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5 years ago
TEXT-Fitch upgrades Korea's 4 policy FIs to 'AA-'; affirms NH Bank at 'A'
September 13, 2012 / 9:20 AM / 5 years ago

TEXT-Fitch upgrades Korea's 4 policy FIs to 'AA-'; affirms NH Bank at 'A'

Fitch has also upgraded KDB New York branch's CP programme to 'F1+' from 'F1', following the upgrade of KDB's Short-Term IDR and given its satisfactory liquidity.

NH Bank's ratings reflect the government's lower propensity to support NH Bank than for the aforementioned four policy financial institutions. Fitch notes in particular that, unlike Korea's four key policy banks, NH Bank does not have any solvency guarantee from the government and this is reflected in the rating being notched below the sovereign's.

NH Bank's ratings could be reviewed if there were significant changes to NH Bank's policy functions in the agricultural sector or in its relationship either with its ultimate parent, National Agricultural Cooperative Federation (NACF), or with the government. In Fitch's view, as the policy function of NH Bank diminishes and the more commercial its operations become in future as is intended, the propensity of extraordinary government support may also weaken, leaving its IDR vulnerable to a downgrade.

Nevertheless, Fitch expects such changes only to occur over the medium- to long-term. In addition, because of its legacy policy role in the interim, NH Bank's Support Rating Floor of 'A' is one notch higher than that of systemically important commercial banks in Korea.

The government controls the policy financial institutions with 100% ownership of KoFC, KEXIM and KDB, and 72.1% ownership of IBK. KDB's privatisation plan was announced in 2008 with a targeted initial sale by May 2014 and IBKs privatisation has been in process since 1994.

NH Bank is a wholly owned subsidiary of NongHyup Financial Group, which in turn is owned by NACF. NACF is owned by 1,167 individual cooperatives that in turn are owned by 2.4 million member farmers. NH Bank was spun off from NACF on 2 March 2012 in a restructuring exercise.

The rating actions are as follows:

KoFC

Long-term Foreign Currency IDR upgraded to 'AA- from 'A+''; Outlook Stable

Short-term Foreign Currency IDR upgraded to 'F1+' from 'F1'

Support Rating affirmed at '1'

Support Rating Floor revised to 'AA-' from 'A+'

Senior unsecured debt and GMTN programme upgraded to 'AA-' from 'A+'

Short term debt and GMTN programme upgraded to 'F1+' from 'F1'

KEXIM

Long-term Foreign Currency IDR upgraded to 'AA-' from 'A+'; Outlook Stable

Short-term Foreign Currency IDR upgraded to 'F1+' from 'F1'

Long-term Local Currency IDR affirmed at 'AA'; Outlook Stable

Support Rating affirmed at '1'

Support Rating Floor revised to 'AA-' from 'A+'

Senior unsecured debt upgraded to 'AA-' from 'A+'

Short-term debt upgraded to 'F1+' from 'F1'

KDB

Long-term Foreign Currency IDR upgraded to 'AA-' from 'A+'; Outlook Stable

Short-term Foreign Currency IDR upgraded to 'F1+' from 'F1'

Support Rating affirmed at '1'

Support Rating Floor revised to 'AA-' from 'A+'

Senior unsecured debt and GMTN programme upgraded to 'AA-' from 'A+'

Short-term debt, US CP programme and GMTN programme upgraded to 'F1+' from 'F1'

KDB New York branch

Commercial paper upgraded to 'F1+' from 'F1'

IBK

Long-term Foreign Currency IDR upgraded to 'AA-' from 'A+'; Outlook Stable

Short-term Foreign Currency IDR upgraded to 'F1+' from 'F1'

Support Rating affirmed at '1'

Support Rating Floor revised to 'AA-' from 'A+'

Senior unsecured debt upgraded to 'AA-' from 'A+'

Senior unsecured debt affirmed at 'AAA(tha)'

NH Bank

Long-term Foreign Currency IDR affirmed at 'A'; Outlook Stable

Short-term Foreign Currency IDR affirmed at 'F1'

Support Rating affirmed at '1'

Support Rating Floor affirmed at 'A'

Senior unsecured debt and GMTN programme affirmed at 'A'

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