Where Book Value Sits
Two credit books, one cycle
Korea Asset In Trust consolidates two lenders to Korean property development, not one. The parent's trust-account advances stood at ₩739.4bn gross at 31 March 2026 against a 25.28% allowance [1]. Korea Asset Capital's loan book stood at ₩612.9bn gross against 6.33% [2]. The subsidiary holds 43% of consolidated equity and produced 63% of first-quarter profit [3] [4]. No tab in this report has examined it.
Sources: gross balances from the consolidated loan note in the FY2025 annual report [5] [6], the FY2024 annual report [7], the FY2023 annual report [8], and the Q1 FY2026 report [9] [10].
The books are comparable in size and have moved in opposite directions. Since end-2023 the trust-account book has grown 58% and its allowance rate has more than doubled; the capital arm's book is 3% smaller than it was two years ago and its allowance rate has risen from 3.39% to 6.33% [11] [12]. In the March 2026 quarter the divergence was direct: the trust-account book fell ₩63.2bn while the capital arm's grew ₩29.1bn.
Source: derived from the gross balances and allowances disclosed in the same consolidated loan notes [13] [14] [15] [16] [17] [18].
A four-times gap in provisioning between two books lent against the same asset class needs a reason, and part of one exists. The trust-account advance is the trustee's own money put into a project it manages, funding cost overruns on units that have not sold. Korea Asset Capital lends project finance and bridge loans against collateral, and management describes its FY2025 posture as selective new origination with the emphasis on recovering existing bridge loans [19]. Different seniority can justify different reserves.
What the reason does not cover is the subsidiary's own supervisory return. Under the capital-company soundness rules, Korea Asset Capital classified ₩71.8bn of credit — 12.08% — as substandard or worse at end-2025, after ₩95.3bn and 14.36% at end-2024 and ₩60m and 0.01% at end-2023 [20]. The ₩37.9bn allowance the group carries against that book equals 53% of the balance the subsidiary itself calls non-performing. In the year the classified balance jumped ₩95.3bn, the allowance rose ₩8.3bn.
The bracket that follows is arithmetic rather than a forecast. Covering the subsidiary's own ₩71.8bn of classified credit in full would take about ₩34bn of additional allowance, 3.1% of consolidated equity. Applying the parent's 25.28% rate to the whole ₩612.9bn book would take about ₩116bn, 10.8% of the ₩1,077.2bn of consolidated equity [21]. The lower end is close to a mechanical consequence of the subsidiary's own classification; the upper end assumes the two books rank equally, which the collateral structure argues against.
The pricing evidence sits on the other side of that argument. The capital arm's loans have consistently earned more than the trust-account advances: ₩49.2bn of loan interest on an average gross book of ₩626.3bn in FY2025, a 7.9% yield, against ₩51.5bn on an average ₩810.9bn of trust-account balances, 6.3% [22]. The book with the higher contracted return carries the lower reserve. Both readings can be true at once — better collateral and better pricing — but they pull in opposite directions, and the filings disclose no vintage, loan-to-value or expected-recovery detail for the subsidiary that would settle it.
What the capital arm earns on the capital it holds
Korea Asset Capital is wholly owned, was founded in 2012 [23], and has been recapitalised three times: ₩40bn in 2020, ₩100bn in 2021 and a further ₩50bn in 2022, taking the parent's cost of investment from ₩60.4bn to ₩250.4bn [24] [25] [26]. That carrying value has not moved since [27].
Sources: summarised subsidiary financial information in the FY2021 [28], FY2022 [29], FY2023 [30], FY2024 [31] and FY2025 [32] annual reports; equity is assets less liabilities as disclosed, and the return is net income over average equity, derived.
Equity has compounded from ₩172.1bn to ₩463.5bn in five years and the return on it has halved twice: 10.2% in FY2022, 10.5% in FY2023, 6.0% in FY2024, 4.6% in FY2025 [33] [34]. Revenue peaked in FY2023 at ₩90.0bn and has fallen 37% since. The March 2026 quarter ran at ₩7.65bn of net income on ₩471.2bn of equity, an annualised 6.5% [35].
Three facts frame what that capital is doing. The subsidiary's regulatory capital ratio was 65% against a 7% minimum for licensed capital companies, up from 55% in each of the two prior years [36] — it is running at roughly a ninth of the leverage its licence permits, and the ratio rose because the book shrank faster than the equity. Its three-month liquidity ratio fell from 244% to 216% to 139% over the same three years [37]. And in FY2025 the only transaction recorded between parent and subsidiary was ₩56.6m of trademark royalty [38] — no dividend has been paid up. Cumulative net income of ₩166.4bn over FY2020 to FY2025 has stayed inside the subsidiary while the group raised its borrowings to ₩579.2bn at an average 5.47% [39].
The counter to reading that as trapped capital is that the two entities run identical leverage — the parent's separate balance sheet is ₩1,288.0bn on ₩867.2bn of equity, the subsidiary's ₩688.0bn on ₩463.5bn, both 1.48 times [40] — so pulling money out of one and into the other changes where the equity sits, not how much the group has. What it would change is the answer to a narrower question: whether ₩463.5bn is what the subsidiary's net assets are worth. On the evidence above, that answer is most sensitive to the ₩38.8bn allowance: the bracket set out above — a further ₩34bn to ₩116bn of provisioning — is 7% to 25% of the subsidiary's ₩463.5bn of equity.
