[Korea] July 9, 2021
Banks Strong earnings and compelling dividends
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
2Q21 preview Consensus estimates continue to be revised higher ó For 2Q21, we forecast the seven financial holding companies under our coverage—including Industrial Bank of Korea (IBK)—to deliver combined net profit of W4.3tr (+38% YoY). ó Our estimate is 11% higher than the recently raised consensus. ó We anticipate : 1) a visible recovery in bank earnings; 2) structurally strong securities earnings; and 3) continued strength in credit card and auto finance/lease subsidiaries. ó Robust top-line growth combined with limited cost increases should provide profit growth momentum.
Robust earnings to continue into Core income indicators to remain healthy , with 2021 NIM likely to rebound 5bps YoY 2H21 ó We estimate bank net interest margin (NIM) expanded 4bps on average in 2Q21, helped by lower deposit rates due to repricing and portfolio improvements (a higher share of low-cost core deposits, such as demand deposits). ó When (short-term) interest rates rise, NIM should expand further on higher lending rates. We have yet to model this into our earnings estimates. ó Last year’s above-10% loan growth should have positive effects on interest income. For 2021, we expect solid loan growth of 6.5%. ó Group interest income: We look for robust group-level interest income, backed by: 1) bank NI M expansion and solid loan growth; 2) healthy interest income from non-bank subsidiaries (credit card and auto finance/lease companies); 3) global operations; and 4) inorganic growth. ó Group commission income: We expect group-level commission income to be supported by: 1) a diversified income base (securities, credit cards, etc.); and 2) a recovery in banks’ commission income (low base effects), including trust commissions. ó SG&A expenses: We see further improvements in the cost-to-income ratio, driven by cost structure improvements (early retirement programs, channel improvements, etc.) and cost - saving efforts. We expect the ratio to decline to 47.2% in 2021 and 46.2% in 2022 (vs. 57.3% in 2015, 52.1% in 2017, 50.5% in 2019, and 49.5% in 2020). ó Credit cost ratio: We forecast credit cost ratio to fall to 33bps in 2021, helped by last year’s preemptive provisioning related to COVID-19 (41bps).
KakaoBank and Kakao Pay set to IPOs could negatively affect near -ter m supply/demand, but some positive s also expected go public in August ó (-): Funds across global equity markets are flowing into industries (companies) that are seen as disruptive and having higher growth potential. This could negatively affect traditional banks (financial holding companies) in terms of supply/demand. ó (-): The battle to become the leading “comprehensive financial platform” is likely to heat up. ó (+): Once the initial IPO effects subside, we believe financial holding companies’ diversified business portfolios, earnings power, robust capital, progress in digital transformation, and cheap valuations will gain renewed attention.
Investment points and Strong and stable earnings across the sector and 2021 -23F dividend yields of 5 -7% valuations ó Sentiment on the banking sector is likely to benefit from expectations for rising interest rates over the medium term from 2H21. ó Banking stocks look undervalued over all, with the sector trading at a 2021F P/B of 0.4x (vs. ROE of 9.2%) and a 2021F P/E of 4.5x. ó Top picks: We recommend Hana Financial Group (HFG) and KB Financial Group (KBFG) as our top picks, as both appear steeply undervalued relative to their fundament als (strong earnings stability and cost efficiency) and outstanding CET1 ratios. ó The Financial Services Commission’s (FSC) recommendation on capital management expired as scheduled at the end of June. We expect financial holding companies with good capital positions to resume their normal dividend policies in July (starting with interi m dividends and 2Q21 quarterly dividends). ó We believe the sector offers attractive dividends, with dividend yields estimated at 5.5% for 2021, 6.1% for 2022, and 6.6% for 2023 (simple averages; quarterly and final dividends combined).
Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Ju ly 9, 2021 Banks
Figure 1. Combined NP of banks (financial holding companies) under our coverage
(Wtr) 16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F
Note: Based on combined NP of KBFG, SFG, HFG, IBK, BNKFG, DGBFG, and JBFG Source: Company data, Mirae Asset Securities Research
Figure 2. Dividend yield forecasts for banks (financial holding companies) under our coverage
(%) 10.0 2021F 2022F 2023F 9.0 8.8 8.0 7.7 8.0 7.6 7.4 7.1 7.2 6.9 6.7 6.9 7.0 6.5 6.4 6.4 6.3 6.3 6.1 6.1 5.8 6.0 6.1 6.0 5.4 5.0 4.0 3.0 2.0 1.0 0.0 KBFG SFG HFG IBK BNKFG DGBFG JBFG
Notes: Based on combined interim and final dividends; based on Jul. 7 closing prices Source: Mirae Asset Securities Research
Table 1. Dividend payout ratios of major banks (financial holding companies) (%) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F KBFG 14.6 46.6 11.7 13.4 15.3 21.5 22.3 23.2 23.2 24.8 26.0 20.0 27.2 28.4 29.1 SFG 32.8 24.6 18.9 17.0 19.5 24.6 26.7 24.8 23.6 23.9 26.0 23.5 26.7 28.4 29.4 HFG 27.3 14.5 11.8 6.7 12.4 18.5 21.1 23.4 22.5 25.5 25.8 20.5 26.0 27.5 29.3 WFG 7.9 16.9 9.4 12.3 - 27.7 31.8 21.4 26.7 21.7 26.6 19.9 N/A N/A N/A IBK 21.7 20.5 25.5 21.8 24.1 27.3 25.8 27.3 27.0 23.4 23.6 24.1 25.3 26.3 27.1 BNKFG 12.2 14.0 16.9 17.4 17.8 5.8 7.9 14.9 18.6 19.5 20.9 20.0 22.0 24.1 26.1 DGBFG 12.4 17.4 14.8 16.1 15.8 18.7 16.1 17.6 19.0 15.9 21.2 19.9 22.0 24.1 25.1 JBFG 5.0 23.2 5.2 9.9 10.7 2.3 6.7 5.4 8.6 14.4 17.1 20.0 22.4 24.1 25.7 Notes: 1) Based on consolidated NP attributable to controlling interests; 2) interim and year-end dividends combined; 3) IBK’s 2018 and 2019 dividend payout ratios were 23.4% (25.7% for general shareholders; 20.9% for controlling shareholders) and 23.6% (28% for general shareholders; 19.7% for controlling shareholders), respectively Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 2 Ju ly 9, 2021 Banks
Figure 3. AAA bank debenture trends since 2010 Figure 4. AAA bank debenture trends since Mar. 2019
(%) (%) 7.0 Bank debenture (AAA, 2Y) Bank debenture (AAA, 10Y) 3.0 Bank debenture (AAA, 2Y) Bank debenture (AAA, 10Y)
6.0 2.5 5.0
2.0 4.0
3.0 1.5
2.0 1.0 1.0
0.0 0.5 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 3/19 6/19 9/19 12/19 3/20 6/20 9/20 12/20 3/21 6/21
Source: KOSCOM, Mirae Asset Securities Research Source: KOSCOM, Mirae Asset Securities Research
Figure 6. COFIX, CD, and bank debenture trends since Mar. Figure 5. COFIX, CD, and bank debenture trends since 2010 2019
Source: Korea Federation of Banks, KOSCOM, Mirae Asset Securities Research Source: Korea Federation of Banks, KOSCOM, Mirae Asset Securities Research
Figure 7. Bank debenture rate (AAA, 3M) Figure 8. Bank debenture rate (AAA, 6M) Figure 9. Bank debenture rate (AAA, 1Y)
(%) (%) (%) 2.0 2.0 2.2
1.8 1.8 2.0
1.6 1.6 1.8
1.4 1.4 1.6
1.2 1.2 1.4
1.0 1.0 1.2
0.8 0.8 1.0
0.6 0.6 0.8
0.4 0.4 0.6 1/17 6/17 11/17 4/18 9/18 2/19 7/19 12/19 5/20 10/20 3/21 1/17 6/17 11/17 4/18 9/18 2/19 7/19 12/19 5/20 10/20 3/21 1/17 6/17 11/17 4/18 9/18 2/19 7/19 12/19 5/20 10/20 3/21
Source: KOSCOM, Mirae Asset Securities Research Source: KOSCOM, Mirae Asset Securities Research Source: KOSCOM, Mirae Asset Securities Research
Mirae Asset Securities Research 3 Ju ly 9, 2021 Banks
Figure 10. Quarterly bank NIM Figure 11. Annual bank NIM
(%) (%) 2.1 2.8
2 2.6
1.9 2.4
2.2 1.8
2 1.7 1.8 1.6 1.6 1.5 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 3Q21F 1Q22F 1.4 10 11 12 13 14 15 16 17 18 19 20 21F 22F 23F
Note: Based on simple avg. of NIMs for banks under coverage Note: Based on simple avg. of NIMs for banks under coverage Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Figure 12. Low-cost deposits by bank (1) Figure 13. Low-cost deposits by bank (2)
(Wtr) (Wtr) 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 180.0 24.0 1Q20 2Q20 3Q20 4Q20 1Q21 1Q20 2Q20 3Q20 4Q20 1Q21 150.0 20.0
16.0 120.0
12.0 90.0
8.0 60.0
4.0 30.0
0.0 0.0 BNK Busan BNK DGB Daegu Kwangju Jeonbuk KB Kookmin Shinhan Hana Woori IBK Kyongnam
Source: Company data, Mirae Asset Securities Research Note: BNK Busan Bank and BNK Kyongnam Bank data based on monthly avg. balance Source: Company data, Mirae Asset Securities Research
Figure 14. Low-cost deposits as % of won-denominated Figure 15. Low-cost deposits as % of won-denominated deposits by bank (1) deposits by bank (2)
(%) KB Kookmin Shinhan Hana (%) BNK Busan BNK Kyongnam Daegu 55.0 Woori IBK 55.0 Kwangju Jeonbuk
50.0 50.0
45.0 45.0
40.0 40.0
35.0 35.0
30.0 30.0
25.0 25.0
20.0 20.0 2015 2016 2017 2018 2019 1Q20 2Q20 3Q20 4Q20 1Q21 2015 2016 2017 2018 2019 1Q20 2Q20 3Q20 4Q20 1Q21
Source: Company data, Mirae Asset Securities Research Note: BNK Busan Bank and BNK Kyongnam Bank data based on monthly avg. balance Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 4 Ju ly 9, 2021 Banks
Table 2. Low-cost deposit (core deposits + MMDA) balance growth (YoY) by bank
(%) 2015 2016 2017 2018 2019 1Q20 2Q20 3Q20 4Q20 1Q21 KB Kookmin 21.1 12.1 7.9 1.4 10.4 12.3 19.6 25.5 25.3 24.7 Shinhan 19.9 9.9 9.5 3.9 9.4 17.4 22.5 29.0 29.0 25.7 KEB Hana 15.6 9.1 5.2 1.2 10.8 14.9 22.2 27.4 25.0 28.2 Woori 12.8 10.2 9.9 0.9 10.8 16.4 24.0 25.3 22.1 20.6 IBK 12.9 19.3 10.9 7.5 14.6 20.5 23.4 24.6 24.7 19.7 BNK Busan 15.5 20.6 4.8 0.5 0.7 9.3 15.7 19.0 18.9 25.2 BNK Kyongnam 10.6 13.2 6.8 -3.0 3.9 7.3 11.2 14.8 17.9 24.2 DGB Daegu 18.1 13.0 7.4 2.2 4.1 13.3 16.4 19.2 21.7 24.9 Kwangju 29.1 21.9 0.6 12.0 9.8 28.0 41.3 48.1 37.4 14.2 Jeonbuk 32.2 14.6 -5.1 4.6 7.8 12.3 22.0 25.0 24.0 23.4 Note: BNK Busan Bank and BNK Kyongnam Bank data based on monthly avg. balance Source: Company data, Mirae Asset Securities Research
Table 3. Low-cost deposit (core deposits + MMDA) balance growth (QoQ) by bank
(%) 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 KB Kookmin 1.2 2.6 1.0 0.0 6.5 4.4 7.6 4.8 6.4 4.0 Shinhan -1.3 1.9 1.7 -0.1 5.6 9.3 6.2 5.2 5.6 6.5 KEB Hana 2.5 4.5 1.9 -1.8 6.0 8.3 8.3 2.4 4.0 11.1 Woori 3.6 -0.2 -0.1 1.2 9.8 4.8 6.5 2.2 6.9 3.6 IBK 1.1 2.4 6.4 0.5 4.7 7.6 8.9 1.5 4.8 3.4 BNK Busan -1.0 -0.4 0.6 0.4 0.1 8.1 3.5 3.0 3.3 13.8 BNK Kyongnam -0.1 3.7 -0.6 0.6 0.1 7.1 3.0 3.9 2.8 12.9 DGB Daegu 0.1 0.9 1.5 0.9 0.7 9.9 4.3 3.3 2.8 12.8 Kwangju 4.1 0.4 2.7 -0.9 7.5 17.0 13.4 3.8 -0.3 -2.8 Jeonbuk -1.2 6.0 4.6 -2.9 0.1 10.4 13.7 -0.6 -0.7 9.9 Note: BNK Busan Bank and BNK Kyongnam Bank data based on monthly avg. balance Source: Company data, Mirae Asset Securities Research
Figure 17. % of demand deposits (low-cost) and time deposits Figure 16. Domestics banks’ deposit breakdown (high-cost)
Demand deposits Time deposits (%) (%) MMDA Other savings 60.0 Time deposit (L) Demand deposit (R) 18.0 CD/RP Bank debentures 100% 16.0 90% 50.0 14.0 80% 70% 40.0 12.0 60% 10.0 30.0 50% 8.0 40% 20.0 6.0 30% 4.0 20% 10.0 10% 2.0 0% 0.0 0.0
Note: Bank trust accounts excluded Note: Bank trust accounts excluded Source: BOK , Mirae Asset Securities Research Source: BOK , Mirae Asset Securities Research
Mirae Asset Securities Research 5 Ju ly 9, 2021 Banks
Figure 18. Korean banking system’s loan asset growth (YTD as of end-May)
Notes: 1) Household loans are based on depository banks (including trust accounts); 2) household loans include loans assigned to KHFC; 3) mortgage loans include all housing-related loans, such as loans for jeonse deposits, moving expenses, and intermediate payments; 4) other household loans consist of general unsecured loans, credit lines (including overdraft protection), loans collateralized by commercial real estate (shopping centers, officetels etc.), and other loans (time deposit/installment saving-backed loans, stock-backed loans, etc. Source: BOK, Mirae Asset Securities Research
Figure 19. Korean banking system’s loan asset growth : +11% in 2020
Notes: 1) Household loans are based on depository banks (including trust accounts); 2) household loans include loans assigned to KHFC; 3) mortgage loans include all housing-related loans, such as loans for jeonse deposits, moving expenses, and intermediate payments; 4) other household loans consist of general unsecured loans, credit lines (including overdraft protection), loans collateralized by commercial real estate (shopping centers, officetels etc.), and other loans (time deposit/installment saving-back ed loans, stock-backed loans, etc. Source: BOK, Mirae Asset Securities Research
Mirae Asset Securities Research 6 Ju ly 9, 2021 Banks
Figure 20. Won-denominated loan growth by bank
(%) 2019 2020 2021F 2022F 15.0 13.3 11.8 12.1 12.0 11.1 11.2 9.8 10.6 9.8 9.5 9.6 9.1 9.0 9.0 7.8 7.5 7.4 6.9 7.4 7.7 5.9 6.1 6.0 5.4 5.3 6.0 4.8 5.0 4.7 4.6 5.0 5.6 5.1 5.1 5.1 4.5 2.8 4.4 3.0 1.1 0.0 -0.1 -3.0 -0.9
-6.0 KB Kookmin Shinhan Hana Woori IBK BNK Busan DGB Daegu BNK Kwangju Jeonbuk Kyongnam
Source: Company data, Mirae Asset Securities Research
Figure 21. Banking sector cost-to-income ratio trend
60%
56%
52%
48%
44%
40% 11 12 13 14 15 16 17 18 19 20 21F 22F 23F
Source: Industry data, Mirae Asset Securities Research
Figure 22. Banking sector cost-to-income ratio trend (1) Figure 23. Banking sector cost-to-income ratio trend (2)
70% SFG KBFG HFG WFG IBK 70% BNKFG DGBFG JBFG
65% 65%
60% 60%
55% 55%
50% 50%
45% 45%
40% 40%
35% 35%
30% 30% 18 19 20 21F 22F 23F 18 19 20 21F 22F 23F
Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 7 Ju ly 9, 2021 Banks
Figure 24. KBFG & SFG: SG&A Figure 25. HFG, WFG & IBK: SG&A Figure 26. BNKFG, DGBFG & JBFG: SG&A
(Wtr) 2018 2019 2020 (Wtr) 2018 2019 2020 (Wtr) 2018 2019 2020 1.6 8.0 2021F 2022F 2023F 4.5 2021F 2022F 2023F 2021F 2022F 2023F 1.4 7.0 4.0 1.2 6.0 3.5 1.0 5.0 3.0 0.8 4.0 2.5 0.6 3.0 2.0 0.4
2.0 1.5 0.2
1.0 1.0 0.0 KBFG SFG HFG WFG IBK BNKFG DGBFG JBFG
Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Figure 27. Banking sector credit cost ratio trend
(%) 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.41 0.50 0.25 0.31 0.00
Source: Company data, Mirae Asset Securities Research
Figure 28. Credit cost ratio trends (1) Figure 29. Credit cost ratio trends (2)
(%) (%) 1.6 KBFG SFG HFG WFG 1.6 IBK BNKFG DGBFG JBFG
1.4 1.4
1.2 1.2
1.0 1.0
0.8 0.8
0.6 0.6
0.4 0.4
0.2 0.2
0.0 0.0 2008 2010 2012 2014 2016 2018 2020 2022F 2008 2010 2012 2014 2016 2018 2020 2022F
Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 8 Ju ly 9, 2021 Banks
Figure 30. Financial holding companies’ BIS ratios (1Q21) Figure 31. Bank BIS ratios (1Q21)
(%) Tier 1 capital ratio Tier 2 capital ratio CET1 ratio (%) Tier 1 capital ratio Tier 2 capital ratio CET1 ratio 18.49 20 20 17.98 17.75 17.3 16.94 17.46 17.9 18 18 2.57 16.59 16 16.32 2.36 1.73 2.12 1.71 15.9 16 2.05 2.06 14.83 1.72 16 1.25 1.2 14.34 1.24 14.97 14 15.6 1.77 16.03 1.06 14.75 15.21 14.81 2.24 14 14.03 13.58 13.22 12 13.98 12.95 12.42 13.16 13.2 13.75 1.65 10 12.05 12 1.91 1.48 11.94 11.22 8 15.92 15.62 15.25 16.02 15.34 16.19 10 10.01 9.48 10.24 14.88 14.87 6 13.06 12.1 8 15.12 4 14.75 14.66 13.91 6 2 11.67 10.94 11.57 0 KB KB Kookmin Shinhan aHan Woori IBK BNKBusan Kwangju Jeonbuk 4 BNKKyongnam DGB Daegu 2 0 KBFG SFG HFG WFG BNKFG DGBFG JBFG
Note: WFG, BNKFG, and JBFG are moving to introduce internal ratings-based Source: Company data, Mirae Asset Securities Research approaches (which would lead to ratio increases). Source: Company data , Mirae Asset Securities Research
Figure 33. KBFG: Digital channel customers as % of total Figure 32. KBFG: No. of digital channel customers active customers
('000) (%) 12000 50 43.8 10,120 45 10000 40 35.8 32.9 8,070 35 8000 7,220 30 27.7 5,930 6000 25 20 4000 15 10 2000 5 0 0 2017 2018 2019 2020 2017 2018 2019 2020
Note: Based on retail customers that conducted 50%+ of transactions via digital Note: Based on retail customers that conducted 50%+ of transactions via digital channels in the most recent six months channels in the most recent six months Source: KBFG , Mirae Asset Securities Research Source: KBFG , Mirae Asset Securities Research
Figure 35. KBFG: New loans via digital channels (total vs. Figure 34. KBFG: New fund sales via digital channels unsecured)
(Wbn) (Wbn) Total loans Unsecured loans 2000 1,897 5000 4,529 4500 1600 4000 3500 2,894 1200 3000
850 2500 800 2000 1500 972 400 1000 416 500 0 0 2017 2020 2017 2020
Source: KBFG, Mirae Asset Securities Research Source: KBFG, Mirae Asset Securities Research
Mirae Asset Securities Research 9 Ju ly 9, 2021 Banks
Figure 36. SFG: Shinhan Bank’s deposit/loan digital coverage Figure 37. SFG: Shinhan Investment’s mobile transactions trends as % of total stock trading transactions
(%) (%) 100 Deposits Loans 100 90 90
80 72.6 73.1 80 68.6 67.5 70 70 64.5 60.1 60 55.2 55.5 60 53.9 46.6 50 50 45.1 39.8 40 40 30 30 20 20 10 10 0 0 2018 2019 2020 1Q21 2018 2019 2020 1Q21
Note: Digital coverage refers to the no. of transactions via digital channels divided by Source: SFG, Mirae Asset Securities Research total no. of transactions Source: SFG , Mirae Asset Securities Research
Figure 38. SFG: Strategic cost savings via digital transformation
