S&P may cut Korean banks

Standard & Poor's said it placed counterparty credit ratings on Kookmin Bank (A/Watch negative/A-1), Woori Bank (A-/Watch negative/A-2), Shinhan Bank (A-/Watch negative/A-2), Hana Bank (A-/Watch negative/A-2) and Korea Exchange Bank (BBB+/ Watch negative/A-2) on CreditWatch with negative implications, due to foreign-currency funding pressures and likely challenges to asset quality and profitability.

The agency placed counterparty credit ratings on Woori Finance Holdings Co. Ltd. (BBB+/ Watch negative/A-2) and Shinhan Card Co. Ltd. (BBB+/Watch negative/A-2) on CreditWatch with negative implications, given companies' credit profiles are dependent on consolidated credit profiles of their respective groups.

Korean banks are exposed to foreign-currency liquidity risk as they face increasing difficulty refinancing maturing borrowing, with the cost of borrowing rising even as maturities shorten amid tougher market conditions, according to the agency.

The Korean government has the capacity and willingness to extend extraordinary support to moderate foreign-currency funding risks at Korean banks, S&P said, but given that no wide-scale government measure has been announced to date, Korean banks' liquidity risks may be further exacerbated in a process of reverse discrimination.

The watch also reflects growing concerns over the adverse impact of tougher macroeconomic conditions, which could challenge the profitability and credit portfolio quality of Korean banks, the agency added.

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