Banks

Opportunities amid crisis

1Q20 preview: Lower NIMs, healthier-than-expected loan growth, and stable credit costs For 1Q20, we expect banks under our coverage—Shinhan Financial Group (SFG), KB Industry Report Financial Group (KBFG), Hana Financial Group (HFG), Industrial Bank of Korea (IBK), April 22, 2020 BNK Financial Group (BNKFG), DGB Financial Group (DGBFG), and JB Financial Group (JBFG)—to post combined net profit attributable to controlling interests of W3tr (-7.5% YoY), in line with the recently lowered consensus. Whil e we see net profit declining YoY on high base effects (due to provision reversals a year ago), we still think banks Mirae Asset Daewoo Co., Ltd. performed decently amid growing concerns over the economy. We estimate bank net

[Banks/Credit Cards ] interest margins (NIMs) fell 4-5bps QoQ, but we believe loa n growth was healthier than expected, as large banks’ won-denominated loans likely expanded 2.5% QoQ on

Heather Kang average. We estimate credit costs increased 17% YoY, while the ratio of credit costs to +822 -3774 -1903 total credit was likely stable at 38bps (vs. 35bps in 1Q19, when reversals of provisions [email protected] were included).

2020 forecast: Net profit to decline 7%; ROE of 7.4% Concerns are growing over the potential impact of COVID-19 on banks (asset quality

and credit costs) and the broader economy, as it is still unknown how long the outbreak will last and what its impact will be. Unlike previous financial crises that were triggered by large conglomerates or banks, we think the potential upcoming crisis is very likely to start from micro businesses, small merchants, and SMEs, before spreading gradually to larger enterprises. This time, however, we believe banks are much better-equipped to cope with a crisis. Our coverage banks (financial holding companies) have markedly improved their fundamentals (capital adequacy and asset quality), drastically reduced loan exposure to cyclical businesses, increased the quality of SME/SOHO loan portfolios by strengthening collateral/government guarantee requirements, and mitigated concentration risk through diversification. Moreover, given policymakers’ wide-ranging support (fiscal and monetary stimulus, financial aid for SMEs and micro businesses, stabilization funds for the bond and securities markets, etc.), the financial system’s risk of immediate collapse/insolvency is low, in our view.

In 2020, we forecast banks’ (financial holding companies) combined net profit to contract 7% YoY, hurt by lower NIMs and a higher credit cost-to-total credit ratio (from 37bps in 2019 to 40bps in 2020). We see ROE falling to 7.4% (from 8.5% in 2019).

Share price vo latility to continue for some time, but stocks look deeply undervalued at current levels Amid worries over the spread of COVID-19, financial authorities have come up with a series of measures to provide financial aid to SMEs/micro businesses and support fi nancial market stability. These include measures to temporarily ease capital, liquidity, and operational regulations (e.g., earlier-than-scheduled adoption of the final Basel III reforms, introduction of stock market stabilization funds, relaxation of liqu idity coverage and loan-to-deposit ratios, etc.). While some may be against banks (financial holding companies) playing a public role, we believe it is necessary to reduce systemic risks during economic and liquidity crises.

Banks (financial holding compan ies) look deeply undervalued, currently trading at a 2020F P/B of 0.27x and P/E of 3.8x—valuations that reflect a bear scenario in which the emerging risks develop into a full-blown crisis. Share price volatility may continue for some time due to heightened uncertainties, but we think current share prices offer a good opportunity to buy on weakness or gradually accumulate shares from a medium- and long-term perspective. When uncertainties ease, we expect large banks (financial holding companies) to rebound more quickly than others. Against this backdrop, we present KBFG and HFG as our top picks.

April 22, 2020 Banks

1Q20 preview: Lower NIMs, healthier-than-expected loan growth, and stable credit costs

In 1Q20, we estimate bank NIMs fell 4-5bps QoQ due to declines in bond yields and the benchmark interest rate. However, NIMs likely fell at a slower pace than in the previous quarter (-6-7bps QoQ), before the emergence of credit/liquidity crunch concerns. In our view, the increase in low-cost core deposits amid the current ultra-low interest rate environment has helped slow the NIM decline. In addition, we believe loan growth was healthier than expected, as large banks’ won-denominated loans likely expanded 2.5% QoQ on average. In March, banks’ corporate loans registered their largest increase since the BOK began compiling preliminary data, as businesses face increasing funding needs amid growing caution against credit risks and worries about liquidity. We also believe household loans continued strong growth, driven by funding demand related to housing transactions, stock market investments, and the substitution of non-bank loans with bank loans. SG&A expenses were likely kept at manageable levels, as: 1) contributions to employee welfare funds were reduced (contributions were raised YoY in the previous year); and 2) voluntary retirement programs were not implemented. Meanwhile, we estimate credit costs increased 17% YoY, while the credit cost-to-total credit ratio was likely stable at 38bps (vs. 35bps in 1Q19, when reversals of provisions were included).

