Moody's retains ratings of Hana Bank on its expected acquisition of KEB

By Kim Young-gyo HONG KONG, March 1 (Yonhap) -- Moody's Investors Service said Tuesday that it has retained Hana Bank's ratings with a stable outlook, expecting the bank will not be hit hard by its expected acquisition of Korea Exchange Bank (KEB). Hana Financial Group Inc., South Korea's No. 4 financial group by assets and the parent company of Hana Bank, clinched a deal last November with U.S. buyout fund Lone Star Funds to buy a 51 percent stake in South Korea's fifth-largest lender for 4.69 trillion won (US$4.19 billion). The group said last Monday that it has raised more than 1.3 trillion won -- about 25 percent of the money needed to buy KEB -- in share offering by selling 34.1 million common shares to 36 domestic and foreign investors at 42,800 won each. "The confirmation of Hana Bank's A1 rating with a stable outlook considers the fact that the completion of the 1.3 trillion won equity raising relieves Hana Financial Group of the financial burden of the acquisition," said Choi Young-il, vice president and senior analyst at Moody's. While the increased debt to fund the acquisition has weakened the capital structure of Hana Financial Group for the next several years, the dividend capacity of the group's subsidiaries is estimated to be sufficiently strong, Moody's said. At the same time, Moody's maintained KEB's long-term debt and deposit ratings with a positive outlook, and its bank financial strength rating with a stable outlook. "The confirmation of KEB's A2 rating -- with a positive outlook -- reflects three factors: the improvement in its financial profile, especially in terms of capital adequacy, the resolution of concerns over shareholder uncertainty and the expected increase in its systemic importance due to membership in Hana Financial Group," Choi said. The group's deal to buy KEB will enable Hana Financial Group to become the country's No. 2 industry player, with assets worth 316 trillion won. Hana plans to complete the transaction by the end of March after receiving a regulatory approval. ygkim@yna.co.kr