Kookmin Bank announces 3Y and 5Y sustainability USD bonds

Kookmin Bank (“KB”) announced on 9 February 2022 that they are intending to issue two sustainability USD notes – a 3Y sustainability note at an initial price guidance (“IPG”) of CT3 + 90 bps and a 5Y sustainability note at an IPG of CT5 + 100 bps.

Both notes will be ranked senior unsecured. The issuer is rated ‘Aa3’ (stable) by Moody’s, ‘A+’ (stable) by S&P and ‘A’ (stable) by Fitch. Likewise, the new issue is expected to be rated ‘Aa3’ by Moody’s and ‘A+’ by S&P. The use of proceeds will be used to finance or refinance new or existing projects from a combination of Green and Social Eligible Categories in accordance with KB’s Sustainable Financing Framework.

Kookmin Bank was established in 1963 with more than 1000 branches worldwide. Its parent company, Kookmin Bank Financial Group was established in 2008 and listed on the Korea Exchange under the ticker, 105560, as well as American Depository Receipts (“ADR”) on the New York Stock Exchange, trading under ticker - KB. It is the largest bank in South Korea and is considered as one of the domestic systemically important banks by the Financial Services Commission of South Korea.

For 3Q21 ended 30 September 2021, KB reported net interest income of KRW 5.66t, a 13.3% increase year-on-year from KRW 4.99t in 3Q20. Profit for KB for 3Q21 was KRW 2.2t, which was a 15.5% increase from the year prior. KB saw improving credit quality with Non-performing loan (“NPL”) ratio for 3Q21 at 0.23%, a decrease of more than 5 basis points (“bps”) YoY. NPL coverage ratio was 182% for 3Q21.

Loans for KB in 3Q21 increased to KRW 311.8t while deposits also increased to KRW 317.9t. As mentioned above, credit quality improved for KB in 3Q21 and NPL coverage ratio was 182% which is more than enough to cover non-performing loans, should there need be.

For 3Q21, KB had KRW 31.6t of Tier 1 capital, KRW 31.0t of common equity Tier 1 capital and KRW 0.6t in additional Tier 1 capital. Common Equity Tier 1 (“CET1”) ratio for 3Q21 was 15.9%, which is much higher than the regulatory requirement of 8.0%. In terms of solvency, KB has sufficient CET1 buffer above regulatory requirements. Liquidity Coverage Ratio (“LCR”) for 3Q21 was 90.7%, above the regulatory requirement of 70%. 

The tenor for the new issues are 3 years and 5 years with an IPG of CT3 + 90 bps and CT5 + 100 bps respectively.  The reference guide interest rates are about 2.5% and 2.8%, which are similar to the rest of the A-grade peers. Considering the excellent credit quality of the issuer, we believe that these two new bonds are attractive and suitable for investors looking for stable income. Investors should note that the final price guidance may not be as high as the initial price guidance.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position and the analyst who produced this report holds a NIL position in the abovementioned securities.