Moody's Reviews Downgrade of Credit Ratings for 4 Regional Banks and IBK Investment & Securities

[Asia Economy Reporter Eunmo Koo] The international credit rating agency Moody's announced on the 25th that it has placed Busan Bank, Daegu Bank, Jeju Bank, and Gyeongnam Bank under review for a possible downgrade of their credit ratings. Moody's currently assigns these four banks a long-term bank deposit rating of 'A2'.

Moody's explained, "This reflects the risk of a weakening credit profile of these banks due to the economic growth slowdown forecast in South Korea caused by the impact and severity of the spread of the novel coronavirus disease (COVID-19)." It further evaluated, "In particular, the four regional banks are either located in areas directly affected by the COVID-19 outbreak or have significant exposure to small and medium-sized enterprises in tourism, service, food and beverage, and distribution sectors, which could weaken asset quality."

Additionally, Moody's maintained the long-term bank deposit rating (Aa2), senior unsecured bond rating (Aa2), and stable outlook for IBK Industrial Bank of Korea, but placed its standalone credit profile (baa2) under review for downgrade. Moody's also initiated a review for a possible downgrade of IBK Investment & Securities' foreign currency long-term credit rating (A1) and short-term corporate credit rating (P-1).

Moody's diagnosed, "Industrial Bank of Korea has significant exposure to small and medium-sized enterprises vulnerable to the impact of COVID-19, which could lead to a deterioration in asset quality," and added, "It is also exposed to the manufacturing sector, which may be affected by a global trade slowdown or disruptions in global supply chains."

It continued, "Consideration was given to the possibility of a weakening in the parent company Industrial Bank of Korea's ability to support IBK Investment & Securities, as well as the potential for profitability to weaken amid increased financial market volatility."

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