"Worked Hard on Value-Up"... Bank Stocks Falter Amid 'Gye-eom'

Banks that have been striving for value-up have seen their stock prices collapse due to the martial law situation. Major bank stocks fell more sharply than the average KOSPI decline, dropping as much as 7-8% intraday on the 4th, and continued to decline for two consecutive days on the 5th. In particular, banks that were not included in the value-up index had raised expectations ahead of the year-end Korea Value-Up Index component changes, but red flags have been raised as investor outflows continue.

Based on the lowest prices, Hana Financial Group recorded -8.94%, KB Financial Group -7.11%, Shinhan Financial Group -7.98%, and Woori Financial Group -4.83% intraday on the 4th. Although closing prices rose slightly, they showed a 4-5% decline again on the morning of the 5th, marking a two-day consecutive downward trend.

Earlier, banks rushed to complete value-up disclosures. These include KB Financial (October 24), Hana Financial (October 29), BNK Financial Group (October 30), and JB Financial Group (September 24). Among internet banks, Kakao Bank (November 26) was the first to make a value-up disclosure.

This followed the Korea Exchange’s announcement on September 24 of the Korea Value-Up Index, stating that companies that complete value-up disclosures by December 6 will be reviewed for new inclusion, with inclusion in the index starting December 20.

Accordingly, banks that were not included in the value-up index rushed to announce value-up disclosures along with their third-quarter earnings reports. KB Financial, Hana Financial Group, JB Financial Group, and BNK Financial Group are considered candidates for inclusion. In particular, KB Financial was excluded from the value-up index in September for failing to meet the price-to-book ratio (PBR) requirement, but after announcing a value-up disclosure at the end of last month, positive evaluations have continued, raising expectations for index inclusion.

However, voices have emerged that the outlook has become uncertain as foreign investors continue to withdraw due to the unexpected martial law situation. Even if inclusion in the value-up index proceeds as the market expects, increased volatility such as exchange rates and intensified foreign investor outflows would contradict the purpose of value-up to resolve the 'Korea discount.' In particular, the banking sector is facing a worsening business environment due to next year’s base interest rate cuts, a new normal exchange rate in the 1,400 won range, and now the unexpected martial law, deepening concerns about appeasing shareholders.

A banking industry official said, "Despite the sluggish stock market this year, bank stocks have consistently attracted investors, but it has become uncertain going forward," adding, "Especially from next year, the banking business environment is expected to become more difficult, so there is little incentive to attract investors."

Yoonjung Kim, a researcher at LS Securities, said, "'The Corporate Value-Up Program' is a capital revitalization policy actively promoted as a major government policy task this year," adding, "With key legislative amendments needed to drive the policy still pending and the martial law situation casting a red light on the current administration’s leadership and regime stability, there is a risk of losing momentum."

Youngjun Ahn, a researcher at Kiwoom Securities, said, "The financial industry needs to closely coordinate with authorities, but due to the unstable situation, it seems to be reacting more sensitively to the martial law situation compared to other industries," adding, "Considering that financial stocks had a large rise previously, the larger decline compared to other industries should also be taken into account."