ID :
207047
Wed, 09/14/2011 - 11:08
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Shortlink :
https://oananews.org//node/207047
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S. Korean lenders tumble on French bank downgrade
SEOUL, Sept. 14 (Yonhap) -- Shares of South Korean banks plunged on Wednesday as Moody's downgrade of two major French banks sapped investor appetite on worries the worsening situation in the eurozone may hit local lenders.
Woori Finance Holdings Co., the largest financial services company by assets, plunged 8.76 percent to 9,170 won (US$8.3) and KB Financial Group Inc., the parent of top lender Kookmin Bank, dropped 7.22 percent to 37,250 won. Smaller player Shinhan Financial Group Co. lost 3.02 percent to 40,200 won.
Moody's Investors Service cut its credit ratings on Credit Agricole SA and Societe Generale SA by one notch, respectively, citing their exposure to Greece. Credit Agricole's rating was lowered from Aa1 to Aa2 while Societe Generale was cut from Aa2 to Aa3.
Market watchers said the impact of the downgrade is expected to linger for the time being.
"The eurozone issue not only involves Greece, but other debt-mired countries such as Portugal and Italy as well. They are the core reason behind the French bank downgrade, which indicates the ongoing concerns will take some time to dissipate," said an official at the Korea Center for International Finance.
He added the upcoming gathering of European financial ministers and regional policy support are factors to keep tabs on.
Others raised views that deteriorating confidence in French financial institutions is likely to dent local banks' funding conditions.
"European lenders, including French banks, have been beefing up sales activities in South Korea. But following the downgrade, they may scale back on extending loans as part of their efforts to minimize exposure risk, which may strain local banks' foreign borrowing," said another industry official, adding that French investors may also accelerate their sales of local bonds.
In August, French investors were one of the key sellers of South Korean bonds, dumping holdings worth 1.1 trillion won, up from 568.1 billion won in the previous month, according to the Financial Supervisory Service.
Others, however, said the impact of the downgrade is likely to be limited thanks to local banks' relatively low exposure to French banks and improved fundamentals.
"South Korean banks have witnessed an improvement in key indicators after the eruption of the 2008 global financial crisis," said Kim In, an analyst at Eugene Investment Securities Co. "The portion of major banks' short-term capital has fallen below 40 percent. The shock from French banks' credit risk is likely to be limited."
Woori Finance Holdings Co., the largest financial services company by assets, plunged 8.76 percent to 9,170 won (US$8.3) and KB Financial Group Inc., the parent of top lender Kookmin Bank, dropped 7.22 percent to 37,250 won. Smaller player Shinhan Financial Group Co. lost 3.02 percent to 40,200 won.
Moody's Investors Service cut its credit ratings on Credit Agricole SA and Societe Generale SA by one notch, respectively, citing their exposure to Greece. Credit Agricole's rating was lowered from Aa1 to Aa2 while Societe Generale was cut from Aa2 to Aa3.
Market watchers said the impact of the downgrade is expected to linger for the time being.
"The eurozone issue not only involves Greece, but other debt-mired countries such as Portugal and Italy as well. They are the core reason behind the French bank downgrade, which indicates the ongoing concerns will take some time to dissipate," said an official at the Korea Center for International Finance.
He added the upcoming gathering of European financial ministers and regional policy support are factors to keep tabs on.
Others raised views that deteriorating confidence in French financial institutions is likely to dent local banks' funding conditions.
"European lenders, including French banks, have been beefing up sales activities in South Korea. But following the downgrade, they may scale back on extending loans as part of their efforts to minimize exposure risk, which may strain local banks' foreign borrowing," said another industry official, adding that French investors may also accelerate their sales of local bonds.
In August, French investors were one of the key sellers of South Korean bonds, dumping holdings worth 1.1 trillion won, up from 568.1 billion won in the previous month, according to the Financial Supervisory Service.
Others, however, said the impact of the downgrade is likely to be limited thanks to local banks' relatively low exposure to French banks and improved fundamentals.
"South Korean banks have witnessed an improvement in key indicators after the eruption of the 2008 global financial crisis," said Kim In, an analyst at Eugene Investment Securities Co. "The portion of major banks' short-term capital has fallen below 40 percent. The shock from French banks' credit risk is likely to be limited."
