The Korea Development Bank (KDB) said on Friday its net loss for the full 2016 is estimated to have reached up to 3.6 trillion won ($3.1 billion), the largest in 18 years, due to massive valuation losses from Daewoo Shipbuilding & Marine Engineering Co. (DSME) in which the state-lender owns 79 percent stake.

The net loss for full 2016 is expected to reach around 3 trillion won due to restructuring expenses worth 5.6 trillion won from money-losing shipping and shipbuilding companies, said the KDB. As the nation’s largest policy bank, KDB has shouldered financial distress from local shipyards including the world’s largest shipbuilder DSME and others that are under creditor-led bailout programs.

The state lender previously projected the net loss for the full 2016 to reach roughly 1 trillion won after forecasting 3.5 trillion won loss from Daewoo Shipbuilding & Marine Engineering, 900 billion won loss from now-defunct Hanjin Shipping, and 1.2 trillion won loss from STX Offshore & Shipbuilding and its affiliates.

The KDB reportedly is taken aback as the actual losses would now triple the expected losses for last year. The 3.6 trillion losses would be the largest since 1998 in the wake of the 1997-1998 Asian financial crisis and almost the double of 1.9 trillion won net loss in full 2015.

The larger-than-expected net losses are largely due to the 1.8 trillion won worth debt-to-equity swap program conducted late last year to revive DSME’s severely impaired capital status. The shipbuilder’s asset soundness had been revised down to precautionary from normal level after the company’s stocks were suspended from trading, failed to win enough new orders, and delayed delivery of new ships. Given the weak financial soundness, Nexia Samduk Auditors & Consultants, the accounting firm responsible for the KDB`s auditing appropriated the shipper’s stock owned by the bank at 1 won apiece, thus expanding the losses for last year from projected figure.

By Chung Seok-woo and Park Yoon-ye

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