[Click eStock] KB Financial, Strong Q2 Earnings Expected... Target Price Raised to 102,000 Won

Hana Securities raised the target price for KB Financial to 102,000 KRW on the 4th, expecting strong second-quarter earnings. The investment rating was maintained as 'Buy.'

Choi Jung-wook, a researcher at Hana Securities, stated in a report on the day, "The target price increase reflects a reduction in the capital cost discount rate considering the leading bank premium and strong second-quarter earnings," and analyzed, "KB Financial's estimated net profit for the second quarter is about 1.52 trillion KRW, a 44.9% increase from the previous quarter, exceeding consensus."

He added, "Despite additional provisions of about 150 to 200 billion KRW related to project financing (PF) burdens such as trust responsibility completion, the reversal of 80 to 90 billion KRW in ELS customer compensation costs due to the rise in the Hong Kong H-Index is expected to offset this to some extent."

He forecasted that the annual net profit this year would exceed 4.8 trillion KRW. Researcher Choi Jung-wook said, "With a significant level-up in recurring profit strength, it is expected to achieve performance exceeding 1.5 trillion KRW in the second quarter despite additional provisions. Furthermore, one-time profit contribution factors such as the potential reversal of Hanwha Ocean provisions remain. Even though ELS-related costs exceeding 860 billion KRW were recognized in the first quarter, the annual net profit is expected to surpass 4.8 trillion KRW this year."

Market attention is now focused on the scale of KB Financial's share buyback and cancellation to be announced this month. Typically, KB Financial announces share buyback and cancellation plans twice a year, in February and July. He viewed KB Financial as the first bank likely to exceed a total shareholder return ratio of 40%.

Researcher Choi Jung-wook said, "Considering the government's key promotion of value-up momentum, it is expected to be significantly larger than the 320 billion KRW in February. However, if the common equity tier 1 (CET 1) ratio falls further due to increased risk-weighted assets (RWA) from higher loan growth rates and exchange rate rises, the current share buyback and cancellation scale may not meet the heightened market expectations. Nevertheless, there is a high possibility of additional share buyback and cancellation in the third quarter, and the annual share buyback and cancellation scale is expected to be at least 700 billion KRW, making it the first financial holding company to exceed a total shareholder return ratio of 40%."

He continued, "Although there is a burden due to the stock price increase rate reaching 56% since the beginning of the year, which is a higher excess rise compared to other banks, the annual recurring net profit is expected to reach 5.4 trillion KRW, with clear future profit momentum, good capital ratios, and a strong commitment to expanding shareholder returns. Therefore, its position as a value-up leader is expected to be maintained."