Fitch: Slowdown affects Korea banks

Fitch Ratings said that Korea's banks will continue to face challenges to their profitability due to higher than usual credit costs sustained through a slowdown in the domestic economy amid the global downturn, albeit tempered by the Korean government's wide-ranging fiscal stimulus efforts.

Nevertheless, the capitalization of the banks remains satisfactory, which should continue, as aided by government support if necessary, the agency said.

Both foreign- and local-currency liquidity for the banks also have eased amidst central bank support and are in line with general liquidity trends globally, although liquidity to the real economy is likely to remain tight for some time to come, which could compound credit costs to an extent, Fitch said.

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