Daishin Securities analyst Park Hye-jin recommended aggressive buying of South Korean bank stocks, citing improved profitability and undervaluation as the four major financial holding companies—KB, Shinhan, Hana, and Woori—expand their non-bank subsidiaries. The analyst stated that the average price-to-book ratio (PBR) for the four financial holdings fell to 0.8x, entering an undervalued zone relative to profitability, despite the capital market boom driving the highest-ever proportion of non-bank subsidiary earnings. Park emphasized that the extended market correction significantly lowered multiples, creating an opportune entry point ahead of anticipated second-half capital returns.
Daishin Securities Sets Target Prices for Four Financial Holdings
Daishin Securities maintained Shinhan Financial Group and Hana Financial Group as top picks, setting target prices of 130,000 won (maintained) and 160,000 won (raised), respectively. The firm raised KB Financial's target price to 220,000 won and maintained Woori Financial Group's target at 43,000 won. Park noted that all four financial holdings demonstrated enhanced earnings capacity and are expected to actively pursue additional shareholder returns in the second half.
Financial Holdings Plan Additional Capital Returns in Second Half
KB Financial's common equity tier 1 (CET1) ratio is expected to exceed 13.7% by the end of June, enabling additional capital returns of up to 800 billion won in the second half, according to Park. Hana Financial Group's additional return capacity is projected to expand to 500 billion won, with the company planning to organically determine the mix of treasury stock buybacks and cash dividends. Shinhan Financial Group's treasury stock buyback scale could reach 700 billion won in the second half under the newly introduced value-up formula, the analyst stated.
Banks Strengthen Non-Bank Subsidiaries to Improve ROE
The four financial holdings are actively allocating risk-weighted assets (RWA) to strengthen non-bank subsidiaries, a shift aimed at improving return on equity (ROE). KB Financial conducted a total capital increase of 1.7 trillion won for KB Securities, 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 decided on a 1 trillion won capital increase for Woori Investment & Securities while pursuing the integration of Dongyang Life Insurance and ABL Life Insurance, which it acquired last year. Park explained that these changes stem from banks' focus on improving ROE, as multiple expansion requires accompanying profitability improvements when return rates cannot be dramatically increased. The analyst added that future RWA allocation is likely to prioritize non-bank subsidiary reinforcement over traditional banking operations.
Daishin Securities Forecasts Q2 Net Profit at 5.7 Trillion Won
Daishin Securities projected the four financial holdings' second-quarter net profit at 5.7 trillion won, representing a 6.1% increase from the first quarter, which recorded the highest earnings ever, and a 4.8% increase year-over-year. Park attributed the forecast to sustained margins as market interest rates rose, with Hana Bank and Woori Bank showing upward trends. Despite stringent household loan regulations, banks are seeking growth through corporate lending led by productive finance, enabling them to meet initial loan growth guidance of 4-5%, the analyst stated. Park emphasized that robust interest income and strong performance from non-bank subsidiaries, led by securities firms, are driving continued earnings momentum, supporting stock price appreciation ahead of the second-quarter earnings season.
FAQ
What did Daishin Securities recommend regarding Korean bank stocks?
Daishin Securities analyst Park Hye-jin recommended aggressive buying of bank stocks for the four major financial holding companies (KB, Shinhan, Hana, Woori), citing improved earnings capacity, undervaluation with an average PBR of 0.8x, and anticipated second-half capital returns.
Why are Korean financial holdings expanding non-bank subsidiaries?
The four financial holdings are strengthening non-bank subsidiaries to improve return on equity (ROE), as profitability improvements are necessary for multiple expansion when return rates cannot be dramatically increased. KB Financial increased KB Securities' capital by 1.7 trillion won, Hana Financial acquired a 6.55% Dunamu stake for 1 trillion won, and Woori Financial decided on a 1 trillion won capital increase for Woori Investment & Securities.
What is Daishin Securities' Q2 earnings forecast for the four financial holdings?
Daishin Securities forecasted second-quarter net profit at 5.7 trillion won for the four financial holdings, a 6.1% increase from the record first quarter and a 4.8% increase year-over-year, driven by sustained margins, corporate loan growth, and strong non-bank subsidiary performance led by securities firms.
