S&P Global Ratings revises Korea Investment & Securities outlook to stable

Investing.com -- S&P Global Ratings has revised its outlook for Korea Investment & Securities Co. Ltd. (KIS) to stable from negative while affirming the company’s ’BBB’ long-term and ’A-2’ short-term issuer credit ratings.

The rating agency announced the change on Monday, citing improving profitability across Korean securities firms that will enable them to better absorb property risks.

S&P also affirmed its ’BBB’ long-term and ’A-2’ short-term foreign currency issue ratings on KIS’s medium-term note program and the outstanding senior unsecured notes.

The stable outlook reflects S&P’s view that KIS and its parent group, Korea Investment Holdings Co. Ltd. (KIH), will maintain adequate capitalization and funding over the next 18-24 months.

Korean securities firms are benefiting from more favorable operating conditions. The sector is seeing growth in international stock transaction volumes and extended trading hours for domestic stocks following the launch of alternative trading system Nextrade earlier this year.

The new government’s support for higher shareholder returns and potential dividend tax reductions have boosted Korean stock markets. Additionally, downward trends in domestic interest rates are supporting trading and valuation gains from fixed income securities.

S&P expects the sector’s return-on-average assets (ROAA) to reach about 1% in 2025-2026, compared with 0.9% in 2024 and 0.5% in 2023. The first quarter of 2025 showed an annualized ROAA of approximately 1.3%.

Property risks appear manageable for major securities firms. Korean securities firms’ exposure to risky real estate projects totaled about Korean won (KRW) 3.4 trillion at the end of 2024, representing about 4% of total shareholders’ equity. The firms had set aside approximately KRW2.8 trillion in provisions against these exposures.

KIS is expected to maintain higher profitability than domestic peers. As the second-largest securities firm in Korea based on consolidated shareholders’ equity as of March 2025, the company reported an annualized ROAA of about 1.9% in the first quarter of 2025.

S&P noted it could lower ratings if KIS’s funding or liquidity profile weakens materially, if the group’s risk-adjusted capital ratio falls consistently below 7%, or if credit quality deteriorates significantly. Conversely, ratings could be raised if the group improves capitalization while maintaining good risk management.

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