directly guaranteed by the government. KDB’s issuer credit is strongly supported by Korean government ownership, statutory purpose, Article 32, FSC supervision, capital injections and rating-agency assessment of support. By contrast, ordinary KDB senior unsecured notes should be read as direct, unsecured obligations of KDB itself unless the issuance documents explicitly state that they are government-guaranteed.

The SEC Form 424B2 dated January 22, 2026 makes this point clear. Under that issuance, KDB issued USD1.25bn of 3.750% notes due 2029, USD1.25bn of 4.000% notes due 2031, and USD0.5bn of SOFR+0.500% FRNs due 2031. The total issue size was USD3.0bn, and net proceeds after underwriting discounts but before estimated expenses were USD2.9838625bn. Use of proceeds was for general operations, including foreign-currency lending and repayment of maturing obligations and other indebtedness. The important point is that the prospectus supplement explicitly states that payment of principal and interest on these notes is not guaranteed by the Government.

Under the KDB Act, there are circumstances in which government guarantees can exist. Article 19 provides that the government may guarantee principal and interest on KDB’s foreign-currency liabilities with prior approval from the National Assembly. Article 26 similarly provides that the government may guarantee principal and interest on Industrial Finance Bonds with prior approval. Therefore, there are legal categories of KDB bonds that can be government-guaranteed. However, this does not mean that all bonds are guaranteed simply because they are issued by KDB. Investors must review each bond’s prospectus, pricing supplement, guarantee language, governing law, ranking, currency, covenants and events of default.

Article 32 should be handled with the same caution. Article 32 is a framework under which the government covers any shortfall if KDB’s annual net losses exceed reserves. This materially increases the likelihood of issuer support. Given the impact that a KDB failure or disorderly default would have on Korea’s financial markets, policy finance and industrial policy, the government has a very strong incentive to maintain KDB’s capital and credit strength. However, Article 32 does not automatically mean that investors can make a direct claim against the Korean government on each note’s payment date.

In practice, KDB bonds are often treated in the market as credit instruments very close to the Korean sovereign. However, in an investor credit memo, relative value and legal recovery rights should be separated. If Article 32 or government ownership is used to erase the legal distinction between KDB senior debt and direct Republic of Korea obligations, the structure analysis becomes flawed.

7. Rating Agency View

KDB’s public IR materials show Moody’s Aa2, S&P AA and Fitch AA-, all Stable. The Korean sovereign is also shown as Moody’s Aa2, S&P AA and Fitch AA-, Stable, so KDB’s ratings are at the same level as the sovereign. Korean government English releases state that Fitch affirmed Korea at AA- Stable on January 30, 2026, Moody’s affirmed Korea at Aa2 Stable on February 12, 2026, and S&P affirmed Korea at AA Stable on April 29, 2026.

KDB IR Presentation 2025 includes rating agency assessments to the effect that, because KDB is deeply linked to the government’s policy function, government support is expected in times of financial stress. It also includes statements to the effect that KDB’s ratings are aligned with the Korean sovereign and that the stand-alone credit profile is not viewed as an important rating driver. However, this report treats those descriptions as rating agency assessments cited in KDB’s official IR materials, not as a direct review of the latest full reports from each rating agency.

There are three caveats in using ratings for credit analysis. First, KDB’s ratings are not determined solely by standalone financials; they depend heavily on government support, policy importance and the Korean sovereign credit profile. Second, the fact that KDB’s ratings are at the same level as the sovereign does not mean ordinary bonds are direct government obligations. Third, rating-agency downgrade triggers, government-support assessment, standalone assessment and details of support uplift should not be asserted without reviewing the latest full reports.

The most important rating risks for KDB are changes in Korea’s sovereign ratings or outlook, weakening of the government support framework or ownership and supervision relationship, reduced confidence in Article 32 or capital-injection policy, insufficient capital support relative to policy-finance expansion, rapid deterioration in asset quality and reduced foreign-currency market access. Conversely, even if KDB’s standalone indicators fluctuate to some degree, the main axis of the rating is likely to remain the sovereign linkage as long as government support and policy importance are maintained. This view also depends on the latest rating-agency judgments and should be updated when formal reports are obtained.

8. Credit Positioning

KDB’s closest credit comparables are the Korean sovereign, KEXIM, IBK, KHFC and major Korean GREs. However, the basis of comparison differs. Relative to the Korean sovereign, the focus is credit level and support capacity. Relative to KEXIM, the focus is the similarity in policy-finance functions and foreign-currency market funding, as well as the distinction between ordinary bonds and government-guaranteed bonds. Relative to IBK, both are government-related financial institutions, but IBK has a stronger SME-finance and deposit-bank character, while KDB has a stronger industrial development, restructuring, market-stabilisation and long-term policy-finance profile. Relative to KHFC, both have strong policy-finance and quasi-sovereign characteristics, but KHFC centres on housing finance and securitisation, while KDB centres on industry, corporates, restructuring and foreign-currency funding.