(Wbn) 90 Front Middle Back Total strategic cost savings 82.8 80 69.2 12.4 70 61.7 12.9 60 11.4 48.2 47.1 50 38.3 6.0 8.2 40 30.8 26 19.7 30 17.8
20 32.1 25.5 10 22.5 21.1 24.3
0 1Q20 2Q20 3Q20 4Q20 1Q21
Notes: “Front” refers to financial services offered via digital channels; “middle” and “back” refers to paperless branches and robotic process automation, respectively. Source: SFG , Mirae Asset Securities Research
Mirae Asset Securities Research 10 Ju ly 9, 2021 Banks
Figure 40. HFG: Unsecured loan breakdown (digital vs. Figure 39. HFG: No. of Hana OneQ subscribers non-digital)
('000) (%) Non-digital Digital 14000 100 12,020 11,600 12000 11,140 90 10,320 9,750 80 10000 9,130 8,360 70 8000 60 86.1 86.9
6000 50 40 4000 30 2000 20 10 0 13.9 13.1 0 4Q20 1Q21
Source: HFG, Mirae Asset Securities Research Source: HFG, Mirae Asset Securities Research
Figure 41. HFG: Time/installment deposit breakdown (digital Figure 42. HFG: Fund breakdown (digital vs. non-digital) vs. non-digital)
(%) Non-digital Digital (%) Non-digital Digital 100 100 90 90 80 80 70 70 65.0 70.7 68.0 60 60 92.8 50 50 40 40 30 30 20 20 35.0 29.3 32.0 10 10 7.2 0 0 4Q20 1Q21 4Q20 1Q21
Source: HFG, Mirae Asset Securities Research Source: HFG, Mirae Asset Securities Research
Figure 44. IBK: % of digital channel customers (deposits vs. Figure 43. IBK: No. of digital channel users loans)
(000s) (%) Deposits Loans 5000 4,675 80 71.9 4500 4,192 70 65.1 4000 3,754 58.0 60 3500 3,263 52.8 50.0 48.0 3000 50 41.0 2500 40 32.9 2000 30 1500 20 1000 500 10 0 0 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20
Notes: Based on MAUs; excluding smart banking/internet banking overlaps. Source: IBK, Mirae Asset Securities Research Source: IBK , Mirae Asset Securities Research
Mirae Asset Securities Research 11 Ju ly 9, 2021 Banks
Table 4. Banks (financial holding companies): Valuations KBFG SFG HFG IBK BNKFG DGBFG JBFG Ticker 105560 KS 055550 KS 086790 KS 024110 KS 138930 KS 139130 KS 175330 KS Rating Buy Buy Buy Buy Buy Buy Buy TP (W) 72,000 50,000 60,500 12,500 9,100 11,500 10,000 CP (W) 52,800 39,200 44,000 10,400 7,530 9,000 7,350 Upside (%) 29.2 36.4 27.6 37.5 20.2 20.8 27.8 Market cap (Wbn) 21,955 20,251 13,211 7,741 2,454 1,522 1,448 Foreign ownership (%) 68.3 60.6 68.3 12.8 38.2 48.3 41.1 P/B (x) 2019 0.57 0.48 0.47 0.31 0.30 0.34 0.42 2020 0.52 0.47 0.43 0.33 0.28 0.32 0.38 2021F 0.47 0.44 0.40 0.31 0.27 0.31 0.35 2022F 0.43 0.40 0.36 0.28 0.26 0.28 0.31 2023F 0.40 0.37 0.33 0.27 0.24 0.26 0.28 P/E (x) 2019 6.7 5.5 5.5 4.3 4.4 4.6 4.1 2020 6.4 5.7 5.0 4.8 4.7 4.6 4.0 2021F 5.0 4.9 4.3 4.1 3.6 3.6 3.1 2022F 4.8 4.7 4.1 4.1 3.5 3.4 3.0 2023F 4.7 4.6 3.9 4.0 3.5 3.4 2.9 P/PPOP (x) 2019 4.3 3.4 3.3 2.0 2.0 2.5 2.3 2020 3.9 3.2 2.8 2.0 2.0 2.0 2.2 2021F 3.1 2.9 2.6 1.9 1.7 1.8 1.8 2022F 3.0 2.7 2.4 1.8 1.6 1.6 1.7 2023F 2.9 2.6 2.3 1.7 1.5 1.6 1.6 Dividend yield (%) 2019 4.2 4.7 4.8 6.4 4.8 4.6 4.1 2020 3.4 3.8 4.2 4.5 4.2 4.3 5.1 2021F 5.8 5.4 6.3 6.1 6.1 6.1 7.2 2022F 6.3 6.0 6.9 6.4 6.9 7.1 8.0 2023F 6.5 6.4 7.7 6.7 7.6 7.4 8.8 ROE (%) 2019 8.9 9.1 8.6 7.4 7.1 7.6 10.3 2020 8.5 8.2 9.0 6.4 6.1 7.3 10.0 2021F 9.8 9.2 9.6 7.6 7.6 8.7 11.6 2022F 9.3 8.9 9.2 7.2 7.5 8.7 10.8 2023F 8.7 8.4 8.8 6.8 7.2 8.1 10.0 ROA (%) 2019 0.7 0.7 0.6 0.5 0.6 0.5 0.7 2020 0.6 0.6 0.6 0.5 0.5 0.4 0.7 2021F 0.7 0.7 0.7 0.5 0.6 0.5 0.9 2022F 0.7 0.7 0.7 0.5 0.6 0.5 0.9 2023F 0.7 0.7 0.7 0.5 0.5 0.5 0.9 EPS growth (%) 2019 8.2 7.7 6.5 -9.1 12.0 -14.6 17.5 2020 4.8 -3.7 10.3 -11.2 -7.6 1.5 2.1 2021F 26.6 15.5 17.1 16.5 30.7 27.0 26.7 2022F 3.7 3.5 4.6 1.4 3.3 6.3 3.5 2023F 2.1 3.1 4.8 1.4 1.0 0.7 3.0 PPOP margin (%) 2019 1.0 1.2 1.0 1.3 1.2 0.9 1.3 2020 1.0 1.1 1.1 1.1 1.1 1.0 1.3 2021F 1.1 1.2 1.1 1.1 1.2 1.0 1.5 2022F 1.1 1.2 1.1 1.1 1.2 1.0 1.6 2023F 1.1 1.2 1.1 1.1 1.2 1.0 1.6 Notes: P/B, P/E, P/PPOP, and dividend yield are based on Jul. 7 closing prices; foreign ownership figures are as of Jul. 7 Source: Company data, Quantiwise, Mirae Asset Securities Research
Mirae Asset Securities Research 12 Ju ly 9, 2021 Banks
Table 5. Target valuations
KBFG SFG HFG IBK BNKFG DGBFG JBFG Ticker 105560 KS 055550 KS 086790 KS 024110 KS 138930 KS 139130 KS 175330 KS Rating Buy Buy Buy Buy Buy Buy Buy TP (W) 72,000 50,000 60,500 12,500 9,100 11,500 10,000 CP (W) 52,800 39,200 44,000 10,400 7,530 9,000 7,350 Upside (%) 36.4 27.6 37.5 20.2 20.8 27.8 36.1 Major assumptions Target P/B (x) 0.65 0.56 0.54 0.37 0.33 0.39 0.47 2021F BPS (W) 111,294 89,024 111,329 34,001 27,796 29,390 21,140 Sustainable ROE (%) 8.2 7.9 7.7 6.4 6.6 7.3 8.2 Cost of equity (%) 11.6 12.5 12.5 13.9 14.0 14.0 14.0 Rf 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Beta 1.60 1.75 1.75 1.98 2.00 2.00 2.00 Market premium 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Growth rate (%) 2.0 2.0 2.0 2.0 3.0 3.0 3.0 Valuation metrics at TP 2021F P/B (x) 0.65 0.56 0.54 0.37 0.33 0.39 0.47 2022F P/B (x) 0.59 0.51 0.49 0.34 0.31 0.36 0.42 2023F P/B (x) 0.54 0.47 0.45 0.32 0.29 0.34 0.38 2021F P/E (x) 6.9 6.3 5.9 5.0 4.4 4.6 4.3 2022F P/E (x) 6.6 6.1 5.6 4.9 4.2 4.3 4.1 2023F P/E (x) 6.5 5.9 5.4 4.8 4.2 4.3 4.0 2021F dividend yield (%) 4.2 4.2 4.5 5.0 5.1 4.8 5.3 2022F dividend yield (%) 4.6 4.7 5.0 5.4 5.7 5.6 5.9 2023F dividend yield (%) 4.8 5.0 5.6 5.6 6.3 5.8 6.5 Note: Based on Jul. 7 closing prices Source: Company data, Quantiwise, Mirae Asset Securities Research
Mirae Asset Securities Research 13 Ju ly 9, 2021 Banks
Table 6. Global banks: Share performance Current Ma rket 52 -week 52 -week Performance (%) price cap high low Country Bank Ticker (local) (US$bn) (local) (local) YTD 1M 3M 6M 1Y 2Y 3Y
US JPMorgan Chase JPM US 153.59 464.9 167.44 90.78 20.9 -7.3 -0.9 13.0 66.4 44.8 61.9 Bank of America BAC US 39.75 340.6 43.49 22.39 31.1 -7.8 -0.7 21.0 72.8 42.8 51.9 Citigroup C US 67.93 140.4 80.29 40.49 10.2 -14.3 -6.5 2.9 35.0 2.4 11.4 Wells Fargo WFC US 43.40 179.4 48.13 20.76 43.8 -7.9 8.5 29.8 77.4 -2.5 -14.2 Morgan Stanley MS US 90.03 167.5 94.27 45.86 31.4 -3.4 13.9 20.1 89.6 118.6 107.2 Goldman Sachs GS US 367.67 130.3 393.26 185.52 39.4 -5.3 12.6 26.1 84.4 86.5 75.8
Truist Financial TFC US 53.68 72.2 62.69 33.47 12.0 -10.6 -9.7 4.3 52.1 17.4 16.9 Canada Royal Bank of Canada RY CN 125.95 143.8 128.72 90.55 20.4 -0.1 8.1 16.5 36.2 30.3 42.1 UK HSBC HSBA LN 417.95 117.8 462.00 281.50 10.3 -6.2 -3.7 0.2 5.8 -34.1 -33.4 Lloyds Banking Group LLOY LN 46.79 45.8 50.44 23.60 28.4 -5.7 7.9 26.8 52.2 -16.0 -18.3 Barclays BARC LN 172.50 40.5 190.30 88.90 17.6 -7.7 -7.9 10.5 50.1 12.9 -1.4 NatWest Group NWG LN 202.50 32.4 212.40 90.54 20.8 -3.5 2.2 20.9 66.3 -2.0 -6.3 Standard Chartered STAN LN 451.40 19.4 533.20 334.30 -3.1 -9.6 -9.7 -11.9 2.1 -37.0 -31.8 France BNP Paribas BNP FP 51.18 75.5 57.92 28.79 18.7 -9.7 -1.6 13.0 40.8 21.5 4.0 Credit Agricole ACA FP 11.70 42.7 13.49 6.51 13.3 -4.6 -6.6 9.6 33.5 13.4 15.6 Societe Generale GLE FP 24.69 24.9 27.03 10.77 45.0 -6.2 10.9 38.9 62.7 11.8 -24.6 Germany Deutsche Bank DBK GR 10.49 25.6 12.59 6.75 17.2 -14.5 1.1 10.1 19.1 55.7 9.0 Commerzbank CBK GR 5.68 8.4 6.89 3.92 7.9 -15.5 10.6 3.6 24.5 -9.2 -31.5 Switzerland UBS UBS US 15.08 55.8 16.58 10.13 8.1 -8.4 -5.8 -1.7 32.1 37.5 12.8 Credit Suisse CSGN SW 9.36 26.8 13.43 8.41 -17.5 -4.1 -6.2 -22.3 -3.8 -18.9 -33.3 Spain Banco Santander SAN SM 3.15 64.3 3.51 1.43 25.0 -7.5 8.6 14.9 49.4 -18.8 -24.9 BBVA BBVA SM 5.22 41.1 5.55 2.10 31.1 -1.8 16.6 23.7 69.6 14.6 -5.8 Italy Intesa Sanpaolo ISP IM 2.30 52.8 2.49 1.37 20.9 -6.4 2.2 18.2 31.1 15.9 0.4 Unicredit UCG IM 9.75 25.7 11.04 6.09 27.4 -9.3 12.5 19.2 13.4 -12.9 -31.2 Netherlands ING Group INGA NA 10.87 50.1 11.68 5.65 42.3 -2.9 4.0 31.1 74.2 10.0 -4.7 Australia CommBank CBA AU 99.71 132.4 106.57 62.64 21.4 -1.7 14.5 16.4 41.3 33.4 51.9 Westpac WBC AU 25.60 70.3 27.12 16.00 32.2 -4.2 1.7 26.2 43.5 -2.1 -1.2
National Australia Bank NAB AU 26.31 65.0 27.84 16.56 16.4 -1.7 -1.2 12.7 46.3 7.0 10.0
ANZ ANZ AU 28.14 60.0 29.64 16.40 24.0 -2.2 -2.1 18.0 52.9 10.2 12.5
Macquarie MQG AU 156.46 43.2 162.09 118.36 13.0 2.0 1.9 11.0 28.6 30.1 42.5 Brazil Itau Unibanco ITUB4 BZ 29.68 52.6 34.34 22.10 -5.8 -10.2 10.4 -9.3 13.0 -13.5 23.5 UAE First Abu Dhabi Bank FAB DH 16.52 49.1 17.14 10.36 28.1 -2.2 14.9 22.4 48.6 24.0 57.6 China ICBC-H 1398 HK 4.58 256.9 5.75 3.96 -8.9 -9.1 -16.6 -7.7 -10.7 -6.0 -1.6 China Merchants Bank-H 3968 HK 64.50 208.4 72.45 35.60 31.6 -6.0 7.5 20.7 56.6 81.9 160.6 China Construction Bank-H 939 HK 5.71 186.6 6.74 4.93 -3.1 -8.6 -12.7 -3.7 -13.1 4.4 0.1
Agricultural Bank of China-H 1288 HK 2.69 160. 1 3.30 2.38 -5.3 -13.2 -13.2 -6.9 -12.4 -3.8 -7.7 Japan Mitsubishi UFG 8306 JP 591.8 72.7 664.2 392.8 29.8 -6.7 1.7 21.7 40.8 24.1 11.8 SMFG 8316 JP 3,802.0 47.2 4,354.0 2,800.0 19.3 -5.3 -2.1 9.1 25.2 10.8 5.5 Mizuho Financial Group 8411 JP 1,560.5 35.8 1,732.5 1,256.0 19.3 -7.7 0.3 9.8 18.1 8.7 -3.1 Resona 8308 JP 422.7 9.6 501.0 335.2 17.3 -8.6 -5.6 9.5 14.7 3.0 -16.3 Singapore DBS Group DBS SP 30.09 57.3 30.88 19.45 20.2 0.2 4.8 9.7 38.1 29.0 36.5 Oversea-Chinese Banking OCBC SP 11.89 39.7 12.77 8.36 18.2 -4.5 0.7 10.8 27.4 14.6 19.6 United Overseas Bank UOB SP 25.93 32.2 26.84 18.85 14.8 -1.4 -0.1 7.1 23.3 8.9 12.9 Note: Based on Jul. 7 closing prices Source: Bloomberg, Mirae Asset Securities Research
Mirae Asset Securities Research 14 Ju ly 9, 2021 Banks
Table 7. Global banks: Key valuation metrics P/B(x) ROE (%) P/E (x) EPS growth (%) ROA (%) Div. yield(%) Country Bank Ticker FY1 FY2 FY0 FY1 FY2 FY1 FY2 FY0 FY1 FY2 FY0 FY1 FY2 FY1 FY2
US JPMorgan Chase JPM US 1.81 1.72 10.0 15.9 13.9 11.6 12.9 -17.2 48.5 -9. 5 0.81 1.14 0.96 2.4 2.6 Bank of America BAC US 1.32 1.27 6.5 10.4 10.1 13.1 12.9 -36.4 62.5 1.6 0.63 0.93 1.00 1.9 2.2 Citigroup C US 0.73 0.68 5.1 10.2 8.5 7.5 8.4 -36.7 84.9 -10.5 0.47 0.85 0.69 3.1 3.3 Wells Fargo WFC US 1.02 0.97 1.3 9.4 8.3 11.4 12.3 -90.1 827.6 -7.0 0.18 0.84 0.74 1.3 2.3 Morgan Stanley MS US 1.66 1.59 11.5 13.1 12.4 13.0 12.8 32.1 5.5 1.4 1.01 1.14 1.04 2.0 2.5 Goldman Sachs GS US 1.38 1.29 9.0 18.2 13.5 8.1 10.1 2.3 84.6 -20.3 0.65 1.29 0.93 1.6 2.0 Truist Financial TFC US 1.15 1.09 7.4 9.6 10.0 11.9 11.3 -13.0 18.4 5.9 0.97 1.21 1.24 3.4 3.6 Canada Royal Bank of Canada RY CN 2.01 1.83 13.9 18.1 16.2 11.6 11.7 -10.3 36.0 -0.5 0.68 0.94 0.84 3.4 3.6 UK HSBC HSBA LN 0.66 0.63 2.3 5.4 6.5 10.0 9.2 -58.9 90.8 9.4 0.20 0.37 0.43 4.1 4.9 Lloyds Banking Group LLOY LN 0.73 0.71 1.8 8.6 7.8 7.4 8.4 -82.7 364.2 -11.1 0.07 0.49 0.42 4.3 5.3 Barclays BARC LN 0.53 0.50 2.5 7.2 7.1 7.2 7.5 -61.5 150.4 -2.9 0.12 0.30 0.31 3.3 4.6 NatWest Group NWG LN 0.63 0.61 -1.6 5.0 6.1 10.2 9.4 -87.6 312.8 8.6 -0.08 0.21 0.27 4.6 5.7 Standard Chartered STAN LN 0.42 0.40 1.8 4.6 5.4 8.8 7.5 -52.8 98.3 17.7 0.17 0.30 0.35 3.1 4.0 France BNP Paribas BNP FP 0.60 0.58 6.0 6.5 6.8 8.8 8.1 -24.7 25.6 9.9 0.29 0.28 0.30 6.2 6.4 Credit Agricole ACA FP 0.58 0.55 4.6 6.5 6.8 8.5 8.0 -17.4 20.0 6.2 0.18 0.20 0.20 6.2 6.7 Societe Generale GLE FP 0.38 0.37 -0.3 5.2 5.3 8.5 7.4 -125.4 382.4 15.0 0.00 0.14 0.19 5.5 5.8 Germany Deutsche Bank DBK GR 0.39 0.37 -0.6 2.4 4.4 11.4 8.8 19.3 165.6 29.8 -0.01 0.15 0.22 1.7 2.9 Commerzbank CBK GR 0.28 0.28 -10.5 0.5 1.9 29.0 11.3 -161.7 153.8 156.6 -0.04 0.04 0.14 0.0 1.1 Switzerland UBS UBS US 0.88 0.82 10.1 9.4 9.9 8.5 8.5 24.3 11.9 0.1 0.56 0.49 0.51 2.6 2.7 Credit Suisse CSGN SW 0.51 0.49 5.5 3.8 7.6 8.2 6.2 13.5 -32.7 30.8 0.38 0.26 0.43 2.0 2.7 Spain Banco Santander SAN SM 0.64 0.62 -9.5 7.0 7.9 8.6 7.8 -41.6 40.1 10.1 -0.60 0.44 0.48 4.4 5.5 BBVA BBVA SM 0.74 0.69 2.9 6.4 7.3 11.2 9.5 -37.9 13.7 17.4 0.22 0.46 0.54 3.7 4.2 Italy Intesa Sanpaolo ISP IM 0.70 0.69 6.1 6.5 7.3 11.4 9.8 -15.6 -18.1 15.8 0.38 0.40 0.43 6.8 7.4 Unicredit UCG IM 0.38 0.36 0.7 3.5 5.0 10.0 7.7 -102.9 1,688.5 30.9 0.09 0.23 0.31 4.0 4.7 Netherlands ING Group INGA NA 0.75 0.73 4.4 7.5 7.6 10.6 9.7 -48.2 61.0 9.2 0.27 0.44 0.43 8.1 5.9 Australia CommBank CBA AU 2.33 2.27 10.7 11.7 12.0 20.9 19.4 -12.3 12.9 8.1 0.78 0.85 0.87 3.6 3.9 Westpac WBC AU 1.30 1.27 4.2 9.7 9.6 14.7 14.5 -63.2 138.5 1.2 0.31 0.75 0.72 4.5 4.8 National Australia Bank NAB AU 1.39 1.35 N/A 10.6 10.6 14.0 13.8 -33.5 58.4 0.8 N/A 0.74 0.73 4.6 5.0 ANZ ANZ AU 1.26 1.23 N/A 9.7 10.0 13.7 13.0 -37.4 54.2 5.7 N/A 0.60 0.62 5.0 5.1 Macquarie MQG AU 2.46 2.35 13.5 13.4 14.1 18.9 17.1 -23.1 36.2 10.1 1.07 1.19 1.26 3.5 3.9 Brazil Itau Unibanco ITUB4 BZ 1.97 1.81 13.6 17.5 18.2 11.7 10.3 -30.0 28.5 13.6 0.96 1.12 1.20 3.5 5.1 UAE First Abu Dhabi Bank FAB DH 1.79 1.75 9.5 11.2 12.1 17.7 15.8 -19.1 0.1 12.1 1.05 1.04 1.07 4.4 4.5 China ICBC-H 1398 HK 0.46 0.43 11.0 11.4 11.3 4.2 3.9 0.0 6.5 6.8 0.93 0.96 0.93 7.4 7.8 China Merchants Bank-H 3968 HK 1.85 1.64 15.3 16.0 16.5 12.2 10.6 2.8 16.0 14.9 1.23 1.28 1.32 2.7 3.1 China Construction Bank-H 939 HK 0.48 0.44 11.3 11.9 11.8 4.2 3.9 1.0 8.0 7.8 0.94 0.99 0.97 7.3 7.8 Agricultural Bank of China - 1288 HK H 0.38 0.36 10.5 10.8 10.8 3.6 3.3 0.0 6.9 7.0 0.75 0.80 0.79 8.8 9.4 Japan Mitsubishi UFG 8306 JP 0.44 0.42 4.3 4.9 5.0 9.0 8.3 47.7 8.8 8.8 0.22 0.24 0.25 4.6 4.8 SMFG 8316 JP 0.43 0.41 4.5 5.5 5.7 8.2 7.1 -26.9 23.4 15.3 0.23 0.30 0.30 5.3 5.6 Mizuho Financial Group 8411 JP 0.42 0.41 4.7 5.5 5.7 7.7 7.2 5.1 9.6 6.3 0.20 0.21 0.21 5.0 5.3 Resona 8308 JP 0.42 0.40 5.7 6.0 6.1 6.9 6.4 -18.2 13.2 8.4 0.22 0.22 0.24 5.0 5.2 Singapore DBS Group DBS SP 1.38 1.30 9.2 11.5 11.8 12.0 11.1 -26.7 38.3 7.8 0.80 0.96 0.98 3.8 4.5 Oversea-Chinese Banking OCBC SP 1.04 0.99 7.1 9.7 10.0 10.9 10.1 -28.4 36.3 7.6 0.68 0.96 1.00 4.3 4.7 United Overseas Bank UOB SP 1.04 0.99 7.3 9.4 10.1 11.4 10.1 -31.1 35.0 12.9 0.70 0.86 0.93 4.3 5.0 Note: Based on Jul. 7 closing prices Source: Bloomberg, Mirae Asset Securities Research
Mirae Asset Securities Research 15 Ju ly 9, 2021 Banks
Figure 45. JPMorgan: Annual shareholder returns Figure 46. JPMorgan: Quarterly shareholder returns
(%) (%) 120 Dividend payout Share repurchases/NP 400 Dividend payout Share repurchases/NP
350 100 300 80 250
60 200
150 40 100 20 50
0 0 2015 2016 2017 2018 2019 2020 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21
Source: JPMorgan, Mirae Asset Securities Research Source: JPMorgan, Mirae Asset Securities Research
Figure 47. Bank of America: Annual shareholder returns Figure 48. Bank of America: Quarterly shareholder returns
(%) (%) 140 Dividend payout Share repurchases/NP 250 Dividend payout Share repurchases/NP
120 200 100
80 150
60 100
40 50 20
0 0 2015 2016 2017 2018 2019 2020 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21
Source: Bank of America, Mirae Asset Securities Research Source: Bank of America, Mirae Asset Securities Research
Figure 49. Citigroup: Annual shareholder returns Figure 50. Citigroup: Quarterly shareholder returns
(%) (%) 140 Dividend payout Share repurchases/NP 200 Dividend payout Share repurchases/NP 180 120 160 100 140 120 80 100 60 80
40 60 40 20 20 0 0 2015 2016 2017 2018 2019 2020 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21
Source: Citigroup, Mirae Asset Securities Research Source: Citigroup, Mirae Asset Securities Research
Mirae Asset Securities Research 16 Ju ly 9, 2021 Banks
Figure 51. Wells Fargo: Annual shareholder returns Figure 52. Wells Fargo: Quarterly shareholder returns
(%) (%) 500 Dividend payout Share repurchases/NP 600 Dividend payout Share repurchases/NP 450 500 400 350 400
300 300 250 200 200
150 100 100 0 50 0 -100 2015 2016 2017 2018 2019 2020 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21
Source: Wells Fargo, Mirae Asset Securities Research Source: Wells Fargo, Mirae Asset Securities Research
Figure 53. HSBC: Annual shareholder returns Figure 54. Barclays: Annual shareholder returns
(%) (%) 1,000 ShareDividend repurchases/NP payout ratio 자사주ShareShare repurchases/NP/순이익 60 Dividend payout
50 800
40 600 30 400 20
200 10
0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Source: HSBC, Mirae Asset Securities Research Source: Barclays, Mirae Asset Securities Research
Figure 55. Lloyds Banking Group: Annual shareholder returns Figure 56. BNP Paribas: Annual shareholder returns
(%) (%) 160 Dividend payout Share repurchases/NP 100 Dividend payout
140 80 120
100 60
80 40 60
40 20 20
0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Source: Lloyds Banking Group, Mirae Asset Securities Research Source: BNP Paribas, Mirae Asset Securities Research
Mirae Asset Securities Research 17 [Korea] Banks July 9, 2021
KB Financial Group Buy (105560 KS ) (Maintain)
A sector leader with strong earnings momentum TP: W72,000 ▲ Upside: 36.4%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Valuation and recommendation Raise TP to W72,000; one of our top picks ó KB Financial Group (KBFG) boasts a well-balanced business portfolio and strong earnings stability. ó In 2020, the group acquired Cambodia’s Prasac Microfinance, Indonesia’s Bank Bukopin, and Prudential Life Insurance of Korea. ó In 2021, we expect inorganic profit growth momentum to take hold. ó We revise up our 2021-23 net profit forecasts by 5.4-6.1%. ó We raise our target price on KBFG from W70,500 to W72,000 (target P/B of 0.65x). ó Given our 2021-23 ROE forecasts of 8.7-9.8%, the stock looks undervalued on an absolute basis, trading at a 2021F P/B of 0.47x. ó We estimate 2021-23 dividend yields at 5.8-6.5% (quarterly dividends to begin at W700 per share for 2Q21).