Mirae Asset Daewoo Research 2 April 22, 2020 Banks

Table 1. Domestic banks: Key valuation metrics SFG KBFG HFG IBK BNKFG DGBFG JBFG Ticker 055550 KS 105560 KS 086790 KS 024110 KS 138930 KS 139130 KS 175330 KS

Rating Buy Buy Buy Buy Buy Buy Buy

TP (W) 41,000 48,500 37,500 10,000 6,000 6,700 6,600

CP (W) 28,500 32,350 24,750 7,880 4,800 4,950 4,410

Upside (%) 43.9 49.9 51.5 26.9 25.0 35.4 49.7 Market cap (Wbn) 13,749 13,451 7,431 4,548 1,564 837 869

Foreign ownership (%) 64.2 66.2 65.6 17.7 49.6 47.4 40.3

P/B (x) 2018 0.38 0.38 0.27 0.25 0.21 0.20 0.28 2019 0.35 0.35 0.26 0.23 0.19 0.19 0.25

2020F 0.34 0.32 0.24 0.23 0.18 0.18 0.23

2021F 0.31 0.30 0.23 0.22 0.17 0.16 0.20

2022F 0.29 0.28 0.21 0.20 0.16 0.15 0.19

P/E (x) 2018 4.3 4.4 3.3 3.0 3.1 2.2 2.9 2019 4.0 4.1 3.1 3.2 2.8 2.6 2.4

2020F 4.4 4.4 3.4 3.6 3.0 2.9 2.6

2021F 4.3 4.2 3.2 3.5 2.9 2.6 2.4

2022F 4.2 4.0 3.1 3.4 2.8 2.4 2.3 P/PPOP (x) 2018 2.6 2.7 2.1 1.1 1.2 1.6 1.4 2019 2.3 2.6 1.8 1.2 1.3 1.4 1.4

2020F 2.3 2.6 2.0 1.2 1.3 1.3 1.3

2021F 2.2 2.4 1.8 1.1 1.2 1.2 1.2

2022F 2.1 2.3 1.7 1.1 1.2 1.1 1.2 Dividend yield (%) 2018 5.6 5.9 7.7 8.8 6.3 7.3 4.1 2019 6.5 6.8 8.5 8.5 7.5 8.3 6.8

2020F 6.0 6.5 8.1 7.6 7.1 7.5 7.5

2021F 6.3 7.1 8.9 8.2 7.7 8.5 8.6

2022F 6.7 7.7 9.5 8.5 8.3 9.3 9.5

ROE (%) 2018 9.2 8.8 8.6 8.6 6.8 9.5 8.7 2019 9.1 8.9 8.6 7.4 7.1 7.6 10.3

2020F 7.9 7.6 7.5 6.5 6.2 6.2 9.2

2021F 7.6 7.4 7.5 6.4 5.9 6.5 9.0

2022F 7.3 7.3 7.1 6.1 5.9 6.6 8.6 ROA (%) 2018 0.7 0.7 0.6 0.6 0.5 0.6 0.5 2019 0.7 0.7 0.6 0.5 0.6 0.5 0.7

2020F 0.6 0.6 0.5 0.5 0.5 0.4 0.7

2021F 0.6 0.6 0.5 0.5 0.5 0.4 0.8

2022F 0.6 0.6 0.5 0.4 0.5 0.4 0.8 EPS growth (%) 2018 8.2 -8.9 8.7 16.8 24.6 26.9 29.2 2019 7.7 8.2 6.5 -9.1 12.0 -14.6 17.5

2020F -9.1 -7.5 -8.8 -9.0 -6.5 -12.1 -4.9

2021F 2.0 5.4 8.1 2.7 1.2 11.9 8.3

2022F 3.1 5.1 2.1 0.8 5.0 7.6 4.7 PPOP margin (%) 2018 1.2 1.1 1.0 1.4 1.3 0.9 1.3 2019 1.2 1.0 1.0 1.3 1.2 0.9 1.3

2020F 1.1 1.0 0.9 1.1 1.1 0.9 1.4

2021F 1.2 1.0 1.0 1.1 1.1 0.9 1.4

2022F 1.2 1.1 1.0 1.1 1.2 0.9 1.5 Note: Based on April 17, 2020 closing prices Source: Company data, Quantiwise, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 3 April 22, 2020 Banks

Table 2. Domestic banks: TP valuation assumptions SFG KBFG HFG IBK BNKFG DGBFG JBFG Ticker 055550 KS 105560 KS 086790 KS 024110 KS 138930 KS 139130 KS 175330 KS

Rating Buy Buy Buy Buy Buy Buy Buy TP (W) 41,000 48,500 37,500 10,000 6,000 6,700 6,600 CP (W) 28,500 32,350 24,750 7,880 4,800 4,950 4,410 Upside (%) 43.9 49.9 51.5 26.9 25.0 35.4 49.7 Market cap (Wbn) 13,749 13,451 7,431 4,548 1,564 837 869 Foreign ownership (%) 64.2 66.2 65.6 17.7 49.6 47.4 40.3

Major assumptions Target P/B (x) 0.49 0.49 0.37 0.30 0.22 0.24 0.34 2020F BPS (W) 83,890 100,263 101,065 34,160 26,874 28,173 19,550 Sustainable ROE (%) 7.0 6.9 6.6 5.8 5.7 5.9 7.1 COE (%) 12.2 12.1 14.4 14.8 15.1 15.1 15.1 Rf 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Beta 1.62 1.60 1.98 2.05 2.10 2.10 2.10 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 2020F P/B (x) 0.49 0.48 0.37 0.29 0.22 0.24 0.34 2021F P/B (x) 0.45 0.45 0.34 0.27 0.21 0.22 0.31 2022F P/B (x) 0.42 0.42 0.32 0.26 0.20 0.21 0.28

2020F P/E (x) 6.3 6.6 5.2 4.5 3.7 3.9 3.8 2021F P/E (x) 6.2 6.3 4.8 4.4 3.7 3.5 3.5 2022F P/E (x) 6.0 6.0 4.7 4.4 3.5 3.3 3.4

2020F dividend yield (%) 4.1 4.4 5.3 6.0 5.7 5.5 5.0

2021F dividend yield (%) 4.4 4.7 5.9 6.5 6.2 6.3 5.8

2022F dividend yield (%) 4.6 5.2 6.3 6.7 6.7 6.9 6.4 Note: Based on April 17, 2020 closing prices Source: Quantiwise, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 April 22, 2020 Banks

