(The following statement was released by the rating agency)
Nov 23 - Fitch Ratings has assigned Korea-based Kookmin Bank's(KB, 'A'/Stable) global medium-term note (GMTN) programme an 'A' rating. The rating is applicable only to the senior unsecured notes issued in foreign currency under the programme.
The size of the GMTN programme is USD8bn. Fitch expects the programme will be updated in late November 2012 with the latest financial data. Notes can be issued in currencies or maturities as may be agreed between KB and the relevant dealer. KB plans to use the notes proceeds for its general corporate purposes.
The GMTN programme is rated at the same level as KB's Long-Term Issuer Default Rating (IDR), which in turn is currently driven by the bank's 'A' Viability Rating (VR). Any change in KB's VR will, therefore, directly affect the programme's rating.
KB's VR is underpinned by its large domestic retail franchise and strong capitalisation. It also reflects KB's contracting margins, adequate loan quality, and below-average liquidity and funding profile by international standards. However, the latter is mitigated by ordinary support from the Korean authorities.
The Stable Outlook on KB's IDR reflects Fitch's expectation that the bank can withstand a reasonable level of financial stress and asset quality deterioration, due to its strong capitalisation and franchise.
A sustainable, significant improvement in KB's profitability, loan quality, and foreign-currency funding and liquidity profile may result in positive rating action for the bank. However, Fitch views such prospects as remote, due to a subdued operating environment and a weak foreign currency retail deposit base in South Korea.
A negative rating action may result from an increase in the bank's risk appetite, reflected in rapid loan growth or deteriorating loan quality, leading to erosion of its capitalisation. However, Fitch does not expect the quality of KB's loans to households and self-employed individuals to deteriorate substantially in the foreseeable future given South Korea's low unemployment rate. Any sizeable M&A activity by its parent, KB Financial Group, may trigger a rating review for KB's ratings.
KB is the largest bank in South Korea, accounting for 14% (USD232bn) of total assets and 17% of total deposits at end-June 2012.
(Bangalore Ratings Team, Hotline:+91 80 4135 5898 Jyothsna.BN@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging:Jyothsna.BN.firstname.lastname@example.org)
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