2Q21 preview Net profit attributable to owners of the parent of W1.17tr (+19% YoY), 5% above consensus ó We expect group net interest income of W2.6tr (+13% YoY, +0.1% QoQ), supported by: 1) bank NIM of 1.57% (+1bp QoQ); 2) won-denominated loan growth of 1.7% QoQ; and 3) non- bank/inorganic growth. ó We expect group net commission income of W922.8bn (+30% YoY, -5% QoQ). We believe securities earnings somewhat weakened QoQ due to a decline in trading value, but the impact was likely cushioned by strong credit card commission income and a pickup in non-life insurance’s other non-interest income. ó We expect cost-to-income ratio of 48.3% (-0.2%p YoY, +1.0%p QoQ). ó We look for credit cost ratio of 24bps (-9bps YoY, +5bps QoQ). Actual delinquencies and new NPL formation likely remained benign.
Profit growth to stand out Sector leader with strong earnings momentum ó We expect: 1) continued strength in non-bank subsidiaries that performed well in 2020; 2) a recovery in insurance; and 3) a turnaround in banking. ó For 2021, we forecast net profit attributable to owners of the parent and EPS to grow 27% YoY.
Key data Current price (7/7/21, W) 52,800 Market cap (Wbn) 21,955 180 KB Financial Group KOSPI 160 NP (21F, Wbn) 4,370 Shares outstanding (mn) 416
140 Consensus NP (21F, Wbn) 4,137 Free float (%) 77.6
120 EPS growth (21F, %) 26.6 Foreign ownership (%) 68.3 P/E (21F, x) 5.0 Beta (12M) 0.91 100 Market P/E (21F, x) 11.9 52-week low (W) 33,950 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 59,700
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -9.0 14.8 47.5 Net interest income (Wbn) 8,905 9,197 9,722 10,755 11,107 11,397 Relative -9.9 5.9 -2.8 Net non -interest income (Wbn) 1,955 2,235 2,770 3,568 3,655 3,674
OP (Wbn) 4,267 4,491 4,616 6,062 6,264 6,394 NP (Wbn) 3,061 3,312 3,455 4,370 4,533 4,627 EPS (W) 7,321 7,924 8,301 10,510 10,902 11,127 EPS growth (%) -8.9 8.2 4.8 26.6 3.7 2.1 P/E (x) 7.2 6.7 6.4 5.0 4.8 4.7 P/PPOP (x) 4.4 4.3 3.9 3.1 3.0 2.9 P/B (x) 0.62 0.57 0.52 0.47 0.43 0.40 ROE (%) 8.8 8.9 8.5 9.8 9.3 8.7 Div. yield (%) 3.6 4.2 3.4 5.8 6.3 6.5 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 8. KBFG: 2Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 2,328.2 2,349.2 2,334.0 2,460.1 2,578.9 2,642.3 2,645.4 13.3 0.1 Net fee/commission income 638.5 670.1 711.2 789.2 788.5 967.2 922.8 29.8 -4.6 Net other income -169.0 -277.3 227.7 -17.6 -121.3 33.8 -20.0 TTR TTR Total net operating income 2,797.7 2,742.0 3,272.9 3,231.7 3,246.0 3,643.4 3,548.2 8.4 -2.6 SG&A expenses 1,814.3 1,459.2 1,586.4 1,600.6 2,186.9 1,722.8 1,713.3 8.0 -0.5 PPOP 983.3 1,282.8 1,686.5 1,631.1 1,059.1 1,920.6 1,834.8 8.8 -4.5 Provisions 210.3 243.7 296.1 214.5 289.2 173.4 224.0 -24.3 29.2 OP 773.1 1,039.1 1,390.5 1,416.5 769.9 1,747.2 1,610.8 15.8 -7.8 Non-operating income -24.0 -19.7 -14.3 154.3 25.3 39.3 4.0 TTB -89.8 Pretax profit 749.1 1,019.4 1,376.2 1,570.9 795.2 1,786.5 1,614.8 17.3 -9.6 NP (owners of the parent) 534.7 729.5 981.8 1,166.6 577.2 1,270.1 1,168.3 19.0 -8.0
Total assets 518,538 544,881 569,477 605,497 610,728 620,908 614,017 7.8 -1.1 Total loans/receivables 339,684 351,403 367,862 378,091 377,167 383,237 369,184 0.4 -3.7 Won-denominated loans (bank) 269,006 280,372 287,212 292,071 295,457 296,610 301,653 5.0 1.7 Total credit 334,553 348,357 355,480 362,675 366,428 369,244 375,417 5.6 1.7 Total deposits 305,593 317,820 327,743 337,987 338,580 338,966 344,413 5.1 1.6 Total shareholders' equity 39,119 38,809 40,307 42,108 43,361 44,065 45,236 12.2 2.7
(%) NIM (bank) 1.61 1.56 1.50 1.49 1.51 1.56 1.57 0.07 0.01 Cost-to-income ratio 64.9 53.2 48.5 49.5 67.4 47.3 48.3 -0.2 1.0 NPL (substandard & below) ratio 0.49 0.50 0.48 0.46 0.41 0.42 0.40 -0.08 -0.02 NPL coverage ratio 301.8 293.5 296.5 311.6 345.9 336.5 350.5 54.0 14.0 ROA (based on avg. value) 0.10 0.14 0.18 0.20 0.09 0.21 0.19 0.01 -0.02 ROE (based on avg. value) 1.39 1.90 2.52 2.89 1.38 2.96 2.67 0.15 -0.29 Credit cost ratio 0.06 0.07 0.08 0.06 0.08 0.05 0.06 -0.02 0.01 BIS ratio 14.48 14.08 14.24 14.65 15.28 16.00 15.73 1.49 -0.27 Tier 1 ratio 13.86 13.29 13.32 13.63 14.06 14.75 15.30 1.98 0.56 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 9. KBFG: Earnings forecast revisions
Revised Previous Chg. (%) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 10,755 11,107 11,397 10,605 10,869 11,151 1.4 2.2 2.2 Net non-interest income 3,568 3,655 3,674 3,545 3,577 3,588 0.7 2.2 2.4 Total net operating income 14,323 14,762 15,071 14,150 14,446 14,739 1.2 2.2 2.3 SG&A expenses 7,332 7,450 7,570 7,303 7,421 7,541 0.4 0.4 0.4 PPOP 6,991 7,312 7,501 6,847 7,025 7,198 2.1 4.1 4.2 Provisions 928 1,048 1,106 1,012 1,110 1,171 -8.3 -5.6 -5.5 OP 6,062 6,264 6,394 5,835 5,915 6,027 3.9 5.9 6.1 Non-operating income 9 1 1 -71 -4 1 N/A N/A 0.0 Pretax profit 6,072 6,265 6,395 5,764 5,911 6,028 5.3 6.0 6.1 NP (owners of the parent) 4,370 4,533 4,627 4,148 4,276 4,361 5.4 6.0 6.1 Source: Mirae Asset Securities Research estimates
Mirae Asset Securities Research 19 July 9, 2021 Banks
Table 10. KBFG: TP calculation
Sustainable ROE 8.20% Growth 2.00% Cost of equity 11.60%
Cost of equity 11.60% Rf 2.00% Beta 1.60 Market premium 6.00%
Fair P/B (x) 0.65 2021F BPS (W) 111,294 TP (W) 72,000 Source: Mirae Asset Securities Research estimates
Table 11. KBFG: Valuation metrics at TP of W72,000
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.84 0.78 0.70 0.65 0.59 0.54 P/E (x) 9.8 9.1 8.7 6.9 6.6 6.5
ROE (%) 8.8 8.9 8.5 9.8 9.3 8.7 EPS growth (%) -8.9 8.2 4.8 26.6 3.7 2.1
Dividend yield (%) 2.7 3.1 2.5 4.2 4.6 4.8 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 20 July 9, 2021 Banks
Table 12. KBFG: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 2,252.1 2,297.1 2,319.4 2,328.2 2,349.2 2,334.0 2,460.1 2,578.9 2,642.3 2,645.4 2,717.0 2,750.0 Net non-interest income 550.6 585.0 580.8 638.5 670.1 711.2 789.2 788.5 967.2 922.8 856.0 864.3 Net other income 62.1 17.0 -30.1 -169.0 -277.3 227.7 -17.6 -121.3 33.8 -20.0 63.5 -119.4 Total net operating income 2,864.8 2,899.2 2,870.2 2,797.7 2,742.0 3,272.9 3,231.7 3,246.0 3,643.4 3,548.2 3,636.5 3,494.9 SG&A expenses 1,513.9 1,487.0 1,455.9 1,814.3 1,459.2 1,586.4 1,600.6 2,186.9 1,722.8 1,713.3 1,707.0 2,189.1 PPOP 1,351.0 1,412.2 1,414.3 983.3 1,282.8 1,686.5 1,631.1 1,059.1 1,920.6 1,834.8 1,929.5 1,305.8 Provisions 191.7 102.0 166.1 210.3 243.7 296.1 214.5 289.2 173.4 224.0 248.9 282.0 OP 1,159.2 1,310.2 1,248.2 773.1 1,039.1 1,390.5 1,416.5 769.9 1,747.2 1,610.8 1,680.6 1,023.9 Non-operating income 6.7 48.6 12.0 -24.0 -19.7 -14.3 154.3 25.3 39.3 4.0 4.0 -38.0 Pretax profit 1,165.9 1,358.8 1,260.1 749.1 1,019.4 1,376.2 1,570.9 795.2 1,786.5 1,614.8 1,684.6 985.9 NP (owners of the parent) 845.7 991.2 940.3 534.7 729.5 981.8 1,166.6 577.2 1,270.1 1,168.3 1,218.7 713.0 Source: Company data, Mirae Asset Securities Research estimates
Table 13. KBFG: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 6,415.8 6,203.2 6,402.5 7,852.8 8,904.9 9,196.8 9,722.3 10,754.6 11,107.1 11,396.7 Net non-interest income 1,382.7 1,535.0 1,584.9 2,050.0 2,243.4 2,355.0 2,958.9 3,610.4 3,576.7 3,601.7 Net other income -601.7 -356.2 -542.5 289.3 -288.6 -119.9 -188.6 -42.0 78.5 72.6 Total net operating income 7,196.8 7,381.9 7,444.9 10,192.2 10,859.7 11,431.9 12,492.6 14,323.0 14,762.3 15,071.0 SG&A expenses 4,009.7 4,523.6 5,228.7 5,628.0 5,918.5 6,271.0 6,833.2 7,332.1 7,450.1 7,570.3 PPOP 3,187.1 2,858.4 2,216.2 4,564.2 4,941.2 5,160.8 5,659.5 6,990.8 7,312.3 7,500.6 Provisions 1,228.0 1,037.2 539.3 548.2 673.7 670.2 1,043.5 928.3 1,047.8 1,106.4 OP 1,959.1 1,821.1 1,676.9 4,016.0 4,267.5 4,490.6 4,616.0 6,062.5 6,264.5 6,394.2 Non-operating income -57.7 343.6 951.7 123.2 34.1 43.3 145.6 9.3 1.0 1.0 Pretax profit 1,901.4 2,164.7 2,628.7 4,139.1 4,301.5 4,534.0 4,761.6 6,071.8 6,265.5 6,395.2 NP (owners of the parent) 1,400.7 1,698.3 2,143.7 3,311.9 3,061.2 3,311.8 3,455.2 4,370.2 4,533.0 4,626.5 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 21 July 9, 2021 Banks
KB Financial Group (105560 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 14,486 14,720 15,161 15,556 Cash & dues 25,609 32,345 32,108 31,890 Interest expenses 4,763 3,965 4,054 4,160 Securities 166,107 168,895 170,531 172,302 Net interest income 9,722 10,755 11,107 11,397 Net loans & receivables 377,167 378,927 398,134 417,539 Net fees & commissions 2,959 3,610 3,577 3,602 Tangible assets 7,967 7,858 8,132 8,415 Net other non-interest income -189 -42 78 73 Other assets 33,879 38,977 39,755 40,561 Total net operating income 12,493 14,323 14,762 15,071 Total assets 610,728 627,001 648,660 670,706 G&A expenses 6,833 7,332 7,450 7,570 Deposits 338,580 352,816 369,168 385,539 PPOP 5,659 6,991 7,312 7,501 Borrowings 49,827 52,896 52,679 52,576 Total provisioning expenses 1,043 928 1,048 1,106 Debentures 62,761 65,055 65,645 66,379 OP 4,616 6,062 6,264 6,394 Other liabilities 116,199 109,062 109,454 109,861 Net non-operating income 146 9 1 1 Total liabilities 567,367 579,829 596,945 614,355 Pretax profit 4,762 6,072 6,265 6,395 Capital stock 2,091 2,091 2,091 2,091 Income tax 1,259 1,680 1,723 1,759 Hybrid securities 1,696 2,295 2,295 2,295 NP 3,455 4,370 4,533 4,627 Capital surplus 16,724 16,724 16,724 16,724 NP attributable to owners 3,455 4,370 4,533 4,627 Retained earnings 22,517 26,010 30,552 35,189 Normalized NP 3,455 4,370 4,533 4,627 Capital adj. -1,136 -1,136 -1,136 -1,136 Other comprehensive income 612 294 294 294 Core income 12,681 14,365 14,684 14,998 Minority interests 858 895 895 895 Core PPOP 5,848 7,033 7,234 7,428 Total shareholders' equity 43,361 47,172 51,715 56,351
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 2.57 2.38 2.38 2.36 Growth (YoY) Interest expenses 0.84 0.64 0.64 0.63 Won-denominated loan growth (bank) 9.8 4.8 5.0 4.8 Net interest income 1.72 1.74 1.74 1.73 Net loan & receivables growth 11.0 0.5 5.1 4.9 Net commission income 0.52 0.58 0.56 0.55 Deposit growth 10.8 4.2 4.6 4.4 Net other non-interest income -0.03 -0.01 0.01 0.01 Shareholders' equity growth 10.8 8.8 9.6 9.0 Total net operating income 2.21 2.31 2.31 2.29 Total asset growth 17.8 2.7 3.5 3.4 G&A expenses 1.21 1.19 1.17 1.15 Net interest income growth 5.7 10.6 3.3 2.6 PPOP 1.00 1.13 1.15 1.14 Net commission income growth 25.6 22.0 -0.9 0.7 Total provisioning expenses 0.19 0.15 0.16 0.17 PPOP growth 9.7 23.5 4.6 2.6 Net non-operating income 0.03 0.00 0.00 0.00 OP growth 2.8 31.3 3.3 2.1 Pretax profit 0.84 0.98 0.98 0.97 NP growth 4.3 26.5 3.7 2.1 Income tax 0.22 0.27 0.27 0.27 Profitability NP attributable to minority interests 0.01 0.00 0.00 0.00 NIS (bank) 1.49 1.55 1.56 1.56 ROA 0.61 0.71 0.71 0.70 NIM (bank) 1.51 1.57 1.58 1.58 Leverage (x) 13.9 13.9 13.1 12.4 PPOP margin 1.0 1.1 1.1 1.1 ROE 8.53 9.85 9.34 8.71 ROA 0.6 0.7 0.7 0.7 Asset quality (%) 2020 2021F 2022F 2023F ROE 8.5 9.8 9.3 8.7 NPL ratio 0.41 0.36 0.35 0.33 Liquidity Broad NPL ratio 1.06 0.94 0.91 0.88 Won-denominated LDR ex-CDs (bank) 101.7 101.7 101.7 101.7 NPL coverage ratio 345.9 375.9 381.1 382.7 Loan/assets 61.8 60.4 61.4 62.3 Reserves/total credit 1.4 1.3 1.3 1.3 Capital adequacy Credit costs/total loans 0.28 0.25 0.26 0.27 Total CAR 15.3 16.1 17.1 18.1 Credit costs/total credit 0.29 0.24 0.26 0.26 Tier 1 CAR 14.1 15.7 16.7 17.7 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.2 0.4 0.4 0.4 EPS (reported) 8,301 10,510 10,902 11,127 Operating efficiency EPS (normalized) 8,301 10,510 10,902 11,127 Cost-to-income ratio 54.7 51.2 50.5 50.2 BPS 102,219 111,294 122,219 133,369 Cost-to-asset ratio 1.1 1.2 1.1 1.1 DPS (common) 1,770 3,050 3,300 3,450 Dividends PPOP/share 13,597 16,813 17,586 18,039 Dividend payout ratio 20.0 27.2 28.4 29.1 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 22 [Korea] Banks July 9, 2021
Shinhan Financial Group Buy (055550 KS ) (Maintain)
Capital returns and EPS growth to normalize in 2021 TP: W50,000 ▲ Upside: 27.6%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Valuation and recommendation NIM expansion and profit growth momentum; raise TP to W50,000 ó Shinhan Financial Group (SFG) enjoys earnings stability, supported by its diversified business portfolio and the growth of its global division. ó Given our ROE forecasts, the stock looks undervalued, trading at a 2021F P/B of 0.44x. ó We revise up our 2021-23 net profit forecasts by 3.8-5.1%. ó We raise our target price from W49,000 to W50,000 (based on a target P/B of 0.5 6x and sustainable ROE of 7.9%).