Table 3. Global banks: Share performance Current Market 52-week 52-week Performance (%) Country Bank Ticker price cap (local) (US$bn) high low YTD 1M 3M 6M 1Y 2Y 3Y US JPMorgan Chase JPM US 95.18 290.0 141.10 76.91 -31.7 11.6 -31.1 -21.1 -16.1 -14.8 12.7 Bank of America BAC US 23.28 202.0 35.72 17.95 -33.9 9.8 -32.9 -23.3 -22.5 -22.9 2.4 Wells Fargo WFC US 28.38 116.3 54.75 25.11 -47.2 0.3 -42.3 -43.2 -40.4 -44.9 -45.6 Citigroup C US 45.45 94.6 83.11 32.00 -43.1 14.7 -44.0 -34.8 -34.8 -35.3 -21.3 Goldman Sachs GS US 183.49 65.8 250.46 130.85 -20.2 22.7 -26.4 -11.2 -10.9 -27.8 -14.3 Morgan Stanley MS US 39.09 61.6 57.57 27.20 -23.5 26.4 -32.0 -10.5 -17.8 -28.5 -7.0 BNY Mellon BK US 37.39 33.1 51.60 26.40 -25.7 24.6 -19.0 -17.5 -22.8 -32.3 -20.2 Canada Royal Bank of Canada RY CN 87.47 89.0 109.68 72.00 -14.9 6.5 -17.9 -18.2 -18.4 -9.5 -8.1 UK HSBC Holdings HSBA LN 414.35 105.5 687.70 387.65 -30.0 -17.1 -30.2 -31.1 -37.8 -40.0 -33.3 Lloyds Banking Group LLOY LN 30.45 26.8 69.99 27.70 -51.3 -5.9 -47.9 -49.4 -53.8 -53.9 -52.2 Barclays BARC LN 90.71 19.7 192.96 73.04 -49.5 8.3 -48.2 -45.0 -46.5 -57.7 -56.5 Royal Bank of Scotland RBS LN 106.20 16.1 265.00 101.20 -55.8 -13.1 -52.7 -55.4 -56.9 -57.2 -50.6 Standard Chartered STAN LN 406.50 16.1 742.60 391.70 -42.9 -9.9 -42.1 -37.6 -39.5 -45.5 -41.4 France Societe Generale GLE FP 13.94 12.9 32.23 12.80 -55.0 1.0 -54.5 -46.4 -51.9 -69.2 -68.5 BNP Paribas BNP FP 25.47 34.6 54.22 24.51 -51.8 -6.3 -49.8 -45.8 -48.0 -59.3 -56.3 Credit Agricole ACA FP 6.53 20.5 13.80 5.70 -49.5 5.0 -49.3 -43.4 -47.6 -51.6 -45.6 Germany Deutsche Bank DBK GR 6.00 13.5 10.37 4.45 -13.2 9.4 -21.1 -15.3 -22.9 -48.6 -59.9 Commerzbank CBK GR 3.16 4.3 8.22 2.80 -42.8 -6.0 -40.3 -40.5 -61.1 -70.8 -61.4 Switzerland Credit Suisse CSGN SW 7.93 21.0 13.87 6.18 -39.5 7.9 -41.2 -34.8 -40.9 -49.1 -38.0 Spain Banco Santander SAN SM 1.96 35.4 4.61 1.93 -47.5 -4.1 -46.7 -49.4 -57.5 -64.4 -64.7 BBVA BBVA SM 2.66 19.3 5.59 2.56 -46.5 -5.0 -44.6 -44.3 -52.4 -59.1 -61.6 Italy Intesa Sanpaolo ISP IM 1.38 26.2 2.63 1.31 -41.4 -3.4 -41.1 -38.4 -41.0 -53.8 -40.2 Unicredit UCG IM 6.86 16.7 14.44 6.42 -47.3 -6.9 -47.8 -40.3 -46.2 -61.6 -49.6 Netherlands ING INGA NA 4.84 20.5 12.07 4.23 -54.7 8.3 -54.4 -52.4 -59.8 -65.9 -65.9 Australia CommBank CBA AU 61.06 68.8 91.05 53.44 -23.6 0.2 -27.4 -23.3 -16.8 -15.7 -27.8 Westpac WBC AU 15.87 36.5 30.05 13.47 -34.5 9.2 -36.5 -45.0 -40.8 -44.5 -53.5 National Australia Bank NAB AU 16.39 31.1 30.00 13.20 -33.5 12.5 -35.6 -43.0 -35.1 -42.1 -49.5 ANZ ANZ AU 16.56 29.9 29.30 14.10 -32.8 10.4 -34.9 -40.3 -38.2 -38.0 -46.9 Macquarie MQG AU 100.41 22.7 152.35 70.45 -27.2 26.6 -30.3 -25.0 -24.6 -3.9 15.9 Brazil Itau Unibanco S-Pref ITUB4 BZ 23.22 42.5 37.69 20.00 -36.5 1.6 -32.6 -31.2 -26.6 -28.1 -2.4 UAE First Abu Dhabi Bank FAB DH 11.26 33.5 16.96 7.78 -25.7 19.9 -27.7 -26.4 -30.3 -10.3 2.8 China ICBC/H 1398 HK 5.14 253.9 6.11 4.81 -14.3 4.9 -12.7 -5.2 -14.3 -25.4 4.7 China Construction Bank/H 939 HK 6.12 198.5 7.03 5.55 -9.1 2.7 -9.6 -2.2 -13.3 -25.2 0.3 Agricultural Bank of China/H 1288 HK 3.11 167.6 3.65 2.69 -9.3 13.5 -7.2 -1.9 -15.0 -29.2 -10.6 Bank of China/H 3988 HK 2.98 138.8 3.80 2.71 -10.5 9.2 -9.7 -6.0 -21.8 -29.4 -17.9 Japan Mitsubishi UFJ 8306 JP 412.90 52.1 603.00 380.00 -30.4 7.7 -29.1 -24.5 -27.0 -42.2 -37.0 SMBC 8316 JP 2,705.00 34.5 4,145.00 2,507.50 -33.0 5.7 -31.7 -27.7 -33.4 -39.8 -30.2 Mizuho Financial Group 8411 JP 121.50 28.7 176.00 108.40 -27.8 -0.7 -26.6 -26.2 -30.3 -37.7 -36.5 Resona Holdings 8308 JP 321.60 7.0 498.20 295.70 -32.9 3.0 -30.5 -29.4 -30.7 -45.2 -43.4 Singapore DBS Group Holdings DBS SP 19.28 34.4 28.64 16.65 -25.5 10.8 -26.8 -22.2 -29.6 -34.4 4.3 OCBC Banking OCBC SP 8.86 27.4 12.19 7.80 -19.3 9.7 -20.9 -17.5 -24.7 -35.5 -7.0 United Overseas Bank UOB SP 20.02 23.5 27.76 17.28 -24.2 9.1 -25.1 -22.5 -24.7 -31.8 -5.7 Note: Based on April 17, 2020 closing prices Source: Bloomberg, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 April 22, 2020 Banks

