KB Financial, PBR Premium Continues... Maintaining Status as Leading Stock

[Asia Economy Reporter Lee Seon-ae] KB Financial Group was identified as the company with the highest price-to-book ratio (PBR) within the financial sector.

On the 11th, KTB Investment & Securities announced that applying a target PBR of 0.59x to KB Financial's expected book value per share (BPS) of 117,387 KRW for this year, the expected return on equity (ROE) is 8.9% (+0.4%p), and the PBR of 0.45x is the highest within the sector.

They judged this was due to limited large-scale provisions related to financial products last year, excellent credit quality based on the bank's loan structure and group structure, and expectations for capital policies based on a high capital ratio.

Researchers Kim Han-i and Hong Jin-young analyzed, "With continued solid performance in the first quarter, KB Financial is expected to maintain its position as the leading stock with the highest PBR in the sector," adding, "However, since the largest increase occurred in February and March, revaluation of other stocks may increase around earnings announcements."

The controlling interest net profit for the first quarter of this year is estimated at 1.11 trillion KRW (+92% QoQ, +52% YoY). Total operating profit is expected to be 3.35 trillion KRW (+3.2% QoQ). Group net interest income, estimated based on a bank NIM increase of +2bp and 1.0% growth in won-denominated loans, is 2.63 trillion KRW (+1.8% QoQ). While last year's second half saw a significant increase in interest income due to M&A effects such as Prasac and Prudential Life, this year, improvement in bank interest income is expected to be substantial. Non-interest income is expected to be 723.9 billion KRW (+8.5% QoQ). Fee income centered on non-bank affiliates such as securities and cards is expected to remain strong, with bank fee income also showing slight improvement.

Provision expenses are estimated at 240.4 billion KRW (-17% QoQ), considered to be at a normal level. The annual CCR for this year is estimated to rise by 1bp from the normal CCR excluding additional provisions from the previous year, based on KTB's standards. KTB Investment & Securities maintains a buy rating on KB Securities and has raised the target price to 68,000 KRW.

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