2Q21 preview Net profit attributable to owners of the parent of W1.15tr (+31% YoY), 12% above consensus ó We expect group net interest income of W2.6tr (+8% YoY, +3% QoQ), aided by: 1) bank NIM of 1.41% (+2bps QoQ) thanks to an increase in low-cost deposits and a decrease in high-cost deposits (time deposits); 2) won-denominated loan growth of 1.6% QoQ; and 3) global/non- bank growth. ó We expect group net commission income of W659.9bn (+10% YoY, -3% QoQ). ó We believe cost-to-income ratio rose to 42.7% (+1.2%p YoY, +2.1%p QoQ) due to: 1) branch efficiency/early retirement programs (W46bn); and 2) costs related to the Jul. 1 integration of the life insurance business with Orange Life Insurance. Still, we view this as a healthy level. ó We project credit cost ratio at 26bps (-39bps YoY, +5bps QoQ). ó We estimate private fund-related losses at around W17bn.
Shareholder return policy to Quarterly dividend distributions to begin in 2Q21 normalize ó The FSC’s recommendation on capital management expired as scheduled at the end of June. ó We forecast SFG’s dividend payout ratio to rise to 26.7% in 2021, 28.4% in 2022, and 29.4% in 2023 (vs. 23.9% in 2018, 26.0% in 2019, and 23.5% in 2020). ó We estimate the stock’s 2021-23F dividend yields at 5.4-6.4% (quarterly dividend distributions to begin at W500 per share for 2Q21).
Key data Current price (7/7/21, W) 39,200 Market cap (Wbn) 20,251 160 Shinhan Financial Group KOSPI NP (21F, Wbn) 4,202 Shares outstanding (mn) 534 140 Consensus NP (21F, Wbn) 4,033 Free float (%) 74.9 120 EPS growth (21F, %) 15.5 Foreign ownership (%) 60.6
100 P/E (21F, x) 4.9 Beta (12M) 0.59 Market P/E (21F, x) 11.9 52-week low (W) 27,200 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 43,000
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -8.6 16.1 30.0 Net interest income (Wbn) 8,580 9,720 9,883 10,557 10,951 11,342 Relative -9.5 7.2 -14.4 Net non -interest income (Wbn) 1,399 1,415 1,650 1,972 1,916 1,898
OP (Wbn) 4,499 5,049 4,930 5,997 6,313 6,523 NP (Wbn) 3,157 3,403 3,415 4,202 4,412 4,548 EPS (W) 6,657 7,170 6,906 7,978 8,260 8,515 EPS growth (%) 8.2 7.7 -3.7 15.5 3.5 3.1 P/E (x) 5.9 5.5 5.7 4.9 4.7 4.6 P/PPOP (x) 3.9 3.4 3.2 2.9 2.7 2.6 P/B (x) 0.52 0.48 0.47 0.44 0.40 0.37 ROE (%) 9.2 9.1 8.2 9.2 8.9 8.4 Div. yield (%) 4.1 4.7 3.8 5.4 6.0 6.4 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 14. SFG: 2Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 2,466.6 2,463.4 2,446.1 2,452.7 2,520.5 2,556.4 2,639.0 7.9 3.2 Net fee/commission income 522.2 531.5 598.4 625.2 627.9 681.5 659.9 10.3 -3.2 Net other income -369.3 -256.9 21.8 -125.5 -372.3 -88.6 -99.5 TTR RR Total net operating income 2,619.5 2,738.1 3,066.3 2,952.3 2,776.2 3,149.2 3,199.4 4.3 1.6 SG&A expenses 1,504.3 1,197.9 1,271.3 1,256.2 1,487.1 1,279.0 1,365.4 7.4 6.8 PPOP 1,115.2 1,540.2 1,795.0 1,696.1 1,289.1 1,870.2 1,834.0 2.2 -1.9 Provisions 203.8 282.8 539.3 228.4 340.1 187.8 231.9 -57.0 23.5 OP 911.4 1,257.4 1,255.7 1,467.7 949.0 1,682.4 1,602.1 27.6 -4.8 Non-operating income -152.8 19.2 -24.9 94.0 -264.2 -37.0 15.0 TTB TTB Pretax profit 758.6 1,276.6 1,230.9 1,561.6 684.8 1,645.3 1,617.1 31.4 -1.7 NP (owners of the parent) 507.5 932.4 873.1 1,144.7 464.4 1,191.9 1,145.6 31.2 -3.9
Total assets 552,420 578,240 578,422 591,812 605,328 618,817 592,278 2.4 -4.3 Total loans/receivables 323,245 334,162 338,355 352,758 356,253 368,137 373,215 10.3 1.4 Won-denominated loans (bank) 225,002 231,468 237,212 242,284 248,813 255,079 259,160 9.3 1.6 Total credit 312,243 321,834 329,243 334,412 341,897 349,696 355,282 7.9 1.6 Total deposits 297,874 308,911 310,865 319,150 326,459 336,693 340,742 9.6 1.2 Total shareholders' equity 41,930 41,943 42,934 45,930 46,356 46,742 47,923 11.6 2.5
(%) NIM (bank) 1.46 1.41 1.39 1.36 1.34 1.39 1.41 0.02 0.02 Cost-to-income ratio 57.4 43.7 41.5 42.6 53.6 40.6 42.7 1.2 2.1 NPL (substandard & below) ratio 0.52 0.54 0.56 0.54 0.56 0.56 0.45 -0.12 -0.11 NPL coverage ratio 290.6 280.2 267.8 274.9 272.9 267.8 365.1 97.3 97.3 ROA (based on avg. value) 0.09 0.16 0.15 0.20 0.08 0.19 0.19 0.04 -0.01 ROE (based on avg. value) 1.30 2.35 2.14 2.69 1.06 2.69 2.54 0.40 -0.15 Credit cost ratio 0.07 0.09 0.16 0.07 0.10 0.05 0.07 -0.10 0.01 BIS ratio 13.90 14.06 14.07 15.97 15.74 15.90 16.89 2.82 0.99 Tier 1 ratio 12.34 12.60 12.63 14.59 14.37 14.66 15.66 3.03 1.00 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 15. SFG: Earnings forecast revisions
Revised Previous Chg. (%) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 10,557 10,951 11,342 10,553 10,922 11,307 0.0 0.3 0.3 Net non-interest income 1,972 1,916 1,898 1,958 1,904 1,885 0.7 0.6 0.7 Total net operating income 12,529 12,867 13,241 12,511 12,825 13,192 0.1 0.3 0.4 SG&A expenses 5,492 5,430 5,539 5,451 5,433 5,542 0.7 -0.1 -0.1 PPOP 7,037 7,437 7,702 7,059 7,393 7,650 -0.3 0.6 0.7 Provisions 1,040 1,124 1,179 1,276 1,366 1,432 -18.4 -17.7 -17.7 OP 5,997 6,313 6,523 5,784 6,027 6,218 3.7 4.7 4.9 Non-operating income -85 -59 -60 -85 -59 -60 0.0 0.0 0.0 Pretax profit 5,912 6,254 6,462 5,699 5,968 6,158 3.7 4.8 5.0 NP (owners of the parent) 4,202 4,412 4,548 4,048 4,205 4,327 3.8 4.9 5.1 Source: Mirae Asset Securities Research estimates
Mirae Asset Securities Research 24 July 9, 2021 Banks
Table 16. SFG: TP calculation
Sustainable ROE 7.90% Growth 2.00% Cost of equity 12.50%
Cost of equity 12.50% Rf 2.00% Beta 1.75 Market premium 6.00%
Fair P/B (x) 0.56 2021F BPS (W) 89,024 TP (W) 50,000 Source: Mirae Asset Securities Research estimates
Table 17. SFG: Valuation metrics at TP of W50,000
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.66 0.62 0.61 0.56 0.51 0.47 P/E (x) 7.5 7.0 7.2 6.3 6.1 5.9
ROE (%) 9.2 9.1 8.2 9.2 8.9 8.4 EPS growth (%) 8.2 7.7 -3.7 15.5 3.5 3.1
Dividend yield (%) 3.2 3.7 3.0 4.2 4.7 5.0 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 25 July 9, 2021 Banks
Table 18. SFG: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 2,381.5 2,398.9 2,472.7 2,466.6 2,463.4 2,446.1 2,452.7 2,520.5 2,556.4 2,639.0 2,680.2 2,681.9 Net non-interest income 479.9 609.3 530.3 522.2 531.5 598.4 625.2 627.9 681.5 659.9 653.6 633.1 Net other income -131.8 -87.6 -138.1 -369.3 -256.9 21.8 -125.5 -372.3 -88.6 -99.5 -154.1 -313.9 Total net operating 2,729.5 2,920.5 2,864.9 2,619.5 2,738.1 3,066.3 2,952.3 2,776.2 3,149.2 3,199.4 3,179.7 3,001.2 income SG&A expenses 1,168.4 1,236.3 1,225.6 1,504.3 1,197.9 1,271.3 1,256.2 1,487.1 1,279.0 1,365.4 1,331.6 1,516.1 PPOP 1,561.2 1,684.2 1,639.2 1,115.2 1,540.2 1,795.0 1,696.1 1,289.1 1,870.2 1,834.0 1,848.1 1,485.1 Provisions 250.8 274.9 221.3 203.8 282.8 539.3 228.4 340.1 187.8 231.9 284.5 336.3 OP 1,310.3 1,409.3 1,417.9 911.4 1,257.4 1,255.7 1,467.7 949.0 1,682.4 1,602.1 1,563.6 1,148.7 Non-operating income 12.2 4.8 -1.6 -152.8 19.2 -24.9 94.0 -264.2 -37.0 15.0 10.1 -73.0 Pretax profit 1,322.5 1,414.0 1,416.3 758.6 1,276.6 1,230.9 1,561.6 684.8 1,645.3 1,617.1 1,573.7 1,075.7 NP (owners of the 918.4 996.1 981.6 507.5 932.4 873.1 1,144.7 464.4 1,191.9 1,145.6 1,113.4 751.6 parent ) Source: Company data, Mirae Asset Securities Research estimates
Table 19. SFG: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 6,789.8 6,692.9 7,205.4 7,843.0 8,580.1 9,719.6 9,882.7 10,557.5 10,950.9 11,342.3 Net non-interest income 1,469.2 1,621.0 1,565.5 1,711.0 1,939.0 2,141.7 2,382.9 2,628.0 2,629.1 2,639.8 Net other income -191.3 165.3 11.4 -369.7 -539.5 -726.9 -732.8 -656.1 -713.4 -741.3 Total net operating 8,067.6 8,479.2 8,782.3 9,184.2 9,979.5 11,134.4 11,532.8 12,529.4 12,866.6 13,240.7 income SG&A expenses 4,462.9 4,475.1 4,508.6 4,811.2 4,741.6 5,134.7 5,212.5 5,492.1 5,429.8 5,539.1 PPOP 3,604.8 4,004.2 4,273.8 4,373.0 5,238.0 5,999.7 6,320.3 7,037.3 7,436.7 7,701.7 Provisions 949.9 1,031.0 1,165.1 544.4 738.6 950.8 1,390.6 1,040.5 1,124.1 1,179.0 OP 2,654.8 2,973.1 3,108.6 3,828.6 4,499.4 5,048.9 4,929.7 5,996.8 6,312.6 6,522.7 Non-operating income 212.8 167.4 61.8 -32.4 -32.8 -137.4 -175.9 -85.0 -58.7 -60.3 Pretax profit 2,867.6 3,140.6 3,170.5 3,796.2 4,466.6 4,911.5 4,753.9 5,911.9 6,253.9 6,462.4 NP (owners of the 2,081.1 2,367.2 2,774.8 2,917.9 3,156.7 3,403.5 3,414.6 4,202.5 4,411.7 4,547.6 parent ) Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 26 July 9, 2021 Banks
Shinhan Financial Group (055550 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 14,774 14,357 14,754 15,269 Cash & dues 33,428 31,093 31,453 31,817 Interest expenses 4,892 3,800 3,804 3,927 Securities 172,993 142,792 144,852 146,944 Net interest income 9,883 10,557 10,951 11,342 Net loans & receivables 356,253 374,125 391,086 408,407 Net fees & commissions 2,383 2,628 2,629 2,640 Tangible assets 4,628 4,591 4,624 4,658 Net other non-interest income -733 -656 -713 -741 Other assets 38,027 40,396 40,868 41,349 Total net operating income 11,533 12,529 12,867 13,241 Total assets 605,328 592,996 612,882 633,175 G&A expenses 5,212 5,492 5,430 5,539 Deposits 326,459 339,189 351,808 364,544 PPOP 6,320 7,037 7,437 7,702 Borrowings 41,590 39,811 39,289 38,800 Total provisioning expenses 1,391 1,040 1,124 1,179 Debentures 75,156 76,676 77,076 77,480 OP 4,930 5,997 6,313 6,523 Other liabilities 115,767 87,458 90,263 93,155 Net non-operating income -176 -85 -59 -60 Total liabilities 558,972 543,133 558,436 573,979 Pretax profit 4,754 5,912 6,254 6,462 Capital stock 2,969 2,969 2,969 2,969 Income tax 1,256 1,601 1,720 1,777 Hybrid securities 2,180 2,779 2,779 2,779 NP 3,415 4,202 4,412 4,548 Capital surplus 12,235 12,095 12,095 12,095 NP attributable to owners 3,415 4,202 4,412 4,548 Retained earnings 27,777 31,162 35,622 40,234 Normalized NP 3,415 4,202 4,412 4,548 Capital adj. -688 -665 -665 -665 Other comprehensive income -404 -793 -793 -793 Core income 12,266 13,186 13,580 13,982 Minority interests 2,287 2,317 2,439 2,577 Core PPOP 7,053 7,693 8,150 8,443 Total shareholders' equity 46,356 49,863 54,446 59,195
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 2.55 2.40 2.45 2.45 Growth (YoY) Interest expenses 0.85 0.63 0.63 0.63 Won-denominated loan growth (bank) 10.6 5.9 4.7 4.6 Net interest income 1.71 1.76 1.82 1.82 Net loan & receivables growth 10.2 5.0 4.5 4.4 Net commission income 0.41 0.44 0.44 0.42 Deposit growth 9.6 3.9 3.7 3.6 Net other non-interest income -0.13 -0.11 -0.12 -0.12 Shareholders' equity growth 10.6 7.6 9.2 8.7 Total net operating income 1.99 2.09 2.13 2.13 Total asset growth 9.6 -2.0 3.4 3.3 G&A expenses 0.90 0.92 0.90 0.89 Net interest income growth 1.7 6.8 3.7 3.6 PPOP 1.09 1.18 1.23 1.24 Net commission income growth 11.3 10.3 0.0 0.4 Total provisioning expenses 0.24 0.17 0.19 0.19 PPOP growth 5.3 11.3 5.7 3.6 Net non-operating income -0.03 -0.01 -0.01 -0.01 OP growth -2.4 21.6 5.3 3.3 Pretax profit 0.82 0.99 1.04 1.04 NP growth 0.3 23.1 5.0 3.1 Income tax 0.22 0.27 0.29 0.29 Profitability NP attributable to minority interests 0.01 0.02 0.02 0.02 NIS (bank) 1.63 1.69 1.70 1.70 ROA 0.59 0.70 0.73 0.73 NIM (bank) 1.37 1.40 1.41 1.41 Leverage (x) 13.9 13.1 12.1 11.5 PPOP margin 1.1 1.2 1.2 1.2 ROE 8.20 9.17 8.86 8.37 ROA 0.6 0.7 0.7 0.7 Asset quality (%) 2020 2021F 2022F 2023F ROE 8.2 9.2 8.9 8.4 NPL ratio 0.56 0.40 0.39 0.38 Liquidity Broad NPL ratio 1.21 1.07 1.05 1.04 Won-denominated LDR ex-CDs (bank) 98.2 98.2 98.2 98.2 NPL coverage ratio 272.9 388.9 368.5 355.2 Loan/assets 58.9 63.1 63.8 64.5 Reserves/total credit 1.5 1.5 1.4 1.3 Capital adequacy Credit costs/total loans 0.39 0.28 0.29 0.29 Total CAR 15.7 17.1 17.7 18.3 Credit costs/total credit 0.41 0.29 0.30 0.30 Tier 1 CAR 14.4 15.9 16.7 17.5 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.4 1.2 0.9 0.8 EPS (reported) 6,906 7,978 8,260 8,515 Operating efficiency EPS (normalized) 6,906 7,978 8,260 8,515 Cost-to-income ratio 45.2 43.8 42.2 41.8 BPS 82,623 89,024 97,376 106,011 Cost-to-asset ratio 0.9 0.9 0.9 0.9 DPS (common) 1,500 2,100 2,350 2,500 Dividends PPOP/share 12,783 13,360 13,924 14,420 Dividend payout ratio 23.5 26.7 28.4 29.4 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 27 [Korea] Banks July 9, 2021
Hana Financial Group Buy (086790 KS ) (Maintain)
Share price to eventually converge with earnings and TP: W60,500 ▲ capital returns Upside: 37.5%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Valuation NIM expansion driving profit growth momentum; lift TP to W60,500 (from W57,000) ó HFG looks steeply undervalued, trading at a 2021F P/B of 0.4x vs. our 2021-23 ROE forecasts of 8.8-9.6%. ó We revise up our 2021-23 net profit forecasts by 2.4-3.8%, reflecting stronger-than-anticipated NIM expansion. ó We lift our target price to W60,500 (based on a target P/B of 0.54x and sustainable ROE of 7.7%).
Recommendation A compelling investment case; our top pick alongside KBFG ó HFG has either resolved or visibly improved the major issues that had contributed to its valuation discount in the past (CET1 ratio, asset quality, earnings power, and ROE). ó We believe HFG is closing its fundamental gap with SFG and KBFG. As such, we believe the stock’s valuation gap could also narrow to a certain extent. ó Dividend appeal: HFG has consistently paid out interim dividends. We estimate 2021-23 dividend yields at 6.3-7.7% b ased on interim and final dividends combined. For 2021, we expect interim dividend of W750 per share (vs. W500 for 2020). ó Cost efficiency: We forecast cost-to-income ratio of 45% in 2021, 43% in 2022, and 42% in 2023 (vs. 62% in 2016, 52% in 2018, and 45% in 2020).
2Q21 preview Net profit attributable to owners of the parent of W860.7bn (+25% YoY), 5% above raised consensus ó We expect group net interest income of W1.6tr (+15% YoY, +5% QoQ), aided by: 1) bank NIM of 1.42% (+6bps QoQ) largely due to lower funding costs; 2) won-denominated loan growth of 1.7% QoQ; and 3) the continuation of strong interest income from global operations. ó We expect group net commission income of W575.1bn (+8% YoY, -3% QoQ), helped by: 1) a recovery in bank commission income (which was sluggish in 2020); and 2) continued strength in non-bank segments (securities and credit card). ó We look for credit cost ratio of 24bps (-33bps YoY, +12bp QoQ). Actual delinquencies and new NPL formation likely remained benign.
