S&P puts Korea Development Bank on positive watch

Standard & Poor's said it placed the long-term issuer and issue ratings on Korea Development Bank on CreditWatch with positive implications, following news that the government is redefining the policy roles for government-related financial institutions.

The Korean government has said it will abolish its privatization plan for Korea Development Bank, instead planning a merger with the bank and Korea Finance Corp.

The agency said it lowered the bank's stand-alone credit profile to BB from BB+, reflecting its high concentration risk in weak corporate sectors and weakening measures of its asset quality amid rising credit costs.

The agency said it also placed the bank on CreditWatch positive to reflect that there is at least a 50% chance that the bank's privatization will be abolished and it will be merged with Korea Finance.

This could reverse a previous expectation for gradual weakening in Korea Development Bank's role and link with the government, Fitch added.

The bank's role would strengthen and be reinforced as critical if it is successfully re-merged with Korea Finance, the agency said.

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