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Korea Development Bank And Lehman Brothers

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Interesting news that Lehman Brothers may be saved from its insolvent fate by Korea Development Bank. Rumors have emerged that a very big investment bank on Wall Street may fail in the near future and Lehman Brothers is a firm candidate.

Lehman Brothers and Wall Street can rejoice but is it a wise decision by Korea Development Bank? The state-run lender has performed poorly in overseas investment and is now lined up for privatization. Net profit halving to $24.6 million in the first half year-on-year.

The setback stands out against other local commercial banks, such as Shinhan and the Korea Exchange Bank (KEB), which enjoyed excellent profit growth abroad. Their lackluster performance is mainly due to high exposure to subprime mortgages and poor risk management.

Korea Development Bank has as good a chance as Lehman Brothers of going under by taking up more mortgage risks. Will they break with tradition and score a home run this time round? Don’t bet on it.

Korea Development Bank’s Chief Executive Officer Min Euoo Sung declined to comment on a Reuters report that the state-run lender is “open to” a potential acquisition of Lehman Brothers Holdings Inc.

Reuters, citing an unidentified Korea Development Bank spokesman, said Korea Development is studying a number of options, including buying Lehman.

The government is aiming to privatize the bank by 2012, and acquisitions of domestic and foreign companies may help the company expand ahead of that target.

Lehman spokesman Mark Lane declined to comment when contacted today by Bloomberg. Lehman, based in New York, is the fourth- largest U.S. securities firm.

Source: Bloomberg

Reported by Jeflin's Personal Ramblings

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