Key data Current price (7/7/21, W) 44,000 Market cap (Wbn) 13,211 180 Hana Financial Group KOSPI 160 NP (21F, Wbn) 3,087 Shares outstanding (mn) 300
140 Consensus NP (21F, Wbn) 3,066 Free float (%) 86.4
120 EPS growth (21F, %) 17.1 Foreign ownership (%) 68.3 P/E (21F, x) 4.3 Beta (12M) 1.03 100 Market P/E (21F, x) 11.9 52-week low (W) 25,750 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 47,550
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -6.6 19.6 62.4 Net interest income (Wbn) 5,637 5,774 5,814 6,583 6,911 7,186 Relative -7.5 10.3 7.0 Net non -interest income (Wbn) 1,927 2,437 2,828 2,564 2,650 2,686
OP (Wbn) 3,152 3,259 3,836 4,227 4,456 4,666 NP (Wbn) 2,233 2,392 2,637 3,087 3,229 3,383 EPS (W) 7,478 7,966 8,784 10,281 10,756 11,267 EPS growth (%) 8.7 6.5 10.3 17.1 4.6 4.8 P/E (x) 5.9 5.5 5.0 4.3 4.1 3.9 P/PPOP (x) 3.7 3.3 2.8 2.6 2.4 2.3 P/B (x) 0.48 0.47 0.43 0.40 0.36 0.33 ROE (%) 8.6 8.6 9.0 9.6 9.2 8.8 Div. yield (%) 4.3 4.8 4.2 6.3 6.9 7.7 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 20. HFG: 2Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 1,428.3 1,428.0 1,433.2 1,469.8 1,483.3 1,574.1 1,650.4 15.2 4.8 Net fee/commission income 547.9 505.7 531.5 582.4 540.0 590.8 575.1 8.2 -2.6 Net other income 355.8 -33.7 253.2 154.3 294.8 30.0 94.0 -62.9 213.8 Total net operating income 2,332.0 1,900.1 2,217.9 2,206.5 2,318.2 2,194.8 2,319.5 4.6 5.7 SG&A expenses 1,186.1 927.9 848.2 966.2 1,175.3 1,020.4 976.8 15.2 -4.3 PPOP 1,145.9 972.2 1,369.7 1,240.3 1,142.9 1,174.4 1,342.7 -2.0 14.3 Provisions 396.7 93.1 432.2 172.8 190.6 98.6 187.1 -56.7 89.7 OP 749.2 879.1 937.5 1,067.5 952.3 1,075.8 1,155.6 23.3 7.4 Non-operating income -191.9 39.7 23.8 15.9 -186.6 83.0 41.0 71.9 -50.6 Pretax profit 557.3 918.7 961.3 1,083.4 765.7 1,158.8 1,196.6 24.5 3.3 NP (owners of the parent) 350.4 657.0 689.0 758.4 532.8 834.4 860.7 24.9 3.1
Total assets 421,506 439,689 441,913 444,181 460,313 475,511 471,972 6.8 -0.7 Total loans/receivables 282,306 288,541 290,043 293,638 308,792 323,451 317,102 9.3 -2.0 Won-denominated loans (bank) 218,385 222,666 226,772 234,513 239,188 244,177 248,328 9.5 1.7 Total credit 286,480 295,079 301,496 311,066 314,340 322,077 309,297 2.6 -4.0 Total deposits 272,794 283,058 288,851 286,464 295,510 306,931 315,307 9.2 2.7 Total shareholders' equity 28,985 29,079 30,451 31,451 31,600 32,006 32,888 8.0 2.8
(%) NIM (bank) 1.41 1.39 1.37 1.33 1.28 1.36 1.42 0.05 0.06 Cost-to-income ratio 50.9 48.8 38.2 43.8 50.7 46.5 42.1 3.9 -4.4 NPL (substandard & below) ratio 0.48 0.47 0.45 0.41 0.40 0.40 0.34 -0.11 -0.06 NPL coverage ratio 265.0 260.6 280.3 301.0 312.2 310.0 354.4 74.1 44.4 ROA (based on avg. value) 0.08 0.15 0.16 0.17 0.12 0.18 0.18 0.03 0.00 ROE (based on avg. value) 1.24 2.33 2.38 2.52 1.74 2.70 2.73 0.34 0.03 Credit cost ratio 0.14 0.03 0.14 0.06 0.06 0.03 0.06 -0.08 0.03 BIS ratio 13.95 13.80 14.07 14.40 14.20 16.36 16.84 2.77 0.48 Tier 1 ratio 12.67 12.58 12.88 13.18 13.03 15.16 15.70 2.82 0.54 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 21. HFG: Earnings forecast revisions
Revised Previous Chg. (%) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 6,583 6,911 7,186 6,453 6,705 6,968 2.0 3.1 3.1 Net non-interest income 2,564 2,650 2,686 2,564 2,650 2,686 0.0 0.0 0.0 Total net operating income 9,146 9,561 9,872 9,017 9,355 9,654 1.4 2.2 2.3 SG&A expenses 4,118 4,150 4,182 4,068 4,100 4,132 1.2 1.2 1.2 PPOP 5,028 5,411 5,690 4,948 5,255 5,522 1.6 3.0 3.0 Provisions 801 955 1,024 822 958 1,027 -2.6 -0.4 -0.3 OP 4,227 4,456 4,666 4,126 4,297 4,495 2.4 3.7 3.8 Non-operating income 93 78 83 93 78 83 0.0 0.0 0.0 Pretax profit 4,320 4,534 4,749 4,219 4,375 4,578 2.4 3.7 3.7 NP (owners of the parent) 3,087 3,229 3,383 3,014 3,114 3,259 2.4 3.7 3.8 Source: Mirae Asset Securities Research estimates
Mirae Asset Securities Research 29 July 9, 2021 Banks
Table 22. HFG: TP calculation
Sustainable ROE 7.70% Growth 2.00% Cost of equity 12.50%
Cost of equity 12.50% Rf 2.00% Beta 1.75 Market premium 6.00%
Fair P/B (x) 0.54 2021F BPS (W) 111,329 TP (W) 60,500 Source: Mirae Asset Securities Research estimates
Table 23. HFG: Valuation metrics at TP of W60,500
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.67 0.65 0.59 0.54 0.49 0.45 P/E (x) 8.1 7.6 6.9 5.9 5.6 5.4
ROE (%) 8.6 8.6 9.0 9.6 9.2 8.8 EPS growth (%) 8.7 6.5 10.3 17.1 4.6 4.8
Dividend yield (%) 3.1 3.5 3.1 4.5 5.0 5.6 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 30 July 9, 2021 Banks
Table 24. HFG: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 1,426.6 1,460.0 1,458.8 1,428.3 1,428.0 1,433.2 1,469.8 1,483.3 1,574.1 1,650.4 1,681.7 1,676.6 Net non-interest income 509.8 541.0 498.5 547.9 505.7 531.5 582.4 540.0 590.8 575.1 552.2 547.5 Net other income 49.9 9.3 -75.5 355.8 -33.7 253.2 154.3 294.8 30.0 94.0 96.0 78.0 Total net operating income 1,986.4 2,010.2 1,881.7 2,332.0 1,900.1 2,217.9 2,206.5 2,318.2 2,194.8 2,319.5 2,329.9 2,302.1 SG&A expenses 1,072.8 928.9 986.6 1,186.1 927.9 848.2 966.2 1,175.3 1,020.4 976.8 953.6 1,167.6 PPOP 913.6 1,081.4 895.1 1,145.9 972.2 1,369.7 1,240.3 1,142.9 1,174.4 1,342.7 1,376.4 1,134.5 Provisions 164.4 100.6 115.6 396.7 93.1 432.2 172.8 190.6 98.6 187.1 257.2 258.3 OP 749.2 980.7 779.6 749.2 879.1 937.5 1,067.5 952.3 1,075.8 1,155.6 1,119.2 876.2 Non-operating income 12.9 -63.6 392.1 -191.9 39.7 23.8 15.9 -186.6 83.0 41.0 56.0 -87.0 Pretax profit 762.1 917.1 1,171.7 557.3 918.7 961.3 1,083.4 765.7 1,158.8 1,196.6 1,175.2 789.2 NP (owners of the parent) 546.1 658.4 836.7 350.4 657.0 689.0 758.4 532.8 834.4 860.7 838.9 552.9 Source: Company data, Mirae Asset Securities Research estimates
Table 25. HFG: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 4,653.9 4,538.9 4,642.1 5,109.5 5,637.2 5,773.7 5,814.3 6,582.8 6,911.3 7,186.3 Net non-interest income 1,617.8 1,696.4 1,639.9 1,876.6 2,069.0 2,097.1 2,159.8 2,265.6 2,337.9 2,375.1 Net other income 30.8 454.3 330.3 613.7 -141.8 339.5 668.6 298.0 312.0 311.0 Total net operating income 6,302.5 6,689.6 6,612.3 7,599.8 7,564.4 8,210.4 8,642.7 9,146.3 9,561.2 9,872.4 SG&A expenses 3,936.2 4,531.0 4,076.9 4,039.1 3,946.9 4,174.4 3,917.7 4,118.3 4,150.1 4,182.2 PPOP 2,366.3 2,158.6 2,535.4 3,560.7 3,617.6 4,036.0 4,725.0 5,028.0 5,411.1 5,690.2 Provisions 1,122.9 1,148.1 921.3 842.6 465.4 777.3 888.6 801.3 954.7 1,023.8 OP 1,243.4 1,010.5 1,614.1 2,718.1 3,152.2 3,258.7 3,836.4 4,226.8 4,456.4 4,666.4 Non-operating income 9.1 185.9 205.9 80.5 -2.4 149.5 -107.2 93.0 78.0 82.9 Pretax profit 1,252.6 1,196.4 1,820.0 2,798.7 3,149.7 3,408.1 3,729.2 4,319.8 4,534.4 4,749.3 NP (owners of the parent) 937.7 909.7 1,330.5 2,036.8 2,233.3 2,391.6 2,637.2 3,086.9 3,229.4 3,382.8 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 31 July 9, 2021 Banks
Hana Financial Group (086790 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 10,080 9,833 10,227 10,602 Cash & dues 27,530 27,354 28,097 28,592 Interest expenses 4,265 3,250 3,316 3,415 Securities 100,549 102,004 104,400 106,038 Net interest income 5,814 6,583 6,911 7,186 Net loans & receivables 308,792 321,745 336,049 350,629 Net fees & commissions 2,160 2,266 2,338 2,375 Tangible assets 4,204 4,167 4,223 4,280 Net other non-interest income 669 298 312 311 Other assets 19,239 25,143 25,544 25,960 Total net operating income 8,643 9,146 9,561 9,872 Total assets 460,313 480,413 498,313 515,499 G&A expenses 3,918 4,118 4,150 4,182 Deposits 295,510 317,507 327,056 336,565 PPOP 4,725 5,028 5,411 5,690 Borrowings 26,494 27,523 28,215 28,930 Total provisioning expenses 889 801 955 1,024 Debentures 48,762 50,548 51,567 52,619 OP 3,836 4,227 4,456 4,666 Other liabilities 57,947 50,501 53,801 56,215 Net non-operating income -107 93 78 83 Total liabilities 428,713 446,079 460,639 474,328 Pretax profit 3,729 4,320 4,534 4,749 Capital stock 1,501 1,501 1,501 1,501 Income tax 1,044 1,177 1,247 1,306 Hybrid securities 2,008 2,008 2,008 2,008 NP 2,637 3,087 3,229 3,383 Capital surplus 10,580 10,578 10,578 10,578 NP attributable to owners 2,637 3,087 3,229 3,383 Retained earnings 17,942 20,630 23,912 27,349 Normalized NP 2,637 3,087 3,229 3,383 Capital adj. -315 -315 -315 -315 Other comprehensive income -1,002 -976 -976 -976 Core income 7,871 7,974 8,848 9,249 Minority interests 887 908 966 1,027 Core PPOP 3,696 4,056 4,730 5,099 Total shareholders' equity 31,600 34,334 37,673 41,171
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 2.29 2.09 2.09 2.09 Growth (YoY) Interest expenses 0.97 0.69 0.68 0.67 Won-denominated loan growth (bank) 9.5 5.4 4.6 4.5 Net interest income 1.32 1.40 1.41 1.42 Net loan & receivables growth 9.4 4.2 4.4 4.3 Net commission income 0.49 0.48 0.48 0.47 Deposit growth 8.3 7.4 3.0 2.9 Net other non-interest income 0.15 0.06 0.06 0.06 Shareholders' equity growth 9.0 8.7 9.7 9.3 Total net operating income 1.96 1.95 1.95 1.95 Total asset growth 9.2 4.4 3.7 3.4 G&A expenses 0.89 0.88 0.85 0.83 Net interest income growth 0.7 13.2 5.0 4.0 PPOP 1.07 1.07 1.11 1.12 Net commission income growth 3.0 4.9 3.2 1.6 Total provisioning expenses 0.20 0.17 0.20 0.20 PPOP growth 17.1 6.4 7.6 5.2 Net non-operating income -0.02 0.02 0.02 0.02 OP growth 17.7 10.2 5.4 4.7 Pretax profit 0.85 0.92 0.93 0.94 NP growth 10.3 17.1 4.6 4.8 Income tax 0.24 0.25 0.26 0.26 Profitability NP attributable to minority interests 0.01 0.01 0.01 0.01 NIS (bank) 1.31 1.39 1.40 1.40 ROA 0.60 0.66 0.66 0.67 NIM (bank) 1.34 1.41 1.42 1.42 Leverage (x) 15.0 14.7 14.0 13.2 PPOP margin 1.1 1.1 1.1 1.1 ROE 8.96 9.63 9.21 8.80 ROA 0.6 0.7 0.7 0.7 Asset quality (%) 2020 2021F 2022F 2023F ROE 9.0 9.6 9.2 8.8 NPL ratio 0.40 0.35 0.33 0.33 Liquidity Broad NPL ratio 1.22 1.00 0.86 0.78 Won-denominated LDR ex-CDs (bank) 100.2 99.0 99.0 99.0 NPL coverage ratio 312.2 310.8 313.0 315.1 Loan/assets 67.1 67.0 67.4 68.0 Reserves/total credit 1.3 1.1 1.0 1.1 Capital adequacy Credit costs/total loans 0.29 0.25 0.28 0.29 Total CAR 14.2 17.1 17.8 18.5 Credit costs/total credit 0.28 0.26 0.29 0.30 Tier 1 CAR 13.0 16.1 17.0 17.9 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.2 1.1 0.8 0.6 EPS (reported) 8,784 10,281 10,756 11,267 Operating efficiency EPS (normalized) 8,782 10,281 10,756 11,267 Cost-to-income ratio 45.3 45.0 43.4 42.4 BPS 102,296 111,329 122,259 133,706 Cost-to-asset ratio 0.9 0.9 0.8 0.8 DPS (common) 1,850 2,750 3,050 3,400 Dividends PPOP/share 15,737 16,747 18,022 18,952 Dividend payout ratio 20.5 26.0 27.5 29.3 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 32 [Korea] Banks July 9, 2021
Industrial Bank of Korea Buy (024110 KS ) (Maintain)
Lower credit costs to drive earnings surprise TP: W12,500 ▲ Upside: 20.2%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Recommendation and valuation Maintain Buy and raise TP to W12,500 (from W11,500) ó We revise up our 2021-23 net profit forecasts on Industrial Bank of Korea (IBK) by 5.4-6.2%. ó We raise our target price from W11,500 to W12,500 (target P/B of 0.37x). ó In 2020, IBK’s policy financing role (supporting small/self-employed businesses hit hard by COVID-19) resulted in profit erosion. ó In 2021, we forecast earnings and ROE to grow on the back of solid loan growth, NIM stabilization, and a lower credit cost ratio. ó Dividends look appealing, with 2021-23 dividend yields estimated at 6.1-6.7%.
2Q21 preview Net profit attributable to owners of the parent of W555.8bn (+76% YoY), 40% above consensus (around W400bn) ó We expect net interest income of W1.49tr (+5% YoY, +4% QoQ). ó Standout volume growth: We look for won-denominated loan growth of 2.3% QoQ (+5.3% YTD). ó The 13.3% loan asset growth in 2020 likely had positive effects on interest income. ó We expect cost-to-income ratio of 41.3% (+1.0%p YoY, +3.5%p QoQ), which includes profit incentive payouts (typically recognized in the second quarter). ó Despite the credit assessments of audited companies in 2Q21, we estimate credit costs fell to 18bps (-44bps YoY, -3bps QoQ) of total assets, thanks to preemptive provisioning last year.
Profit growth to resume on NIM NIM bottom s out in 1H21; growth to get back on track in 2021 rebound ó We believe NIM continued to recover in 2Q21, gaining 4bps QoQ to 1.51% (vs. +1bp QoQ in 1Q21). ó Despite the lingering effects of ultra-low interest rate loans (due for repricing in 2022), we believe NIM rebounded in 1H21, helped by the expansion of other loans. ó For 2021, we forecast net profit to expand to W1.99tr (+29% YoY) and ROE to rise to 7.6% (vs. 6.4% in 2020).
