[Click eStock] "iM Financial Holdings Has Ample Room to Expand Shareholder Return Rate... Target Price Raised"

On December 26, Shinhan Investment Corp. raised its target price for iM Financial Holdings from 17,000 won to 19,000 won, citing ample room for an increase in shareholder return rates. The investment opinion remains 'Buy'.

Eun Kyungwan, a researcher at Shinhan Investment Corp., explained, "Although the year-end common equity tier 1 (CET1) ratio will fall below 12% due to the payment of year-end dividends, we believe that, under a management policy focused on profitability and capital ratio management, there is no significant obstacle to a gradual expansion of shareholder returns." He added, "Accordingly, despite only minor changes in earnings estimates, we have raised our target price to reflect a decrease in the valuation discount rate."

Recently, the relative strength of small and mid-sized banks has become increasingly evident. Researcher Eun analyzed, "This is because they are free from various penalty issues such as equity-linked securities (ELS), and their sensitivity to profit and capital ratios due to exchange rate increases is not significant." He added, "In addition, as the total shareholder return rate of major large banks is expected to exceed 50% in 2025, the investment appeal of small and mid-sized banks is rising in terms of the potential for improvement going forward."

Shinhan Investment Corp. forecasts that iM Financial Holdings will post a controlling shareholder net profit of 29.3 billion won in the fourth quarter of this year, turning to profit compared to the same period last year. Researcher Eun stated, "With the disappearance of one-off factors such as the recovery of overdue interest from the previous quarter, the net interest margin declined by 6 basis points (1bp=0.01 percentage points), and the growth rate of won-denominated loans was around 0.2%, resulting in a slight decrease in net interest income. At the same time, non-interest income was sluggish due to valuation losses on marketable securities." He added, "However, aside from seasonal selling and administrative expenses, there are no large-scale cost issues."

An additional year-end dividend payout is expected to apply for separate taxation of dividend income. Researcher Eun explained, "The dividend per share is expected to be 720 won, achieving a total shareholder return rate of 38.0% (25.0% cash dividends + 13.0% treasury shares)." He added, "There is also a possibility of pursuing a reduction in dividends through the transfer of capital surplus to retained earnings."