Reuters logo
Fitch Rates Shinhan Bank's Basel III Tier 2 Notes 'BBB+(EXP)'
November 30, 2016 / 6:21 AM / in a year

Fitch Rates Shinhan Bank's Basel III Tier 2 Notes 'BBB+(EXP)'

(The following statement was released by the rating agency) SEOUL, November 30 (Fitch) Fitch Ratings has assigned a 'BBB+(EXP)' expected rating to South Korea-based Shinhan Bank's (Shinhan; A/Stable) proposed US dollar-denominated subordinated unsecured notes. Fitch expects the notes to have an issue size of USD500m, a tenor of 10 years and a call option after five years. Shinhan will use the proceeds to strengthen its Basel III Tier 2 (or gone-concern) regulatory capital position and for general corporate purposes. The notes will be issued under Shinhan's USD6bn global medium-term note programme, which was last updated on 15 March 2016. The final rating is contingent upon the receipt of final documents conforming to the information already received. KEY RATING DRIVERS Fitch rates the Basel III-compliant Tier 2 subordinated notes two notches below Shinhan's Long-Term Issuer Default Rating (IDR), which in turn is driven by its 'a' Viability Rating (VR). This reflects the notes' high loss-severity relative to senior unsecured instruments due to their subordinated status. If the bank reaches the point of non-viability (PONV), the notes will be fully and permanently written off. This means investors would not recover any of their investment. We believe that the anchor rating best reflecting the risk of Shinhan triggering the non-viability event is the IDR, which is currently underpinned by Shinhan's VR and is higher than its Support Rating Floor. South Korea's banks would reach the PONV when designated as an insolvent financial institution (FI) as defined in Article 2 of the Act on the Structural Improvement of the Financial Industry, the key resolution legislation in Korea. This effectively means the PONV is reached upon insolvency or default, which is similar to the point at which senior unsecured debt is considered to be in default. As such, Fitch believes investors of both senior unsecured and Tier 2 subordinated debt would benefit from pre-emptive support from the local authorities given Shinhan's systemic importance to Korea's banking system. The resolution legislation says a financial institution becomes insolvent if: - its liabilities exceed its assets, - it is under suspension of payment of claims, such as deposits, or redemption of money borrowed from other FIs, or - the Financial Services Commission or Deposits Insurance Committee deems it is unable to pay claims, such as deposits, or redeem borrowed money without external support. For more details on Fitch's approach to rating Basel III-compliant Tier 2 notes, see the non-rating action commentary <a href="https://www.fitchratings.com/site/pr/883114">Fitch: Korean Basel III Terms Become More Creditor Friendly, dated 26 September 2014. RATING SENSITIVITIES Any change in Shinhan's Long-Term IDR, which is currently driven by its Viability Rating, would affect the rating of these notes. Any downgrade of the IDR would be limited to one notch given that the current Support Rating Floor for Shinhan is at 'A-'. For more details on the drivers and sensitivities of Shinhan's VR, see <a href="https://www.fitchratings.com/site/pr/1004727 ">Fitch Affirms Shinhan Bank at 'A'/Stable, dated 19 May 2016. Shinhan's other ratings are as follows: Long-Term IDR rated at 'A'; Outlook Stable Short-Term IDR rated at 'F1' Viability Rating rated at 'a' Support Rating rated at '1' Support Rating Floor rated at 'A-' Senior unsecured debt rated at 'A' Subordinated debt (Basel III-compliant Tier 2) rated at 'BBB+' Contact: Primary Analyst Heakyu Chang Director +82 2 3278 8363 Fitch Australia Pty Ltd, Korea Branch 9F Kyobo Securities Building 97 Uisadang dae-ro, Youngdeungpo-gu Seoul 07327 Korea Secondary Analyst Matt Choi Associate Director +82 2 3278 8372 Committee Chairperson Tim Roche Senior Director +61 2 8256 0310 Date of the Relevant Rating Committee: 18 May 2016 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Global Bank Rating Criteria - Effective from 20 March 2015 to 15 July 2016 (pub. 20 Mar 2015) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below