Matt Choi, analyst at Fitch Ratings / Courtesy of Fitch Ratings
Small- and medium-sized enterprises (SMEs) and self-employed borrowers, whose repayment capacity may weaken under prolonged economic pressure stemming from the Iran war, remain the biggest weak spot for Korean banks, according to Fitch Ratings analyst Matt Choi.
In an interview with The Korea Times in Seoul, Thursday, Choi said Korean banks are expected to maintain relatively stable earnings this year, but warned that risks tied to vulnerable borrowers should be closely monitored.
"We expect Fitch-rated banks, particularly the large commercial banks, to maintain resilient credit profiles and deliver broadly stable near-term performance, given their ability supported by steady net interest margin and also the moderate loan growth for the sector overall," Choi said, adding that he expects Korea's policy rate to remain broadly stable, helping banks preserve interest margins.
Choi is a director of financial institutions at Fitch Ratings. Based in Hong Kong, he covers bank credit ratings in Korea and Hong Kong.
In a recent report, Fitch maintained an A+ operating environment score for Korea's banking sector, one of the highest among major Asian economies.
Still, Choi warned that financial stress among SMEs and self-employed borrowers has persisted longer than previously expected, particularly in sectors tied to domestic real estate and project financing exposures.
"For the asset quality side, we expect the pressure on vulnerable sectors to be sustained, especially for SMEs and self-employed individuals, and we are looking at the monthly loan area ratio, and we are seeing continue to increase the ratios for those segments," he said.
"We previously expected that to be stabilized, but it appears that the pressure appears to be continued, especially on some of the real estate related exposures," he said.
Automated teller machines belonging to major commerical banks are installed at a building in Seoul, April 12. Newsis
Source: Korea Times News
