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Region: Korea
Korea Electric Power Corp.
- Sector: Energy
- Sub Sector: Utilities
- Region: Korea
- Bond: KORELE 5.5 28
- Indicative Yield-to-Maturity (YTM): 4.858%
- Credit Rating : AA
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Fundamental View
AS OF 07 Jul 2025KEPCO is Korea’s only fully integrated electricity utility and is considered a quasi-sovereign credit, with its financial strength anchored by a very high level of government support stemming from its essential role in securing the nation’s power supply.
In FY24, KEPCO’s credit profile improved significantly due to higher tariffs and stabilizing fuel costs, driving strong rebounds in revenue, EBITDA margin, and cash flow. Credit metrics strengthened, with total debt/EBITDA and net debt/EBITDA improving to 6.7x/6.6x. Although capex remains substantial and continues to keep debt elevated, the stronger operating performance has provided a cushion. These factors, combined with KEPCO’s critical policy function and the strong likelihood of government support, underpin its solid credit standing.
Business Description
AS OF 07 Jul 2025- KEPCO is a quasi-sovereign credit and the sole integrated electric utilities company in Korea. It is majority-owned by the Korean government, which maintains at least a 51% stake as stipulated by law, with shares listed on both the Korea Exchange and the New York Stock Exchange.
- It is South Korea’s leading electricity utility, holding an effective monopoly over the country’s transmission and distribution networks and acting as the primary power generator. Through its six wholly owned generation subsidiaries - Korea Hydro & Nuclear Power (KHNP), Korea South-East Power (KOEN), Korea Western Power (KOWEPO), Korea East-West Power (EWP), Korea Midland Power (KOMIPO), and Korea Southern Power (KOSPO), KEPCO supplies around two-thirds of Korea’s electricity and manages more than half of the nation’s total power capacity. KHNP is the sole nuclear power generation company in Korea. On a consolidated basis, electricity transmission & distribution accounts for over 95% of KEPCO's annual revenues.
Risk & Catalysts
AS OF 07 Jul 2025Key risks to KEPCO’s standalone credit profile include: 1) higher-than-expected fuel costs due to continued increase of international prices of coal, natural gas and oil as well as a significant depreciation of the KRW against the $; (2) inability to pass through high fuel costs due to insufficient or delayed tariff adjustment; and (3) higher-than-expected capex and investments related to Korea’s green transition. However, we do not foresee these risks to materially impair KEPCO’s ability to access funding, credit rating and overall credit profile as we expect KEPCO to continue receiving an extremely high level of support from the Korean government.
KEPCO’s exposure to nuclear power operations and coal-fired power generation may post ESG concerns for investors with an ESG mandate. The company also faces challenges from Korea’s push for decarbonization, with tightening environmental regulations and a planned reduction in coal-fired power potentially increasing compliance costs and execution risks during the energy transition.
Key Metric
AS OF 07 Jul 2025| KRW bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 55.3% | 60.1% | 76.9% | 80.5% | 78.9% |
| Net Debt to Book Cap | 54.1% | 58.7% | 75.3% | 78.4% | 77.8% |
| Debt/Total Equity | 1.2x | 1.5x | 3.3x | 4.1x | 3.7x |
| Debt/Total Assets | 43.0% | 46.7% | 59.6% | 64.3% | 62.6% |
| Gross Leverage | 5.6x | 16.5x | -6.9x | 18.2x | 6.9x |
| Net Leverage | 5.5x | 16.1x | -6.8x | 17.7x | 6.8x |
| Interest Coverage | 7.8x | 3.1x | -7.2x | 1.9x | 4.8x |
| EBITDA Margin | 26.5% | 9.8% | (28.3%) | 9.6% | 23.9% |
CreditSight View Comment
AS OF 06 Feb 2025KEPCO is the sole electricity distributor and transmitter in South Korea, undertaking an irreplaceable policy role. Its credit profile is underpinned by excellent government support which allows the company to enjoy strong access to the onshore and offshore funding channels that mitigate its elevated leverage and insufficient cash coverage for short-term debt. KEPCO is in the process of implementing a financial improvement plan and aim to restore its financial soundness by 2027. Its $ bonds provide attractive yield pick-ups compared to lower-rated Chinese SOEs and BBB-rated low beta Korean corporates, in our view. We prefer the new KORELE Feb-28 and KORELE 5.5% Apr-28 for short-dated high-coupon carry and better trading liquidity.
Recommendation Reviewed: February 06, 2025
Recommendation Changed: July 24, 2023
Who We Recommend
Sultanate of Oman
Korea Gas Corp.
