Malaysia RAM: Hana Bank's rating not affected by Hana Financial

KUALA LUMPUR: Malaysia's RAM Ratings is of the opinion that the AAA(s) rating of Hana Bank's up to 1.0 billion ringgit Nominal Value Multi-Currency Medium-Term Note Programme (2009/2012) is not affected by Hana Financial Group Inc's (HFG) proposed acquisition of a 51 percent stake in Korea Exchange Bank (KEB). The enhanced AAA(s) rating is supported by a guarantee from the Government of the Republic of Korea. Hana Bank is the core banking subsidiary of HFG, a South Korean financial-services holding company.

In February 2011, HFG finalised its funding plan for the proposed acquisition of KEB. The acquisition of the 51 percent-interest will cost HFG about KRW4.75 trillion and will be funded by a mixture of debt, equity and internal funds.

The latter includes a dividend of KRW1.93 trillion from Hana Bank to its parent, paid on 21 February 2011. Hana Bank's pro forma tier-1 and overall risk-weighted capital-adequacy ratios stood at an estimated 10.3 percent and 13.5 percent, respectively, as at end-December 2010 (end-September 2010: 12.5 percent and 15.7 percent).

While lower, the latest available capitalisation levels are still deemed adequate.

RAM Ratings understands that there are no immediate plans to merge Hana Bank and KEB. In the short term, we expect some pressure on Hana Bank in terms of having to support HFG's debt-servicing obligations through dividend payments. KEB's financial profile is viewed to be healthy; its eventual contributions are expected to alleviate HFG's reliance on dividends from Hana Bank.