[Click eStock] Earnings Are Strong, and Now Rate Momentum Too... Top Pick Among Bank Stocks

Hana Securities has raised its target price for KB Financial Group from 220,000 won to 235,000 won, while maintaining its buy recommendation.

On September 15, Hanwha Securities analyst Choi Jungwook stated, "We expect third-quarter net profit this year to reach 2.06 trillion won, marking a record high for quarterly net profit," adding, "Contrary to market concerns, third-quarter results this year will be quite solid."

The estimated net profit for the third quarter of this year is projected at 2.06 trillion won, up 22.2% from the same period last year. Although the net interest margin (NIM) is expected to drop by 0.02 percentage points from the previous quarter to 1.72%, the negative impact will likely be offset by approximately 1.7% growth in the bank’s won-denominated loans. Brokerage commission income will decrease from the previous quarter due to a decline in stock market trading volume, but the group’s net commission income for the third quarter is projected to be 1.45 trillion won, higher than the first quarter’s 1.36 trillion won.

In particular, there could be a reversal of approximately 110 billion won in penalties related to Hong Kong equity-linked securities (ELS) recognized in non-operating income in the third quarter. However, if the Financial Services Commission does not reach a final decision, net profit for the third quarter is highly likely to remain in the 2 trillion won range, similar to the second quarter.

The effect of a roughly 200-won drop in the exchange rate in the third quarter could raise the Common Equity Tier 1 (CET1) capital ratio by 0.3 to 0.4 percentage points. Analyst Choi stated, "It is highly likely that the CET1 ratio will exceed 14% in the third quarter, but with the expanded capital buffer, KB Financial Group can pursue asset growth in its subsidiaries. Thus, the CET1 ratio for the third quarter is expected to be around 13.95%, up 0.2 percentage points from the previous quarter, which is more than sufficient for an increased shareholder return ratio."

Although concerns are spreading that KB Financial Group could face fines for collusion in government bond primary dealer (PD) bidding, uncertainties are expected to diminish. Analyst Choi commented, "Even if a fine is imposed, it will likely be smaller than market concerns," adding, "With growing expectations for a US benchmark interest rate hike causing a momentum in bank share interest rates, the supply-demand conditions—previously hurt by foreign investors’ net selling—could improve."

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