Hana Securities said on the 12th that KB Financial's estimated net profit for the second quarter is close to 2 trillion won, likely marking the largest quarterly result since the holding company was established. It maintained a Buy rating and raised the target price to 220,000 won. KB Financial's previous closing price was 151,500 won.
Hana Securities forecast KB Financial's second-quarter estimated net profit at 1.97 trillion won. This is a 15% increase from a year earlier and is expected to set a record for the largest quarterly net profit.
That is because second-quarter won-denominated bank loans are expected to grow 0.9%, and the bank net interest margin (NIM) to rise an additional 2 basis points from the previous quarter, pushing net interest income to exceed 3.4 trillion won, up 10% from a year earlier.
Noninterest income is also expected to hold up, helped by higher securities brokerage fees. In addition, despite the impact of the education tax hike and increased performance pay, selling, general and administrative expenses are projected to rise only 3.5% from a year earlier. Group credit costs are forecast to come in around 520 billion won, down about 20% from a year earlier.
It also saw a possibility that the Hong Kong ELS penalty surcharge on KB Financial could be further reduced. Choi Jeong-uk, a researcher at Hana Securities, said, "The Financial Supervisory Service reduced the Hong Kong ELS penalty surcharge on KB Financial to about 300 billion won, and we judge there could be an additional reduction at the regular meeting of the Financial Services Commission," adding, "We are assuming a final amount of around 250 billion won."
KB Financial recognized about 360 billion won in ELS penalty surcharges as non-operating losses in the fourth quarter and the first quarter, but if an additional reduction is made, a write-back of around 110 billion won is expected. Even without an additional reduction by the Financial Services Commission (FSC), at least a 60 billion won write-back is anticipated.
In addition, the common equity tier 1 (CET1) ratio in the second quarter is expected to rise 10 basis points from the previous quarter to around 13.73%. This is because net profit nearing 2 trillion won is projected to offset factors such as about 600 billion won in share buybacks and around 400 billion won in cash dividends, a decrease in accumulated other comprehensive income due to rising rates, and an increase in risk-weighted assets (RWA).
Choi said, "The current exchange rate is not much different from the end of the first quarter, and considering the efforts of the foreign exchange authorities, we judge the likelihood of a sharp rise from here is not high."
Additional share buybacks in the second half are projected at about 850 billion won. Including 1.2 trillion won in the first half, this year's share buybacks are expected to exceed 2 trillion won, and the total shareholder return ratio is expected to be raised to 56% from 52.4% in 2025.
Choi said, "The issue of the Hong Kong ELS penalty surcharge, which had weighed on the stock since the second half of last year, has entered a resolution phase, the non-taxable dividends funding to be implemented from next year stands at 12 trillion won—overwhelmingly larger than peers—and even though the expected return on equity (ROE) based on this year's estimated net profit of 6.45 trillion won exceeds 10%, the current price-to-book ratio (PBR) is only 0.81 times."