[Click eStock] KB Financial, High Profit Growth Rate 'Representative Beneficiary of Interest Rate Hikes'

[Asia Economy Reporter Lee Seon-ae] IBK Investment & Securities announced on the 26th that it maintains a 'Buy' rating on KB Financial Group, citing a high profit growth rate in the first quarter and an upward revision of this year's net profit forecast, and raised the target price from the previous 57,000 KRW to 65,000 KRW.

The consolidated net profit for the first quarter of 2021 is expected to be 1.023 trillion KRW, a 40.3% increase compared to the previous year. This is largely due to the normalization of the securities subsidiary's performance, which recorded a loss of 21.4 billion KRW in the first quarter of 2020 due to losses related to Lime Asset Management, as well as an increase in interest income driven by a rise in NIM. The consolidated net profit for 2021 is revised upward by 2.74% to 3.714 trillion KRW, expected to increase by 7.5% compared to 2020. The 2021 ROE forecast is also raised by 0.2 percentage points to 8.4%.

KB Securities continues to carry out various M&As, reaping the benefits of increased non-bank profits. Non-bank profits increased by 15% in 2020, significantly contributing to overall profit growth despite a decline in bank profits. In 2021, the improvement in KB Securities' subsidiary performance and the full-year reflection of Prudential Life's net profit, which included four months of net profit in 2020, are expected to have a positive effect.

The revised target price corresponds to a PBR of 0.64 times based on BPS at the end of 2020 and a PBR of 0.60 times based on BPS at the end of 2021. With a 2021 ROE forecast of 8.4%, the current PBR of 0.48 times is low relative to profitability. Kim Eun-gap, a researcher at KB Securities, explained, "Bank stocks are recovering investor sentiment based on rising interest rates and forming momentum for stock price increases. KB Financial Group is expected to benefit as a leading stock in the sector."

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