Supply risk to bite on Korean bank credits

Korean banks will be tapping the bond markets in the near term, adding supply risk to their outstanding bonds, believes Nomura.

  • 26 Oct 2011
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Under pressure from the Korean banking regulator to pre-fund their 2012 maturities, Korean banks are likely to go to credit markets for funding soon, according to an October 24 Nomura research note from the sales and trading desk.

"We are worried about the upcoming supply risk from the Korean banks, as they are facing regulatory pressure to pre-fund for their maturities in 2012," said the note written by analyst William Mak. "In particular, Hana has relatively sizeable maturities of US$1.5 billion in [the first half of 2012] (including US$1 billion of senior [funding] maturing in April and US$500 million of [lower tier two] callable in April)."

Nomura believes that the supply could hit the market in the near term due to the recent tightening of credit spreads for Korean financials and the recent US$1 billion bond issue from Korean National Oil Corp (KNOC). Hana may have a particular need for funding but Korea Development Bank (KDB) is likely to be first in line to tap the markets, according to Mak.

Responding to a rally in the secondary markets, KNOC priced its bond issue on October 20 reopening Asia’s international bond markets and pulled in around US$8 billion worth of orders, according to sister publication Euroweek.

As a positive, Nomura believes that Korean commercial banks have recently improved their foreign currency (FX) liquidity under guidance from the regulator in view of recent volatility in the FX wholesale funding market.

  • 26 Oct 2011

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1 JPMorgan 17,834.38 72 10.56%
2 Citi 16,648.84 65 9.86%
3 HSBC 14,502.17 79 8.59%
4 Deutsche Bank 10,659.15 37 6.31%
5 Standard Chartered Bank 8,423.03 47 4.99%

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1 JPMorgan 7,610.36 27 13.98%
2 Citi 6,685.06 20 12.28%
3 HSBC 4,539.92 22 8.34%
4 Deutsche Bank 3,547.08 9 6.52%
5 Standard Chartered Bank 3,538.08 13 6.50%

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5 Standard Chartered Bank 591.66 6 6.41%