Table 4. Global banks: Key valuation metrics Div. yield Div. payout P/E (x) P/B (x) ROE (%) ROA (%) EPS growth (%) Nation Bank Ticker (%) ratio (%) FY1 FY2 FY1 FY2 FY0 FY1 FY2 FY0 FY1 FY2 FY1 FY2 FY1 FY2 FY0 FY1 FY2 US JPMorgan Chase JPM US 16.2 10.7 1.23 1.18 14.5 7.1 11.1 1.27 0.64 0.94 3.8 3.9 31.5 31.5 19.1 -45.3 52.4 Bank of America BAC US 14.3 10.1 0.82 0.78 10.5 6.5 8.2 1.12 0.66 0.81 3.2 3.4 23.8 23.8 11.9 -44.5 41.7 Wells Fargo WFC US 18.8 9.8 0.72 0.70 11.3 3.7 7.1 1.10 0.39 0.65 7.2 7.3 47.1 47.1 1.5 -63.4 90.7 Citigroup C US 12.8 7.1 0.54 0.50 9.6 4.6 7.6 0.93 0.48 0.65 4.5 4.8 24.2 24.2 15.6 -53.7 79.0 Goldman Sachs GS US 13.5 8.4 0.80 0.75 10.0 6.3 9.0 0.88 0.47 0.70 2.8 2.9 19.6 19.6 0.7 -44.0 60.8 Morgan Stanley MS US 10.5 8.3 0.81 0.78 10.9 7.5 8.8 0.93 0.64 0.77 3.7 3.9 24.7 24.7 8.0 -25.0 25.7 BNY Mellon BK US 10.3 10.0 0.85 0.80 10.1 8.7 8.1 1.12 0.83 0.78 3.3 3.4 26.2 26.2 -4.5 -9.3 2.4 Canada Royal Bank of Canada RY CN 9.9 9.6 1.56 1.41 16.9 15.9 15.4 0.90 0.77 0.75 4.9 5.2 46.4 46.4 3.9 -1.1 4.1 UK HSBC Holdings HSBA LN 11.0 9.5 0.62 0.62 8.0 5.1 5.6 0.55 0.30 0.36 7.2 9.3 172.0 172.0 1.5 -35.6 15.9 Lloyds Banking Group LLOY LN 7.1 6.5 0.52 0.51 12.9 6.9 8.9 0.47 0.30 0.44 7.2 9.2 94.0 94.0 13.8 -45.2 9.3 Barclays BARC LN 8.5 5.0 0.29 0.28 6.2 4.0 6.4 0.30 0.20 0.32 6.2 8.2 48.8 48.8 10.7 -56.6 70.1 Royal Bank of Scotland RBS LN 10.0 6.1 0.35 0.35 7.7 1.2 4.7 0.40 0.04 0.24 8.0 9.5 84.8 84.8 21.0 -72.7 64.2 Standard Chartered STAN LN 11.1 7.0 0.36 0.34 5.6 4.2 5.1 0.41 0.17 0.28 4.9 6.3 46.4 46.4 24.5 -39.4 57.7 France Societe Generale GLE FP 9.1 4.8 0.21 0.21 5.5 3.2 4.4 0.24 0.12 0.21 7.6 9.5 73.3 73.3 -27.7 -62.2 90.4 BNP Paribas BNP FP 7.2 4.8 0.31 0.30 7.9 4.7 6.2 0.38 0.15 0.32 9.1 10.0 50.0 50.0 7.1 -42.5 51.7 Credit Agricole ACA FP 8.0 5.6 0.32 0.31 7.1 4.1 4.9 0.25 0.29 0.37 5.4 9.4 93.2 93.2 11.1 -40.9 42.0 Germany Deutsche Bank DBK GR N/A 39.2 0.24 0.24 -7.6 -3.3 0.2 -0.35 -0.17 0.00 0.2 1.0 N/A N/A -33.8 -276.4 130.0 Commerzbank CBK GR 59.5 9.3 0.14 0.14 2.3 0.5 1.9 0.16 0.05 0.15 2.2 3.6 28.4 28.4 -16.0 -91.0 537.7 Switzerland Credit Suisse CSGN SW 7.4 6.2 0.42 0.40 7.4 6.7 7.2 0.41 0.33 0.38 3.2 3.8 19.8 19.8 42.2 -28.2 18.5 Spain Banco Santander SAN SM 8.2 5.0 0.32 0.31 7.0 5.6 6.5 0.43 0.38 0.46 4.2 9.8 58.7 58.7 0.9 -48.7 62.9 BBVA BBVA SM 7.4 5.3 0.36 0.35 8.9 5.6 6.6 0.64 0.44 0.50 4.3 8.0 49.3 