Export-Import Bank of Korea

  • Sector: Financial Services
  • Sub Sector: Banks
  • Region: Korea
  • Bond: EIBKOR 5.125 33
  • Indicative Yield-to-Maturity (YTM): 4.71%
  • Credit Rating (Moody’s/Standard & Poor’s/Fitch): ( Aa2 / AA / AA- )
Detailed Information

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Fundamental View

AS OF 18 Aug 2022
  • KEXIM is a pure policy bank that is directly and indirectly wholly owned by the government of the Republic of Korea which is obliged under Article 37 of the Export-Import Bank of Korea Act to fund any losses that cannot be covered by the bank’s reserves.
  • While this is a solvency guarantee and does not explicitly guarantee the timely repayment of debt, we view it as inconceivable that the Korean authorities would fail to provide KEXIM with support in a timely manner, should this be needed, given its crucial policy role and close government links.

Business Description

AS OF 18 Aug 2022
  • KEXIM was set up in 1976 to support Korean companies in their overseas business through export credit guarantee programs, as well as providing finance for imports and for overseas investment. It provides funding for both short term trade and long term investment, manages the Economic Development Cooperation Fund, a Korean official development assistance program, and was a conduit through which the government doled out COVID-19 assistance to affected companies.
  • Till 2030, KEXIM aims to preferentially focus on seven sectors (hydrogen energy, wind and solar power, rechargeable battery and energy storage systems (ESS), future mobility, 5G and next-generation semiconductors, pharmaceutical and healthcare, and digital technology and cultural content) which are considered new growth drivers of the Korean economy. It has historically focused on the shipbuilding, and engineering & construction industries.
  • KEXIM is 100% owned by the Korean government: 69% directly and the remainder through stakes held by the Bank of Korea (9%) and Korea Development Bank (22%). In contrast to peer policy banks IBK and KDB, KEXIM has remained more consistently a policy bank but its role has been adjusted to ensure it complements rather than competes with the Korean commercial banks.

Risk & Catalysts

AS OF 18 Aug 2022
  • Previous Korean governments have made moves to privatise the other policy banks, but KEXIM has retained its policy bank role and government ownership, and these are not likely to change.
  • Korea’s shipbuilders have long been the largest users of KEXIM’s services. Losses on exposure to the sector, in particular Daewoo Shipbuilding (DSME), pushed KEXIM into the red in 2016 but the government injected capital and its condition has recovered.
  • Together with KDB, KEXIM has played a key role in helping corporate Korea survive the COVID-19 induced crisis.
  • KEXIM’s ratings are the same as the Korea’s sovereign ratings, which are now all in the AA range.

Key Metrics

AS OF 18 Aug 2022
KRW bn FY21 FY20 FY19 FY18 FY17
Pre-Impairment Operating Profit / Average Assets 1.12% 1.17% 1.34% 1.34% 1.42%
ROAA 0.48% 0.10% 0.47% 0.78% 0.02%
ROAE 3.2% 0.7% 3.2% 5.3% 0.1%
Provisions/Average Loans 0.49% 1.16% 0.46% 0.61% 1.52%
Nonperforming Loans/Total Credits 1.31% 1.22% 1.47% 1.38% 3.37%
CET1 Ratio 13.3% 13.4% 12.9% 12.7% 11.4%
Total Equity/Total Assets 15.1% 14.8% 14.9% 15.0% 14.8%
Net Interest Margin (NIR/Ave Assets) 0.92% 0.94% 0.98% 1.14% 1.26%
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CreditSights View

AS OF 30 May 2023

KEXIM is a wholly government owned policy bank benefiting from a Korean government solvency guarantee. It plays a key role in financing large-ticket exports in particular ships and large-scale overseas engineering projects. Its credit exposures include some industry and borrower concentrations especially to Korea’s shipbuilders and its financial performance has at times suffered. But the Korean government has always acted in a timely manner to endure its solvency and with this strong backing we view it as a sound credit. We view its secondary levels as in line with where we would expect it to trade and so continue with our Market perform recommendation.

Recommendation Reviewed: May 30, 2023

Recommendation Changed: September 22, 2020

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