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Press Release: S&PGR: Korean Banking Sector To Sustain Its Steady Performance

23 Jan 2018 6:49 am
 
 
The following is a press release from Standard & Poor's: 
 
HONG KONG (S&P Global Ratings) Jan. 23, 2018--Korean banks are likely to 
maintain their credit profiles in 2018, according to a report, titled "Korea's 
Banking Sector Will Preserve Its Creditworthiness Unless Burdened By High 
Household Debt And Bail-In," that S&P Global Ratings published today. 
 
"Korean banks should be able to sustain their capitalization and manage credit 
risks this year," said S&P Global Ratings credit analyst HongTaik Chung. 
 
The economic risks for the banking industry will likely remain stable, given 
the steady domestic and global economic growth outlook, broadly stable 
property prices, and moderating growth in household debt in Korea. 
 
Gradually expanding net interest margin amid rising interest rates should 
increase Korean banks' buffer to absorb potential losses. We forecast that the 
banking sector's return on assets will improve slightly to 0.50%-0.55% in 
2018, compared to about 0.5% in 2017 and 0.1% in 2016. 
 
However, we expect asset quality to come under pressure and credit costs to 
rise modestly year over year. Our view is based on the ongoing pressure on 
weak corporates in the shipbuilding and shipping sectors, the gradual 
weakening of household loan quality stemming from rising interest rates, and 
likely smaller reversals of provisioning than in the past year. 
 
Heavy household debt could threaten Korea's banking system, but we believe the 
financial regulator will take further steps to contain the risk. In addition, 
the average national housing prices in Korea are relatively stable compared 
with that in other countries in Asia-Pacific, although we see some price 
volatility in certain areas, such as Gangnam and neighboring districts in 
Seoul. 
 
We expect Korean regulators to continue the effort of setting up new crisis 
management and resolution frameworks as recommended by the Financial Stability 
Board. While such frameworks could reduce moral hazard in the long run, the 
transition could negatively affect Korean bank ratings. 
 
"A resolution regime that includes bail-in of senior creditors could lead us 
to re-assess government support to the banking sector, and may result in some 
downgrades of systemically important banks," said Mr. Chung. 
 
Only a rating committee may determine a rating action and this report does not 
constitute a rating action. 
 
A Korean-language version of this media release is available via 
www.spratings.co.kr or via S&P Global Ratings' CreditWire Korea on Bloomberg 
Professional at SPCK <GO>. 
 
The report is available to subscribers of RatingsDirect at www.capitaliq.com. 
If you are not a RatingsDirect subscriber, you may purchase a copy of the 
report by calling (1) 212-438-7280 or sending an e-mail to 
research_request@spglobal.com. Ratings information can also be found on the 
S&P Global Ratings' public website by using the Ratings search box located in 
the left column at www.standardandpoors.com. Members of the media may request 
a copy of this report by contacting the media representative provided. 
 
Primary Credit Analyst: HongTaik Chung, CFA, Hong Kong (852) 2533 3597; 
                        hongtaik.chung@spglobal.com 
Secondary Contacts: Daehyun Kim, CFA, Hong Kong (852) 2533-3508; 
                    daehyun.kim@spglobal.com 
                    Scott Han, Hong Kong 852-2532-8022; 
                    Scott.Han@spglobal.com 
 
 
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All rights reserved. 
 
 

(END) Dow Jones Newswires

January 23, 2018 01:49 ET (06:49 GMT)
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