Suhyup Bank

The stable outlook on Suhyup reflects our view that the bank will maintain adequate capitalization to support its business growth over the next 18-24 months. Suhyup's focus on risk management with reasonably tight underwriting standards will likely prevent significant deterioration in asset quality. The outlook also reflects our view that the bank will have a very high likelihood of receiving extraordinary support from the Korean government, if needed, over the period. We could downgrade Suhyup if the bank's asset quality significantly weakens along with a sharp increase in credit costs compared with the industry peer average. We believe an upgrade on Suhyup is unlikely over the next 18-24 months. We could raise the rating if Suhyup's capitalization strengthens, with the

...Suhyup Bank's focus on risk management will prevent significant strain on asset quality. We believe the bank's reasonably tight underwriting standards will help ensure adequate repayment capabilities for household borrowers. Suhyup's loans to small and midsize enterprises (SMEs) are also highly collateralized. These factors will mitigate downside risks from rapid loan growth over the past several years. In addition, we anticipate the bank will maintain an adequate capital buffer to support business growth, backed by largely stable profitability. Suhyup will likely continue to have a modest retail market presence compared with major domestic bank peers. The bank is small in Korea, with only about 1% loan and deposit market share among deposit-taking institutions. Suhyup's weak retail deposit franchise will likely constrain its funding capabilities, in our view. The bank's funding metrics have improved in the past few years, driven by its efforts to grow customer deposits, albeit at the expense...

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