Fitch analyst warns SME borrower risks biggest threat to Korean banks

Small- and medium-sized enterprises (SMEs) and self-employed borrowers, whose repayment capacity may weaken under prolonged economic pressure stemming from the Iran war, remain the biggest weak spot for Korean banks, according to Fitch Ratings analyst Matt Choi. In an interview with The Korea Times in Seoul, Thursday, Choi said Korean banks are expected to maintain relatively stable earnings this year, but warned that risks tied to vulnerable borrowers should be closely monitored. "We expect Fitch-rated banks, particularly the large commercial banks, to maintain resilient credit profiles and deliver broadly stable near-term performance, given their ability supported by steady net interest margin and also the moderate loan growth for the sector overall," Choi said, adding that he expects Korea's policy rate to remain broadly stable, helping banks preserve interest margins. Choi is a director of financial institutions at Fitch Ratings. Based in Hong Kong, he covers bank credit ratings in Korea and Hong Kong. In a recent report, Fitch maintained an A+ operating environment score for Korea's