49.3 -1.4 -45.5 38.3 Italy Intesa Sanpaolo ISP IM 7.9 7.6 0.46 0.46 7.8 5.7 5.9 0.50 0.36 0.38 9.9 10.0 81.6 81.6 11.2 -40.1 4.0 Unicredit UCG IM 7.5 6.0 0.28 0.27 5.9 2.2 3.5 0.44 0.04 0.24 4.8 6.4 68.9 68.9 21.8 -56.5 23.9 Netherlands ING INGA NA 6.1 5.3 0.34 0.33 9.5 6.1 6.7 0.57 0.31 0.38 6.9 9.8 56.2 56.2 -11.2 -35.4 15.5 Australia CommBank CBA AU 13.3 14.3 1.52 1.51 12.7 11.8 10.8 0.88 0.85 0.80 5.8 5.5 91.1 91.1 -9.0 -4.3 -7.1 Westpac WBC AU 11.6 10.0 0.83 0.81 11.1 7.8 8.1 0.79 0.58 0.62 6.0 7.4 89.0 89.0 -16.5 -30.9 15.5 National Australia Bank NAB AU 9.5 9.5 0.85 0.83 9.9 9.3 8.7 0.61 0.63 0.62 6.7 7.7 94.4 94.4 -13.3 -3.6 0.1 ANZ ANZ AU 9.5 9.6 0.76 0.74 10.9 8.4 7.6 0.68 0.53 0.51 6.5 7.4 72.5 72.5 -4.3 -17.7 -1.3 Macquarie MQG AU 12.3 12.8 1.76 1.73 17.5 15.3 13.9 1.55 1.32 1.20 5.5 5.3 65.1 65.1 16.5 -7.6 -4.2 Brazil Itau Unibanco S-Pref ITUB4 BZ 8.7 7.9 1.57 1.46 21.7 18.6 19.3 1.66 1.37 1.39 7.5 7.4 69.3 69.3 10.6 -5.0 10.3 UAE First Abu Dhabi Bank FAB DH 11.9 12.0 1.20 1.16 12.8 12.6 11.9 1.63 1.33 1.33 5.6 5.6 67.5 67.5 4.3 -17.8 -0.6 China ICBC/H 1398 HK 5.2 5.1 0.61 0.56 12.9 11.9 11.5 1.08 1.02 0.98 5.8 6.0 30.4 30.4 4.9 4.0 3.2 China Construction 939 HK 5.2 4.9 0.61 0.56 13.1 12.2 11.7 1.11 1.03 1.01 6.0 6.2 30.4 30.4 4.7 3.1 4.8 Bank /H Agricultural Bank of 1288 HK 4.6 4.5 0.51 0.47 12.4 11.4 11.0 0.90 0.82 0.79 6.4 6.9 30.7 30.7 0.0 3.7 3.9 Chin a/ H Bank of China/H 3988 HK 4.3 4.2 0.45 0.41 11.3 10.4 10.2 0.87 9.83 10.47 7.2 7.5 31.1 31.1 4.1 3.4 2.2 Japan Mitsubishi UFJ 8306 JP 7.4 6.6 0.32 0.31 6.2 4.5 4.7 0.31 0.26 0.26 6.1 6.4 32.9 32.9 -10.2 -17.0 13.4 SMBC 8316 JP 5.2 5.7 0.34 0.32 7.2 6.7 5.9 0.43 0.38 0.29 6.8 7.1 34.6 34.6 -0.1 0.2 -8.4 Mizuho Financial Group 8411 JP 6.5 7.9 0.35 0.34 4.0 5.4 4.2 0.20 0.24 0.15 6.2 6.2 197.2 197.2 -83.3 388.7 -17.1 Resona Holdings 8308 JP 5.0 5.4 0.33 0.32 8.1 7.1 6.2 0.35 0.27 0.22 6.5 6.7 27.9 27.9 -24.8 -14.4 -8.5 Singapore DBS Group Holdings DBS SP 9.2 8.6 0.96 0.91 13.1 9.9 10.8 1.12 0.91 0.96 6.4 6.6 49.2 49.2 15.0 -15.4 7.8 OCBC Banking OCBC SP 9.2 8.5 0.82 0.78 11.2 9.1 9.7 1.06 0.97 0.94 6.0 6.1 48.1 48.1 3.1 -12.3 7.8 United Overseas Bank UOB SP 9.3 8.6 0.85 0.81 11.6 9.3 9.8 1.09 0.93 0.95 5.8 6.2 51.1 51.1 1.9 -12.1 8.4 Note: Based on April 17, 2020 closing prices Source: Bloomberg, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 6 April 22, 2020 Banks

