[Click eStock] "KB Geumyung, Earnings Exceeding Forecasts and Shareholder Returns... Target Price Up"

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[Asia Economy Reporter Myunghwan Lee] Korea Investment & Securities announced on the 25th that it maintains a buy rating on KB Financial Group and raises the target price by 11% from the previous 72,000 KRW to 80,000 KRW. The reasons are earnings that exceeded market expectations and shareholder return policies.

KB Financial Group's first-quarter controlling net profit was 1.4531 trillion KRW. This figure surpassed Korea Investment & Securities' estimate and the market consensus by 8% and 16%, respectively. Although non-interest income was weaker than expected, interest income, provisions, and selling and administrative expenses were all favorable, according to Korea Investment & Securities' assessment. The bank's net interest margin (NIM) rose by 5 basis points from the previous quarter due to the repricing effect of loans and deposits following the base rate hike. The bank's KRW loans increased by 0.8% compared to the previous quarter. Household loans decreased by 1.4% due to credit loan repayments, but corporate loans increased by 3.4% during this period due to expanded demand.

However, non-interest income was evaluated as disappointing. KB Financial Group's group loan loss ratio was 0.15%, down 5 basis points from the same period last year. The recurring loan loss ratio, excluding one-time reversals, was 0.21%, similar to last year, which Korea Investment & Securities interprets as a sign that provisions were conservatively accumulated this quarter. The group's general administrative expenses recorded 1.7 trillion KRW, down 2% year-on-year due to overall cost efficiency improvements. Fee income increased by 4% from the previous quarter as decreases in card and asset management profits were offset by increased securities business income centered on investment banking (IB). Other operating income was 160.7 billion KRW, down 15 billion KRW from the previous quarter. The combined non-interest income from fees and other operating income was relatively weak.

Korea Investment & Securities explained that the reason for raising the target price was that the estimated NIM increased as the number of base rate hikes this year was raised from three to four in terms of earnings. Fee income, general administrative expenses, and provision expenses are also expected to perform better than previously forecasted. Meanwhile, KB Financial Group announced a quarterly dividend of 500 KRW per share based on confidence in its earnings.

Researcher Baek Doosan of Korea Investment & Securities said, "Along with the 150 billion KRW share buyback announced in February, shareholder-friendly policies have continued," and analyzed, "In conclusion, although concerns about the economy and capital markets remain, considering the inflation hedging ability and shareholder return history, a steady stock price trend is inevitable."

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