S&P rates Shinhan notes BBB

Standard & Poor's said it assigned a BBB rating to South Korea-based Shinhan Bank's (A-/stable/A-2) proposed $300 million upper tier 2 subordinated notes, which are scheduled to be drawn down from the bank's $3 billion global medium-term note program.

The two-notch difference between the counterparty rating on the bank and the rating on the proposed notes reflects the notes' relatively worse recovery prospects due to their subordinated status as well as the deferability of the notes' coupon payments, the agency said.

The ratings on Shinhan reflect the good asset quality, adequate risk management and diversified revenue structure of parent Shinhan Financial Group Co. Ltd., the agency said. As such, the ratings on Shinhan reflect the consolidated credit profile of Shinhan Financial in view of the typical convergence of risks that occur among subsidiaries of a common holding company.

Offsetting these positives is the risk associated with the post-merger integration process after the planned merger between Shinhan and Chohung Bank in April, and there is potential risk of short to midterm deterioration of the overall capital strength of the group, depending on the purchase price and financing structure, if Shinhan Financial takes over LG Card Ltd., the agency said.

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