[Click eStock] "IBK, NIM Improvement Trend to Continue"

DB Financial Investment Report

[Asia Economy Reporter Minji Lee] DB Financial Investment maintained a buy rating and a target price of 14,700 KRW for Industrial Bank of Korea (IBK) on the 26th.

In the first quarter, IBK recorded a net income attributable to controlling shareholders of 658.1 billion KRW, representing an 11.7% growth compared to the same period last year. The net interest margin (NIM) showed a solid performance at 6 basis points, and small and medium-sized enterprise loans grew by 2.6%, resulting in net interest income meeting expectations.

An additional provision of 121.1 billion KRW was set aside related to COVID-19, and due to last year's strong performance, contributions to the in-house welfare fund increased significantly, causing selling and administrative expenses to rise more than anticipated.

Researcher Byunggun Lee of DB Financial Investment stated, “Although the loan loss cost ratio was somewhat high at 40 basis points compared to recent trends, considering the proactive additional provisions related to COVID-19, it is judged to have stabilized at around 30 basis points in practical terms.”

To support small business owners, IBK handled ultra-low interest loans amounting to 2 trillion KRW in 2019 before COVID-19, and 7.8 trillion KRW in 2020 related to COVID-19. After the three-year ultra-low interest period ends and normal guaranteed loan interest rates are applied, a significant increase in margin is expected. When the ultra-low interest loans mature in 2023, an additional margin improvement of about 4 basis points is anticipated from these loans.

Researcher Lee added, “As a policy bank, it is true that IBK has been excluded from recent trends among large banks such as increased shareholder returns and quarterly dividends. However, it has maintained a relatively high dividend payout ratio compared to other banks, and the dividend yield at the current stock price level is sufficiently attractive.”