Chairman Shin Dong-kyu of NH Financial Holding Co. has decided to increase the capital of its affiliates including NH Bank and NH Life Insurance by around 1.7 trillion won to boost their competitive strength. The increased funds will be invested largely in non-financial business sectors, the holding company said recently.

At a media conference held at the Banker’ s Hall in Myeongdong, downtown Seoul, on Aug. 28, the chairman said they will issue bonds to raise the 1.7 trillion won, which will go to boost the farmer’ s cooperatives, the National Agricultural Cooperatives Federation (NACF), and Nonghyup’ s other non-banking affiliates, to upgrade their scales because they are far behind their rivals in their respective industries. Nonghyup ranks fifth in terms of total assets including those of banking affiliates.

“We have to greatly increase the assets of non-financial affiliates including NH Life Insurance, NH Non-Life Insurance, and NH Capital to make Nonghyup a recognizable conglomerate in Korea,” Shin said.

He said among the financial affiliates that will see their capital increased in October, NH Bank will be getting the largest share, 900 billion won, which is needed to shore up the bank’ s BIS ratio since the 1 trillion won that the government pledged to the bank will be in stocks, not cash, including 500 billion won worth of Korea Expressway shares and 500 billion won worth of shares of Korea Development Bank. When calculating BIS, stocks are classified as risky funds, with cash counted as real funds.

NH Life Insurance will get 350 billion won to increase its capacity to mobilize funds to meet reimbursement requirements, boosting its fund mobilizing capacity to 230 percent from 208 percent.

The maturity dates of the bonds will vary from three years to five years, bearing a 3.2 percent annual yield and a 3.3 percent yield, respectively.

Financial sources said it will be a burdensome job for the holding company to issue bonds to support its affiliates, and an inevitable choice for the newly-launched Nonghyup, which can be seen as active management to shore up its affiliates and boost their operations into a higher gear.

Shin said the holding company should post 1 trillion won in net profit this year, combining the net profits made by all of its financial affiliates, with every one of its officers and staff tightening their belts to achieve the goal.

The holding company’ s first half results have not been good since it had to build up its loss provision to around 300 billion won and paid 170 billion won to Nonghyup for the use of its corporate name.

Shin said the government pledge to provide 1 trillion won worth of stocks should be executed as early as possible and he has been contacting legislators connected with the parliamentary approval of the matter to expedite the additional government funding for Nonghyup.

The problems of IT sector damage caused by accidents in the electronics calculating system have been referred to the bank to solve by next year including an investigation into what caused the mishap by Nonghyup, which was to take care of them by 2015.