[Click eStock] "KB Financial, Best Shareholder Return Policy in the Industry... Target Price Up"

Goal Raised from 105,000 Won to 110,000 Won

Shinhan Investment Corp. raised its target price for KB Financial Group from 105,000 KRW to 110,000 KRW on the 25th, citing the bank sector's best shareholder return policy that continues to sustain a valuation premium. The investment rating was maintained at 'Buy.'

Researcher Eun Kyung-wan of Shinhan Investment Corp. stated, "Next year's net profit and return on equity (ROE) are forecasted at 5.5 trillion KRW and 9.0%, respectively. Assuming a 5% increase in risk-weighted assets, the total shareholder return ratio is estimated to be around 44% (approximately 2.4 trillion KRW)." He added, "With overwhelming fundamentals and the best shareholder return policy in the banking sector, the valuation premium continues, leading to an upward revision of the target price and recommending it as the top pick."

KB Financial Group's third-quarter earnings this year exceeded market expectations. Eun said, "The controlling shareholder net profit for KB Financial Group in Q3 was 1.61 trillion KRW, surpassing the consensus (average securities firm forecast) by 6.6%. This quarterly performance demonstrated stable recurring profit strength without large one-off issues." Won-denominated loans grew evenly across households and corporations by 2.9%. The net interest margin (NIM) sharply dropped by 13 basis points (1bp = 0.01 percentage points) due to a decline in market interest rates, causing net interest income to decrease by 1.3% compared to the previous quarter. On the other hand, fees and other non-interest income were solid, and expenses were moderate.

The common equity tier 1 capital ratio recorded 13.85%, up 25 basis points from the previous quarter. Eun noted, "With the increased capital ratio, an additional 100 billion KRW of share buybacks and cancellations were decided. Reflecting this, the shareholder return amount for this year is estimated at 2 trillion KRW (1.2 trillion KRW in dividends + 800 billion KRW in share buybacks), with a shareholder return ratio of 39.8%."

Along with the earnings announcement, KB Financial Group unveiled plans to enhance corporate value. They plan to implement a shareholder return policy linked to the capital ratio, using capital exceeding 13% at year-end as shareholder return funds for the following year, while also utilizing capital exceeding 13.5% during the year for shareholder returns. They will continue to conduct annual share buybacks and cancellations of over 10 million shares and maintain quarterly equal dividends on a total amount basis until the price-to-book ratio (PBR) reaches 1.0 times. Eun evaluated, "Although the value-up disclosure, which has attracted everyone's attention, may seem somewhat complex, it is positive in terms of differentiation," and added, "They will maintain their status as the leading stock in value-up due to their superior capital ratio."