Fitch Ratings-Hong Kong/Singapore-XX December 2005: Fitch Ratings has today assigned Korea-based Busan Bank (“BS”) a Long-term rating of ‘BBB+’ with a Stable Outlook and Short-term rating of ‘F2’. Fitch also affirmed BS’s Individual rating at ‘B/C’ and its Support rating at ‘2’. PB’s Long-term and Individual ratings reflect the bank’s reasonably good asset quality, adequate capitalisation and profitability, as well as its strong franchise within its home market of Busan city. BS recorded fairly strong loans growth of c. 15% p.a. over 2003 and 2004, mainly on the back of strong demand for mortgage loans, particularly those tied to specific property developments. Growth slowed in the first three quarters of 2005 to 10.5% (annualised) as Korea’s residential property market cooled. At end-September 2005, BS’s loan book (62% of assets) was split as follows: 33% to consumers, 61% to small and medium-sized enterprises (“SMEs”) and 3% to larger corporates, with the 3% balance being mainly to government entities. Since the 1997/1998 Asian crisis, BS has focused mainly on consumers and SMEs, its earlier concentration on larger corporates having led to huge losses during the crisis. Geographically, 80% of the bank’s loans originated in Busan, 15% in the neighbouring province of Kyongnam and 5% in Seoul. Although not to the same extent as Korea’s larger nation-wide banks, problematic credit-card exposures resulted in quite a high level of credit losses for PB in 2003 and 2004. Amidst a reasonably strong economic environment, however, the incidence of new NPLs over the first nine months of 2005 (“9M05”) was very low. With its problematic credit card outstandings written off and given reasonably strong loans growth and a low level of new NPLs over 9M05, PB’s NPLs ratio at 30 September 2005 was low at 1.16%, with adequate reserves coverage of 113%. Precautionary loans were also quite low at 2.28% of loans. Given stable growth in Korea going forward, credit losses at PB should remain quite low. That said, with its small level of precautionary loans, and focus on export-oriented SMEs and more generally the port-city of Busan, the bank may be susceptible to any slowdown in the Korean economy led by lower demand for Korean exports. Even under difficult circumstances, however, the bank should be held in good stead by its adequate underlying profitability and capitalisation; BS’s pre-provisioning-return-on-average-assets came it at around 2.1% p.a. over the three years to 30 September 2005 and it should benefit from any modest rise in interest rates. Meanwhile, at 30 September 2005, its equity/assets ratio stood at 5.97% while its Tier 1 and total CARs came in at 9.51% and 12.4%, respectively. BS has a 33% dividend-payout policy and a minimum 9% Tier I CAR policy which should be sustainable even with the bank’s ongoing expansion into Busan city’s neighboring province of Kyongnam. Established in 1967, BS’s operations are concentrated in Busan, one of Asia’s major ports. BS’s ownership is diverse, with foreign institutional investors accounting for c.60% of its shareholding. BS’s importance to Busan’s regional economy (where it has a 32% market share in deposits and a 21% share of the loan market) makes it highly probable that state support would be forthcoming if needed.