[Click eStock] "KakaoBank, Unfavorable Domestic and External Conditions Due to Loan Regulations... Fair Value ↓"

[Asia Economy Reporter Lee Myunghwan] Meritz Securities announced on the 4th that it maintains a neutral investment rating on KakaoBank and lowers the target price from the previous 53,000 KRW to 48,000 KRW. The reasons are the decreased investment attractiveness due to rising interest rates and the policy of reducing unsecured loans.

KakaoBank's net profit in the first quarter of this year was 66.8 billion KRW, a 43.2% increase compared to the same period last year. However, this is 13.7% and 10.0% lower than Meritz Securities' estimates and market expectations, respectively. The initial performance of the online mortgage loan product launched in February was insignificant, and the pros and cons of the mandatory handling of mid-interest loans appeared. While the net interest margin (NIM) improved significantly, loan growth was sluggish, and the loan loss cost ratio increased. Fee income maintained a relatively stable growth trend but accounted for only about 8.4% of core profits, showing no clear difference from traditional banks, according to Meritz Securities' evaluation.

Meritz Securities analyzed that KakaoBank's asset growth conditions are not easy. Unlike commercial banks, which have already achieved economies of scale and where NIM and provisions are key variables for stock prices, KakaoBank's loan growth rate is the most important factor. The problem is that the proportion of mid-interest loans is only about 20%, so the policy of reducing unsecured loans is inevitable. In response, KakaoBank announced plans to secure growth by expanding the target and limits of mortgage loans in the second quarter of this year and launching loans for individual business owners and deposit products in the second half of the year.

Researcher Eun Kyungwan of Meritz Securities diagnosed, "Considering various loan regulations and unfavorable domestic and international conditions, it seems difficult to meet market expectations."