Update: Kookmin Bank

The stable outlook on Kookmin reflects our view that the bank will maintain its adequate capitalization over the next 18-24 months, backed by a moderate growth appetite. We believe Kookmin's efforts to manage risks and maintain adequate underwriting standards will help prevent material deterioration in asset quality. This is despite an increased financial burden on borrowers amid elevated domestic interest rates, subdued property market conditions, and slowing economic growth in Korea. In addition, Kookmin will likely maintain stable funding and liquidity profiles, backed by its solid nationwide customer base. We could lower our ratings on Kookmin if: (1) the bank's capitalization weakens considerably, dragging the RAC ratio sustainably below 7%. This could be due to rapid business growth or a

...Kookmin Bank's adequate risk control and underwriting standards will help the bank withstand strain on asset quality. Debt servicing to income ratio requirements set by the regulator for banks in Korea will help ensure household borrowers have adequate repayment capability. Kookmin's loans to small and midsize enterprises are also highly collateralized. We anticipate a moderate increase in the bank's nonperforming assets (NPA) ratio (based on stage 3 credit-impaired loans under Korean International Financial Reporting Standards) in the coming few years. The ratio rose slightly to about 0.9% as of end-June 2023, after staying steady at about 0.8% in the prior few years. An increase in credit losses is likely to be manageable. In our view, Kookmin has adequate earnings capacity to absorb credit losses on the back of its stable revenue stream and risk management capabilities. The bank's annualized credit costs (measured by new loan loss provisions as a percentage of average gross loans) increased...

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