[Click eStock] "KakaoBank Lowers Earnings Estimates... Target Price Down"

[Asia Economy Reporter Hwang Yoon-joo] Hi Investment & Securities stated on the 4th that although KakaoBank's second-quarter earnings fell short of consensus, it expects loan growth to recover in the second half of the year. Accordingly, it maintained a 'Buy' investment rating but lowered the target price to 42,000 KRW.

Kim Hyun-ki, a researcher at Hi Investment & Securities, analyzed, "We have lowered earnings estimates due to increased costs," adding, "The price-to-book ratio (PBR) valuation of the peer group was adjusted, leading us to revise the target PBR."

It was explained that the second-quarter credit quality indicators slightly increased due to one-off factors. Researcher Kim diagnosed, "First, the delinquency rate temporarily reflected about 5 basis points due to delays in subrogation payments for jeonse and monthly rent loans. Excluding this, the quarterly delinquency rate was around 0.28%, rising only 2 basis points compared to the previous quarter."

The quarterly loan loss provision including additional reserves was recorded at 74.4 billion KRW. Researcher Kim said, "There was a revision in the overall banking sector's future economic outlook, and the internet-only bank also set aside an additional 12.6 billion KRW in reserves, causing the loan loss provision ratio (CCR) to rise."

He judged that excluding the additional reserves, the CCR showed figures similar to the previous quarter, indicating that the normal level is sound.

Meanwhile, KakaoBank's net profit for the second quarter was 57 billion KRW, falling short of consensus. The main causes were increased costs due to additional quarterly loan loss provisions and higher selling and administrative expenses.