Korea Exchange Bank (KEB) expects fiscal year 2005 to be another period of solid profit growth and asset quality improvement with a stronger revenue structure and more quality-driven asset management. The bank will continue drive ahead to strengthen its position as one of Northeast Asia leading financial institutions. KEB has developed a dominant position in foreign exchange and international trade financing since the bank was established in 1967 as a government-owned banking institution specializing in foreign exchange and international trade financing. KEB was privatized in 1989, and has since continued to solidify its standing as one of the country premier commercial banks. Today we are Korea leading international bank with a demonstrated track record of finance expertise, says Korea Exchange Bank president & CEO Richard F. Wacker.

Korea Exchange Bank president & CEO Richard F. Wacker

Overcoming considerable challenges that emerged during the Asian financial crisis, the bank has managed a successful turnaround following Lone Star capital injection at the end of October 2003. The influx of fresh capital and a new management team, representing a potent mix of global experience and top local-market talent, allowed the bank to implement extensive reorganization of operations and achieve recovery that led to record earnings in 2004. Also in 2004, the bank merged the operations of KEB Credit Service (KEBCS), previously KEB credit card subsidiary, a business with a long history of innovation and leadership in the card industry. The strategic goal of management is to transform KEB not into a bigger bank, but into a smarter, faster, and more efficient bank. To achieve this, Mr. Wacker said reorganization of 2004 was carried out to clarify our o-to-Marketapproach and involved the realignment of operations into Global Corporate Bank, Retail Bank and Card Bank. These steps have leveraged existing franchise strengths to improve KEB marketing excellence and product and service innovation. Targeted restructuring was also implemented to enhance productivity by addressing excesses and imbalances in staffing structure. Three Main Business Channels Global Corporate Bank Global Corporate Bank, one of KEB main business channels, offers a full range of services to corporate and institutional clients of all sizes. Global Corporate Bank consists of 5 sub business segments: Corporate Group, World Corporate Group, Global Products Department, Global Markets Department, and International Department. International Operations Spanning 21 countries across the globe and totaling 28 branches and offices, Korea Exchange Bank overseas operations are the most extensive of any Korean bank. The bank expansive global network is not merely a function of pursing scale for its own sake, but of positioning ourselves in the most strategic markets for growth today and in the future, Wacker explains. For this reason, he goes on, e constantly monitor current economic trends and long-range forecasts, establishing or closing outlets accordingly, to ensure the bank has the presence and reach that will enable us to continue competing and winning. As of the end of 2004, KEB overseas operations included 17 branches, 9 subsidiaries, and 2 representative offices. Last year, the bank set up 4 regional centers, one each in the Americas, Europe, China and Southeast Asia, in an effort to induce synergy effects in those key regions through more effective cooperation and information sharing among branches in each region. The bank recently opened a branch in Irbil, Iraq for early positioning in that country. In 2005, the bank plans to establish or expand its present profile in the increasingly important BRICs markets of Brazil, Russia, India and China, as well as in Slovakia and South Africa. Investment Banking Since pioneering the investment banking sector nearly 30 years ago, KEB has been at the forefront of credit and structured loans and mergers and acquisitions. Mr. Wacker is proud of this record, saying e win industry accolades for our successes in these areas for the same reasons we continue to earn the trust and business of clients: that is, recognized franchise expertise and experience, diversified product offerings, and the unmatched quality of service provided by our high-caliber team of investment bankers. KEB was Korea top-tier arranger of mergers and acquisitions in 2004, handling three M&A deals worth an industry-leading US$407.6 million, roughly 26% of the entire market of such deals arranged by domestic commercial banks. Though the M&A business in Korea remains relatively sluggish, the bank continues to hone its skills, expertise and deal-sourcing efforts, while fostering long-term client relationships for the future. F/X & Trade Finance On the back of the Korean banking sector most extensive global presence, along with continuous rollout of diversified and targeted F/X products and promotional campaigns throughout the year, KEB easily retained its unrivalled lead in foreign exchange and trade finance in 2004. The bank handled 46% of all F/X transactions conducted by Korea eight largest commercial banks last year. Though off slightly from our 49% market share of 2003, last year figure was still more than four times the F/X amount handled by our nearest competitor, an official at KEB responsible for F/X & Trade Finance points out. He further notes that we also succeeded in boosting our industry-leading market shares and trading volumes in export and import transactions to over 25% for both categories, extending our dominance in trade finance. In recognition of KEB solid market leadership in foreign exchange and trade finance, KEB was selected est Foreign Exchange Bankfor the fourth consecutive year and est Trade Finance Bankfor the fifth year running for 2004 by Global Finance. The bank also has been selected Korea est Foreign Exchange Bankand est Trade Finance Bankof 2004 by Asia Money. Custody & Fund Administration Last year KEB became the first custodian bank in Korea to introduce a securities-lending program on behalf of its clients with assets under custody. The bank handles over half of all such transactions with domestic borrowers in this new and fast-growing fee-based business. Business to Foreign-invested enterprises (FIEs) One of KEB unique strengths has been its pivotal role as facilitator and financial partner for foreign-invested enterprises in Korea. KEB explains that this fact owes much to its leading position as Korea foremost FX & trading finance handler and advanced e-banking platform MS Pluslead KEB to be the strongest player in this area. KEB succeeded in attracting an additional 423 FIEs to the bank in 2004, bringing the total from 3,697 clients at year-end 2003 to 4,120 at year-end 2004. Notification of foreign direct investment through KEB represented 36% of total cases nationwide, the highest among all Korean banks. Continuously Linked Settlement (CLS) In December 2004, KEB once again demonstrated its expertise in foreign exchange business by becoming the Settlement Member and Korean Won Liquidity Provider for CLS Bank International, enabling KEB to extend third-party continuously linked settlement services for the remaining Korean banks. Retail Bank Private Banking Services In the three years since its launch, KEB Private Banking (PB) operations have become the primary focus of its profit-growth strategies in the retail banking business that center around differentiating and targeting specific customer segments. Leveraging our franchise strengths as Korea premier foreign exchange bank and our unrivalled global presence, Wacker said KEB is able to meet the needs of Korea increasingly affluent banking clientele with personalized expertise and consulting in a wide range of financial and investment-related fields. Along with the industry highest of caliber human resources, KEB offers diversified, packaged product and service solutions available nowhere else. These range from traditional retail banking and loan services to securities, insurance, real property, estate management, tax, health and legal consultation. Bancassurance Since its introduction in 2003, bancassurance has become one of the key contributors to the bank non-interest income. Outmaneuvering its larger rivals, KEB bancassurance sales were ranked No. 2 among all Korean commercial banks. Card Bank The merger of KEB and its former credit card subsidiary was effective as of March 2, 2004. This completed strategic initiatives to fully integrate card and bank business operations. KEB has cleaned up pre-existing delinquent card receivables, signifying the complete wrap-up of the bank legacy problems. KEB card banking business is regaining its competitive edge with highly differentiated products and services, and today serves as a very solid third leg of its platform along with Global Corporate and Retail. Leadership in Information Technology (IT) In Korea competitive financial services industry, success or failure hinges ultimately on the ability to provide the products and services that customers want quickly and conveniently. To ensure we continue to do that, the president underscores KEB began an extensive overhaul of its IT infrastructure in December 2002, building a powerful ext-generation banking system(NGBS). Tremendous efforts to develop a more efficient and convenient system were completed with the successful conversion to NGBS in February 2005, following the conversion of its card operations in October 2004. Through NGBS, KEB can enhance convenience, efficiency and flexibility in providing services for today corporate, retail and card customers.