By Na Jeong-ju
Staff Reporter

Standard & Poor's Ratings revised its outlook on long-term credit ratings for Woori Financial Group and its banking subsidiary, Woori Bank, to ``negative'' from ``stable'' Sunday, saying they face greater risks due to sharp loan growth in recent months.

The agency also said all Korean banks are exposed to risks of a global economic downturn and a slowdown in the domestic construction sector, an indication that its view of their financial health is not as optimistic as before.

``The outlook revision reflects potential risks posed by the simultaneous emergence of negative industry-wide factors that could put Woori's rating under downward pressure, although no single negative factor is likely to trigger a downgrade,'' S&P said in a statement.

The report came amid rising concerns that the rapid growth of mortgages and a housing slump will cause serious consequences here if the U.S. credit crisis spreads across global markets.

Construction firms are finding it increasingly difficult to sell apartments amid a housing slump, heavier property taxes and tough lending rules. Banks have reduced loans to households and companies to ease default risks amid worries of a possible credit crunch.

S&P said Woori has greater exposure to industry-wide risk factors than other major Korean banks, partly due to its aggressive average loan growth. The lender increased loans by 29 percent over the past three years, compared with the industry average of 14 percent.

Woori has relatively high concentration risk in the construction sector. About 9 percent of Woori's total loans were provided to residential builders implementing property development projects. Among these, about a quarter of the exposure rests with domestic construction companies that are relatively vulnerable to domestic economic cycles and have weak cash flow generation and funding capabilities amid the recent stagnation of the housing presale market, it said.

The agency maintained the ratings on Woori Bank and Woori Financial Group at ``A-/A-2'' and ``'BBB/A-2,'' respectively, but hinted at a downgrade if the situation worsens.

``The ratings affirmation reflects our belief that Woori should maintain its satisfactory financial risk profile, backed by its strong asset quality and modest capitalization for the current ratings level, despite the industry-wide risks that lie ahead, including its large exposure to the fragile residential property development segment, a foreign currency liquidity crunch, and a potential economic slowdown,'' it said.

As the Korean economy is highly correlated with the global economy, a severe global economic slowdown could pressure Korean exporters and their local vendors. That should translate into a deterioration of credit quality among all Korean banks amid credit deterioration in the construction sector, the agency said.

Also, if they don't see an improvement in foreign currency funding, the outlooks on other domestic peer banks may also be revised to ``negative,'' it said.

jj@koreatimes.co.kr