Strong Earnings and Dividend Season... Banks Stocks Attracting Attention

Continuous Rise Since Mid-October... KB Financial Hits Highest Price Since COVID-19
KB Financial and Hana Financial Group Achieve Strong Earnings... Woori Financial Group Also Expected to Perform Well
Possibility of Aggressive Dividends to Boost Stock Price

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[Asia Economy Reporter Minwoo Lee] The stock prices of financial holding companies, which had lagged behind the KOSPI's rise, are now on an upward trend. This is analyzed to be due to growing investor sentiment fueled by strong third-quarter earnings and rising dividend expectations.

According to financial information provider FnGuide on the 26th, the KOSPI banking sector recorded a 10.23% increase over the past month. This is about 9% higher than the KOSPI's 1.18% rise.

On the 23rd, Hana Financial Group's stock closed at 32,950 KRW, up 2.49% from the previous day. This marks an increase of about 13.2% compared to the closing price of 29,100 KRW on the 16th. The five consecutive trading days of gains is the first since early June. KB Financial Group's stock is also on the rise. It has increased for five consecutive trading days since the 16th, closing at 42,250 KRW on the 23rd. During the day, it even rose to 43,000 KRW. This is the highest price since February 17, before the global stock market crash caused by the spread of COVID-19. Shinhan Financial Group and Woori Financial Group also rose 12.2% and 9.6%, respectively, compared to their closing prices on the 16th. Bank stocks, which had been sluggish, have all shown a simultaneous upward trend.

The strong third-quarter earnings are credited for this. Earlier on the 22nd, KB Financial announced a third-quarter net profit of 1.1666 trillion KRW for this year. This represents an 18.8% increase from the previous quarter and a 24.1% increase from the same period last year. The increase in net interest income and net fee income, along with a base effect from the proactive additional loan loss provisions (about 149 billion KRW) made in the second quarter and a bargain purchase gain (145 billion KRW) related to the acquisition of Prudential Life, are considered factors.

Hana Financial Group recorded a third-quarter net profit of 772.2 billion KRW this year. Although this is an 8.86% decrease compared to the same period last year, it exceeded market consensus by 19.31%. It also increased by 11.2% compared to the previous quarter. The growth in non-bank sectors, such as increased fee income, was effective. Hana Financial Investment, an affiliate, recorded a 36.2% increase in cumulative third-quarter net profit compared to the same period last year, reaching 288 billion KRW due to increased fee income. Hana Card also saw its cumulative consolidated net profit rise 129.6% to 114.4 billion KRW compared to the third quarter of last year, driven by increased credit card fees.

Woori Financial Group is also expected to perform well in its earnings announcement. According to FnGuide, the third-quarter consensus is operating profit of 689.5 billion KRW and net profit of 540.7 billion KRW. These represent increases of 4.57% and 1.24%, respectively, compared to the same period last year. However, Shinhan Financial Group is expected to perform somewhat sluggishly. The consensus forecasts operating profit of 1.2787 trillion KRW and net profit of 924.7 billion KRW, down 9.82% and 11.8%, respectively, from the same period last year.

Dividend expectations are also cited as a factor driving stock price increases. Banks typically pay dividends around 5%. This is a yield about ten times the domestic base interest rate of 0.5%. Jungwook Choi, a researcher at Hana Financial Investment, explained, "Each bank has expressed a strong shareholder return intention, such as considering quarterly dividends as a stock price boosting measure, easing dividend concerns despite regulatory authorities' recommendations to restrain dividends." He added, "Last week, domestic institutions net purchased bank stocks worth 334 billion KRW, and foreign investors also slightly net purchased bank stocks except for Shinhan Financial Group, increasing expectations for improved supply and demand."

However, there are concerns that dividends might be reduced. Jaewoo Kim, a researcher at Samsung Securities, pointed out, "Due to the ongoing economic recession and a significant increase in loans up to the third quarter, there is a growing demand for banks to retain capital." He added, "Annual profits may decrease due to COVID-19, so dividends might be somewhat conservatively paid."

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