[Click eStock] "Shinhan Financial Group Expects Profitability Improvement Through Share Swap with KT"

Daishin Securities Report
Shinhan Bank-KT Decide on 437.5 Billion KRW Share Swap

[Asia Economy Reporter Minji Lee] Daishin Securities expressed on the 18th that Shinhan Financial Group is expected to see profitability improvement and new business entry effects through a share swap with KT. The investment opinion was maintained as Buy, and the target stock price was kept at 50,000 KRW.

On the previous day, Shinhan Bank and KT decided on a share swap worth 437.5 billion KRW. KT acquired shares held by NTT Docomo, the second-largest shareholder of KT, and KT plans to purchase shares of Shinhan Financial Group, the parent company of Shinhan Bank and a listed company, through on-market purchases by 2023 for the same amount. The shares KT will purchase account for about 2.17% of the market capitalization based on the previous day's closing price, and there is no lock-up period for the shares acquired by both companies.

Researcher Hyejin Park of Daishin Securities said, “Recently, Shinhan Bank has been actively entering digital businesses to secure traffic, such as launching the dedicated delivery app ‘Ttaenggyeoyo’ and the digital branch 'DIGILOG',” adding, “The share swap with KT is an extension of such decision-making.”

Although the areas of collaboration are quite extensive, it is expected that in the short term, cooperation will focus on AI call centers, and in the long term, on development cooperation for idle real estate owned by KT. Shinhan Financial Group operates call centers for most of its affiliates, including banking, card, and securities, and these are operated separately and independently by each affiliate. The company’s goal is to unify call centers using KT’s communication servers and further advance AI integration.

In the mid to long term, joint development of idle real estate owned nationwide by KT is anticipated. As of 2020 book value, the estimated value of land and buildings owned by KT is 3.9 trillion KRW. The company has strengths through the GIB organization, where capital market teams from affiliates such as banking, securities, insurance, and capital jointly conduct corporate finance projects. The GIB consortium recorded operating revenue of 916 billion KRW in 2020.

Researcher Hyejin Park explained, “This decision will enable the development of alternative credit evaluation using KT customer information and the launch of bundled telecommunication products,” adding, “Dividend income, considering the nearly 50% payout ratio, is also a factor to consider.”