Fitch rates Shinhan Bank hybrids BBB+

Fitch Ratings said it assigned an expected BBB+ rating to South Korea-based Shinhan Bank's planned hybrid tier 1 notes. The issue size is expected to be $350 million.

At the same time, the rating on Shinhan's existing hybrid tier 1 notes was upgraded to BBB+ from BBB.

The ratings on the issues are linked to Shinhan's A- issuer default rating and are in line with the agency's general notching policy for hybrid tier 1 notes for higher-rated entities (A- or above). Fitch said the ratings also take into account Shinhan's good operating performance and its enlarged presence after its smooth merger with Chohung Bank as well as the expected acquisition of LG Card by holding company parent Shinhan Financial Group for a reported 6.7 trillion Korean won.

Shinhan Financial Group will fund the purchase through the issuance of 3 trillion Korean won of senior debt and 3.7 trillion Korean won of redeemable preferred shares, redeemable convertible preferred shares and perpetual preferred shares. Fitch said it does not view this extra debt at the holding company level posing any significant threat to Shinhan's financial soundness given the bank's and the group's current robust financial condition and the strong potential cash flow from LG Card.

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