[Click eStock] "KB Geumyung, Expected to Achieve Over 5 Trillion Won Net Profit This Year"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 78,500 KRW for KB Financial on the 9th, expecting net profit to reach up to 5 trillion KRW this year.

Net profit for the fourth quarter of last year was 637 billion KRW, up 10.4% year-on-year, in line with market expectations. After proactively and conservatively accounting for approximately 376 billion KRW in total costs?including an additional COVID-19 provision of 264 billion KRW, an additional provision for overseas subsidiaries of 82 billion KRW, and customer compensation costs related to securities private equity funds of 29.5 billion KRW?the results significantly exceeded market expectations in substance.

Additionally, a major one-time factor was the voluntary retirement costs of about 262 billion KRW due to the implementation of a voluntary retirement program. Besides the solid performance, a year-end dividend of 2,190 KRW per share was decided, raising the dividend payout ratio to 25.4%, and a resolution was made to retire 150 billion KRW worth of treasury shares (3.5 million shares, approximately 0.8% of issued shares). Jeongwook Choi, a researcher at Hana Financial Investment, said, “Although the scale of this treasury share retirement is only about 13% compared to the approximately 1.1 trillion KRW worth of treasury shares already held, it is the second time since 2019, which we believe sufficiently impresses investors with the company’s shareholder-friendly policy commitment.”

The net interest margin (NIM) rose by 3 basis points (1bp = 0.01%p) from the previous quarter to 1.61%. Considering that other commercial banks are expected to improve by about 6bp in the fourth quarter, this is somewhat disappointing. However, the company previously mentioned that the improvement in the first quarter of this year would be greater. Monthly NIM analysis also shows a significant increase in December compared to October and November, so NIM is expected to rise considerably in the first half of this year.

Researcher Choi explained, “Because the company has a relatively long asset duration and a high proportion of core low-cost funds compared to other banks, if interest rates continue to rise, the company’s NIM increase will appear more significantly with a lag.”

Hana Financial Investment estimates this year’s net profit at about 4.85 trillion KRW, expecting around a 10% increase. Depending on the expansion of the base rate hike within the year and the performance of non-bank and non-interest income sectors, net profit could enter the 5 trillion KRW range. Researcher Choi said, “Although the absolute stock price level is still cheap, the continuous outperformance compared to other banks and the widening PBR gap with competing banks are burdens. However, strong buying by foreigners is accompanying this, so the multiple premium is expected to remain justified for some time.”

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