Korea Financial Group, Securities Stocks Remain 'Top Pick' Despite Bleak Earnings Outlook

Jung Il-moon, President of Korea Investment & Securities

[Asia Economy Reporter Junho Hwang] Hundreds of billions of won in profits are expected to decrease. Although the securities industry forecasts that Korea Financial Group's earnings will likely fall short of market expectations, it is still considered the top pick among securities stocks.

According to the Korea Exchange on the 15th, Korea Financial Group's stock price dropped to the 90,000 won range (as of the 5th of this month) after the 100% compensation plan was announced on the 16th of last month, but it is barely maintaining the 100,000 won level. The closing price on the 14th was 103,500 won.

The earnings outlook for Korea Financial Group in the second quarter is bleak. Hana Financial Investment expects that among the four listed securities companies, only Korea Financial Group's controlling shareholder net profit will decrease by 40.5% compared to the previous quarter, falling short of market expectations. NH Investment & Securities also forecasts a decline of about 43.9% compared to the previous quarter.

The 55 billion won cost related to the 100% compensation payment by Korea Investment & Securities is cited as the main cause of the earnings decline. On the other hand, its competitor Mirae Asset Securities is expected to post record-high earnings due to expanded valuation gains on investment assets.

Nevertheless, the securities industry still regards Korea Financial Group as the top pick among securities stocks. Given that most securities stocks are unlikely to secure strong third-quarter earnings amid a stagnant stock market, Korea Financial Group is expected to benefit from the impact of KakaoBank's initial public offering (IPO) scheduled for the second half of this year. Junseop Jeong, a researcher at NH Investment & Securities, analyzed, "If KakaoBank goes public, it is expected to generate approximately 500 billion won in equity method disposal gains based on the offering price. The value of the KakaoBank stake (27.26% after listing) is likely to be highlighted again, and supply-driven selling is considered a temporary factor."

There is also speculation that profits from KakaoBank's listing could be used as a source for dividends. Hongjae Lee, a researcher at Hana Financial Investment, stated, "It is uncertain whether the equity method disposal gains from KakaoBank's listing will be fully reflected in dividends, but some portion is expected to be included in this year's dividend resources."

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