Key data Current price (7/7/21, W) 10,400 Market cap (Wbn) 7,741 160 Industrial Bank of Korea KOSPI NP (21F, Wbn) 1,987 Shares outstanding (mn) 797 140 Consensus NP (21F, Wbn) 1,793 Free float (%) 36.1 120 EPS growth (21F, %) 16.5 Foreign ownership (%) 12.8
100 P/E (21F, x) 4.1 Beta (12M) 0.56 Market P/E (21F, x) 11.9 52-week low (W) 7,790 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 11,000
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -5.5 17.2 27.8 Net interest income (Wbn) 5,632 5,752 5,615 6,055 6,390 6,669 Relative -6.4 8.2 -15.8 Net non -interest income (Wbn) 626 561 615 522 505 531
OP (Wbn) 2,396 2,228 2,126 2,760 2,823 2,859 NP (Wbn) 1,754 1,619 1,536 1,987 2,028 2,057 EPS (W) 2,666 2,425 2,153 2,509 2,544 2,579 EPS growth (%) 16.8 -9.1 -11.2 16.5 1.4 1.4 P/E (x) 3.9 4.3 4.8 4.1 4.1 4.0 P/PPOP (x) 2.0 2.0 2.0 1.9 1.8 1.7 P/B (x) 0.33 0.31 0.33 0.31 0.28 0.27 ROE (%) 8.6 7.4 6.4 7.6 7.2 6.8 Div. yield (%) 6.6 6.4 4.5 6.1 6.4 6.7 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 26. IBK: 2Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 1,428.1 1,403.1 1,422.9 1,376.8 1,412.3 1,443.4 1,495.5 5.1 3.6 Net fee/commission income 162.7 115.6 138.3 161.1 148.9 154.4 156.8 13.4 1.5 Net other income -5.1 -16.0 45.1 6.9 14.7 -27.0 -23.3 TTR RR Total net operating income 1,585.7 1,502.7 1,606.3 1,544.8 1,575.9 1,570.8 1,628.9 1.4 3.7 SG&A expenses 615.1 573.4 647.2 585.0 624.4 593.4 673.1 4.0 13.4 PPOP 970.6 929.3 959.1 959.8 951.5 977.3 955.8 -0.3 -2.2 Provisions 573.7 268.0 532.4 475.6 398.2 197.0 170.8 -67.9 -13.3 OP 396.9 661.3 426.7 484.2 553.3 780.3 785.0 84.0 0.6 Non-operating income -24.7 11.9 -7.0 27.3 -70.8 27.0 -13.0 RR TTR Pretax profit 372.3 673.3 419.7 511.5 482.5 807.3 772.0 84.0 -4.4 NP (owners of the parent) 258.0 500.0 316.6 361.2 357.9 589.1 555.8 75.5 -5.7
Total assets 318,111 326,886 344,206 353,168 361,616 370,177 377,826 9.8 2.1 Total loans/receivables 239,321 238,579 244,641 258,409 268,688 267,612 272,567 11.4 1.9 Won-denominated loans (bank) 206,310 210,751 222,064 229,075 233,766 240,466 246,069 10.8 2.3 Total credit 219,994 224,971 235,659 243,184 246,566 245,582 251,304 6.6 2.3 Total deposits 117,991 120,194 129,712 132,083 140,942 140,473 143,043 10.3 1.8 Total shareholders' equity 22,777 23,066 24,179 25,066 25,142 25,773 26,382 9.1 2.4
(%) NIM (bank) 1.74 1.69 1.60 1.48 1.46 1.47 1.51 -0.09 0.04 Cost-to-income ratio 38.8 38.2 40.3 37.9 39.6 37.8 41.3 1.0 3.5 NPL (substandard & below) ratio 1.28 1.29 1.18 1.11 1.08 1.08 1.04 -0.13 -0.04 NPL coverage ratio 170.1 168.1 177.8 187.5 190.9 197.8 197.8 20.0 0.0 ROA (based on avg. value) 0.08 0.16 0.09 0.10 0.10 0.16 0.15 0.05 -0.01 ROE (based on avg. value) 1.14 2.19 1.35 1.47 1.43 2.33 2.14 0.79 -0.18 Credit cost ratio 0.18 0.08 0.15 0.13 0.11 0.05 0.05 -0.11 -0.01 BIS ratio 14.47 14.26 14.45 14.47 14.82 14.75 15.02 0.57 0.28 Tier 1 ratio 11.97 12.03 12.31 12.44 12.82 12.99 13.09 0.78 0.10 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 27. IBK: Earnings forecast revisions
Revised Previous Chg. (%) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 6,055 6,390 6,669 6,164 6,588 6,870 -1.8 -3.0 -2.9 Net non-interest income 522 505 531 555 477 503 -5.9 5.8 5.6 Total net operating income 6,577 6,895 7,200 6,719 7,065 7,373 -2.1 -2.4 -2.3 SG&A expenses 2,512 2,600 2,691 2,505 2,592 2,683 0.3 0.3 0.3 PPOP 4,065 4,295 4,509 4,215 4,473 4,690 -3.6 -4.0 -3.9 Provisions 1,305 1,472 1,650 1,609 1,794 1,994 -18.9 -18.0 -17.2 OP 2,760 2,823 2,859 2,606 2,679 2,697 5.9 5.4 6.0 Non-operating income -8 -5 -2 1 -5 -5 N/A N/A N/A Pretax profit 2,752 2,818 2,857 2,607 2,674 2,692 5.6 5.4 6.1 NP (owners of the parent) 1,987 2,028 2,057 1,882 1,924 1,937 5.6 5.4 6.2 Source: Mirae Asset Securities Research estimates
Mirae Asset Securities Research 34 July 9, 2021 Banks
Table 28. IBK: TP calculation
Sustainable ROE 6.40% Growth 2.00% Cost of equity 13.88%
Cost of equity 13.88% Rf 2.00% Beta 1.98 Market premium 6.00%
Fair P/B (x) 0.37 2021F BPS (W) 34,001 TP (W) 12,500 Source: Mirae Asset Securities Research estimates
Table 29. IBK: Valuation metrics at TP of W12,500
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.39 0.37 0.40 0.37 0.34 0.32 P/E (x) 4.7 5.2 5.8 5.0 4.9 4.8
ROE (%) 8.6 7.4 6.4 7.6 7.2 6.8 EPS growth (%) 16.8 -9.1 -11.2 16.5 1.4 1.4
Dividend yield (%) 5.5 5.4 3.8 5.0 5.4 5.6 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 35 July 9, 2021 Banks
Table 30. IBK: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 1,406.6 1,470.5 1,446.8 1,428.1 1,403.1 1,422.9 1,376.8 1,412.3 1,443.4 1,495.5 1,544.7 1,571.5 Net non-interest income 110.5 128.2 112.9 162.7 115.6 138.3 161.1 148.9 154.4 156.8 158.3 143.0 Net other income 91.2 0.2 -39.3 -5.1 -16.0 45.1 6.9 14.7 -27.0 -23.3 12.0 -52.0 Total net operating income 1,608.3 1,598.9 1,520.3 1,585.7 1,502.7 1,606.3 1,544.8 1,575.9 1,570.8 1,628.9 1,715.0 1,662.5 SG&A expenses 580.3 653.7 560.4 615.1 573.4 647.2 585.0 624.4 593.4 673.1 601.3 644.4 PPOP 1,028.0 945.2 959.9 970.6 929.3 959.1 959.8 951.5 977.3 955.8 1,113.7 1,018.1 Provisions 283.6 368.4 450.2 573.7 268.0 532.4 475.6 398.2 197.0 170.8 468.1 469.3 OP 744.4 576.8 509.7 396.9 661.3 426.7 484.2 553.3 780.3 785.0 645.5 548.8 Non-operating income 13.3 14.9 8.9 -24.7 11.9 -7.0 27.3 -70.8 27.0 -13.0 17.0 -39.0 Pretax profit 757.7 591.7 518.6 372.3 673.3 419.7 511.5 482.5 807.3 772.0 662.5 509.8 NP (owners of the parent) 553.4 427.0 380.7 258.0 500.0 316.6 361.2 357.9 589.1 555.8 475.0 367.2 Source: Company data, Mirae Asset Securities Research estimates
Table 31. IBK: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 4,511.0 4,630.9 4,876.2 5,260.0 5,632.3 5,752.0 5,615.1 6,055.0 6,390.3 6,669.0 Net non-interest income 345.9 405.6 375.4 407.2 451.2 514.2 563.8 612.5 595.1 608.4 Net other income -299.2 -277.1 -311.1 -67.7 175.2 47.1 50.7 -90.3 -90.3 -77.0 Total net operating income 4,557.7 4,759.5 4,940.6 5,599.5 6,258.6 6,313.3 6,229.7 6,577.2 6,895.2 7,200.4 SG&A expenses 2,005.5 2,096.7 2,154.6 2,188.5 2,298.7 2,409.5 2,430.0 2,512.3 2,600.2 2,691.3 PPOP 2,552.2 2,662.8 2,786.0 3,411.0 3,959.9 3,903.8 3,799.7 4,064.9 4,294.9 4,509.1 Provisions 1,163.9 1,163.1 1,253.4 1,382.7 1,563.5 1,675.9 1,674.2 1,305.2 1,471.9 1,650.3 OP 1,388.3 1,499.7 1,532.6 2,028.3 2,396.4 2,227.9 2,125.5 2,759.7 2,823.1 2,858.8 Non-operating income -45.0 -30.2 -15.4 -74.7 3.0 12.3 -38.6 -8.0 -5.0 -2.0 Pretax profit 1,343.3 1,469.5 1,517.2 1,953.6 2,399.5 2,240.2 2,086.9 2,751.7 2,818.1 2,856.8 NP (owners of the parent) 1,026.6 1,143.0 1,157.5 1,501.4 1,754.2 1,619.1 1,535.7 1,987.0 2,028.5 2,056.6 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 36 July 9, 2021 Banks
Industrial Bank of Korea (024110 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 8,654 8,390 8,767 9,217 Cash & dues 12,838 20,937 20,937 21,414 Interest expenses 3,039 2,335 2,377 2,548 Securities 68,685 72,664 72,666 74,320 Net interest income 5,615 6,055 6,390 6,669 Net loans & receivables 268,688 278,029 295,066 313,057 Net fees & commissions 564 613 595 608 Tangible assets 2,175 2,203 2,232 2,261 Net other non-interest income 51 -90 -90 -77 Other assets 9,230 12,275 12,436 12,599 Total net operating income 6,230 6,577 6,895 7,200 Total assets 361,616 386,108 403,337 423,651 G&A expenses 2,430 2,512 2,600 2,691 Deposits 140,942 144,613 150,464 156,552 PPOP 3,800 4,065 4,295 4,509 Borrowings 38,132 41,611 45,661 50,106 Total provisioning expenses 1,674 1,305 1,472 1,650 Debentures 131,215 137,913 151,338 166,071 OP 2,126 2,760 2,823 2,859 Other liabilities 26,185 34,740 26,598 19,575 Net non-operating income -39 -8 -5 -2 Total liabilities 336,474 358,876 374,062 392,304 Pretax profit 2,087 2,752 2,818 2,857 Capital stock 4,183 4,211 4,211 4,211 Income tax 539 750 775 786 Hybrid securities 3,060 3,559 3,559 3,559 NP 1,536 1,987 2,028 2,057 Capital surplus 1,145 1,170 1,170 1,170 NP attributable to owners 1,536 1,987 2,028 2,057 Retained earnings 16,159 17,757 19,800 21,871 Normalized NP 1,536 1,987 2,028 2,057 Capital adj. 0 0 0 0 Other comprehensive income 472 416 416 416 Core income 6,179 6,668 6,985 7,277 Minority interests 124 119 119 119 Core PPOP 3,749 4,155 4,385 4,586 Total shareholders' equity 25,142 27,232 29,275 31,346
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 2.55 2.24 2.22 2.23 Growth (YoY) Interest expenses 0.89 0.63 0.60 0.62 Won-denominated loan growth (bank) 13.3 7.5 6.1 6.1 Net interest income 1.65 1.62 1.62 1.61 Net loan & receivables growth 12.3 3.5 6.1 6.1 Net commission income 0.17 0.16 0.15 0.15 Deposit growth 19.5 2.6 4.0 4.0 Net other non-interest income 0.02 -0.02 -0.02 -0.02 Shareholders' equity growth 10.4 8.3 7.5 7.1 Total net operating income 1.83 1.76 1.75 1.74 Total asset growth 13.7 6.8 4.5 5.0 G&A expenses 0.72 0.67 0.66 0.65 Net interest income growth -2.4 7.8 5.5 4.4 PPOP 1.12 1.09 1.09 1.09 Net commission income growth 9.6 8.6 -2.8 2.2 Total provisioning expenses 0.49 0.35 0.37 0.40 PPOP growth -2.7 7.0 5.7 5.0 Net non-operating income -0.01 0.00 0.00 0.00 OP growth -4.6 29.8 2.3 1.3 Pretax profit 0.61 0.74 0.71 0.69 NP growth -5.2 29.4 2.1 1.4 Income tax 0.16 0.20 0.20 0.19 Profitability NP attributable to minority interests 0.00 0.00 0.00 0.00 NIS (bank) 1.55 1.48 1.50 1.50 ROA 0.45 0.53 0.51 0.50 NIM (bank) 1.55 1.51 1.53 1.54 Leverage (x) 14.3 14.3 14.0 13.7 PPOP margin 1.1 1.1 1.1 1.1 ROE 6.44 7.62 7.21 6.81 ROA 0.5 0.5 0.5 0.5 Asset quality (%) 2020 2021F 2022F 2023F ROE 6.4 7.6 7.2 6.8 NPL ratio 1.09 0.98 0.97 0.96 Liquidity Broad NPL ratio 2.49 2.28 2.22 2.16 Won-denominated LDR ex-CDs (bank) 0.0 0.0 0.0 0.0 NPL coverage ratio 190.9 201.7 204.6 207.5 Loan/assets 74.3 72.0 73.2 73.9 Reserves/total credit 2.0 2.1 2.0 2.1 Capital adequacy Credit costs/total loans 0.62 0.47 0.50 0.53 Total CAR 14.3 14.7 15.7 16.0 Credit costs/total credit 0.68 0.51 0.54 0.57 Tier 1 CAR 12.0 13.0 13.8 14.2 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 2.2 1.8 1.9 1.8 EPS (reported) 2,153 2,509 2,544 2,579 Operating efficiency EPS (normalized) 2,153 2,509 2,544 2,579 Cost-to-income ratio 39.0 38.2 37.7 37.4 BPS 31,597 34,001 36,563 39,160 Cost-to-asset ratio 0.7 0.7 0.6 0.6 DPS (common) 471 630 670 700 Dividends PPOP/share 5,328 5,132 5,386 5,655 Dividend payout ratio 24.3 25.3 26.3 27.1 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 37 [Korea] Banks July 9, 2021
BNK Financial Group Buy (138930 KS ) (Upgrade)
Solid 2Q21 earnings expected TP: W9,100 ▲ Upside: 20.8%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Investment points and valuation Upgrade to Buy and lift TP to W9,100 ó We revise up our 2021-23 net profit estimates for BNK Financial Group (BNKFG) by 5.5-12.3% , in light of faster-than-expected net interest income growth. ó We lift our target price to W9,100 (from W8,200), based on a target P/B of 0.33x. ó Accordingly, we upgrade our rating on BNKFG to Buy from Trading Buy. ó For 2021, we forecast net profit to grow 31% YoY and ROE to improve to 7.6% (from 6.1% in 2020) on the back of robust loan growth and NIM expansion.
2Q21 preview Net profit attributable to owners of the parent of W203.2bn (+17% YoY) ó For 2Q21, we expect net profit to come in 4-10% above consensus estimates (which have been steadily raised). ó Group net interest income likely amounted to W613bn (+14% YoY, +4% QoQ). ó We estimate NIM increased 6bps to 1.97% at BNK Busan Bank and 1bp to 1.85% at BNK Kyongnam Bank, with loans likely growing 4.4% QoQ (+9.2% YTD) at BNK Busan Bank and 1.9% QoQ (+6.2% YTD) at BNK Kyongnam Bank. We believe non-banking subsidiaries also recorded healthy interest income. ó We believe group fee/commission income was supported by continued strength in PF fees (banking) and securities operations. ó We believe cost-to-income ratio was efficiently managed at 49.3% (-2.3%p YoY, +1.3%p QoQ). ó We estimate credit cost ratio at 40bps (-7bps YoY, -8bps QoQ).
Dividend Dividend payout ratio to be raised ó If the group’s internal ratings-based approach is approved by regulators within 2021, we estimate this will provide a roughly 2%p lift to the CET1 ratio. ó We forecast dividend payout ratio to rise to 22% in 2021, 24.1% in 2022, and 26.1% in 2023 (vs. 14.8% in 2016, 19.5% in 2018, and 20% in 2020). ó Dividend yields look attractive, estimated at 6.1% for 2021, 6.9% for 2022, and 7.6% for 2023. Key data Current price (7/7/21, W) 7,530 Market cap (Wbn) 2,454 180 BNK Financial Group KOSPI 160 NP (21F, Wbn) 679 Shares outstanding (mn) 326
140 Consensus NP (21F, Wbn) 636 Free float (%) 81.7
120 EPS growth (21F, %) 30.7 Foreign ownership (%) 38.2 P/E (21F, x) 3.6 Beta (12M) 0.35 100 Market P/E (21F, x) 11.9 52-week low (W) 4,935 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 8,290
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -5.9 30.3 48.8 Net interest income (Wbn) 2,344 2,187 2,185 2,470 2,626 2,741 Relative -6.8 20.2 -2.0 Net non -interest income (Wbn) 173 325 454 416 379 390
OP (Wbn) 750 807 748 953 989 1,009 NP (Wbn) 502 562 519 679 701 708 EPS (W) 1,540 1,725 1,593 2,082 2,151 2,173 EPS growth (%) 24.6 12.0 -7.6 30.7 3.3 1.0 P/E (x) 4.9 4.4 4.7 3.6 3.5 3.5 P/PPOP (x) 2.0 2.0 2.0 1.7 1.6 1.5 P/B (x) 0.32 0.30 0.28 0.27 0.26 0.24 ROE (%) 6.8 7.1 6.1 7.6 7.5 7.2 Div. yield (%) 4.0 4.8 4.2 6.1 6.9 7.6 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 32. BNKFG: 2Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 528.6 536.5 537.6 545.8 564.6 589.0 613.0 14.0 4.1 Net fee/commission income 49.9 68.6 128.0 86.1 81.0 109.5 103.0 -19.6 -6.0 Net other income -22.2 11.6 24.4 19.0 35.3 22.8 13.8 -43.5 -39.4 Total net operating income 556.4 616.7 690.0 650.9 680.9 721.3 729.8 5.8 1.2 SG&A expenses 336.2 327.5 355.8 318.0 435.4 346.5 359.8 1.1 3.8 PPOP 220.2 289.2 334.3 332.9 245.5 374.8 369.9 10.7 -1.3 Provisions 152.1 83.2 98.9 141.5 130.0 112.1 95.8 -3.1 -14.5 OP 68.1 206.0 235.4 191.4 115.5 262.7 274.1 16.5 4.3 Non-operating income -12.3 -11.0 8.0 -0.4 -10.4 4.1 4.0 -50.1 -2.1 Pretax profit 55.8 195.0 243.4 191.0 105.1 266.8 278.1 14.3 4.2 NP (owners of the parent) 33.0 137.7 173.2 136.5 71.9 192.7 203.2 17.3 5.4
Total assets 104,539 106,206 111,512 110,988 114,157 119,769 121,051 8.6 1.1 Total loans/receivables 80,657 82,445 85,808 85,947 87,701 91,973 92,641 8.0 0.7 Won-denominated loans (bank) 71,562 71,722 73,247 75,253 77,397 80,832 83,546 14.1 3.4 Total credit 81,127 82,053 83,624 86,053 88,378 92,617 94,868 13.4 2.4 Total deposits 76,610 76,036 77,902 80,140 83,033 86,322 86,827 11.5 0.6 Total shareholders' equity 9,181 9,337 9,505 9,583 9,626 9,694 9,686 1.9 -0.1
(%) NIM (bank) 1.98 1.94 1.88 1.84 1.87 1.91 1.97 0.09 0.06 Cost-to-income ratio 60.4 53.1 51.6 48.9 63.9 48.0 49.3 -2.3 1.3 NPL (substandard & below) ratio 1.04 1.08 1.05 0.94 0.70 0.73 0.74 -0.31 0.00 NPL coverage ratio 163.6 159.0 163.3 158.5 198.9 194.8 195.6 32.3 0.8 ROA (based on avg. value) 0.13 0.52 0.64 0.49 0.26 0.66 0.67 0.04 0.02 ROE (based on avg. value) 1.60 6.59 8.13 6.32 3.30 8.80 9.24 1.11 0.44 Credit cost ratio 0.19 0.10 0.12 0.16 0.15 0.12 0.10 -0.02 -0.02 BIS ratio 12.95 12.98 12.75 13.45 12.93 12.42 12.73 -0.02 0.31 Tier 1 ratio 11.13 11.24 11.09 11.87 11.38 10.94 10.82 -0.27 -0.13 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 33. BNKFG: Earnings forecast revisions
Revised Previous Chg. (%) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 2,470.5 2,626.4 2,741.0 2,446.6 2,581.2 2,686.8 1.0 1.7 2.0 Net non-interest income 416.3 378.8 389.6 383.3 375.5 386.4 8.6 0.9 0.8 Total net operating income 2,886.8 3,005.2 3,130.6 2,830.0 2,956.7 3,073.2 2.0 1.6 1.9 SG&A expenses 1,453.3 1,479.0 1,517.7 1,437.7 1,464.6 1,502.5 1.1 1.0 1.0 PPOP 1,433.5 1,526.2 1,613.0 1,392.2 1,492.1 1,570.7 3.0 2.3 2.7 Provisions 480.3 537.5 603.6 509.3 547.9 585.3 -5.7 -1.9 3.1 OP 953.2 988.7 1,009.4 882.9 944.2 985.4 8.0 4.7 2.4 Non-operating income -6.9 -6.6 -4.6 -3.9 -2.6 0.4 N/A N/A N/A Pretax profit 946.3 982.0 1,004.8 879.0 941.6 985.8 7.7 4.3 1.9 NP (owners of the parent) 678.5 701.1 708.3 604.1 639.4 671.5 12.3 9.7 5.5 Source: Mirae Asset Securities Research estimates
Mirae Asset Securities Research 39 July 9, 2021 Banks
Table 34. BNKFG: TP calculation
Sustainable ROE 6.60% Growth 3.00% Cost of equity 14.00%
Cost of equity 14.00% Rf 2.00% Beta 2.00 Market premium 6.00%
Fair P/B (x) 0.33 2021F BPS (W) 27,796 TP (W) 9,100 Source: Mirae Asset Securities Research estimates
Table 35. BNKFG: Valuation metrics at TP of W9,100
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.39 0.36 0.34 0.33 0.31 0.29 P/E (x) 5.9 5.3 5.7 4.4 4.2 4.2
ROE (%) 6.8 7.1 6.1 7.6 7.5 7.2 EPS growth (%) 24.6 12.0 -7.6 30.7 3.3 1.0
Dividend yield (%) 3.3 4.0 3.5 5.1 5.7 6.3 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 40 July 9, 2021 Banks
Table 36. BNKFG: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 557.9 552.4 547.9 528.6 536.5 537.6 545.8 564.6 589.0 613.0 630.5 637.9 Net non-interest income 53.9 71.0 71.6 49.9 68.6 128.0 86.1 81.0 109.5 103.0 75.7 70.3 Net other income 36.9 36.0 28.3 -22.2 11.6 24.4 19.0 35.3 22.8 13.8 18.8 2.5 Total net operating income 648.7 659.5 647.7 556.4 616.7 690.0 650.9 680.9 721.3 729.8 725.0 710.7 SG&A expenses 308.1 319.8 309.3 336.2 327.5 355.8 318.0 435.4 346.5 359.8 304.4 442.5 PPOP 340.6 339.7 338.4 220.2 289.2 334.3 332.9 245.5 374.8 369.9 420.5 268.2 Provisions 92.8 92.8 94.3 152.1 83.2 98.9 141.5 130.0 112.1 95.8 142.0 130.3 OP 247.8 246.9 244.1 68.1 206.0 235.4 191.4 115.5 262.7 274.1 278.5 137.9 Non-operating income 0.8 -1.7 -0.2 -12.3 -11.0 8.0 -0.4 -10.4 4.1 4.0 2.0 -17.0 Pretax profit 248.5 245.2 243.9 55.8 195.0 243.4 191.0 105.1 266.8 278.1 280.5 120.9 NP (owners of the parent) 177.1 174.1 178.0 33.0 137.7 173.2 136.5 71.9 192.7 203.2 201.8 80.8 Source: Company data, Mirae Asset Securities Research estimates
Table 37. BNKFG: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 1,427.2 2,034.0 2,140.4 2,280.6 2,343.5 2,186.8 2,184.5 2,470.5 2,626.4 2,741.0 Net non-interest income 114.2 204.5 168.1 159.7 203.9 246.4 363.7 358.5 343.6 349.4 Net other income 430.7 -42.3 -96.1 -164.7 -30.7 79.0 90.2 57.8 35.2 40.2 Total net operating income 1,972.1 2,196.2 2,212.3 2,275.6 2,516.8 2,512.2 2,638.5 2,886.8 3,005.2 3,130.6 SG&A expenses 751.5 1,103.6 1,122.2 1,137.7 1,264.7 1,273.4 1,436.7 1,453.3 1,479.0 1,517.7 PPOP 1,220.6 1,092.6 1,090.2 1,137.9 1,252.0 1,238.9 1,201.8 1,433.5 1,526.2 1,613.0 Provisions 279.5 396.4 377.9 543.6 502.2 432.0 453.6 480.3 537.5 603.6 OP 941.1 696.2 712.3 594.3 749.8 806.9 748.2 953.2 988.7 1,009.4 Non-operating income -22.1 3.9 -23.9 -36.6 -31.2 -13.5 -13.8 -6.9 -6.6 -4.6 Pretax profit 919.1 700.1 688.4 557.7 718.6 793.4 734.4 946.3 982.0 1,004.8 NP (owners of the parent) 809.8 485.5 501.6 403.1 502.1 562.2 519.3 678.5 701.1 708.3 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 41 July 9, 2021 Banks
BNK Financial Group (138930 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 3,304 3,385 3,572 3,724 Cash & dues 4,505 5,186 5,347 5,513 Interest expenses 1,119 915 946 983 Securities 18,554 20,340 20,917 21,510 Net interest income 2,185 2,470 2,626 2,741 Net loans & receivables 87,701 94,930 99,788 104,485 Net fees & commissions 364 359 344 349 Tangible assets 1,838 1,733 1,800 1,870 Net other non-interest income 90 58 35 40 Other assets 1,559 1,631 1,670 1,711 Total net operating income 2,639 2,887 3,005 3,131 Total assets 114,157 123,819 129,522 135,090 G&A expenses 1,437 1,453 1,479 1,518 Deposits 83,033 88,800 92,883 97,036 PPOP 1,202 1,434 1,526 1,613 Borrowings 6,836 7,990 8,249 8,518 Total provisioning expenses 454 480 538 604 Debentures 11,248 12,228 12,677 13,144 OP 748 953 989 1,009 Other liabilities 3,239 4,666 5,062 5,061 Net non-operating income -14 -7 -7 -5 Total liabilities 104,531 113,862 119,055 123,950 Pretax profit 734 946 982 1,005 Capital stock 1,630 1,630 1,630 1,630 Income tax 172 225 238 253 Hybrid securities 827 827 827 827 NP 519 679 701 708 Capital surplus 779 780 780 780 NP attributable to owners 519 679 701 708 Retained earnings 5,561 5,904 6,414 7,087 Normalized NP 519 679 701 708 Capital adj. 0 0 0 0 Other comprehensive income -69 -81 -81 -81 Core income 2,548 2,829 2,970 3,090 Minority interests 897 897 897 897 Core PPOP 1,112 1,376 1,491 1,573 Total shareholders' equity 9,626 9,957 10,467 11,140
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 3.02 2.85 2.82 2.82 Growth (YoY) Interest expenses 1.02 0.77 0.75 0.74 Won-denominated loan growth (bank) 8.2 10.6 5.2 4.7 Net interest income 2.00 2.08 2.07 2.07 Net loan & receivables growth 8.7 8.2 5.1 4.7 Net commission income 0.33 0.30 0.27 0.26 Deposit growth 8.4 6.9 4.6 4.5 Net other non-interest income 0.08 0.05 0.03 0.03 Shareholders' equity growth 4.8 3.4 5.1 6.4 Total net operating income 2.41 2.43 2.37 2.37 Total asset growth 9.2 8.5 4.6 4.3 G&A expenses 1.31 1.22 1.17 1.15 Net interest income growth -0.1 13.1 6.3 4.4 PPOP 1.10 1.21 1.21 1.22 Net commission income growth 47.6 -1.4 -4.2 1.7 Total provisioning expenses 0.42 0.40 0.42 0.46 PPOP growth -3.0 19.3 6.5 5.7 Net non-operating income -0.01 -0.01 -0.01 0.00 OP growth -7.3 27.4 3.7 2.1 Pretax profit 0.67 0.80 0.78 0.76 NP growth -7.6 30.7 3.3 1.0 Income tax 0.16 0.19 0.19 0.19 Profitability NP attributable to minority interests 0.04 0.04 0.03 0.03 NIS (bank) 2.13 2.19 2.20 2.20 ROA 0.48 0.57 0.55 0.54 NIM (bank) 1.88 1.96 1.97 1.97 Leverage (x) 12.9 13.4 13.6 13.4 PPOP margin 1.1 1.2 1.2 1.2 ROE 6.11 7.63 7.53 7.15 ROA 0.5 0.6 0.6 0.5 Asset quality (%) 2020 2021F 2022F 2023F ROE 6.1 7.6 7.5 7.2 NPL ratio 0.70 0.73 0.72 0.72 Liquidity Broad NPL ratio 1.87 1.73 1.66 1.59 Won-denominated LDR ex-CDs (bank) 98.2 97.6 97.6 97.6 NPL coverage ratio 198.9 201.0 208.1 215.2 Loan/assets 76.8 76.7 77.0 77.3 Reserves/total credit 1.4 1.5 1.5 1.5 Capital adequacy Credit costs/total loans 0.59 0.56 0.60 0.64 Total CAR 12.9 13.3 13.2 13.4 Credit costs/total credit 0.51 0.49 0.53 0.57 Tier 1 CAR 11.4 11.0 11.2 11.4 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.6 2.2 2.1 1.9 EPS (reported) 1,593 2,082 2,151 2,173 Operating efficiency EPS (normalized) 1,593 2,082 2,151 2,173 Cost-to-income ratio 54.5 50.3 49.2 48.5 BPS 26,781 27,796 29,360 31,426 Cost-to-asset ratio 1.3 1.2 1.1 1.1 DPS (common) 320 460 520 570 Dividends PPOP/share 3,687 4,398 4,682 4,949 Dividend payout ratio 20.0 22.0 24.1 26.1 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 42 [Korea] Banks July 9, 2021
DGB Financial Group Buy (139130 KS ) (Maintain)
Another record earnings delivery likely TP: W11,500 ▲ Upside: 27.8%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Valuation and recommendation Raise TP to W 11 ,500 ó We revise up our 2021-23 net profit estimates for DGB Financial Group (DGBFG) by 7.8-9.4% to reflect loan growth and a stronger-than-expected NIM. ó Accordingly, we raise our target price from W10,500 to W11,500 (target P/B of 0.39x). ó We continue to see solid loan growth, NIM gains, and robust earnings from non-banking subsidiaries (auto finance/lease, etc.). ó For the full year, we look for net profit growth of 27% YoY and ROE of 8.7% (vs. 7.3% in 2020). ó Dividend yields look attractive, estimated at 6.1% for 2021, 7.1% for 2022, and 7.4% for 2023.