The related-party loan sits inside the capital arm
₩56.9bn of the subsidiary's loan book is lent to MDM Plus, the controlling family's unlisted development company, against an allowance of ₩190m — 0.33%, against 6.50% for the book as a whole [41]. The balance was ₩51.0bn a year earlier and took a fresh ₩6.0bn advance during FY2025 [42]. A ₩10.0bn loan to The M Retail, an MDM joint venture, was repaid in full in the same year [43]. None of this appears in the parent's separate related-party note [44]; the lending to the controller's affiliates runs through the subsidiary. Control of the group and its economics are set out in People.
The scale argument runs the other way, and it is the stronger of the two. MDM Plus reported ₩3,361.6bn of assets and ₩1,719.2bn of equity for 2025 on the company's own group disclosure — larger than Korea Asset In Trust itself [45]. The affiliates also guarantee part of the group's contract-deposit lending to unit buyers, a flow the related-party ledger in People sets out [46]. A near-zero reserve against a borrower of that size is defensible on credit grounds. It remains the one loan the filings break out in a ₩583.8bn book, and the filings disclose no rate, maturity or security for it.
The securities book is smaller than it looks
The third block of the balance sheet is ₩238.1bn of financial assets at fair value through profit or loss, 70.5% of it level 3 — ₩112.9bn of beneficiary certificates and ₩49.3bn of partnership interests valued on net asset value, discounted earnings at rates of 4.72% to 20.33%, or original cost [47] [48]. That composition invites the assumption that reported profit rests on unverifiable marks. The roll-forward does not support it.
Level 3 assets fell from ₩213.7bn to ₩167.9bn during FY2025. The movement was ₩11.3bn of purchases, ₩32.6bn of sales, ₩17.2bn transferred out, and a valuation loss of ₩7.3bn [49]. The level-3 book shrank mostly by being sold, and its marks cost the group money rather than making it. A one-percentage-point move in the unobservable inputs shifts the remaining ₩147.5bn of level-3 fair value by about ₩2.4bn either way [50] [51].
Sources: gains and losses on financial instruments from the consolidated income statements in the FY2025 annual report [52], the FY2023 annual report [53] and the Q1 FY2026 report [54]; distribution and dividend income from other operating income notes [55] [56] [57].
Netted properly, the portfolio has been a modest contributor, not a swing factor. Gains of ₩24.3bn in FY2025 came with losses of ₩14.8bn, for ₩9.5bn net; FY2024's ₩13.2bn of gains came with ₩22.6bn of losses, for minus ₩9.3bn [58]. Adding distribution and dividend income, the three years FY2023 to FY2025 produced about ₩38.9bn on an average portfolio near ₩249bn, roughly 5.2% a year — below the 5.47% the group paid on its borrowings in FY2025 [59].
The exception is the quarter just reported, and it deserves stating plainly rather than smoothing. In 1Q FY2026 the portfolio produced ₩20.1bn of gains against ₩6.6bn of losses — ₩13.5bn net, more than the ₩10.8bn of consolidated operating income and the ₩12.2bn of net income recorded in the same three months [60]. Roughly ₩9.7bn of the gain was realised on disposal rather than marked [61], which is the part that reduces the concern; the composition of the book has also shifted, with listed equities rising from ₩14.4bn to ₩43.3bn during FY2025 as ₩20.5bn was invested in 35 quoted names [62] [63]. A trust company in the middle of a workout added a quoted equity book; that is a use of capital worth watching in its own right.
What would move the read
The judgment here is that the group's book value question is wider than the trust accounts the report has examined so far (Provisions and Profit), and that the capital subsidiary is the part of it the filings describe least. Three observable things would settle the direction, and all three are disclosed quarterly.
The subsidiary's non-performing balance and its allowance moving together. A classified balance falling toward the ₩38.8bn already reserved would confirm the current rate; the balance holding near ₩70bn while the allowance stays put would not.
Whether the capital arm's book keeps growing. It added ₩29.1bn in the March quarter after management said new origination would be selective. Growth funded by the ₩94.7bn of undrawn commitments the group already carries would raise the exposure without a new decision being visible.
Any dividend from the subsidiary to the parent. Six years of retained profit and a 65% capital ratio against a 7% minimum make one possible; its absence has been the consistent pattern since 2020.
The undrawn commitment figure is the ₩94,652,547 thousand of unused loan agreements the group reported at 31 December 2025 [64].
Against this read stands the simplest counter-fact available: almost none of either book's provisioning has yet been tested by an actual loss — ₩253.8m of loans were written off in FY2025 against a ₩206.8bn allowance [65] — and the subsidiary has never reported a loss-making year in the six covered here [66] [67]. What would change the read in the other direction is the subsidiary's allowance rate converging on the parent's without the classified balance falling — the pattern that would say the two books were always the same risk.