Macquarie Bank
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Fundamental View
AS OF 27 Jun 2025KORGAS is Korea’s sole integrated gas utility company and a quasi-sovereign credit, maintaining an effective monopoly over E&P, procurement, storage and production, transmission, and wholesale distribution of natural gas.
Its credit profile is supported by its dominant position in the natural gas and hydrogen utility market, as well as strong government support, which partially offsets the credit impact of delayed and incomplete pass-through of gas procurement costs during periods of natural gas price surges, such as in FY22.
We expect its credit profile to improve in FY25, aided by stabilizing oil and LNG prices, improved tariff adjustments, and ongoing government backing, which should partially mitigate concerns related to its larger planned capex.
Business Description
AS OF 27 Jun 2025- KORGAS is 54.6% owned directly/indirectly by the Korean government (Central Government 26.2%, KEPCO 20.5%, Local Government 7.9%). It is Korea's only fully integrated gas utility, holding an effective monopoly over E&P, procurement, storage, transmission, and wholesale distribution of natural gas. KORGAS plays a key role in Korea’s energy transition, with plans to increase LNG generation capacity by 56% by 2036 from 2022. KORGAS was also designated as Korea’s sole hydrogen distribution agency in 2020.
- The Korean natural gas sector is split into wholesale and retail segments. KORGAS is the exclusive wholesaler, while city gas companies manage retail supply via regional networks. In FY24, 46% of KORGAS's gas sales were to domestic LNG-fired power generation companies (gencos, including KEPCO subsidiaries and IPPs), with the remaining 54% sold to city gas and heating companies.
- KORGAS's operations are heavily regulated, with government oversight on tariffs, investments, and expansion. Besides domestic LNG, KORGAS owns overseas E&P assets to enhance energy security. In line with government policy, KORGAS is investing in hydrogen infrastructure and renewables, using its gas network and expertise to support Korea’s clean energy transition.
Risk & Catalysts
AS OF 27 Jun 2025Risks: (1) delayed tariff adjustments; (2) larger-than-expected debt-funded capex; (3) domestic regulatory and policy risks; (4) overseas E&P volatility, including political, operational and market risks; (5) depreciation of the KRW against the USD; (6) liquidity shortfalls; (7) asset impairment risks due to decline in global oil and gas prices.
Catalysts: (1) stronger-than-expected government support; (2) tariff increases; (3) stabilizing fuel prices; (4) hydrogen and green energy initiatives; (5) regulated city gas operations with a formula-based cost pass-through system.
Key Metric
AS OF 27 Jun 2025| KRW bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 75.7% | 75.8% | 81.3% | 80.7% | 79.0% |
| Net Debt to Book Cap | 74.6% | 74.2% | 79.8% | 79.1% | 77.2% |
| Debt/Equity | 312.4% | 313.3% | 434.4% | 418.0% | 377.0% |
| Gross Leverage | 9.4x | 9.1x | 9.9x | 11.6x | 8.0x |
| Net Leverage | 9.3x | 8.9x | 9.7x | 11.4x | 7.8x |
| Interest Coverage | 3.4x | 4.8x | 5.1x | 2.2x | 3.4x |
| EBITDA Margin | 12.3% | 11.4% | 8.8% | 8.0% | 13.3% |
CreditSight View Comment
AS OF 02 Jul 2025We maintain our O/P recommendation on KORGAS. Its credit profile is supported by its essential policy role as South Korea’s only vertically integrated natural gas utility and a key energy supplier, which results in strong government backing, a dominant market position, and excellent funding access—offsetting its high leverage. We anticipate its credit profile will strengthen in FY25, driven by stable oil and LNG prices, improved tariff adjustments, and continued government support, which should help address concerns over higher planned capex. We find KORGAS attractive relative to lower-rated Chinese SOEs, BBB-rated low beta Korean corporates, and other Korean quasi-sovereigns. We recommend KORGAS to investors seeking ~5% safe carry in the Asia credit space.
Recommendation Reviewed: July 02, 2025
Recommendation Changed: June 27, 2023
Who We Recommend
Sultanate of Oman
Korea Electric Power Corp.
Macquarie Bank
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Fundamental View
AS OF 04 Jun 2025IBK benefits from a legally binding solvency guarantee from the Korean government and is viewed as a Korean quasi-sovereign issuer. The bank is listed, but remains majority state-owned. Previous governments had proposed privatizing it, but subsequent governments scrapped these plans. The government intends to keep its stake above 50%, and wants IBK to focus on lending to SMEs and provide earlier stage investment capital.
