Export-Import Bank of Korea - 2009

MARC has reaffirmed the ratings of AAA and AAAID assigned to The Export-Import Bank of Korea’s (KEXIM) conventional and Islamic Medium Term Notes Programmes with a combined nominal value of RM3.0 billion. The ratings reflect KEXIM’s key role in supporting Korea’s export and import industries, strong standalone financial profile and its full government ownership. The ratings also receive uplift from MARC’s assessment of a high likelihood of support from the Korean government in the event of need.  MARC opines that support from the Korean government will continue in view of KEXIM’s important role in supporting the growth of Korea’s export-oriented economy and the Korean government’s significant capacity to provide liquidity and/or capital support. The outlook on the ratings remains stable.

KEXIM is a specialised bank mandated with the role of an export credit agency to support Korean international trade transactions. The bank’s activities mainly comprise export credit, overseas investment projects as well as provision of guarantees. Being a state-owned bank with a policy mandate, profit considerations have never been its key objective. Nonetheless, since its inception the bank has always been able to achieve modest profits. Under the Export-Import Bank of Korea Act, the sovereign has an obligation to ensure KEXIM’s ongoing solvency. Accordingly, the government has injected a total of KRW1.7 trillion (approximately RM4.8 billion) during 2008 and 1H2009 to strengthen the bank’s capital structure.  

KEXIM’s strong standalone credit quality is underpinned by its relatively healthy capital structure (with total capital ratio of 10.6% as at June 30, 2009), modest profitability and sound asset quality as evidenced by low and well reserved NPLs (with NPL ratio of less than 1% for the past five years). KEXIM’s loan portfolio is geographically well diversified with credit exposures extended across the world. Although the bank faces currency and interest rate risks, such risks have thus far been well managed through the use of derivatives. Meanwhile, KEXIM’s increasing credit exposures to the manufacturing and shipbuilding industries have resulted in elevated concentration risk. This risk is, however, mitigated somewhat by the sound credit profiles of the borrowers comprising strong and established Korean corporations with proven capabilities to produce high value capital goods, such as the Hyundai Group and Samsung Heavy Industries Co Ltd.

The stable outlook on KEXIM’s ratings reflects the stable outlook for the Korean economy which is currently poised for a recovery, as well as MARC’s expectation that the bank’s economic importance and close ties with the government of Korea will remain intact over the medium term.

Major Rating Factors

Strengths