Fitch: Kookmin Bank Ratings Unaffected by Parent's Purchase of Hyundai Securities
OREANDA-NEWS. Fitch Ratings says that the ratings on South Korea-based Kookmin Bank (A/Stable/a) will not be affected by its parent KB Financial Group Inc.'s acquisition of Hyundai Securities Co. Ltd. (Hyundai Securities).
KB Financial Group on 12 April has agreed to acquire 22.6% of Hyundai Securities for KRW1.3trn (about USD11bn), strengthening its brokerage and investment banking operation. Once the acquisition is completed, the group will effectively become the controlling shareholder of the brokerage firm. This will allow KB Financial Group to diversify its operations and pursue cross-selling opportunities in the long term, which will help offset the effects of the low interest rates environment.
Fitch estimates the acquisition would not significantly burden Kookmin Bank in terms of dividends to its parent because it is modest relative to capital base, leverage and profitability of the bank and the bank holding company. The Long-Term Issuer Default Rating on Kookmin Bank, the flagship subsidiary of KB Financial Group, is driven by its 'a' Viability Rating, which reflects its robust Fitch Core Capital (FCC) of KRW22.6trn and FCC ratio of 15.2% at end-2015.
KB Financial Group reported consolidated net profit of KRW1.7trn for 2015 and its common-equity double leverage ratio was 107% at end-2015. Fitch expects the double leverage ratio to increase to 115% in the short term (but remain below 120% in the long term) as and when the group completes the acquisition of 30% in Hyundai Securities within one year, as per the local regulatory requirements for financial holding companies purchasing stock exchange-listed subsidiaries. Fitch expects KB Financial Group to fund the acquisition with debt.