IBK manages the difficult feat of combining its policy role to support Korean SMEs with performance that compares creditably with Korean commercial banks.
Business Description
AS OF 04 Jun 2025- IBK was established under its own Act in 1961 to assist the development of Korea's small business sector. It claims a 24% market share in SME lending.
- It was listed in the early 1990s, but was re-nationalised following heavy losses in the Asian economic crisis of the late 1990s. It was re-listed in 2003, and is majority owned by the government which holds 59.5%; the National Pension Scheme holds 5.6%, and other policy banks have small stakes (7.2% by Korea Development Bank and 1.8% by the Export-Import Bank of Korea).
- Under Article 43 of the IBK Act, if the bank incurs losses they should be set against its reserves and "if the reserves are not sufficient the Government shall assume the remaining loss". Although this is a solvency guarantee and not an explicit guarantee for the timely payment of debts, we believe the Korean government will ensure IBK is in a position to make such timely payments.
Risk & Catalysts
AS OF 04 Jun 2025The bank’s ratings are closely tied to the Korean sovereign’s ratings due to its quasi-sovereign status.
Its ratings and its default risk should therefore not be impacted by any deterioration in its financials, provided the government continues to inject new capital when needed, which it is expected to.
Its policy mandate requires it to use at least 70% of its funding for SMEs. Risks are mitigated by its granular SME exposures which are more than 80% secured, including guarantee from state-owned credit guarantee agencies. Korean governments have also always been quick to provide support including capital injections to IBK when needed, with the most recent injection of KRW 1.3 tn during the COVID.
Key Metric
AS OF 04 Jun 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Operating Profit / Average Assets | 1.30% | 1.49% | 1.59% | 1.39% | 1.33% |
| ROAA | 0.6% | 0.6% | 0.6% | 0.6% | 0.7% |
| ROAE | 9.2% | 9.5% | 8.8% | 8.1% | 9.6% |
| Provisions/Average Loans | 0.34% | 0.50% | 0.67% | 0.52% | 0.37% |
| Nonperforming Loans/Total Loans | 0.85% | 0.85% | 1.05% | 1.34% | 1.34% |
| CET1 Ratio | 11.3% | 11.1% | 11.3% | 11.3% | 11.4% |
| Total Equity/Total Assets | 6.92% | 6.79% | 7.10% | 7.25% | 7.10% |
| NIM | 1.51% | 1.78% | 1.79% | 1.70% | 1.63% |
CreditSight View Comment
AS OF 16 Jun 2025IBK is not wholly government owned – 59.5% direct government ownership, 7.2% KDB and 1.8% KEXIM – but is a policy bank benefiting from a Korean government solvency guarantee. For a policy bank it also has a fairly good track record and manages the difficult feat of combining its policy role to support Korean SMEs with performance that compares creditably with Korean commercial banks. As the leading lender to Korea’s medium and small businesses, IBK plays a key role in the country’s economy, enhanced by the longstanding objective of numerous administrations to achieve a more diversified economy less reliant on the “chaebol”. Successive Korean governments have always been quick to provide support including capital injections to the policy banks when needed.
Recommendation Reviewed: June 16, 2025
Recommendation Changed: March 17, 2017
Who We Recommend
Sultanate of Oman
Korea Electric Power Corp.
Korea Gas Corp.
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Fundamental View
AS OF 06 May 2025Shinhan FG was the best-managed of the large Korean financial groups over many years. During the Asian Financial Crisis, it took advantage of the opportunity to acquire competitors and other businesses, increasing its scale and expanding its business lines.
Its performance has been more variable in the past few years. After a bumpy 2020, it had a better FY21 and FY22, thanks to rising interest rates. However, operating performance turned weak again in FY23, and its FY24 profit growth was softer than peers, impacted by non-bank performance.
In addition to owning a Big 4 bank in Korea, Shinhan FG also has a diversified non-banking business portfolio, including a leading credit card company and a top 10 securities firm.
Business Description
AS OF 06 May 2025- Shinhan Financial Group (Shinhan FG) is one of Korea's most diversified financial groups and the holding company of the second largest Korean bank - Shinhan Bank. It also has credit cards, securities, asset management and insurance subsidiaries.
- Shinhan Bank was set up in 1982 with seed capital from Korean residents in Japan. It was more professionally managed than the heavily politicised older banks and came through the 1997 Asian Financial Crisis in relatively good shape, taking the opportunity to acquire the larger and much longer-established Chohung Bank in 2003.
- In 2007, it made another timely acquisition, buying LG Card from its creditors after it failed during the 2003 Korean consumer lending crisis. Shinhan Card is the largest card issuer in Korea.
