[Click eStock] "KakaoBank Posts Earnings Below Expectations... Growth Not Easy"

[Asia Economy Reporter Lee Myunghwan] DB Financial Investment announced on the 4th that it maintains its investment opinion of 'underweight' and a target price of 24,600 KRW for KakaoBank. This is due to KakaoBank's second-quarter earnings this year falling short of expectations.

KakaoBank's net profit for the second quarter of this year recorded 57 billion KRW, a 17.7% decrease compared to the same period last year. This is significantly below the market forecast of 74.1 billion KRW and DB Financial Investment's estimate of 70.9 billion KRW.

KakaoBank explained in its earnings announcement that considering the 11.6 billion KRW gain from non-performing loan sales and an additional provision of 12.6 billion KRW in the second quarter of last year, its actual growth was 28% year-on-year. Nevertheless, DB Financial Investment evaluated that the increase in selling and administrative expenses beyond expectations clearly caused the earnings to fall short of forecasts. It also analyzed that non-interest income continued to incur losses due to a significant increase in costs.

Looking at each segment, KRW loans increased by 851.4 billion KRW, expanding from 103.5 billion KRW in the first quarter, but it is assessed to have grown only 3.7% since the end of last year. However, it is expected that annual growth of around 14.3% is possible in the second half of this year due to the expansion of mortgage loan targets and SOHO loans. Considering the plan to increase the proportion of secured loans and the need to expand loans to low- and medium-credit borrowers, the analysis points out that there is little room to increase loans to high-credit borrowers, which is a burden.

KakaoBank has announced plans to raise the proportion of secured loans to around 70% within three years. However, regarding regulations, the requirement to maintain the proportion of low- and medium-credit loans within unsecured loans at 30% until 2023 still remains. DB Financial Investment judged that this goal is achievable by maintaining the current unsecured loan balance of 13.3 trillion KRW at 14 trillion KRW while increasing jeonse (key money deposit) loans, mortgage loans, and SOHO loans by more than 5 trillion KRW annually over the next three years.

Researcher Lee Byung-geon of DB Financial Investment said, "The revision range of earnings forecasts after 2023 is not large, so the target price and investment opinion are maintained," but added, "It is a situation where growth beyond expectations is not easy."

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