Financial Stocks Bowing Despite Strong Earnings

Investment Sentiment Revealed Amid DLF and Lime Incomplete Sales Controversy... Stock Prices Decline

[Asia Economy Reporter Ji-hwan Park] Despite recent strong earnings, the stock prices of domestic financial holding companies such as KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group have failed to rise. On the surface, institutional sell-offs aimed at recovering investments seem to be blocking stock price increases, but this is interpreted as a reflection of investor sentiment wanting to move away from controversies surrounding mis-selling issues like derivative-linked funds (DLF) and Lime Asset Management funds.

According to the Financial Supervisory Service's electronic disclosure system and FnGuide on the 14th, the combined net profit of the four domestic financial holding companies?KB, Shinhan, Hana, and Woori?for the fourth quarter of last year was projected at 1.7415 trillion KRW, marking a 48.9% increase compared to the same period the previous year. This is not a short-term result due to one-off factors. They have maintained annual earnings in the 2 to 3 trillion KRW range for three consecutive years since 2017.

Despite strong earnings, the stock prices of financial holding companies have struggled to escape a downward trend. Factors cited include increased opportunity costs after ex-dividend dates, expectations of additional interest rate cuts in the first half of the year, and government real estate policies. Above all, issues with uncertain damage scales appear to have significantly hindered progress.

Kyungwan Eun, a researcher at Meritz Securities, diagnosed, "Unlike the booming domestic stock market, bank stocks show no signs of stopping their retreat," adding, "The DLF incident followed by the Lime scandal has caused discomfort among investors."

Among all related to the DLF and Lime scandals, Woori Financial Group, which has faced the most significant mis-selling controversies, has experienced the largest stock price decline. As of the closing price on the 13th of this month, Woori Financial's stock was at 10,600 KRW, down 7% from the beginning of the year (11,400 KRW). Compared to early fourth quarter last year (12,300 KRW), it decreased by 14%. Although Woori Financial Group Chairman Tae-seung Sohn purchased 5,000 shares of the company’s stock on the first trading day of the year to enhance shareholder value, the effect was limited.

Jinsang Kim, a researcher at Hyundai Motor Securities, analyzed, "Woori Bank's stock has weakened due to the DLF incident, Lime scandal, and Middle East instability, resulting in a dividend yield reaching the mid-6% range."

The situation is not much different for other financial companies. Shinhan Financial Group, whose Chairman Cho Yong-byeong is awaiting the first trial verdict for a recruitment corruption case this month, saw its stock price fall 1.5% from 42,350 KRW on October 1 last year to 41,750 KRW on the 13th. Hana Financial Group, which is about to face the Financial Supervisory Service’s disciplinary committee regarding the DLF incident along with Woori Financial this week, saw a slight decrease from 34,850 KRW to 34,750 KRW.

On the other hand, KB Financial Group, which has distanced itself from the successive controversies such as the DLF and Lime scandals, is the only one showing an upward trend. KB Financial's stock price rose nearly 10% from 42,500 KRW on October 1 last year to 46,700 KRW as of the 13th. KB Financial never sold DLF products through KB Kookmin Bank from the start, and the bond-type funds managed by Lime Asset Management were fully redeemed by the third quarter of last year, leaving KB Financial free from the current controversies.

This content was produced with the assistance of AI translation services.