2Q21 preview Net profit attributable to owners of the parent of W123 .5bn ( +27%) ó DGBFG’s 2Q21 net profit likely came in 6-9% above consensus estimates. ó Group net interest income likely increased 10% YoY (+4% QoQ) to W390.4bn. ó At the bank level, we estimate NIM gained 2bps QoQ thanks to lower deposit rates, with loans likely growing 3% QoQ (+7.0% YTD). ó Expenses related to early retirement packages, which are typically concentrated in 4Q, will be distributed more evenly this year (2Q and 3Q); cost-to-income ratio likely reached 54.8% (+1.8%p YoY, +2.3%p QoQ). ó We believe that W8bn in credit costs (related to an overseas property purchase) were written back. ó We estimate credit cost ratio at 30bps (-37bps YoY, -1bp QoQ).
Diversification effects Loan portfolio /geographical diversification policy ó Loan portfolio asset/geographical diversification policy: The group is seeking to increase its mix of household loans—mainly high-quality secured loans—to over 35% (33% in 1Q21, up from 25% in 2018). ó Diversified business portfolio: The net profit contribution of non-bank subsidiaries has been increasing following the Hi Investment & Securities acquisition in Oct. 2018.
Key data Current price (7/7/21, W) 9,000 Market cap (Wbn) 1,522 200 DGB Financial Group KOSPI 180 NP (21F, Wbn) 422 Shares outstanding (mn) 169 160 Consensus NP (21F, Wbn) 396 Free float (%) 83.6 140 EPS growth (21F, %) 27.0 Foreign ownership (%) 48.2 120 P/E (21F, x) 3.6 Beta (12M) 0.80 100 Market P/E (21F, x) 11.9 52-week low (W) 5,010 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 9,590
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -5.4 25.0 73.7 Net interest income (Wbn) 1,394 1,412 1,429 1,561 1,654 1,720 Relative -6.3 15.3 14.5 Net non -interest income (Wbn) -63 139 360 381 390 389
OP (Wbn) 334 432 490 628 667 678 NP (Wbn) 384 327 332 422 449 452 EPS (W) 2,268 1,936 1,965 2,495 2,652 2,672 EPS growth (%) 26.9 -14.6 1.5 27.0 6.3 0.7 P/E (x) 4.0 4.6 4.6 3.6 3.4 3.4 P/PPOP (x) 2.9 2.5 2.0 1.8 1.6 1.6 P/B (x) 0.36 0.34 0.32 0.31 0.28 0.26 ROE (%) 9.5 7.6 7.3 8.7 8.7 8.1 Div. yield (%) 4.0 4.6 4.3 6.1 7.1 7.4 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 38. DGBFG: 2Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 354.6 353.1 353.8 358.5 363.4 375.6 390.4 10.3 3.9 Net fee/commission income 81.6 84.4 99.1 98.6 95.9 111.2 108.2 9.1 -2.7 Net other income -64.1 -24.4 5.1 -7.4 8.7 -25.2 -11.2 TTR RR Total net operating income 372.0 413.0 458.0 449.7 468.0 461.6 487.3 6.4 5.6 SG&A expenses 279.4 228.4 242.7 262.1 289.1 242.1 267.0 10.0 10.3 PPOP 92.6 184.7 215.3 187.6 178.9 219.5 220.3 2.3 0.4 Provisions 36.6 51.4 82.3 56.1 86.6 41.1 40.9 -50.3 -0.5 OP 56.0 133.3 133.0 131.5 92.3 178.4 179.4 34.9 0.6 Non-operating income -7.9 -3.2 7.5 4.6 0.2 -0.7 1.0 -86.7 TTB Pretax profit 48.2 130.0 140.5 136.1 92.5 177.7 180.4 28.4 1.5 NP (owners of the parent) 55.3 88.2 96.9 91.2 56.0 123.5 123.5 27.5 0.0
Total assets 72,403 75,307 78,243 79,646 79,971 83,497 85,836 9.7 2.8 Total loans/receivables 46,587 47,655 48,521 49,461 50,801 53,797 55,288 13.9 2.8 Won-denominated loans (bank) 39,408 41,388 41,929 42,669 44,167 45,861 47,236 12.7 3.0 Total credit 45,814 47,902 48,970 49,906 51,599 53,425 54,936 12.2 2.8 Total deposits 42,758 43,826 45,114 46,051 47,248 49,205 50,630 12.2 2.9 Total shareholders' equity 5,434 5,563 5,674 5,818 5,804 5,903 6,023 6.2 2.0
(%) NIM (bank) 1.93 1.86 1.79 1.76 1.77 1.82 1.84 0.05 0.02 Cost-to-income ratio 75.1 55.3 53.0 58.3 61.8 52.5 54.8 1.8 2.3 NPL (substandard & below) ratio 0.89 0.98 0.88 0.75 0.58 0.69 0.66 -0.22 -0.03 NPL coverage ratio 148.8 139.9 148.9 181.0 215.8 184.4 184.4 35.5 0.0 ROA (based on avg. value) 0.08 0.12 0.13 0.12 0.07 0.15 0.15 0.02 -0.01 ROE (based on avg. value) 1.20 1.88 2.02 1.85 1.12 2.45 2.40 0.39 -0.05 Credit cost ratio 0.08 0.11 0.17 0.11 0.17 0.08 0.07 -0.09 0.00 BIS ratio 12.32 12.06 12.13 12.93 12.41 14.96 14.87 2.74 -0.09 Tier 1 ratio 10.92 10.58 10.64 11.47 11.02 13.90 13.84 3.20 -0.06 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 39. DGBFG: Earnings forecast revisions
Revised Previous Chg. (%) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 1,560.8 1,654.1 1,720.0 1,534.4 1,600.6 1,659.8 1.7 3.3 3.6 Net non-interest income 380.5 389.8 389.0 381.5 407.0 406.3 -0.3 -4.2 -4.2 Total net operating income 1,941.3 2,043.9 2,109.1 1,915.9 2,007.6 2,066.1 1.3 1.8 2.1 SG&A expenses 1,084.0 1,121.2 1,146.5 1,059.2 1,084.2 1,109.8 2.3 3.4 3.3 PPOP 857.4 922.7 962.6 856.7 923.4 956.3 0.1 -0.1 0.7 Provisions 228.9 255.3 284.8 258.4 279.0 292.7 -11.4 -8.5 -2.7 OP 628.5 667.4 677.8 598.3 644.4 663.6 5.0 3.6 2.1 Non-operating income -3.2 -1.5 -1.5 -3.2 -1.5 -1.5 0.0 0.0 0.0 Pretax profit 625.3 665.9 676.3 595.1 642.9 662.1 5.1 3.6 2.1 NP (owners of the parent) 422.0 448.6 451.9 386.9 409.9 419.3 9.1 9.4 7.8 Source: Mirae Asset Securities Research estimates
Mirae Asset Securities Research 44 July 9, 2021 Banks
Table 40. DGBFG: TP calculation
Sustainable ROE 7.30% Growth 3.00% Cost of equity 14.00%
Cost of equity 14.00% Rf 2.00% Beta 2.00 Market premium 6.00%
Fair P/B (x) 0.39 2021F BPS (W) 29,390 TP (W) 11,500 Source: Mirae Asset Securities Research estimates
Table 41. DGBFG: Valuation metrics at TP of W11,500
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.46 0.43 0.41 0.39 0.36 0.34 P/E (x) 5.1 5.9 5.9 4.6 4.3 4.3
ROE (%) 9.4 7.6 7.3 8.7 8.7 8.1 EPS growth (%) 26.9 -14.6 1.5 27.0 6.3 0.7
Dividend yield (%) 3.1 3.6 3.4 4.8 5.6 5.8 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 45 July 9, 2021 Banks
Table 42. DGBFG: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 351.0 355.4 351.2 354.6 353.1 353.8 358.5 363.4 375.6 390.4 394.9 399.9 Net non-interest income 57.9 67.2 65.2 81.6 84.4 99.1 98.6 95.9 111.2 108.2 104.4 105.6 Net other income -16.8 -10.7 -41.3 -64.1 -24.4 5.1 -7.4 8.7 -25.2 -11.2 2.5 -14.9 Total net operating income 392.1 411.8 375.1 372.0 413.0 458.0 449.7 468.0 461.6 487.3 501.8 490.6 SG&A expenses 213.2 226.3 231.2 279.4 228.4 242.7 262.1 289.1 242.1 267.0 277.9 297.0 PPOP 178.8 185.5 143.8 92.6 184.7 215.3 187.6 178.9 219.5 220.3 224.0 193.6 Provisions 46.4 45.7 39.9 36.6 51.4 82.3 56.1 86.6 41.1 40.9 68.8 78.1 OP 132.4 139.8 103.9 56.0 133.3 133.0 131.5 92.3 178.4 179.4 155.1 115.5 Non-operating income 12.4 -0.5 2.3 -7.9 -3.2 7.5 4.6 0.2 -0.7 1.0 0.5 -4.0 Pretax profit 144.8 139.3 106.2 48.2 130.0 140.5 136.1 92.5 177.7 180.4 155.6 111.5 NP (owners of the parent) 103.8 97.8 70.6 55.3 88.2 96.9 91.2 56.0 123.5 123.5 103.8 71.2 Source: Company data, Mirae Asset Securities Research estimates
Table 43. DGBFG: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 1,021.9 1,160.5 1,202.1 1,275.1 1,394.0 1,412.1 1,428.7 1,560.8 1,654.1 1,720.0 Net non-interest income 67.1 78.1 69.6 80.4 120.2 271.8 378.0 429.4 422.6 427.9 Net other income -50.0 -45.1 -49.9 -86.5 -183.2 -133.0 -18.0 -48.9 -32.8 -38.8 Total net operating income 1,039.1 1,193.5 1,221.8 1,269.1 1,331.0 1,551.0 1,788.7 1,941.3 2,043.9 2,109.1 SG&A expenses 544.0 627.2 639.0 676.9 810.0 950.2 1,022.3 1,084.0 1,121.2 1,146.5 PPOP 495.0 566.3 582.8 592.2 520.9 600.8 766.4 857.4 922.7 962.6 Provisions 171.1 223.3 195.9 181.2 187.0 168.6 276.4 228.9 255.3 284.8 OP 323.9 343.0 386.9 411.0 333.9 432.2 490.0 628.5 667.4 677.8 Non-operating income 0.0 0.4 0.9 0.0 154.2 6.3 9.1 -3.2 -1.5 -1.5 Pretax profit 323.9 343.4 387.8 411.0 488.1 438.5 499.1 625.3 665.9 676.3 NP (owners of the parent) 229.7 294.1 287.7 302.2 383.5 327.4 332.3 422.0 448.6 451.9 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 46 July 9, 2021 Banks
DGB Financial Group (139130 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 2,075 2,098 2,217 2,309 Cash & dues 3,682 3,860 3,903 3,948 Interest expenses 646 537 563 589 Securities 21,549 23,152 23,725 24,322 Net interest income 1,429 1,561 1,654 1,720 Net loans & receivables 50,801 56,535 59,647 62,476 Net fees & commissions 378 429 423 428 Tangible assets 976 979 982 986 Net other non-interest income -18 -49 -33 -39 Other assets 2,963 3,153 3,209 3,269 Total net operating income 1,789 1,941 2,044 2,109 Total assets 79,971 87,678 91,467 95,001 G&A expenses 1,022 1,084 1,121 1,146 Deposits 47,248 51,805 54,716 57,340 PPOP 766 857 923 963 Borrowings 9,822 9,555 9,812 10,081 Total provisioning expenses 276 229 255 285 Debentures 6,330 7,151 7,371 7,601 OP 490 628 667 678 Other liabilities 11,066 13,377 13,382 13,359 Net non-operating income 9 -3 -2 -2 Total liabilities 74,466 81,887 85,280 88,383 Pretax profit 499 625 666 676 Capital stock 846 846 846 846 Income tax 122 151 161 164 Hybrid securities 299 398 398 398 NP 332 422 449 452 Capital surplus 1,562 1,562 1,562 1,562 NP attributable to owners 332 422 449 452 Retained earnings 2,355 2,695 3,091 3,523 Normalized NP 332 422 449 452 Capital adj. 0 0 0 0 Other comprehensive income -74 -132 -132 -132 Core income 1,807 1,990 2,077 2,148 Minority interests 815 820 820 820 Core PPOP 784 906 955 1,001 Total shareholders' equity 5,505 5,791 6,187 6,619
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 2.72 2.50 2.48 2.48 Growth (YoY) Interest expenses 0.85 0.64 0.63 0.63 Won-denominated loan growth (bank) 12.1 9.6 6.0 5.2 Net interest income 1.88 1.86 1.85 1.85 Net loan & receivables growth 9.0 11.3 5.5 4.7 Net commission income 0.50 0.51 0.47 0.46 Deposit growth 10.5 9.6 5.6 4.8 Net other non-interest income -0.02 -0.06 -0.04 -0.04 Shareholders' equity growth 4.2 5.2 6.8 7.0 Total net operating income 2.35 2.32 2.28 2.26 Total asset growth 10.5 9.6 4.3 3.9 G&A expenses 1.34 1.29 1.25 1.23 Net interest income growth 1.2 9.2 6.0 4.0 PPOP 1.01 1.02 1.03 1.03 Net commission income growth 39.1 13.6 -1.6 1.3 Total provisioning expenses 0.36 0.27 0.29 0.31 PPOP growth 27.6 11.9 7.6 4.3 Net non-operating income 0.01 0.00 0.00 0.00 OP growth 13.4 28.3 6.2 1.6 Pretax profit 0.66 0.75 0.74 0.73 NP growth 1.5 27.0 6.3 0.7 Income tax 0.16 0.18 0.18 0.18 Profitability NP attributable to minority interests 0.06 0.06 0.06 0.07 NIS (bank) 2.07 2.12 2.14 2.14 ROA 0.44 0.50 0.50 0.49 NIM (bank) 1.79 1.85 1.87 1.87 Leverage (x) 16.6 17.4 17.3 16.7 PPOP margin 1.0 1.0 1.0 1.0 ROE 7.25 8.74 8.68 8.09 ROA 0.4 0.5 0.5 0.5 Asset quality (%) 2020 2021F 2022F 2023F ROE 7.3 8.7 8.7 8.1 NPL ratio 0.58 0.65 0.63 0.60 Liquidity Broad NPL ratio 1.62 1.54 1.46 1.38 Won-denominated LDR ex-CDs (bank) 96.6 96.0 96.0 96.0 NPL coverage ratio 215.8 225.1 232.3 239.5 Loan/assets 63.5 64.5 65.2 65.8 Reserves/total credit 1.2 1.5 1.5 1.4 Capital adequacy Credit costs/total loans 0.54 0.41 0.43 0.46 Total CAR 12.4 14.9 15.2 15.6 Credit costs/total credit 0.54 0.41 0.43 0.45 Tier 1 CAR 11.0 13.9 14.3 14.7 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.4 1.0 1.0 0.9 EPS (reported) 1,965 2,495 2,652 2,672 Operating efficiency EPS (normalized) 1,965 2,495 2,652 2,672 Cost-to-income ratio 57.2 55.8 54.9 54.4 BPS 27,726 29,390 31,730 34,282 Cost-to-asset ratio 1.3 1.2 1.2 1.2 DPS (common) 390 550 640 670 Dividends PPOP/share 4,531 5,069 5,455 5,691 Dividend payout ratio 19.9 22.0 24.1 25.1 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 47 [Korea] Banks July 9, 2021
JB Financial Group Buy (175330 KS ) (Maintain)
Steadily improving fundamentals and attractive TP: W10,000 ▲ dividends Upside: 36.1%
Mirae Asset Securities Co., Ltd. Heather Kang [email protected]
Valuation and recommendation Raise TP to W 10 ,000; retain Buy rating ó We revise up our 2021, 2022, and 2023 net profit estimates for JB Financial Group (JBFG) by 6.7% each, reflecting stronger-than-expected NIM expansion. ó We lift our target price to W10,000 (from W9,500), applying a target P/B of 0.47x. ó Capital adequacy (e.g., CET1 ratio) and asset quality have been well-managed, and JBFG has continued to meet earnings expectations. ó Currently, the stock is trading at a 2021F ROE of 11.6%—the highest level among banks (financial holding companies) under our coverage—vs. a 2021F P/B of 0.35x.
Dividends DPS growth: 42 % in 2021F (vs. 67% in 2019 and 25% in 2020) ó In recent years, JBFG’s low CET1 ratio has resulted in low dividend payout ratios relative to peers. ó Dividend payout: 14.4% in 2018 and 17.1% in 2019 (vs. 2019 ratios of 20.9% for BNKFG and 21.2% for DGBFG) ó The FSC’s recommendation to exercise caution on dividends due to COVID-19 uncertainties expired at end-June. ó We forecast dividend payout to increase to 22.4% in 2021, 24.1% in 2022, and 25.7% in 2023, which would translate into attractive dividend yields of 7.2%, 8.0%, and 8.8%, respectively.