KDB also shares the Korean government-support theme with Korean GREs such as KEPCO, KOGAS, KNOC, Korea Expressway Corporation and Korea Land & Housing Corporation. However, because KDB is a financial institution rather than an operating company, the core risks are not operating-company risks such as electricity tariffs, gas procurement, crude-oil prices, road traffic or the real-estate cycle, but loans and investments, guarantees, credit costs, capital ratios, bond-market access, hedging and foreign-currency liquidity. KDB is the financial hub of Korean industrial policy, not an operator in a single sector.

The difference from KEXIM is particularly important. KEXIM, as the official export credit agency for export credit, overseas investment and supply-chain stabilisation, is heavily involved in guarantees and foreign-currency projects. KDB covers broader domestic industrial finance, corporate restructuring, financial market stabilisation and new growth-industry funds. Both are supported by their Korean government linkage and high ratings, but KEXIM has greater export, overseas project and guarantee concentration, while KDB has a stronger domestic industrial policy, restructuring, large-scale market-based funding and policy-fund profile. For investors looking at the Korean policy-finance SSA bucket, KDB and KEXIM are the closest pair, but their stress paths are not identical.

Compared with major Korean private banks, KDB’s strength is its government linkage and policy importance, while its constraint is that it assumes policy risk in a way that differs from a commercial-bank deposit franchise or earnings diversification. For KDB, in addition to financial metrics, the government’s capital policy, Article 32, Industrial Finance Bonds, policy-finance expansion, the existence or absence of government-guaranteed fund bonds and the Korean sovereign investor base are more important.

9. Key Credit Strengths and Constraints

KDB’s largest credit support is its institutional linkage with the Korean government. 100% government ownership, purpose, business scope and supervision under the KDB Act, Article 32 annual net-loss compensation, FSC approval of business plans, government appointment of officers, continuing capital injections and international ratings at the same level as the Korean sovereign indicate a support likelihood that is clearly stronger than that of ordinary private financial institutions.

The second support is KDB’s difficult-to-substitute role. KDB is the policy-finance hub supporting Korea’s industrial development, corporate restructuring, financial market stabilisation and advanced strategic-industry investment. It would be undesirable for the Korean government if KDB were to lose large-scale market access or become unable to perform its policy functions because of capital constraints. This is a key reason KDB’s issuer credit is pulled close to the Korean sovereign.

The third support is the financial and capital indicators confirmed to date. At end-June 2025, unconsolidated total assets were KRW340.869tn, total equity was KRW44.848tn and profit for the period in 1H25 was KRW1.908tn. In KDB’s IR materials, the 1H25 NPL ratio was 0.6%, the coverage ratio was 269.5%, the BIS capital ratio was 14.8% and the Tier 1 ratio was 13.9%. These indicate that, at least on a disclosed basis, asset quality and capital are not in a materially weakened state.

The fourth support is market access. KDB raised USD9.1bn in foreign-currency funding in 2024, USD9.9bn in 2025, and issued USD3.0bn of SEC-registered notes in January 2026. Recognition among international investors as a Korea SSA-style issuer, together with USD/EUR benchmark issuance, private placements, bank loans and other multiple funding channels, supports liquidity and refinancing capacity.

The credit constraints are also clear. First, ordinary KDB bonds are not necessarily direct government-guaranteed bonds. Even where KDB’s ratings are aligned with the Korean sovereign and Article 32 exists, some issues, such as the January 2026 notes, are not government-guaranteed for principal and interest. Investors need to distinguish issuer support from legal guarantees.

Second, KDB can assume risk for policy purposes. Corporate restructuring, industrial support, advanced strategic industries and financial market stabilisation have high public-policy relevance, but they also involve risks that private finance may not be able to assume on its own. As KDB’s balance sheet expands, the government’s capital policy and KDB’s credit-risk management become more important.

Third, dependence on market-based funding is high. Debentures were KRW165.102tn at end-2024 and KRW164.199tn at end-June 2025, meaning access to domestic and international bond markets is directly linked to KDB’s credit strength. If Korea’s sovereign outlook, foreign-currency funding conditions, USD/EUR investor demand, hedging costs, exchange rates or global interest rates deteriorate, KDB’s funding costs and refinancing headroom would be affected.

Fourth, earnings have multiple sources of volatility. Net income alone cannot be used to judge underlying earnings capacity.

