By Lee Min-hyung
Moody's is considering downgrading ratings for four regional banks and IBK Securities, as their credit quality is expected to deteriorate due to the coronavirus-induced economic shock.
The banks are Busan, Daegu, Jeju and Kyongnam banks, all of which are the most exposed to possible global contraction, the credit agency said.
"The review for a downgrade reflects Moody's expectation that Korea's economic growth will slow, as well as the risk of a deterioration in the banks' credit quality due to the breadth and severity of the shock from the coronavirus outbreak," it said in a report released early Wednesday.
"The banks are also exposed to the manufacturing sector, which is vulnerable to a potential global contraction in trade or disruptions to global supply chains," it added.
Moody's also placed IBK Securities on a list for potential ratings downgrade, citing the firm's possible revenue decline.
"As the company manages a large trading book of bonds and derivatives to match their structured products, it is likely that IBK Securities will incur mark-to-market losses on their derivative trading associated with high market volatility."
The company is also expected to generate lower revenue, as it mainly derives its earnings from its investment banking business providing financing services and advisories to small- and medium-sized enterprises, a vulnerable segment of the economy, the report said.
The ratings agency said it is reviewing the possibility of downgrading the firm's A1 foreign currency long-term issuer rating and P-1 short-term issuer rating.
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The banks are Busan, Daegu, Jeju and Kyongnam banks, all of which are the most exposed to possible global contraction, the credit agency said.
"The review for a downgrade reflects Moody's expectation that Korea's economic growth will slow, as well as the risk of a deterioration in the banks' credit quality due to the breadth and severity of the shock from the coronavirus outbreak," it said in a report released early Wednesday.
"The banks are also exposed to the manufacturing sector, which is vulnerable to a potential global contraction in trade or disruptions to global supply chains," it added.
Moody's also placed IBK Securities on a list for potential ratings downgrade, citing the firm's possible revenue decline.
"As the company manages a large trading book of bonds and derivatives to match their structured products, it is likely that IBK Securities will incur mark-to-market losses on their derivative trading associated with high market volatility."
The company is also expected to generate lower revenue, as it mainly derives its earnings from its investment banking business providing financing services and advisories to small- and medium-sized enterprises, a vulnerable segment of the economy, the report said.
The ratings agency said it is reviewing the possibility of downgrading the firm's A1 foreign currency long-term issuer rating and P-1 short-term issuer rating.
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