Global credit rating agencies favorably assess major Korean banks

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By Anna J. Park

Global credit rating agencies continue to favorably assess major Korean banks amid expectations of market interest rate increases.

S&P upgraded Woori Bank's long-term credit rating by one notch from A to A+ on Wednesday, while the bank's long-term senior unsecured ratings also rose to the same rating of A+. According to S&P's rating system comprised of 22 levels from AAA to D, A+ is the sixth-highest rating.

Woori Bank attributed the rating upgrade to the bank's improved profitability as the lender has focused on enhancing its asset soundness by effectively reducing the amount of loans to vulnerable sectors, such as maritime transportation, shipbuilding and construction.

With the improved evaluation from global credit rating agencies, Woori Financial Group's stock price hit its 52-week high during Thursday's trading session, reflecting positive investor sentiment surrounding the financial group's business outlook.

Other banks' ratings remain strong as well. Earlier this week, Moody's maintained the Aa3 credit rating for Shinhan Bank's deposits as well as senior unsecured debts, based on the stable outlook. The credit rating company first gave the bank the Aa3 rating back in December 2017.

“The rating outlook remains stable, reflecting Moody's view that the bank's asset quality, capital and profitability will remain broadly steady over the next 12-18 months, supported by Korea's resilient economic growth and the bank's plan to slow down its loan growth,” Moody's statement read.

The ratings agency also gave the same Aa3 rating for KB Kookmin bank, reflecting the lender's strong retail banking franchise and solid capitalization that is in line with its domestic bank peers. Moody's also stated that a moderate profitability outlook as well as the Korean government's high level of support contributed to the rationale behind the bank's Aa3 rating.

KEB Hana Bank's credit rating by Moody's remained at A1, the same as last year, for the bank's long-term bank deposits, as well as its senior unsecured debts. According to Moody's rating system, A1 is one notch lower than the agency's Aa3 rating.

The bank's stable asset quality and profitability, as well as good funding structure, made the bank receive an A+ rating from S&P. Based on the stable ratings, Hana Bank recently succeeded in issuing $600 million worth of ESG-themed bonds.