S&P: Ratings Raised On Five Korean Commercial Banks And Four FI GREs Following Sovereign Action; Outlooks Stable
Today's rating actions follow our raising of the foreign and local currency sovereign credit ratings on the Republic of Korea to 'AA' from 'AA-' (see "Republic of Korea Long-Term Sovereign Rating Raised To 'AA' With Stable Outlook; Short-Term Rating Affirmed At 'A-1+'," published Aug. 8, 2016). We also affirmed the short-term ratings at 'A-1+' on Korea. The outlook on Korea is stable.
We raised our long-term issuer credit and senior unsecured issue ratings on KDB and KEXIM to 'AA' from 'AA-', equalizing the ratings with the sovereign ratings. This reflects the entities' integral links with, and their critical roles to, the government of Korea. We believe there is an almost certain likelihood of extraordinary government support to these GREs.
We raised our long-term issuer credit and senior unsecured issue ratings on IBK to 'AA-' from 'A+'. At the same time, we raised the short-term rating on IBK to 'A-1+' from 'A-1'. This mainly reflects IBK's very strong links with, and its critical roles to, the government of Korea. We believe there is an extremely high likelihood of extraordinary government support to IBK.
We raised our long-term issuer credit and senior unsecured issue ratings on NongHyup to 'A+' from 'A'. This reflects additional government notching given NongHyup's very strong links with, and its very important roles to, the government of Korea at the current stand-alone credit profile (SACP) level. We believe there is a very high likelihood of extraordinary government support to Nonghyup.
We raised our long-term issuer credit and senior unsecured issue ratings on Kookmin and Shinhan to 'A+' from 'A' and Woori to 'A' from 'A-'. At the same time, we raised the short-term rating on Woori to 'A-1' from 'A-2' and Basel II subordinated issue rating to 'A-' from 'BBB+'. These upgrades mainly reflect additional government notching given that at the current SACP levels, these three major commercial banks have a high likelihood of receiving government support by virtue of their high systemic importance in Korea, and a highly supportive Korean government.
We raised our long-term issuer credit and senior unsecured issue ratings on Daegu and long-term issuer credit rating on Busan to 'A-' from 'BBB+'. The upgrades reflect additional government notching given that at the current SACP level, Daegu and Busan have a moderately high likelihood of receiving government support by virtue of their moderate systemic importance in Korea.
The stable outlooks on KDB, KEXIM, and IBK reflect that on the sovereign and our view that they will likely maintain the current likelihood of receiving extraordinary government support at least for the coming one to two years. The ratings on these institutions will move in tandem with the sovereign ratings.
The outlook on five commercial banks and NongHyup reflect that on the sovereign and our view that they will likely maintain their current systemic importance at least for the coming one to two years. This also reflects our view that their overall credit profiles will likely remain stable for the same period.
We could downgrade these banks if we revise down their SACPs, which could happen if their capitalization significantly weakens or asset quality sharply deteriorates. We think an upgrade is unlikely in the near term.
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