Now Is the Time to Buy... Experts Urge 'Aggressive Purchases' of Bank Stocks [Weekend Money]

Daishin Securities: "All Four Major Financial Holding Companies See Improved Earnings Power"

"Strengthening of Non-Banking Subsidiaries Also Contributes to Profitability Improvement"

Shinhan Financial Group and Hana Financial Group Named as

As the four major financial holding companies (KB, Shinhan, Hana, and Woori) move to strengthen their non-banking subsidiaries, the Yeouido financial district is emphasizing the purchase of bank stocks, anticipating strong performance driven by a booming capital market.

On July 11, Park Hyejin, a researcher at Daishin Securities, stated, "All four major financial holding companies are expected to actively pursue additional shareholder returns in the second half of the year, on top of improved earnings capacity. Therefore, we believe now is the right time to buy bank stocks aggressively." Park added, "This year is expected to see the highest proportion of non-banking subsidiary profits since the companies’ founding, thanks to a favorable capital market. Nevertheless, extended market corrections have pushed multiples down considerably."

According to Daishin Securities, the average price-to-book ratio (PBR) of the four financial holding companies has fallen to 0.8 times this year, entering a range undervalued relative to profitability. As such, Daishin Securities continues to list Shinhan Financial Group and Hana Financial Group as its top picks, maintaining a target price of 1.3 million won for Shinhan and raising Hana’s target price to 1.6 million won. The target prices for KB Financial Group and Woori Financial Group were set at 2.2 million won (upgraded) and 430,000 won (maintained), respectively.

Park noted, "KB Financial Group’s Common Equity Tier 1 (CET1) ratio is expected to exceed 13.7% at the end of June, with additional shareholder returns in the second half likely increasing to as much as 800 billion won. Hana Financial Group plans to flexibly determine the mix between share buybacks and cash dividends, and its additional return capacity is expected to expand to 500 billion won. Shinhan Financial Group is also likely to conduct up to 700 billion won in share buybacks in the second half, according to its newly introduced value-up formula."

Banks are actively utilizing risk-weighted assets (RWA) to bolster their non-banking affiliates, which is also expected to improve profitability. KB Financial Group injected a total of 1.7 trillion won into KB Securities this year, while Hana Financial Group acquired a 6.55% stake in Dunamu for 1 trillion won. Shinhan Financial Group is reviewing the acquisition of Lotte Insurance, and Woori Financial Group is working on integrating Tongyang Life and ABL Life, both acquired last year. At the same time, Woori decided to inject 1 trillion won into Woori Investment & Securities.

Park explained, "These changes are driven by banks’ recent focus on improving return on equity (ROE). Since there are limits to how much they can increase shareholder return ratios, improving profitability is necessary for multiples to rise again." Park added, "Therefore, it is highly likely that the allocation of RWAs by holding companies will continue to focus on strengthening non-banking subsidiaries rather than the banks themselves."

Daishin Securities estimates the four financial holding companies' combined net profit for the second quarter at 5.7 trillion won. This would represent a 6.1% increase from the record-breaking first quarter, and a 4.8% increase compared to the same period last year.

Park said, "As market interest rates rise, margins are being maintained at solid levels, and Hana Bank and Woori Bank are even showing an upward trend. While household lending regulations remain strict, the banks are seeking new growth through corporate lending, led by productive financing, so loan growth should easily meet the original guidance of 4-5%."

She added, "Interest income is also holding steady, and as non-banking subsidiaries, led by securities, deliver strong performance, overall earnings remain robust. With the second quarter earnings season approaching, these factors are expected to drive bank stock prices higher."

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