[Click eStock] KakaoBank, Fee Income Slump Leads to 'Neutral' Investment Opinion

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 28th that it has downgraded its investment opinion on KakaoBank from Buy to Neutral, while maintaining the target price at 27,000 KRW. The adjustment in investment opinion is due to sluggish fee income.

Researcher Park Hye-jin of Daishin Securities pointed out, "Although the net interest margin (NIM), which significantly exceeds that of commercial banks, is maintained and net profit shows a level-up each quarter due to steady interest income growth, the slowdown in loan growth and sluggish fee income, including platform revenue, are disappointing." She added, "Next year, expansion of housing types and target regions, along with convenience and interest rate competitiveness, are expected to drive overall loan growth led by mortgage loans, enabling the company to achieve some of the initially expected growth rate. However, a breakthrough for improving fee income currently seems distant."

KakaoBank's net profit for the fourth quarter of this year is estimated at 62 billion KRW, a 71.4% increase compared to the same period last year, but below the market consensus of 66.3 billion KRW. Although it falls short of consensus, the performance itself has significantly improved compared to the same period last year.

Researcher Park noted, "The main driver of this quarter's performance is interest income, and the NIM, which rose sharply in the third quarter due to a surge in low-cost deposits, continues to improve with the base rate hike." She added, "NIM is expected to record 2.63%, up 7 basis points from the previous quarter, and interest income is projected to increase by 48.5% year-on-year to 278.4 billion KRW, maintaining a favorable growth trend."

Total loans are expected to increase significantly to 28 trillion KRW, up 8.5% year-on-year, with mortgage loans, the main focus, surpassing the year-end target balance of 1 trillion KRW. The balance of jeonse and monthly rent secured loans is also expected to increase smoothly to 12.8 trillion KRW. He noted, "However, unsecured loans continue to decline," and forecasted, "The balance of mid-interest rate loans is 319 billion KRW, expected to comfortably achieve the initial target of 25% of total unsecured loans."

Low-cost deposits, mainly from group accounts in the third quarter, increased significantly. Although the growth rate is unlikely to continue, it is expected to be maintained. Researcher Park said, "This trend differs from domestic banks, where deposits still concentrate on high-cost fixed deposits," and added, "Core deposit balances are expected to increase by 26.2% year-on-year to 22.2 trillion KRW."

Loan loss provisions are expected to be conservatively accrued due to seasonality in the fourth quarter, projected at 46.9 billion KRW, a 44.7% increase year-on-year. Selling and administrative expenses are forecasted at 120.3 billion KRW, up 22.6% year-on-year, reflecting performance bonuses. CCR and CIR are 0.67% and 45.7%, respectively, with a one-time 10 billion KRW contribution to the in-house employee welfare fund expected this quarter.

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