Shinhan Financial Group (055550 KS) Solid 1Q20 earnings and share cancellation

Banks 1Q20 preview: In-line net profit of W867.3bn For 1Q20, we forecast Shinhan Financial Group (SFG) to report net profit attributable to (Maintain) Buy controlling interests of W867.3bn (-5.6% YoY, +70.9% QoQ), in line with the consensus (W864.4bn based on Bloomberg, W863.6bn based on FnGuide). Other than preemptive Target Price (12M, W) 41,000 provisioning related to German Heritage DLS, we do not believe there were any major one-off items. Share Price (04/17/20, W) 28,500 Results likely solid overall, aside from NIM decline Expected Return 44% In 1Q20, we believe SFG’s bank-level NIM declined 5bps QoQ, which is slightly better than our previous forecast (-6bps QoQ). We believe a slight pickup in bond yields amid

NP (20F, Wbn) 3,226 heightened credit concerns (March), together with low-cost core deposit growth, Consensus NP (20F, Wbn) 3,123 provided some NIM support. We expect NIM to contract another 5bps QoQ in 2Q20 and 3bps QoQ in 3Q20. Bank won-denominated loans likely grew 2.8% QoQ, aided by sharp EPS Growth (20F, %) -9.1 corporate lending growth amid the COVID-19 pandemic. For the full year, we revised up Market EPS Growth (20F, %) 38.4 our loan growth forecast to 5.3%. We believe core income was strong in 1Q20, with P/E (20F, x) 4.4 group net interest income of W2.42tr (+1.8% YoY, -1.8% QoQ) and net commission Market P/E (20F, x) 11.9 income of W510.1bn (+6.3% YoY, -2.3% QoQ). Meanwhile, group-wide credit costs likely KOSPI 1,914.53 expanded to W342.9 (+36.7% YoY, +68.3% QoQ), with the credit cost ratio rising to 43bps Market Cap (Wbn) 13,749 (annualized; +9bps YoY, +17bps QoQ). Shares Outstanding (mn) 500 Free Float (%) 82.5 Set for W150bn share cancellation Foreign Ownership (%) 64.1 On March 26 th , SFG’s board of directors (BOD) approved a W150bn share cancellation in Beta (12M) 1.02 order to offset the dilution of shareholder value resulting from its acquisition of the 52-Week Low 22,200 remaining stake in Orange Life Insurance. Based on the March 25 th closing price 52-Week High 48,000 (W27,350 per share), a total of 5,484,460 shares will be repurchased and cancelled over a (%) 1M 6M 12M three-month period. While this would normally commence the day after BOD approval, th Absolute 13.1 -33.3 -37.4 actual share repurchases will begin on April 28 , as share repurchases are banned for Relative -1.2 -27.6 -26.6 three months after the cancellation of treasury shares under the Financial Investment Services and Capital Markets Act. 120 Shinhan Financial Group KOSPI 100 Whatever the scale, we believe the share cancellation plan—like that of KBFG—is positive from a shareholder value enhancement perspective. It also suggests SFG will be 80 able to gradually improve shareholder value through efficient capital policies, in our

60 view.

40 Maintain Buy and TP of W41,000 4.19 8.19 12.19 4.20 We expect SFG to weather the ongoing challenges on the back of its strong risk management capabilities, business portfolio diversification, global growth, full ownership of Orange Life Insurance, and acquisition of long-term rental car assets.

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 7,843 8,580 9,720 9,657 9,902 10,135 Net non-interest inc. (Wbn) 1,341 1,399 1,415 1,667 1,795 1,878 Heather Kang Operating profit (Wbn) 3,829 4,499 5,049 4,746 4,943 5,129 +822 -3774 -1903 Net profit (Wbn) 2,918 3,157 3,403 3,226 3,341 3,445 [email protected] EPS (W) 6,153 6,657 7,170 6,518 6,646 6,853 EPS growth (%) 6.7 8.2 7.7 -9.1 2.0 3.1 P/E (x) 4.6 4.3 4.0 4.4 4.3 4.2 P/PPOP (x) 3.1 2.6 2.3 2.3 2.2 2.1 P/B (x) 0.41 0.38 0.35 0.34 0.31 0.29 ROE (%) 9.1 9.2 9.1 7.9 7.6 7.3 Dividend yield (%) 5.1 5.6 6.5 6.0 6.3 6.7 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 7 April 22, 2020 Banks

Table 5. SFG: 1Q20 preview YoY chg. QoQ chg. (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%,%p) Net interest income 2,171.8 2,228.1 2,381.5 2,398.9 2,472.7 2,466.6 2,423.2 1.8 -1.8 Net fee/commission income 479.4 463.7 479.9 609.3 530.3 522.2 510.1 6.3 -2.3 Net other income -214.6 -225.2 -131.8 -87.6 -138.1 -369.3 -100.4 RR RR Total net operating income 2,436.6 2,466.5 2,729.5 2,920.5 2,864.9 2,619.5 2,832.9 3.8 8.1 SG&A expenses 1,089.2 1,439.0 1,168.4 1,236.3 1,225.6 1,504.3 1,224.0 4.8 -18.6 PPOP 1,347.4 1,027.5 1,561.2 1,684.2 1,639.2 1,115.2 1,608.9 3.1 44.3 Provisions 214.8 170.6 250.8 274.9 221.3 203.8 342.9 36.7 68.3 Operating profit 1,132.6 856.9 1,310.3 1,409.3 1,417.9 911.4 1,266.0 -3.4 38.9 Non-operating income 33.7 -59.4 12.2 4.8 -1.6 -152.8 1.7 -86.1 TTB Pretax profit 1,166.3 797.5 1,322.5 1,414.0 1,416.3 758.6 1,267.7 -4.1 67.1 Net profit (controlling interests) 847.8 513.3 918.4 996.1 981.6 507.5 867.3 -5.6 70.9

Total assets 457,709 459,601 513,865 530,149 546,005 552,420 518,372 0.9 -6.2 Total loans/receivables 292,360 299,609 307,960 311,472 317,058 323,245 330,012 7.2 2.1 Won-denominated loans (bank) 205,188 209,568 215,007 219,230 220,737 225,002 231,302 7.6 2.8 Total credit 281,369 287,918 295,961 302,193 305,648 312,243 317,642 7.3 1.7 Total deposits 260,651 265,000 273,848 280,382 284,142 297,874 305,231 11.5 2.5 Total shareholders' equity 36,017 36,651 38,594 40,737 41,757 41,930 43,545 12.8 3.9

