[Click e Stocks] Korea Financial Group Exceeds Expectations Despite Fund Mis-selling Compensation

[Asia Economy Reporter Hwang Junho] Korea Financial Group posted earnings in the second quarter of this year that exceeded market expectations despite 100% compensation for incomplete fund sales by Korea Investment & Securities. Hana Financial Investment maintained its buy rating and target price of 130,000 KRW for Korea Financial Group on the 3rd.

Korea Financial Group announced that its controlling shareholder net profit for the second quarter of this year was 301.1 billion KRW, a 21.7% decrease compared to the previous year. Net operating income also decreased by 0.7% year-on-year to 613.3 billion KRW. Although net profit declined compared to last year, it was higher than the market consensus of 257.5 billion KRW.

For Korea Investment & Securities, separate net profit was 199.4 billion KRW due to a slowdown in brokerage indicators, bond valuation losses caused by rising interest rates, and one-time costs of 60 billion KRW related to full compensation for private equity funds. This figure represents an 11.7% decrease from the previous year. However, it is analyzed that steady performances from savings banks, capital, asset management, and the turnaround to profitability in real estate trust played a significant role in defending earnings.

In the third quarter of this year, equity method disposal gains of 500 billion KRW are expected to be reflected in the earnings. Similar to last year's rights offering, approximately 500 billion KRW of equity method disposal gains (non-operating income) related to Korea Financial Group's stake in KakaoBank are expected to be recognized in the third quarter.

Lee Hongjae, a researcher at Hana Financial Investment, said, "Since the profit scale is considerably large compared to last year, it is unlikely that all of it will be used as dividend resources this time," adding, "The dividend payout ratio this year is estimated to be slightly reduced compared to last year (15%)."