- Shinhan is also looking for overseas opportunities where growth is strong and Korean businesses have a presence, with a focus on Vietnam (where Shinhan Card also bought a consumer finance business in 2019) and Indonesia.
Risk & Catalysts
AS OF 06 May 2025As one of Korea’s “Big Four” financial groups, we believe Shinhan FG would likely receive governmental support if needed.
Asset quality pressure has been rising from domestic real estate project financing at non-bank subsidiaries, with credit costs rising from very low levels. Management expects FY25 credit costs to normalize to the mid-30 bp from 47 bp in FY24, though we remain cautious about this outlook.
Loan growth is expected to slow down this year due to both weaker demand and the need to defend its 13% CET 1 ratio target.
Profit growth may encounter challenges if there is volatility in the KRW, which could lead to significant FX losses, or if the high-rate environment in the US persists, causing further overseas CRE valuation losses.
Key Metric
AS OF 06 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.11% | 1.10% | 3.89% | 3.89% | 1.28% |
| ROA | 0.66% | 0.72% | 0.66% | 0.63% | 0.83% |
| ROE | 9.2% | 10.0% | 8.6% | 8.4% | 11.4% |
| Provisions/Average Loans | 0.28% | 0.34% | 0.78% | 0.66% | 0.41% |
| NPL Ratio | 0.39% | 0.41% | 0.56% | 0.71% | 0.81% |
| CET1 Ratio | 13.10% | 12.79% | 13.17% | 13.06% | 13.27% |
| Equity/Assets | 7.3% | 7.6% | 7.8% | 7.6% | 7.6% |
| Net Interest Margin | 1.81% | 1.96% | 5.91% | 5.85% | 1.91% |
CreditSight View Comment
AS OF 07 Jul 2025Shinhan FG is one of the four nation-wide commercial banking groups in Korea, with a leading credit card arm. It had over many years the best operating track record, but have shown more consistent performance with peers in recent years. Its topline performance lagged behind its peers in 1Q25, but its ROE was high and just behind KBFG. Shinhan showed commitment to enhancing its NPL coverage ratio, which provides some reassurance, compared to its peers. The group has set an ambitious ROE target of a 50+ bp improvement for FY25, while we maintain a more cautious outlook. We have a Market perform recommendation at both group and bank levels.
Recommendation Reviewed: July 07, 2025
Recommendation Changed: September 22, 2020
Who We Recommend
Sultanate of Oman
Korea Electric Power Corp.
Korea Gas Corp.
How may we help you?
Search topics about wealth insights and investments.The Export-Import Bank of Korea
- Sector: Financial Services
- Sub Sector: Banks
- Region: Korea
- Bond: EIBKOR 5.125 33
- Indicative Yield-to-Maturity (YTM): 4.55%
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Fundamental View
AS OF 14 Aug 2024KEXIM 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 14 Aug 2024- 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, and manages two government-entrusted funds: the Economic Development Cooperation Fund (EDCF), a Korean official development assistance program, and the Inter-Korean Cooperation Fund (IKCF), an economic cooperation program to promote exchanges with North Korea. It is also 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: 73% directly and the remainder through stakes held by the Bank of Korea (8%) and Korea Development Bank (19%). 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 07 Jan 2025Previous Korean governments have made moves to privatise the other policy banks, but KEXIM has retained its policy bank role and government ownership, which 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.
Key Metric
AS OF 14 Aug 2024| KRW bn | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Pre-Impairment Operating Profit / Average Assets | 1.3% | 1.2% | 1.1% | 1.1% | 1.1% |
| ROAA | 0.5% | 0.1% | 0.5% | 0.4% | 0.6% |
| ROAE | 3.2% | 0.7% | 3.2% | 2.7% | 4.7% |
| Provisions/Average Loans | 0.5% | 1.2% | 0.5% | 0.8% | 0.3% |
| Nonperforming Loans/Total Loans | 2.4% | 1.8% | 1.9% | 1.2% | 0.7% |
| CET1 Ratio | 12.9% | 13.4% | 13.3% | 11.8% | 13.0% |
| Total Equity/Total Assets | 14.9% | 14.8% | 15.1% | 12.6% | 14.3% |
| Net Interest Margin (NIR/Ave Assets) | 1.0% | 0.9% | 0.9% | 0.9% | 0.7% |
CreditSight View Comment
AS OF 07 Jan 2025KEXIM 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: January 07, 2025
Recommendation Changed: September 22, 2020
Who We Recommend
Sultanate of Oman
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