S&P upgrades Korea Exchange Bank

Standard & Poor's said it raised Korea Exchange Bank's long-term counterparty credit ratings to BBB+ from BBB and its subordinated lower tier II bonds to BBB from BBB-. The short-term rating was affirmed at A-2.

The outlook is stable.

The agency said the upgrade reflects the improvement in the bank's capitalization and asset quality. The bank's capitalization has improved significantly over the past few years, mainly driven by increased profitability, and its profitability in turn has recovered to a level on par with that of its domestic peers relatively rapidly due to its stabilizing credit costs.

The ratings reflect Korea Exchange Bank's competitive strengths in its international trade finance and foreign exchange operations and its focused strategy on improving efficiency and managing risk, S&P said.

The bank's weak overall position in the domestic market compared with its major competitors and uncertainty over its shareholding structure remain constraining factors on the rating, S&P said, adding that concerns also remain over the bank's future dividend plan. After the bank's major shareholder, Lone Star with 64.62% ownership, cancelled plans to sell its stake to Kookmin Bank on Nov. 23, Korea Exchange Bank's board of directors announced a cash dividend plan with a dividend payout ratio of 64.09% on Feb. 2.

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