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Fitch Rates IBK's Senior Unsecured Euro Notes 'AA-(EXP)'

SEOUL/HONG KONG, October 23 (Fitch) Fitch Ratings has assigned Industrial Bank of Korea's (IBK) proposed long-term senior unsecured euro-denominated notes an expected rating of 'AA-(EXP)'. IBK is expected to issue EUR500m of five-year notes, though this is subject to change depending on the market situation. The notes will be issued under the bank's existing USD8bn Global Medium Term Note Programme, last updated on 29 March 2013 at the Singapore Exchange Securities Trading Limited. The proceeds from the issue will be used for the bank's general purposes, including rolling over and/or repaying maturing foreign currency debt and other obligations. The final rating is contingent upon the receipt of final documents conforming to the information already received. KEY RATING DRIVERS The notes are rated at the same level as IBK's Long-Term Foreign-Currency Issuer Default Rating (IDR) as they will constitute direct, unconditional, unsecured and unsubordinated obligations of the bank. The bank's IDR is equalised with South Korea's sovereign rating to reflect the de facto solvency guarantee. According to Article 43 of the Industrial Bank of Korea Act, the government is responsible for any losses incurred by the bank but not covered by the bank's reserves. IBK is 72.3%-owned by the state (68.84% directly, 1.91% through Korea Finance Corporation (AA-/Stable), and 1.55% through Export-Import Bank of Korea (AA-/Stable)). RATING SENSITIVITIES The ratings of IBK would be directly affected by a change to South Korea's sovereign ratings or a major change in IBK's relationship with the government (for example, a change to the solvency guarantee under the IBK Act). Fitch does not expect any significant change to either in the foreseeable future. IBK is one of South Korea's policy banks. Its mandate is to provide credit to SMEs, and it focuses on small but viable manufacturing companies. Korea's government announced a stop to the privatisation of IBK in late August 2013, affirming IBK's importance in supplying funds to SMEs, especially when the system is under stress. That said, the government wants to reduce its stake in IBK to fund its spending plans, especially in improving social welfare. Contact: Primary Analyst Heakyu Chang Director +82 2 3278 8363 Fitch Ratings Limited 9F Kyobo Securities Building, 26-4 Youido-Dong, Youngdeungpo-Gu, Seoul, Korea Secondary Analyst Mihwa Park Associate Director +82 2 3278 8372 Committee Chairperson Tim Roche Senior Director +612 8256 0310 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, "Global Financial Institutions Rating Criteria", dated 15 August 2012, are available at www.fitchratings.com. Applicable Criteria andALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.