[Click eStock] "JB Geumyung, Undervalued Stock Price Compared to Improved Strength"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 12,500 KRW for JB Financial on the 14th, stating that despite improved fundamentals, the stock price remains undervalued.

Net profit for the fourth quarter of last year recorded 94.2 billion KRW, a 44.1% increase compared to the same period last year, exceeding market expectations. Although a significant portion was due to the recovery amount related to Doosan Infracore China (DICC) of 43 billion KRW (interest 4.6 billion KRW, non-interest 10 billion KRW, provision reversal 28.4 billion KRW), excluding this, the net profit was still a healthy 62 billion KRW. One-off factors included a 5.3 billion KRW valuation gain from the Milan asset management fund, 33.1 billion KRW in retirement costs, and 3.3 billion KRW in COVID-19 provisions.

However, group fee income sharply declined. This reflected the effect of the 1.7 billion KRW early repayment fee from PPCB (Phnom Penh Commercial Bank, a Cambodian subsidiary) being reclassified as interest income and a 13.2 billion KRW decrease in PF fees compared to the previous quarter. Jungwook Choi, a researcher at Hana Financial Investment, said, “Considering that PF fees tend to seasonally decrease in the fourth quarter, there is no major concern,” adding, “The group net interest margin (NIM), including PPCB, rose 12 basis points to 2.98% quarter-on-quarter. Excluding the 2 basis points effect from PPCB early repayment fee reclassification and 4 basis points from DICC interest recovery, the underlying NIM improvement was about 6 basis points.”

Credit costs remained low as bad debt expenses decreased to 31 billion KRW. Ordinary provisions, considering DICC reversals, additional COVID-19 provisions, and capital accounting policy changes, were only 39 billion KRW.

JB Financial Group has significantly increased mid-interest loans compared to other banks. Therefore, the management of credit risk for the expanded mid-interest loans is expected to have a major impact on the company’s fundamentals going forward. In the fourth quarter, Jeonbuk Bank’s household credit loans surged, which is believed to be a balloon effect due to loan regulations on commercial banks, mostly involving high-credit borrowers. Researcher Jungwook Choi analyzed, “The sharp decline in Jeonbuk Bank’s real delinquency and net increase of substandard loans before sale and write-off is due to DICC recovery, and excluding this, there are no signs of deteriorating asset quality yet.”

Last year, the company earned a net profit of 506.6 billion KRW, achieving the highest ROE among banks at 12.8%. This year, estimated net profit is 532 billion KRW, with ROE expected to exceed 12%. Additionally, last year’s dividend payout ratio was 23.3%, up 3 percentage points from 20.3% in 2020, marking a five-year consecutive increase of more than 3 percentage points. Researcher Jungwook Choi stated, “Since 2020, the stock price has risen 54.6%, the highest increase among bank stocks, but it remains undervalued compared to the improved fundamentals.”

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