[Click eStock] Securities Sector BK Indicator Improvement and Profit Stability Enhancement "Top Pick is..."

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment on the 17th maintained an overweight opinion on the securities sector, with Korea Financial Group as the top pick and Samsung Securities as a stock of interest. The target price for Korea Financial Group is 111,000 KRW, and for Samsung Securities, it is 51,000 KRW.

BK-related indicators have continued to show a favorable trend since the beginning of the year. Last month, the average daily trading value of KOSPI and KOSDAQ reached a record high of 42.1 trillion KRW, a 254.3% increase compared to the previous year. Although it decreased somewhat to around 30 trillion KRW in February, this level remains high compared to the annual average daily trading value of approximately 23 trillion KRW last year. Investor deposits and credit loan balances also showed strong performance in January, increasing by 136.8% and 110.1% respectively compared to the same period last year. The KOSPI index currently exceeds 3000, and the market interest rate spread between short and long-term has widened. Early redemption of ELS has slightly recovered, but issuance remains sluggish.

The combined net income attributable to controlling shareholders of the four covered companies in the fourth quarter was 712.7 billion KRW (YoY +44.0%, QoQ -25.0%). Except for Korea Financial Group, all covered companies fell short of consensus. The main reasons were large one-time losses incurred by each company and operating expenses exceeding expectations. In particular, the combined one-time losses from provisions and impairment losses on alternative investment assets for the four companies approached approximately 400 billion KRW, but such large-scale losses are not expected to expand further this year.

Lee Hong-jae, a researcher at Hana Financial Investment, stated, "Korea Financial Group has less burden on the earnings base since Korea Investment & Securities recorded a decline in earnings last year. Along with increased profit contributions from subsidiaries outside securities, a stock price momentum is expected due to KakaoBank’s listing within this year." Regarding Samsung Securities, he explained, "Since the dividend payout ratio at the end of 2020 was maintained at the usual level, dividend reliability has been highlighted within the financial sector. Also, as one-time costs were recognized in the fourth quarter for ELS volatility management, earnings volatility related to this is expected to decrease this year."