Will Financial Holdings with Strong Performance on 'Geumyung Day' Also See Stock Prices Soar?

Simultaneous Announcement of Maximum Net Profit on the 25th
Interest Income Grows Due to Rate Hikes
Positive Factors Like High Dividend Appeal
But Concerns Over Next Year's Earnings Uncertainty Remain

[Asia Economy Reporter Myung-Hwan Lee] On the 25th, Financial Day, the four major domestic financial holding companies simultaneously announced record-high net profits, drawing attention to their stock price trends. While the recent trend of interest rate hikes has significantly boosted interest income, securities firms analyze that there is considerable uncertainty regarding next year's earnings.

According to the financial industry on the 26th, KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group all posted results exceeding market expectations from securities firms the previous day. Notably, all four companies recorded their highest-ever net profits, with their cumulative net profits for the third quarter reaching 4.3154 trillion KRW for Shinhan Financial Group, 4.0279 trillion KRW for KB Financial Group, 2.8494 trillion KRW for Hana Financial Group, and 2.6617 trillion KRW for Woori Financial Group.

The strong performance is attributed to the expansion of interest income, including a widening interest rate spread between loans and deposits. As of the third quarter, the net interest margin (NIM) of commercial banks under the four major holding companies was higher than in the second quarter. The continued trend of interest rate hikes, such as the U.S. Federal Reserve's consecutive giant steps (0.75 percentage point increases in the benchmark rate), appears to have significantly increased interest income.

The securities industry's evaluation of the banks that posted strong results is also positive. Baek Doo-san, a researcher at Korea Investment & Securities, stated, "Considering the steady profit growth and the stabilization of capital costs at historically high levels, we maintain an overweight rating on the banking sector," emphasizing, "Performance is what you can trust." Lee Hong-jae, a researcher at Hyundai Motor Securities, also said, "Although macroeconomic conditions and related industry uncertainties persist, considering valuation attractiveness, the downside rigidity of stock prices is expected to be high," upgrading the investment opinion on the banking sector from 'neutral' to 'overweight.'

The high dividend appeal of financial holding stocks was also highlighted as a strength. Lee Jung-bin, a researcher at Shinhan Investment Corp., noted, "Due to the recent stock price decline, dividend yields of bank stocks are approaching 6-9%, increasing the dividend attractiveness of financial stocks," and predicted, "There is a high possibility of bargain hunting inflows into bank stocks through the end of the year."

However, some concerns have been raised about the banks' earnings for next year. Kim Jae-woo, a researcher at Samsung Securities, said, "The market's focus is more on concerns about earnings declines next year than on current results," diagnosing, "Considering the risks surrounding the macro environment, the uncertainty about next year's earnings is high, so the possibility of a rapid recovery in bank stocks in the short term is limited."

Concerns about non-performing loans due to bond market tightening triggered by Legoland-related issues have also emerged. Financial holding companies seemed aware of this, focusing on explanations related to real estate project financing (PF) during conference calls. Jung Seok-young, Chief Risk Officer (CRO, Vice President) of Woori Financial Group, stated, "The group's total real estate exposure is about 1.8 trillion KRW, of which 1 trillion KRW is on the bank side, and there are no non-performing loans at all." Lee Hu-seung, Chief Financial Officer (CFO) of Hana Financial Group, also emphasized, "Regarding exposure to Legoland PF asset-backed commercial paper (ABCP), neither Hana Securities nor any subsidiaries of Hana Financial Group are involved."

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