(%) NIM (bank) 1.62 1.61 1.61 1.58 1.53 1.46 1.41 -0.20 -0.05 Cost-to-income ratio 44.7 58.3 42.8 42.3 42.8 57.4 43.2 0.4 -14.2 NPL (substandard & below) ratio 0.55 0.53 0.54 0.59 0.60 0.52 0.59 0.05 0.06 NPL coverage ratio 290.7 301.8 297.2 277.6 265.4 291.5 281.2 -16.0 -10.3 RoA (based on avg. value) 0.19 0.11 0.19 0.19 0.18 0.09 0.16 -0.03 0.07 RoE (based on avg. value) 2.46 1.45 2.55 2.68 2.55 1.30 2.17 -0.38 0.87 Credit cost ratio 0.08 0.06 0.08 0.09 0.07 0.07 0.11 0.02 0.04 BIS ratio 15.25 14.87 14.02 14.26 14.17 13.96 14.97 0.94 1.01 Tier 1 ratio 13.79 13.42 12.67 12.84 12.61 12.40 13.36 0.69 0.96 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on the old formula, which includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 6. SFG: Earnings forecast revisions Revised Previous Change (%) (Wbn) 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F Net interest income 9,657 9,902 10,135 9,521 9,757 9,990 1.4 1.5 1.5 Net non-interest income 1,667 1,795 1,878 1,620 1,804 1,878 2.9 -0.5 0.0 Total net operating income 11,325 11,697 12,013 11,141 11,561 11,868 1.6 1.2 1.2 SG&A expenses 5,345 5,433 5,477 5,350 5,438 5,482 -0.1 -0.1 -0.1 PPOP 5,979 6,264 6,536 5,791 6,123 6,387 3.2 2.3 2.3 Provisions 1,233 1,321 1,407 1,128 1,213 1,305 9.3 8.9 7.8 Operating profit 4,746 4,943 5,129 4,663 4,910 5,081 1.8 0.7 0.9 Non-operating income 2 2 1 2 2 1 0.0 0.0 0.0 Pretax profit 4,748 4,944 5,130 4,665 4,911 5,083 1.8 0.7 0.9 Net profit (controlling interests) 3,226 3,341 3,445 3,166 3,317 3,411 1.9 0.7 1.0 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 8 April 22, 2020 Banks

Table 7. SFG: TP calculation

Sustainable ROE 7.00% Growth 2.00% Cost of equity 12.22%

Cost of equity 12.22% Rf 2.50% Beta 1.62 Market premium 6.00%

Fair P/B (x) 0.49 2020F BPS (W) 83,890 TP (W) 41,000 Source: Mirae Asset Daewoo Research estimates

Table 8. SFG: Valuation metrics at TP of W41,000 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.59 0.54 0.50 0.49 0.45 0.42 P/E (x) 6.7 6.2 5.7 6.3 6.2 6.0 ROE (%) 9.1 9.2 9.1 7.9 7.6 7.3 EPS growth (%) 6.7 8.2 7.7 -9.1 2.0 3.1 Dividend yield (%) 3.5 3.9 4.5 4.1 4.4 4.6 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 9 April 22, 2020 Banks

Table 9. SFG: Quarterly earnings

(Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 2,058.8 2,121.4 2,171.8 2,228.1 2,381.5 2,398.9 2,472.7 2,466.6 2,423.2 2,387.9 2,403.9 2,442.2 Net commissions income 482.6 513.3 479.4 463.7 479.9 609.3 530.3 522.2 510.1 567.6 542.3 557.2 Net other non-interest income -98.1 -1.6 -214.6 -225.2 -131.8 -87.6 -138.1 -369.3 -100.4 -116.5 -133.3 -159.6 Total net operating income 2,443.3 2,633.1 2,436.6 2,466.5 2,729.5 2,920.5 2,864.9 2,619.5 2,832.9 2,839.0 2,812.9 2,839.9 SG&A expenses 1,087.0 1,126.4 1,089.2 1,439.0 1,168.4 1,236.3 1,225.6 1,504.3 1,224.0 1,279.5 1,263.3 1,578.4 PPOP 1,356.3 1,506.7 1,347.4 1,027.5 1,561.2 1,684.2 1,639.2 1,115.2 1,608.9 1,559.5 1,549.5 1,261.5 Provisions 179.4 173.8 214.8 170.6 250.8 274.9 221.3 203.8 342.9 282.7 277.6 329.9 Operating profit 1,176.9 1,332.9 1,132.6 856.9 1,310.3 1,409.3 1,417.9 911.4 1,266.0 1,276.9 1,271.9 931.6 Non-operating income 17.1 -24.1 33.7 -59.4 12.2 4.8 -1.6 -152.8 1.7 15.5 14.2 -29.5 Pretax profit 1,194.0 1,308.8 1,166.3 797.5 1,322.5 1,414.0 1,416.3 758.6 1,267.7 1,292.4 1,286.1 902.1 Net profit (controlling 857.5 938.1 847.8 513.3 918.4 996.1 981.6 507.5 867.3 883.7 877.6 597.5 interests) Notes: Net interest income and net other non-interest income differ from the data in SFG’s IR materials, as interest expenses in li abilities under insurance contracts, which are booked as non-interest expenses in financial statements, were classified as interest expenses in IR materials; the figures above are derived from financial statements. Source: Company data, Mirae Asset Daewoo Research estimates

