[Click eStock] "DGB Financial Group, Net Profit Expected to Grow 5% This Year"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained its buy rating and target price of 13,500 KRW for DGB Financial Group on the 11th, expecting solid performance again this year.

The controlling shareholder net profit on a consolidated basis for the fourth quarter was 85.6 billion KRW, exceeding market expectations. This was due to a 35.4 billion KRW increase effect reflected in the fourth quarter following an accounting policy change related to guarantee reserves by DGB Life Insurance. However, excluding the effect of DGB Life Insurance's accounting policy change, the results slightly missed market expectations. The provision burden was larger than expected, with voluntary retirement costs of 58.1 billion KRW and additional COVID-19 provisions of 20.4 billion KRW reflected. The bank's fourth-quarter KRW loans increased by 0.3%, and the NIM rose by 6 basis points, contributing to an increase in net interest income. Non-interest income included a loan bond sale gain of 20.1 billion KRW.

Seunggeon Kang, a researcher at KB Securities, said, "After reflecting the additional COVID-19 provision of 20.4 billion KRW, the group's CCR this year is 30 basis points, and the bank's CCR is 26 basis points, demonstrating a very excellent level," adding, "It is positive in that the portfolio improvement effect through the expansion of household loan proportion is leading to a reduction in provision burden."

The controlling shareholder net profit for 2022 is expected to increase by 5% year-on-year to 528.1 billion KRW. Although the bank subsidiary's profit is expected to increase by 14.7%, the base effect of accounting issues and the non-bank subsidiary's profit are expected to stagnate this year. Researcher Kang explained, "In the fourth quarter, the net interest margin (NIM) improved by 6 basis points, and this year as well, the increase in net interest income due to the rise in NIM will continue to drive the bank subsidiary's profit growth."

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