[Click eStock] KakaoBank with No PF·ELS Issues, Investment Opinion and Target Price Upward Revised

Shinhan Investment Corp. upgraded its investment opinion on KakaoBank to 'Buy' on the 2nd, stating that unlike commercial banks, it is free from issues related to real estate project financing (PF) and Hong Kong H-Index equity-linked securities (ELS), and raised the target price to 33,000 KRW.

Eun Kyung-wan, a researcher at Shinhan Investment Corp., said, "With the general election next week, bank stocks are inevitably under increased pressure for profit-taking, and the cost of voluntary compensation for ELS losses is likely to be reflected in the first-quarter earnings," adding, "We expect KakaoBank to benefit during the sector rotation."

The expansion of interest income and the potential diversification of platform revenue are also positive factors. To enhance KakaoBank's return on equity (ROE) and corporate value, it is necessary to expand the interest income base through loan leverage. The researcher evaluated, "Fortunately, loan growth remains at a high level despite strengthened financial regulatory measures, and new services such as public offering subscription services and foreign exchange products are steadily being prepared following fund sales.

Meanwhile, the expected net profit for the first quarter is projected to increase by 13.2% year-on-year to 115.3 billion KRW, slightly missing the consensus by 4.6%. This is thanks to aggressive interest rate policies and sustained competitive advantages in the refinancing loan market despite overall weak household loan demand. Loan growth is expected to be around 5%, mainly driven by mortgage loans. On the other hand, the net interest margin (NIM) is expected to decline by more than 5 basis points compared to the previous quarter.

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