Fifth, the latest full-year audited financials have not yet been confirmed. The end-June 2025 and end-September 2025 information is useful, but because the FY2025 Annual Report has not been confirmed, the audited FY2025 profit, capital, NPLs, guarantees, investment valuations, derivatives and maturity schedule need to be checked in the next update.

10. Downside Scenarios and Monitoring Triggers

KDB’s credit deterioration scenarios differ somewhat from those of an ordinary commercial bank. The most important factor is change in the Korean sovereign and the government support framework. Because KDB’s ratings and market access depend heavily on the government’s support capacity and willingness, a downgrade of Korea’s sovereign rating, a negative outlook change, or deterioration in fiscal or foreign-currency liquidity assessment would be likely to have a direct effect on KDB’s credit assessment and spreads.

The second risk is institutional or political weakening of government support. As long as KDB remains 100% government-owned and retains Article 32, the support framework is strong. However, if ownership, legislation, government guarantee policy, the capital-injection stance, FSC supervision or the role of policy finance were to change in the future, the assumptions underlying supported credit strength would also change. No such change has been confirmed at present, but this is the most important monitoring item for a quasi-sovereign issuer.

The third risk is that capital fails to keep pace with policy-finance expansion. KDB has broad roles expected by the government, including advanced strategic industries, the National Growth Fund, corporate restructuring and financial market stabilisation. If policy-finance expansion causes rapid growth in risk assets, guarantees, investments and long-term projects while government capital injections are insufficient, the BIS ratio, Tier 1 ratio, NPL coverage and funding costs could come under pressure.

The fourth risk is a rapid deterioration in asset quality. The NPL ratio was low at 0.6% in 1H25, but that does not guarantee the absence of stress. If parts of Korea’s large corporate, shipbuilding, defence, semiconductor, secondary-battery, infrastructure, overseas expansion and corporate-restructuring exposures deteriorate simultaneously, provisions, guarantee calls, valuation losses and capital consumption could increase.

The fifth risk is the market funding environment. KDB is a large foreign-currency and domestic bond issuer, and refinancing market access is important. Higher global rates, tight dollar funding, wider risk premia for the Korean sovereign or Korean financial sector, geopolitical events, won depreciation, higher hedging costs, or lower investor demand for SSA paper would affect KDB’s spreads and funding headroom.

The sixth risk is overlooking bond terms. Even if KDB’s issuer credit is very strong, individual bonds differ in ranking, guarantee status, capital nature, call features, governing law, liquidity and use of proceeds. Article 32 and ratings should not be used to group all individual bonds together for legal-risk purposes.

11. Credit View and Monitoring Focus

KDB is a policy-finance issuer with much stronger supported credit strength than an ordinary private financial institution, based on its institutional linkage with the Korean government, 100% government ownership, the annual net-loss compensation framework under KDB Act Article 32, government supervision, capital injections and international ratings aligned with the Korean sovereign. The base case for supported credit depends heavily on government support, and the rating agency assessments cited in KDB’s IR materials also indicate this sovereign linkage. The direction of credit strength is driven more by Korea’s sovereign credit quality, the government’s support stance, capital policy and the pace of policy-finance mandate expansion than by KDB’s short-term standalone earnings. The view would change rapidly if Korea’s sovereign outlook deteriorated, confidence in Article 32, government ownership or capital injections weakened, foreign-currency market access fell sharply, or capital and asset quality failed to keep pace with policy-finance expansion.

As an issuer, KDB can be assessed with a strong assumption of government support, but ordinary bond investment requires a clear distinction as to whether a legal guarantee exists. The SEC-registered notes issued in January 2026 show that KDB can execute a large USD3.0bn foreign-currency issuance, while also explicitly stating that payment of principal and interest is not government-guaranteed. Therefore, KDB senior unsecured debt can be assessed, on a supported basis, as a credit close to the Korean sovereign, but legally it is an obligation of KDB itself and should not be equated with direct Republic of Korea debt.

On confirmed data, KDB’s standalone financials reinforce this supported credit strength. The unaudited selected separate K-IFRS financial information in the SEC filing showed total assets of KRW345.045tn, total loans of KRW218.519tn, equity of KRW45.651tn and 9M25 net income of KRW2.250tn at end-September 2025. KDB’s IR materials show a BIS capital ratio of 14.8%, Tier 1 ratio of 13.9% and NPL ratio of 0.6% at end-June 2025. However, 9M25 profit growth included investment disposal gains, impairment reversals and lower derivative losses, while credit costs shifted from large reversals in the prior-year period toward provisioning. Net income alone should therefore not be read as an improvement in underlying earnings capacity.

