[Click eStock] "Expecting Increase in Total Shareholder Return Rate... KB Financial Target Price Up"

On the 15th, IBK Investment & Securities raised the target price for KB Financial Group from 86,000 KRW to 103,000 KRW. The buy rating was also maintained. This adjustment was made as concerns related to real estate project financing (PF) are expected to be partially alleviated along with a decrease in provisions, and the capital cost (COE) was adjusted to reflect expectations of an increase in the total shareholder return ratio.

KB Financial Group, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

On the same day, Woo Do-hyung, a researcher at IBK Investment & Securities, said, "Given that the main investment point for financial stocks at this time is shareholder returns, we maintain KB Financial Group, which has the greatest shareholder return capacity, as our top preferred stock."

Researcher Woo stated, "In the second quarter of this year, KB Financial Group’s net income attributable to controlling shareholders is expected to be 1.4337 trillion KRW, a 4.4% decrease compared to the same period last year, aligning with the market consensus of 1.4726 trillion KRW. Won-denominated loans in the second quarter are expected to increase by 1.6% compared to the first quarter, and the net interest margin (NIM) is anticipated to decline by 2 to 3 basis points (1 bp = 0.01 percentage points). Interest income is expected to remain at a level similar to the previous quarter." Non-interest income is also projected to be favorable due to strong trading commission fees from securities and cost management in card company recruitment.

He added, "Although loan loss provisions related to real estate PF will increase compared to the first quarter, the increase will not be significant," and explained, "With the rise of the Hong Kong H Index (Hang Seng China Enterprises Index, HSCEI), some reversal of costs related to equity-linked securities (ELS) is expected to be reflected in non-operating income."

KB Financial Group is expected to announce additional share repurchases and cancellations in its second-quarter earnings report. Researcher Woo said, "They announced a shareholder return policy to distribute 1.2 trillion KRW as dividends in installments of 300 billion KRW each quarter. The expected total shareholder return ratio for this year is 40%. Assuming net income attributable to controlling shareholders of 4.9 trillion KRW this year, about 760 billion KRW of share repurchases will be required."

He noted, "Since they already announced a share repurchase and cancellation of 320 billion KRW in February, an additional announcement of share repurchase and cancellation around 340 billion KRW is expected this month." He added, "KB Financial Group has the highest common equity tier 1 (CET1) ratio among banks, indicating strong shareholder return capacity. As the shareholder return ratio rises in the future, it is expected to have a positive impact on the stock price."