Fitch ups Industrial Bank of Korea notes

Fitch Ratings said it upgraded Industrial Bank of Korea's (IBK; AA-/stable) dollar-denominated Basel III compliant Additional Tier 1 (AT1) hybrid notes to BBB from BB+ and removed the rating from rating watch positive.

The upgrade follows the publication of Fitch's March 23 Bank Rating Criteria, which provides scope to factor in government support for hybrid securities issued by a policy bank when Fitch believes the support can effectively be used to neutralize the hybrid securities' non-performance risk.

Fitch said the upgrade was driven by a change of the notes' anchor rating to the bank’s AA- long-term issuer default rating, rather than from its viability rating of a-, the agency’s reassessment of incremental non-performance risk of one notch, loss severity of two notches embedded in the notes relative to those in senior unsecured debt and the rating cap applied to issuer default rating-anchored hybrid notes as per the new criteria of BBB in Industrial Bank of Korea’s case.

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