[Alpha Biz= Reporter Kim Sangjin] Nice Credit Rating Agency has forecasted that, following the strengthening of criteria for assessing the viability of real estate project financing (PF), capital companies will absorb losses but face heightened credit pressure, particularly for those with significant exposure and risk.
The initial assessment of real estate PFs revealed that the capital sector has 24 trillion KRW in businesses with concerns over potential default. The overall provision for bad debts stands at 13 trillion KRW, with reserves at 9 trillion KRW.
Nice Credit Rating has identified five capital companies—DB Capital, Meritz Capital, Shinhan Capital, Korea Capital, and Korea Investment Capital—as "key monitoring targets," due to their ratio of watch-listed loans exceeding 10% among those whose real estate PFs surpass 100% of their equity capital. Shinhan Capital holds an AA credit rating, while the others are rated A, which is necessary for issuing corporate bonds.
The five monitored companies have shown declining profitability since 2022. Although their simple return on assets (ROA) is similar to that of their peers, their adjusted ROA, which accounts for provisions for bad debts, has dropped to 0%.
While capital companies are required to set aside provisions under IFRS accounting standards, if these provisions fall short of regulatory requirements, they must maintain additional reserves.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
