Kbank(279570) has fallen into a double bind of earnings contraction and weak stock performance. That contrasts with KakaoBank(323410) and Toss Bank, competitors that posted record half-year results. In the industry, people are saying "Kbank President Choi U-hyeong's leadership is facing a full-fledged test."
According to the financial sector on the 2nd, Kbank's net profit for the first half of this year was 60.1 billion won, down nearly 30% from 84.2 billion won in the first half of last year. During the same period, deposit balances fell from 2.6762 trillion won to 2.6637 trillion won, and non-interest income dropped from 73.3 billion won to 23.3 billion won, down nearly 70%.
KakaoBank and Toss Bank achieved their highest half-year results in the first half of this year. KakaoBank's net profit was 328 billion won, up 24.4% from the same period last year. Toss Bank's net profit was also 58.9 billion won, up 46%.
The key reason for Kbank's earnings contraction is reduced gains from loan receivables sales. Gains from loan receivables sales, which were 66.9 billion won in the first half of last year, fell to 27.2 billion won this year, down nearly 60%. An increase of more than 10% in selling, general, and administrative expenses from 104.6 billion won to 115.5 billion won over the same period also had an impact.
Kbank's weak results are being reflected in its stock price. Kbank shares closed at 5,650 won the previous day, well below the offering price of 8,300 won. They have fallen more than 40% from the post-listing high of 9,880 won. According to Kbank's half-year report, total shareholder return (TSR), which combines stock gains and dividends, was -31.81%. KakaoBank's TSR was -1.1%.
Management indicated it will focus on the company's growth rather than immediately boosting shareholder value. Lee Jun-hyeong, Kbank's head of strategy, said on the first-half earnings conference call, "When the return on equity (ROE) reaches an appropriate level through asset growth, we will then actively pursue shareholder returns." President Choi also said at the initial public offering (IPO) press briefing in Feb., "We plan to consider shareholder returns after achieving double-digit ROE."
As results contracted, ROE also backpedaled. Kbank's ROE was 5% in the second quarter of this year, down 0.9 percentage point (p) from the first quarter's 5.9%.
At the time of listing, Kbank's indicative IPO price range was 8,300 to 9,500 won per share, and the final offering price was the bottom end, 8,300 won. Based on the upper end, the expected market capitalization was cut from 7 trillion won at the first IPO attempt to 4 trillion won this time. Kbank's current market capitalization is about 2.8 trillion won.