Moody's confirms Kookmin Bank

Moody's Investors Service said it confirmed South Korea-based Kookmin Bank's D+ bank financial strength rating with a stable outlook. This action concludes the review for possible downgrade that began on March 27 following the selection of Kookmin Bank as preferred bidder for the acquisition of Korea Exchange Bank (Baa2/Prime-2/D).

All other Kookmin Bank ratings are unaffected, including the A3 senior and Baa1 subordinated debt ratings, the Prime-1 short-term debt rating and the foreign-currency A3 long-term and Prime-2 short-term deposit ratings, the agency said.

The outlook for the long-term ratings is positive and the short-term ratings is stable.

The confirmation reflects the recovery in the bank's earnings - attributable to reduced credit costs and restructuring efforts - that enabled capital to build up, Moody's said. Because the bank's post-transaction economic capital will be lower due to the acquisition goodwill, the financial metrics are sufficiently strong to allow it to maintain its D+ bank financial strength rating.

The agency also said it views the acquisition of Korean Exchange Bank as synergistic to Kookmin Bank's franchise, particularly in the corporate banking and foreign exchange sectors where Korean Exchange is strong.

However, potential synergies from the transaction will most likely materialize in the medium term given the magnitude of the entities and the expected integration challenges, Moody's added.

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