S&P: Korean banks have buffer

Standard & Poor's said in a report that the improvement seen in the financial profile of Korean banks over the past few years should provide a relatively absorbent buffer against expected losses arising from potential risks at their respective rating levels over the coming quarters.

Yet the agency noted that it still believes that the creditworthiness of the Korean banks may be tested over the next several quarters due to deterioration in the residential real estate development sector, a possible deterioration in overall asset quality driven by an economic slowdown following aggressive asset growth over the past few years, the unfavorable foreign currency funding environment and deteriorating net interest margin.

The financial profile improvement, evidenced by the banks' good capital adequacy levels and adequate profitability, is best reflected by the fact that ratings on the Korean banks have remained unchanged since September 2007, the agency added.

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