S&P boosts thee Korean banks

Standard & Poor's said it upgraded three Korean banks, along with their debt issues, by one notch due to their improving stand-alone asset quality and strengthening capitalization.

The local and foreign currency long-term and short-term counterparty credit ratings on Kookmin Bank, Industrial Bank of Korea (IBK) and National Agricultural Cooperative Federation (NACF) were raised to A/A-1 from A-/A-2.

The outlooks on the ratings on all three entities are stable.

The Bank Fundamental Strength Rating on Kookmin Bank was raised to B from C+, the agency said, noting that the upgrade of Kookmin reflects the bank's improving overall credit profile, mainly driven by a more rigorous risk management system and conservative asset growth strategy for the past few years.

These factors have translated into a significant improvement in capitalization and asset quality, evidenced by an expected improvement in BIS Tier 1 ratio to 10% in 2006 from 6.7% in 2004 and a problem asset ratio decline to 2.2% at the end of 2006 from 4.0% in 2005, the agency said.

S&P added that a significant improvement in revenue diversification and earnings stability could lead to a revision of the outlook on the ratings on Kookmin to positive, although the ratings upside remains limited at the current rating level due to country risk.

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