"Strong Q3 Earnings Expected, Increasing Bank Stock Weight"

[Asia Economy Reporter Koh Hyung-kwang] Hana Financial Investment judged on the 18th that the third-quarter earnings of some banks, including Hana Financial and DGB Financial, are highly likely to exceed the recently estimated profit assumptions, making it a timing to increase weight.

Choi Jung-wook, a researcher at Hana Financial Investment, said, "Although Hana Financial Investment anticipated the possibility of proactive reserve accumulation during the third quarter for Hana Financial, similar to other banks, it is expected to accumulate reserves in the fourth quarter rather than the third quarter, so the actual net profit will significantly exceed 700 billion KRW. DGB Financial is also expected to achieve net profit in the mid-85 billion KRW range due to the strong performance of its securities affiliates." However, he estimated that BNK Financial would find it somewhat difficult to exceed 130 billion KRW in third-quarter net profit as it partially reflected additional reserves in the third quarter.

Researcher Choi said, "Although market interest rates slightly declined last week, given the global interest rate environment, the possibility of weakening interest rate momentum in the near term is low, and the KRW-USD exchange rate continues to show a favorable trend for bank stocks," adding, "If market interest rates set a direction toward rising rather than falling, the market will expand interest in value stocks."

He continued, "Due to regulatory uncertainties, the dividend reliability of bank stocks is not high, but even assuming a slight decrease in dividend payout ratio, the dividend yield remains at the highest level in the industry," adding, "Considering that earnings will also support this, it is a timing to increase the weighting of bank stocks."

Additionally, Researcher Choi said, "Although bank stocks fell by 1.4% last week, they slightly outperformed the KOSPI decline rate (2.1%), showing an excess rise for the third consecutive week," diagnosing, "With no significant progress in the US stimulus negotiations and the worsening COVID-19 situation in Europe and the US, global stock markets showed a slight correction, and domestic institutional selling continued the KOSPI's correction trend."

He added, "Due to a sharp decrease in reserves, global bank stocks including JP Morgan announced better-than-expected third-quarter consensus results, but global financial stocks' prices weakened following JP Morgan chairman's mention of future uncertainties," and conveyed the atmosphere, "However, analysts locally are expressing opinions that further rises in US tech stocks are difficult and that attention should be paid to bank stocks or automobile stocks."