Moody's may downgrade Kookmin, upgrade Korea Exchange Bank

Moody's Investors Service said it placed Kookmin Bank's D+ bank financial strength rating on review for possible downgrade and affirmed the bank's A3 senior debt rating, Baa1 subordinated debt rating, A3 long-term deposit rating and Prime-2 short term deposit rating.

At the same time, Moody's placed Korea Exchange Bank's Baa2 senior debt rating, Baa3 subordinated debt rating, Baa2 long-term deposit rating and Prime-3 short-term deposit rating on review for possible upgrade. The bank's D- bank financial strength rating remains on review for possible upgrade.

The rating actions follow the selection of Kookmin Bank as preferred bidder for the acquisition of Korea Exchange Bank.

The affirmation of Kookmin Bank's credit ratings reflected the agency's view that the transaction will further enhance the bank's systemic significance as the combined entity will control a 28% share of system deposits, a substantial market position that augers well for increased systemic support to the institution.

The review of Kookmin's D+ financial strength rating will focus on the potential diminution of the combined entity's economic capital level as a result of acquisition goodwill and the yet to be determined funding structure of the transaction, Moody's said.

The review of Korea Exchange Bank's ratings will center on its acquisition by a financially stronger strategic parent as well as its gaining greater systemic importance in the domestic banking landscape, the agency said.

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