US credit rating agency Fitch Ratings said on Wednesday that the near-term performance of South Korea‘s four major banks will be supported by loan-loss provisioning already made in 2020 and sustained relief measures introduced by the regulator.
The pressure on their financial profiles, however, may persist as the ramification of last year’s pandemic-induced recession is likely to linger and affect the banks‘ asset quality and profitability, according to the company.
“The preliminary 2020 results of the four major commercial banks -- Kookmin Bank (A), Shinhan Bank (A), KEB Hana Bank (A-) and Woori Bank (A-) -- were broadly steady in the absence of a notable increase in the expected-loss-based provisioning,” the company said.
The ratings firm expects a boost to their loan-loss reserves to act as a moderate buffer to the future asset-quality deterioration, with the magnitude ultimately depending on the pace of economic recovery.
The Korean government plans to extend relief measures for borrowers by six months to September 2021 amid the recent resurgence of domestic infections.
The government’s sustained support should help banks maintain steady profitability and asset quality for the short term although their vulnerability to shock may increase due to a potentially greater risk appetite or larger exposure to vulnerable sectors, the company said.
By Kim Young-won (firstname.lastname@example.org)