[Click eStock] "IBK, Q4 Earnings Exceed Market Expectations"

[Asia Economy Reporter Park Ji-hwan] Yuanta Securities maintained a 'Buy' investment rating and a target price of 10,500 KRW for Industrial Bank of Korea (IBK) on the 8th, citing better-than-expected performance in the fourth quarter results last year.

Jeong Tae-jun, a researcher at Yuanta Securities, stated, "The consolidated profit for the fourth quarter was 357.9 billion KRW, surpassing our estimate of 283.2 billion KRW and the market expectation of 258.3 billion KRW." He evaluated positively that the bank's interest income met estimates, and both non-bank interest income and non-interest income showed better-than-expected results. Although dividends have not yet been decided, since the bank is not subject to the financial authorities' recommendation to refrain from dividends, a favorable dividend payout is expected.

Interest income decreased by 1.1% compared to the same period last year but increased by 2.6% compared to the previous quarter. The bank's net interest margin (NIM) fell by only 2bps (1bps = 0.01 percentage points) quarter-on-quarter. Researcher Jeong emphasized, "This is believed to be due to a decline in loan growth rate." Non-interest income increased by 248.4% year-on-year and by 13.4% quarter-on-quarter.

Last year, the annual expense ratio for selling and administrative expenses was 39.9%, up 0.8 percentage points from the previous year. He explained, "Due to cancellations of events caused by COVID-19, other expense expenditures decreased, so the amount itself was similar to the previous year, but net operating income declined."

Last year's loan loss cost ratio improved by 6bps compared to the previous year. This was due to the ordinary loan loss cost ratio, excluding proactive COVID-19 provisions, being 47bps, down 20bps from the previous year. Researcher Jeong said, "Despite setting aside 116.4 billion KRW in COVID-19 provisions in the fourth quarter, the provision amount for the fourth quarter fell short of estimates because other provisions included in the second quarter provisions were reclassified as non-operating expenses."

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