However, a KDB credit memo should not end with “strong government linkage”. KDB assumes risks that differ from those of an ordinary private bank through policy-finance expansion, corporate restructuring, advanced strategic industries, foreign-currency market funding, guarantees and investments. In future updates, priority should be given to confirming the FY2025 Annual Report, the latest full rating-agency reports, the institutional design of the High-Tech Strategic Industry Fund, actual terms for any government-guaranteed fund bonds, KDB’s capital injections, NPLs, coverage and BIS ratio, and foreign-currency bond maturities and funding costs.

The practical view at the date of this report is to treat KDB as a core issuer in the Korean policy-finance SSA bucket and compare it with KEXIM as a top-tier Korean policy-finance peer. KDB’s spreads and individual bond valuations require relative comparison with the Korea sovereign, KEXIM, IBK, KHFC, major Korean banks and other sovereign/SSA peers, but live spreads have not been checked in this report. Any relative-value decision must confirm the target bond’s guarantee status, maturity, currency, liquidity, issuance format, index eligibility and use of proceeds.

12. Short Summary & Conclusion

KDB is a statutory policy-finance institution 100% owned by the Korean government and is a core issuer in the Korean policy-finance SSA bucket, supported by KDB Act Article 32, government supervision, capital injections and ratings aligned with the Korean sovereign. Its credit strength is very close to the Korean sovereign, but ordinary KDB bonds are not direct obligations of the Republic of Korea unless a government guarantee is explicitly stated, and issuer support must be distinguished from individual bond guarantees. The main monitoring points are the Korean sovereign, government capital policy, policy-finance expansion, asset quality, foreign-currency market access, and the guarantee status, ranking and terms of each bond.

13. Sources

Primary company and legal sources

• The Korea Development Bank, IR Presentation 2025, December 2025. https://www.kdb.co.kr/wcmscontents/pdf/IR_Presentation_2025.pdf
• The Korea Development Bank, The KDB Act & Regulations, amended by Law No. 17253, May 1, 2020. https://www.kdb.co.kr/wcmscontents/pdf/The_KDB_Act_2020.pdf
• The Korea Development Bank, SEC Form 424B2 prospectus supplement, filed January 22, 2026. https://www.sec.gov/Archives/edgar/data/869318/000119312526018610/d20828d424b2.htm
• The Korea Development Bank, Annual Reports page, accessed 2026-05-18. https://www.kdb.co.kr/BZCOWS00N00.act?_mnuId=IHIHEN0024&wcmsPath=%2Fhmp%2Fch%2Fgl%2Fir%2FCHGLIR0100.html

Government and sovereign sources

• Ministry of Economy and Finance, A 50 Trillion KRW High-Tech Strategic Industry Fund to be Established, March 5, 2025. https://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=6109
• Ministry of Finance and Economy, Fitch Ratings Affirms Korea's Sovereign Credit Rating at 'AA-' with a Stable Outlook, January 30, 2026. https://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=6346
• Ministry of Finance and Economy, Moody's Affirms Korea's Sovereign Credit Rating at Aa2 with a Stable Outlook, February 12, 2026. https://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=6354
• Ministry of Finance and Economy, S&P Global Ratings Affirms Korea's Sovereign Credit Rating at 'AA' with a Stable Outlook, April 29, 2026. https://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=6398

Internal peer references

• The Export-Import Bank of Korea issuer_summary, dated 2026-05-16.
• Other Korean policy-finance and GRE issuer summaries where relevant: Industrial Bank of Korea, Korea Housing Finance Corporation, KEPCO, KOGAS, KNOC.

14. Unverified / Pending

• FY2025 audited Annual Report was not located as of 2026-05-18. The next update should confirm whether KDB has published FY2025 audited financial statements and update the financial, capital, NPL, guarantee, derivative and maturity tables.
• Latest full Moody's, S&P and Fitch rating reports were not obtained. Rating symbols and selected support language are from KDB IR Presentation 2025 and MOEF sovereign-rating release.
• The latest consolidated English translation of the KDB Act after the September 2025 amendment was not downloaded. The legal status of the KRW45tn authorized capital increase is confirmed through KDB's January 22, 2026 SEC Form 424B2, but the full amended English law text should be obtained when available.
• Live spread levels and relative-value conclusions were not verified. Before making a bond recommendation, compare KDB against Korea sovereign, KEXIM, IBK, KHFC, Korean commercial banks and relevant SSA peers.
• Bond-by-bond guarantee status, ranking, covenants, tax, use of proceeds and capital-security terms must be checked in each relevant pricing supplement or prospectus.
• More granular sector and single-name exposure data beyond the reviewed KDB IR/SEC materials should be added if obtained, especially for corporate restructuring, shipbuilding, semiconductors, secondary batteries and high-tech strategic industries. The current report incorporates the SEC 424B2 table for selected substandard-or-below large exposures but not a full portfolio concentration table.