2Q21 preview Net profit attributable to owners of the parent of W133 .2bn (+ 45 % YoY) ó For 2Q21, we expect net profit to come in roughly 16% above the consensus. ó Bank NIM likely expanded 8bps at Jeonbuk Bank and 9bps QoQ at Kwangju Bank, driven by falling deposit rates and reduced exposure to less profitable assets. ó Bank loans likely contracted 1.4% QoQ at Jeonbuk Bank and expanded 0.9% QoQ at Kwangju Bank. Notably, JBFG is not actively seeking to facilitate loan growth; rather it is focusing on reducing low-margin assets such as progressive payment loans. ó We believe cost-to-income ratio was well managed, at 40.6% (-4.7%p YoY, -4.3%p QoQ). ó We estimate credit cost ratio at 35bps (-16bps YoY, +15bps QoQ).
Key data Current price (7/7/21, W) 7,350 Market cap (Wbn) 1,448 180 JB Financial Group KOSPI 160 NP (21F, Wbn) 461 Shares outstanding (mn) 197
140 Consensus NP (21F, Wbn) 426 Free float (%) 82.0
120 EPS growth (21F, %) 26.7 Foreign ownership (%) 41.1 P/E (21F, x) 3.1 Beta (12M) 0.49 100 Market P/E (21F, x) 11.9 52-week low (W) 4,290 80 7.20 11.20 3.21 7.21 KOSPI 3,285.34 52-week high (W) 7,930
Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -4.5 29.4 53.6 Net interest income (Wbn) 1,255 1,233 1,260 1,405 1,471 1,525 Relative -5.5 19.4 1.2 Net non -interest income (Wbn) -2 62 94 89 97 100
OP (Wbn) 417 485 470 648 677 700 NP (Wbn) 243 342 364 461 477 491 EPS (W) 1,538 1,807 1,845 2,338 2,420 2,494 EPS growth (%) 29.2 17.5 2.1 26.7 3.5 3.0 P/E (x) 4.8 4.1 4.0 3.1 3.0 2.9 P/PPOP (x) 2.4 2.3 2.2 1.8 1.7 1.6 P/B (x) 0.46 0.42 0.38 0.35 0.31 0.28 ROE (%) 8.7 10.3 10.0 11.6 10.8 10.0 Div. yield (%) 2.4 4.1 5.1 7.2 8.0 8.8 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. July 9, 2021 Banks
Table 44. JBFG: 1Q21 preview YoY chg. QoQ chg. (Wbn) 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F (%, %p) (%, %p) Net interest income 309.3 306.5 310.7 317.3 325.5 335.5 347.7 11.9 3.6 Net fee/commission income 8.4 19.1 15.8 21.6 8.9 14.6 15.8 0.0 8.0 Net other income 2.8 2.8 9.1 12.7 3.9 11.5 12.1 33.7 5.4 Total net operating income 320.6 328.4 335.5 351.6 338.3 361.6 375.5 11.9 3.9 SG&A expenses 204.6 162.8 152.0 156.9 217.8 162.5 152.5 0.3 -6.2 PPOP 116.0 165.6 183.5 194.8 120.5 199.1 223.0 21.5 12.0 Provisions 39.0 29.2 52.2 41.6 71.8 21.2 36.7 -29.7 72.7 OP 77.0 136.4 131.3 153.1 48.7 177.8 186.4 41.9 4.8 Non-operating income -2.9 -1.3 0.1 0.2 -4.6 4.8 -0.6 TTR TTR Pretax profit 74.1 135.1 131.5 153.4 44.0 182.7 185.8 41.3 1.7 NP (owners of the parent) 47.7 96.5 91.7 109.9 65.4 132.3 133.2 45.3 0.6
Total assets 47,530 49,146 51,850 52,862 53,375 53,776 52,178 0.6 -3.0 Total loans/receivables 37,109 37,978 39,393 41,003 41,438 41,852 40,114 1.8 -4.2 Won-denominated loans (bank) 31,397 31,832 33,325 34,307 34,438 34,689 34,668 4.0 -0.1 Total credit 37,914 38,579 40,284 41,433 41,736 42,229 41,489 3.0 -1.8 Total deposits 34,175 35,167 36,813 38,152 38,122 38,017 36,880 0.2 -3.0 Total shareholders' equity 3,820 3,869 3,955 3,962 4,029 4,075 4,212 6.5 3.4
(%) NIM (bank) 2.70 2.66 2.61 2.58 2.57 2.71 2.79 0.18 0.08 Cost-to-income ratio 63.8 49.6 45.3 44.6 64.4 44.9 40.6 -4.7 -4.3 NPL (substandard & below) ratio 0.88 0.91 0.72 0.68 0.67 0.67 0.69 -0.04 0.01 NPL coverage ratio 165.1 158.8 197.1 207.5 214.3 207.4 207.6 10.5 0.2 ROA (based on avg. value) 0.10 0.20 0.18 0.21 0.12 0.25 0.25 0.07 0.00 ROE (based on avg. value) 1.38 2.76 2.58 3.01 1.75 3.50 3.44 0.86 -0.06 Credit cost ratio 0.10 0.08 0.13 0.10 0.17 0.05 0.09 -0.04 0.04 BIS ratio 13.16 12.95 13.70 13.40 13.22 13.22 14.18 0.48 0.96 Tier 1 ratio 11.17 11.06 11.84 11.59 11.43 11.57 12.36 0.52 0.79 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Securities Research estimates
Table 45. JBFG: Earnings forecast revisions
Revised Previous Chg. (%, %p) (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F
Net interest income 1,405.1 1,470.5 1,525.1 1,398.4 1,464.3 1,518.2 0.5 0.4 0.5 Net non-interest income 88.9 96.6 99.7 76.2 85.4 89.1 16.6 13.1 11.9 Total net operating income 1,493.9 1,567.1 1,624.8 1,474.6 1,549.7 1,607.3 1.3 1.1 1.1 SG&A expenses 690.1 710.5 728.9 695.8 716.4 735.1 -0.8 -0.8 -0.8 PPOP 803.9 856.6 895.8 778.8 833.3 872.2 3.2 2.8 2.7 Provisions 155.9 180.0 195.7 169.2 195.9 212.5 -7.9 -8.2 -7.9 OP 648.0 676.7 700.1 609.6 637.3 659.6 6.3 6.2 6.1 Non-operating income 0.1 -3.7 -3.7 0.1 -3.7 -3.7 0.0 0.0 0.0 Pretax profit 648.0 673.0 696.4 609.7 633.6 655.9 6.3 6.2 6.2 NP (owners of the parent) 460.6 476.8 491.2 431.6 446.9 460.5 6.7 6.7 6.7 Source: Mirae Asset Securities Research estimates
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Table 46. JBFG: TP calculation
Sustainable ROE 8.20% Growth 3.00% Cost of equity 14.00%
Cost of equity 14.00% Rf 2.00% Beta 2.00 Market premium 6.00%
Fair P/B (x) 0.47 2021F BPS (W) 21,140 TP (W) 10,000 Source: Mirae Asset Securities Research estimates
Table 47. JBFG: Valuation metrics at TP of W10,000
2018 2019 2020 2021F 2022F 2023F P/B (x) 0.63 0.57 0.52 0.47 0.42 0.38 P/E (x) 6.5 5.5 5.4 4.3 4.1 4.0
ROE (%) 8.7 10.3 10.0 11.6 10.8 10.0 EPS growth (%) 29.2 17.5 2.1 26.7 3.5 3.0
Dividend yield (%) 1.8 3.0 3.7 5.3 5.9 6.5 Source: Company data, Mirae Asset Securities Research estimates
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Table 48. JBFG: Quarterly earnings
(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21F 3Q21F 4Q21F Net interest income 301.1 310.4 311.8 309.3 306.5 310.7 317.3 325.5 335.5 347.7 358.0 363.9 Net non-interest income 15.6 14.8 13.3 8.4 19.1 15.8 21.6 8.9 14.6 15.8 17.5 9.6 Net other income -0.3 1.7 5.8 2.8 2.8 9.1 12.7 3.9 11.5 12.1 5.2 2.7 Total net operating income 316.5 326.8 330.9 320.6 328.4 335.5 351.6 338.3 361.6 375.5 380.6 376.2 SG&A expenses 153.0 149.2 157.5 204.6 162.8 152.0 156.9 217.8 162.5 152.5 161.7 213.3 PPOP 163.4 177.6 173.4 116.0 165.6 183.5 194.8 120.5 199.1 223.0 218.9 162.8 Provisions 40.6 21.0 44.8 39.0 29.2 52.2 41.6 71.8 21.2 36.7 44.3 53.7 OP 122.8 156.6 128.6 77.0 136.4 131.3 153.1 48.7 177.8 186.4 174.6 109.2 Non-operating income 4.7 -1.7 -1.8 -2.9 -1.3 0.1 0.2 -4.6 4.8 -0.6 -0.6 -3.6 Pretax profit 127.5 154.9 126.8 74.1 135.1 131.5 153.4 44.0 182.7 185.8 174.0 105.6 NP (owners of the parent) 92.6 111.5 90.1 47.7 96.5 91.7 109.9 65.4 132.3 133.2 123.4 71.7 Source: Company data, Mirae Asset Securities Research estimates
Table 49. JBFG: Annual earnings
(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 565.3 977.0 1,019.1 1,162.5 1,254.7 1,232.6 1,260.0 1,405.1 1,470.5 1,525.1 Net non-interest income 2.3 19.4 16.8 13.5 10.5 52.1 65.3 57.4 71.4 71.1 Net other income 3.0 -6.5 -1.2 -37.3 -12.1 10.1 28.6 31.5 25.2 28.7 Total net operating income 570.6 990.0 1,034.6 1,138.7 1,253.1 1,294.8 1,353.8 1,493.9 1,567.1 1,624.8 SG&A expenses 338.5 560.5 589.7 626.4 653.9 664.4 689.5 690.1 710.5 728.9 PPOP 232.1 429.5 445.0 512.3 599.1 630.4 664.4 803.9 856.6 895.8 Provisions 150.5 233.0 192.4 162.4 182.3 145.5 194.9 155.9 180.0 195.7 OP 81.6 196.4 252.6 349.9 416.8 484.9 469.5 648.0 676.7 700.1 Non-operating income 498.0 2.8 9.3 -2.8 -0.3 -1.6 -5.5 0.1 -3.7 -3.7 Pretax profit 579.6 199.3 261.8 347.1 416.5 483.3 464.0 648.0 673.0 696.4 NP (owners of the parent) 549.0 114.7 142.7 185.1 243.1 341.9 363.5 460.6 476.8 491.2 Source: Company data, Mirae Asset Securities Research estimates
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JB Financial Group (175330 KS)
Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 1,814 1,833 1,903 1,977 Cash & dues 2,781 2,818 2,853 2,891 Interest expenses 554 428 432 452 Securities 6,226 6,543 6,469 6,404 Net interest income 1,260 1,405 1,471 1,525 Net loans & receivables 41,438 40,809 42,829 44,949 Net fees & commissions 65 57 71 71 Tangible assets 449 309 231 197 Net other non-interest income 29 31 25 29 Other assets 2,482 2,395 2,357 2,341 Total net operating income 1,354 1,494 1,567 1,625 Total assets 53,375 52,874 54,739 56,782 G&A expenses 689 690 710 729 Deposits 38,122 36,870 38,805 40,840 PPOP 664 804 857 896 Borrowings 1,892 1,933 1,846 1,811 Total provisioning expenses 195 156 180 196 Debentures 7,837 8,150 6,464 6,507 OP 470 648 677 700 Other liabilities 1,479 1,463 2,626 2,062 Net non-operating income -6 0 -4 -4 Total liabilities 49,330 48,416 49,741 51,220 Pretax profit 464 648 673 696 Capital stock 985 985 985 985 Income tax 73 157 163 169 Hybrid securities 403 403 403 403 NP 364 461 477 491 Capital surplus 705 705 705 705 NP attributable to owners 364 461 477 491 Retained earnings 1,732 2,128 2,635 3,162 Normalized NP 364 461 477 491 Capital adj. 0 0 0 0 Other comprehensive income -52 -56 -56 -56 Core income 1,325 1,462 1,542 1,596 Minority interests 273 293 327 363 Core PPOP 636 772 831 867 Total shareholders' equity 4,045 4,458 4,998 5,562
DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 3.60 3.45 3.54 3.55 Growth (YoY) Interest expenses 1.10 0.81 0.80 0.81 Won-denominated loan growth (bank) 9.7 2.5 5.1 5.1 Net interest income 2.50 2.65 2.73 2.74 Net loan & receivables growth 11.7 -1.5 5.0 5.0 Net commission income 0.13 0.11 0.13 0.13 Deposit growth 11.5 -3.3 5.2 5.2 Net other non-interest income 0.06 0.06 0.05 0.05 Shareholders' equity growth 5.5 10.2 12.1 11.3 Total net operating income 2.68 2.81 2.91 2.91 Total asset growth 12.3 -0.9 3.5 3.7 G&A expenses 1.37 1.30 1.32 1.31 Net interest income growth 2.2 11.5 4.7 3.7 PPOP 1.32 1.51 1.59 1.61 Net commission income growth 25.4 -12.1 24.3 -0.4 Total provisioning expenses 0.39 0.29 0.33 0.35 PPOP growth 5.4 21.0 6.6 4.6 Net non-operating income -0.01 0.00 -0.01 -0.01 OP growth -3.2 38.0 4.4 3.5 Pretax profit 0.92 1.22 1.25 1.25 NP growth 6.3 26.7 3.5 3.0 Income tax 0.15 0.30 0.30 0.30 Profitability NP attributable to minority interests 0.05 0.06 0.06 0.07 NIS (bank) 2.71 2.79 2.89 2.89 ROA 0.72 0.87 0.89 0.88 NIM (bank) 2.42 2.58 2.61 2.61 Leverage (x) 13.9 13.4 12.2 11.3 PPOP margin 1.3 1.5 1.6 1.6 ROE 10.02 11.61 10.79 9.95 ROA 0.7 0.9 0.9 0.9 Asset quality (%) 2020 2021F 2022F 2023F ROE 10.0 11.6 10.8 10.0 NPL ratio 0.67 0.64 0.61 0.59 Liquidity Broad NPL ratio 1.76 1.95 1.86 1.78 Won-denominated LDR ex-CDs (bank) 98.8 98.4 98.4 98.4 NPL coverage ratio 214.3 215.1 224.4 229.9 Loan/assets 77.6 77.2 78.2 79.2 Reserves/total credit 1.4 1.4 1.4 1.4 Capital adequacy Credit costs/total loans 0.29 0.30 0.30 0.30 Total CAR 13.2 13.7 14.0 15.1 Credit costs/total credit 0.47 0.37 0.41 0.43 Tier 1 CAR 11.4 11.9 12.7 13.8 Per-share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.8 1.8 1.3 1.3 EPS (reported) 1,845 2,338 2,420 2,494 Operating efficiency EPS (normalized) 1,845 2,338 2,420 2,494 Cost-to-income ratio 50.9 46.2 45.3 44.9 BPS 19,152 21,140 23,715 26,389 Cost-to-asset ratio 1.3 1.3 1.3 1.3 DPS (common) 374 530 590 650 Dividends PPOP/share 3,373 4,081 4,349 4,548 Dividend payout ratio 20.0 22.4 24.1 25.7 Source: Company data, Mirae Asset Securities Research estimates
Mirae Asset Securities Research 52 July 9, 2021 Banks
Appendix 1
Important disclosures and disclaimers Two-year rating and TP history
Company Date Rating TP (W) Company Date Rating TP (W) KB Financial Group (105560) 04/21/20 Buy 10,000 07/09/21 Buy 72,000 03/05/20 Buy 11,500 04/23/21 Buy 70,500 02/03/20 Buy 14,000 04/14/21 Buy 69,000 10/22/19 Buy 16,000 12/29/20 Buy 56,500 01/22/19 Buy 19,500 10/13/20 Buy 51,000 BNK Financial Group (138930) 03/17/20 Buy 48,500 07/09/21 Buy 9,100 12/06/19 Buy 63,000 04/30/21 Trading Buy 8,200 10/22/19 Buy 61,500 04/14/21 Buy 8,200 04/23/19 Buy 65,000 12/29/20 Trading Buy 6,700 Shinhan Financial Group (055550) 07/23/20 Trading Buy 6,000 07/09/21 Buy 50,000 04/21/20 Buy 6,000 04/23/21 Buy 49,000 02/03/20 Buy 8,300 04/14/21 Buy 48,000 01/30/20 One year 8,900 12/29/20 Buy 41,000 01/30/19 Buy 8,900 10/28/20 Buy 37,000 DGB Financial Group (139130) 10/16/20 Buy 35,500 07/09/21 Buy 11,500 09/07/20 Buy 37,000 04/14/21 Buy 10,500 07/20/20 Buy 39,000 12/29/20 Buy 9,000 03/17/20 Buy 41,000 10/30/20 Trading Buy 7,700 01/22/20 Buy 54,000 10/16/20 Trading Buy 7,000 10/22/19 Buy 57,000 07/23/20 Buy 6,400 12/04/18 Buy 60,000 04/21/20 Buy 6,700 Hana Financial Group (086790) 02/03/20 Buy 9,000 07/09/21 Buy 60,500 10/23/19 Buy 9,600 04/26/21 Buy 57,000 08/01/19 Buy 11,000 04/14/21 Buy 55,500 01/30/19 Buy 12,000 12/29/20 Buy 47,000 JB Financial Group (175330) 10/26/20 Buy 42,000 07/09/21 Buy 10,000 10/13/20 Buy 39,000 04/28/21 Buy 9,500 04/21/20 Buy 37,500 04/14/21 Buy 8,800 03/17/20 Buy 39,000 12/29/20 Buy 7,600 01/22/20 Buy 49,000 10/29/20 Buy 6,700 10/22/19 Buy 51,000 10/16/20 Buy 6,300 01/21/19 Buy 58,500 04/21/20 Buy 6,600 Industrial Bank of Korea (024110) 02/04/20 Buy 8,000 07/09/21 Buy 12,500 08/04/19 Buy 8,600 04/14/21 Buy 11,500 07/01/19 Buy 8,300 12/29/20 Trading Buy 10,500 10/16/20 Trading Buy 9,500
(W) KB Financial Group (W) Shinhan Financial Group (W) Hana Financial Group (W) Industrial Bank of Korea 80,000 80,000 80,000 25,000
20,000 60,000 60,000 60,000
15,000 40,000 40,000 40,000 10,000
20,000 20,000 20,000 5,000
0 0 0 0 Jul 19 Jul 20 Jul 21 Jul 19 Jul 20 Jul 21 Jul 19 Jul 20 Jul 21 Jul 19 Jul 20 Jul 21
Mirae Asset Securities Research 53 July 9, 2021 Banks
(W) BNK Financial Group (W) DGB Financial Group (W) JB Financial Group 10,000 15,000 12,000
8,000 10,000 10,000 8,000 6,000 6,000 4,000 5,000 4,000
2,000 2,000
0 0 0 Jul 19 Jul 20 Jul 21 Jul 19 Jul 20 Jul 21 Jul 19 Jul 20 Jul 21
Stock ratings Sector ratings Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months Sell Expected 12-month performance: -10% or worse
Rating and TP history: Share price ( ─), TP (▬), Not Rated ( ■), Buy ( ▲), Trading Buy ( ■), Hold ( ●), Sell ( ◆) * Our investment rating is a guide to the expected return of the stock over the next 12 months. * Outside of the official ratings of Mirae Asset Securities Co., Ltd., analysts may call trading opportunities should technical or short-term material developments arise. * The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings. * TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Ratings distribution and investment banking services Buy Trading Buy Hold Sell Ratings distribution 80.00% 10.67% 8.00% 1.33% Investment banking services 83.33% 16.67% 0.00% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2021)
Disclosures As of the publication date, Mirae Asset Securities Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Industrial Bank of Korea, Shinhan Financial Group, Hana Financial Group, KB Financial Group as an underlying asset; other than this, Mirae Asset Securities has no other special interests in the covered companies.
Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Securities Co., Ltd. (“Mirae Asset Securities”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Securities, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Securities except as otherwise stated herein.
Disclaimers This report was prepared by Mirae Asset Securities, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Securities makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws, and accounting principles, and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Securities or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person, and such person shall not be treated as a client of Mirae Asset Securities by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Securities may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views, and analytical methods of the analysts who prepared them. Mirae Asset Securities may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Securities and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making, or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Securities. For further information regarding company-specific information as it pertains to the representations and disclosures in this Appendix 1, please contact [email protected] or +1 (212) 407-1000.
Mirae Asset Securities Research 54 July 9, 2021 Banks
Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Securities is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Securities or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Securities. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This report is distributed in Hong Kong by Mirae Asset Securities (HK) Limited, which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. India: This report is being distributed by Mirae Asset Capital Markets (India) Private Limited (“MACM”) in India to the customers based in India and is personal information only for those authorised recipient(s). MACM is inter alia a Securities and Exchange Board of India (“SEBI”) registered Research Analyst in India and is not registered outside India. MACM and Mirae Asset, Korea are group entities. MACM makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The user assumes the entire risk of any use made of this information. This report has been provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipient must read the entire Appendix 1 to the report carefully for Important Disclosures & Disclaimers. All other jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Securities or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Securities and its affiliates to any registration or licensing requirement within such jurisdiction.
Mirae Asset Securities Research 55 July 9, 2021 Banks
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Mirae Asset Securities Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. One-Asia Equity Sales Team Units 8501, 8507-8508, 85/F 41st Floor, Tower 42 Mirae Asset Center 1 Building International Commerce Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 1 Austin Road West London EC2N 1HQ Korea Kowloon United Kingdom Hong Kong Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000
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