[Click eStock] "JB Geumyung Jiju, Most Stable Fundamentals Among Regional Banks"

Hana Securities Report

[Asia Economy Reporter Minji Lee] Hana Securities maintained its buy rating and target price of 10,000 KRW for JB Financial Group on the 27th, based on the assessment that it holds stable fundamentals among regional banks.

The net profit for the second quarter recorded 153.2 billion KRW, down 8.1% from the previous quarter. The group's net profit declined due to increased capital procurement costs following a sharp rise in market interest rates and expanded FVPL securities valuation losses, which reduced capital net income. JB Woori Capital's net profit for the second quarter was 49.5 billion KRW, down 16.1% from the previous quarter. Although the new procurement interest rate rose further from 2.54% in the first quarter to 3.31% due to a sharp increase in credit bond rates, and the total procurement interest rate also increased from 1.98% to 2.04% in the first quarter, interest income still expanded.

Choi Jung-wook, a researcher at Hana Securities, said, "We expect that capital company margins will no longer decline in the second half of the year," adding, "The possibility of continued weakness in non-interest income is low." The capital delinquency rate is relatively stable at 1.10%, and credit loss costs decreased to 7.8 billion KRW, indicating that the trend of net profit improvement is expected to continue.

Despite setting aside a conservative provision of 11.5 billion KRW reflecting future economic outlooks, the bank showed solid performance due to an increase in net interest margin (NIM). Jeonbuk Bank's household loan delinquency rate rose further to 0.86% in the second quarter following the first quarter, with real household delinquency before write-offs and net increases in NPLs during the second quarter also rising by 12.7 billion KRW and 11.9 billion KRW respectively. Researcher Choi explained, "Concerns may arise as Jeonbuk Bank has somewhat aggressively increased mid-interest rate loans compared to other banks, but since most of the delinquent loans are social finance products with about a 90% guarantee rate from the Korea Inclusive Finance Agency, the final loss size is expected to be limited."

With the approval of the group’s internal rating system, the common equity tier 1 (CET1) capital ratio improved by 103 basis points, resulting in a group CET1 ratio of approximately 11.2% in the second quarter, up 94 basis points from the previous quarter. Based on the improved capital strength, the company decided on an interim dividend of 120 KRW per share. Researcher Choi Jung-wook stated, "This is the first interim dividend among regional banks," and added, "JB Financial Group holds the most stable fundamentals among regional banks and is very proactive in shareholder return policies, with dividend payout ratios continuously increasing."

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