Korea Financial Group's Q2 Net Profit Estimate Significantly Exceeds Expectations... Target Price Raised

[Asia Economy Reporter Oh Ju-yeon] Daishin Securities stated on the 17th that Korea Financial Group's Q2 net profit significantly exceeded consensus, and raised its 2020 annual profit forecast by 20.9% to 701 billion KRW. Accordingly, it maintained a 'Buy' investment rating and raised the target stock price to 84,000 KRW.

Korea Financial Group achieved an 'earnings surprise' in Q2 with controlling shareholder net profit on a consolidated basis exceeding market consensus by 59.2%. This strong performance was attributed to a recovery in trading gains, improved results from subsidiaries including funds, investment associations, and KakaoBank, as well as solid investment banking (IB) performance.

Researcher Park Hye-jin diagnosed, "The turnaround from trading losses in the previous quarter to profits this quarter led to an increase in gains from product management, driving the Q2 earnings improvement."

Non-operating income in Q2 rose significantly to 126 billion KRW, reflecting improved subsidiary performance and 9 billion KRW in equity-method gains from KakaoBank. Despite challenges in face-to-face sales, the strong IB segment recorded 86 billion KRW, similar to Q1.

However, brokerage commission revenue increased by 16.2% compared to the previous quarter, while overseas stock commission revenue grew by only 7.9%. It was analyzed that the effect of free commission events due to the increase in non-face-to-face channels was greater compared to competitors.

Researcher Park said, "With significant improvements in trading gains and equity-method income, earnings are likely to peak in Q2 (peak out and then decline), but the 2020 annual profit forecast reflecting this remains among the highest in coverage." She added, "This quarter once again proved Korea Financial Group's earning power."

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