[Click eStock] "KakaoBank, Governance and Growth Uncertainty... Target Price Down"

Hana Securities lowered the target price for KakaoBank from 33,000 KRW to 28,000 KRW on the 9th. The investment rating was maintained as 'Buy.'

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KakaoBank recorded an operating profit of 95.4 billion KRW in the third quarter. This represents a 16.4% increase compared to the previous quarter, significantly exceeding market expectations. The net interest margin (NIM) rose by 5 basis points (bp), resulting in related profits increasing by 13.3% quarter-on-quarter. Additionally, fee income turned positive during the quarter due to an increase in check card transaction volume. The delinquency rate for low- to medium-credit borrowers at the end of the third quarter is estimated to be around 1.7%, which is lower than competitors. The loan-to-deposit ratio for the third quarter was approximately 87%, up from 83% in the previous quarter. It is expected to rise to around 90% in the fourth quarter. The annual operating profit for this year is estimated to be about 341 billion KRW, an increase of approximately 30% compared to last year.

Despite these favorable results, Hana Securities explained that the reason for lowering KakaoBank’s target price is due to significant uncertainties regarding governance and growth potential. Jungwook Choi, a researcher at Hana Securities, stated, "The recently emerging issue of household debt control is inevitably expected to affect individual banks as well. Given that household loan demand remains high, if loan interest rates are lowered under pressure for mutually beneficial finance, there is a high likelihood that total volume regulation will be introduced, which could restrict the growth rate of individual banks."

He added, "The recently publicized major shareholder risk will inevitably have an impact as well. It is known that regulatory authorities are actively considering penalties against the Kakao corporation, but even if penalties are confirmed, considering that administrative lawsuits and other processes could take several years, the possibility of a quick sale of shares is low."