[Click eStock] "IBK, Dividend Expectations Strengthened... Target Price Up"

NH Investment & Securities forecasted on the 8th that Industrial Bank of Korea (IBK) will see strengthened dividend expectations due to strong performance in the fourth quarter of last year. Accordingly, they maintained a 'Buy' investment rating and raised the target price to 17,000 KRW.

Jung Joon-seop, a researcher at NH Investment & Securities, stated, "IBK's 2023 dividend per share (DPS) is expected to be set at 1,000 KRW (payout ratio 33.1%) or higher," adding, "Dividend expectations are likely to increase until the dividend record date (expected in early April)."

The main reason for the anticipated strengthening of the dividend momentum is the fourth-quarter performance of 2023. IBK's net profit in the fourth quarter was 553.2 billion KRW, down 26.7% year-on-year. Consequently, the consolidated net profit for last year reached 2.6752 trillion KRW, slightly higher than in 2022. Contrary to market consensus, the annual profit for 2023 increased compared to 2022.

Researcher Jung said, "Since the performance exceeded expectations, the DPS is also more likely to be revised upward than anticipated," and added, "The recent expansion of shareholder return ratios among banks is also favorable."

He further explained, "IBK negotiates dividends with its major shareholder, the Ministry of Economy and Finance, based on confirmed performance at the beginning of the year and industry trends. The shareholder return ratios of financial holding companies of commercial banks that announced their results earlier rose to 33-38%, higher than before."

Meanwhile, IBK set aside a smaller-than-expected provision (266.3 billion KRW) in the fourth quarter. This was due to lower real estate project financing (PF) exposure compared to other companies. Most of the provisions reflected future economic outlooks (real estate collateral LGD), and 182.5 billion KRW was recorded as costs for win-win finance.