S&P rates Chohung notes BBB-, BB+

Standard & Poor's said it assigned its ratings to Chohung Bank's (BBB/stable/A-2) proposed $200 million lower tier II subordinated notes (BBB-) and its $200 million upper tier II subordinated notes (BB+).

The one-notch difference between Chohung's counterparty rating and the rating on the lower tier II notes reflects the terms and conditions of the proposed notes, and the overall financial status of the bank. The two-notch difference between its counterparty rating and the rating on the upper tier II notes additionally incorporates the deferability of coupon payments.

S&P said the rating on Chohung reflects the expected convergence of Chohung and Shinhan Bank's credit quality ahead of the merger of the banks planned for the second half of 2006. This includes resulting benefits from consolidating with Shinhan Financial Group Co. Ltd. Constraining factors on the bank's rating include its relatively moderate asset quality as well as low capitalization and profitability.

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