Table 10. SFG: Annual earnings

(Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 6,602.9 6,789.8 6,692.9 7,205.4 7,843.0 8,580.1 9,719.6 9,657.2 9,901.8 10,135.3 Net commissions income 1,386.4 1,469.2 1,621.0 1,565.5 1,711.0 1,939.0 2,141.7 2,177.2 2,186.2 2,256.0 Net other non-interest income 35.1 -191.3 165.3 11.4 -369.7 -539.5 -726.9 -509.7 -391.3 -378.5 Total net operating income 8,024.3 8,067.6 8,479.2 8,782.3 9,184.2 9,979.5 11,134.4 11,324.7 11,696.7 12,012.8 SG&A expenses 4,202.5 4,462.9 4,475.1 4,508.6 4,811.2 4,741.6 5,134.7 5,345.2 5,433.2 5,476.7 PPOP 3,821.7 3,604.8 4,004.2 4,273.8 4,373.0 5,238.0 5,999.7 5,979.5 6,263.6 6,536.2 Provisions 1,184.2 949.9 1,031.0 1,165.1 544.4 738.6 950.8 1,233.1 1,320.6 1,407.0 Operating profit 2,637.6 2,654.8 2,973.1 3,108.6 3,828.6 4,499.4 5,048.9 4,746.4 4,942.9 5,129.2 Non-operating income 44.6 212.8 167.4 61.8 -32.4 -32.8 -137.4 1.9 1.5 1.2 Pretax profit 2,682.1 2,867.6 3,140.6 3,170.5 3,796.2 4,466.6 4,911.5 4,748.3 4,944.4 5,130.4 Net profit (controlling 1,902.8 2,081.1 2,367.2 2,774.8 2,917.9 3,156.7 3,403.5 3,226.0 3,341.1 3,445.4 interests) Notes: Net interest income and net other non-interest income differ from the data in SFG’s IR materials, as interest expenses in liabilities under insurance contracts, which are booked as non-interest expenses in financial statements, were classified as interest expenses in IR materials; the figures above are derived from financial statements. Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 10 April 22, 2020 Banks

Shinhan Financial Group (055550 KS/Buy/TP: W41,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 15,689 15,079 15,191 15,515 Cash & dues 28,424 28,493 28,246 28,383 Interest expense 5,969 5,421 5,289 5,380 Securities 162,408 130,797 131,258 132,533 Net interest income 9,720 9,657 9,902 10,135 Net loans and receivables 323,245 339,162 347,744 361,241 Net fees and commissions 2,142 2,177 2,186 2,256 Tangible assets 4,572 4,485 4,347 4,269 Net other non-interest income -727 -510 -391 -378 Other assets 33,771 33,535 33,230 33,044 Total net operating income 11,134 11,325 11,697 12,013 Total assets 552,420 536,471 544,825 559,472 G&A expenses 5,135 5,345 5,433 5,477 Deposits 297,874 310,732 315,706 325,791 PPOP 6,000 5,979 6,264 6,536 Borrowings 34,863 34,178 33,473 32,902 Total provision expenses 951 1,233 1,321 1,407 Debentures 75,363 75,369 75,254 75,393 Operating profit 5,049 4,746 4,943 5,129 Other liabilities 102,388 71,047 71,656 72,729 Net non-operating income -137 2 2 1 Total liabilities 510,489 491,326 496,089 506,816 Income before income taxes 4,912 4,748 4,944 5,130 Capital stock 2,732 2,732 2,572 2,572 Income tax expense 1,269 1,306 1,360 1,411 Hybrid securities 1,731 1,731 1,731 1,731 Net profit 3,642 3,443 3,585 3,720 Capital surplus 10,565 11,228 11,218 11,218 Net profit (ex. minority interest) 3,403 3,226 3,341 3,445 Retained earnings 25,526 28,011 31,522 35,168 Normalized net profit 3,403 3,226 3,341 3,445 Capital adjustments -1,117 -1,267 -1,267 -1,267 Other comprehensive income -260 -260 -253 -253 Core income 11,861 11,834 12,088 12,391 Non-controlling interests 2,752 2,969 3,213 3,487 Core PPOP 6,727 6,489 6,655 6,915 Total shareholders' equity 41,930 45,145 48,736 52,656

DuPont analysis (%) Key ratios (%) Interest income 3.10 2.77 2.81 2.81 Growth (YoY) Interest expense 1.18 1.00 0.98 0.97 W loan growth (Bank) 7.4 5.3 4.3 4.0 Net interest income 1.92 1.77 1.83 1.84 Net loans & receivables growth 7.9 4.9 2.5 3.9 Net commissions income 0.42 0.40 0.40 0.41 Deposit growth 12.4 4.3 1.6 3.2 Net other non-interest income -0.14 -0.09 -0.07 -0.07 Shareholders' equity growth 14.4 7.7 8.0 8.0 Total net operating profit 2.20 2.08 2.16 2.18 Total assets growth 20.2 -2.9 1.6 2.7 G&A expenses 1.02 0.98 1.01 0.99 Net interest income growth 13.3 -0.6 2.5 2.4 PPOP 1.19 1.10 1.16 1.18 Net fee income growth 10.5 1.7 0.4 3.2 Total provision expenses 0.19 0.23 0.24 0.26 PPOP growth 14.5 -0.3 4.8 4.4 Net non-operating income -0.03 0.00 0.00 0.00 Operating profit growth 12.2 -6.0 4.1 3.8 Income before income taxes 0.97 0.87 0.92 0.93 Net profit growth 7.8 -5.2 3.6 3.1 Income tax expense 0.25 0.24 0.25 0.26 Profitability Net profit (non-controlling) 0.05 0.04 0.05 0.05 Net interest spread (Bank) 1.81 1.64 1.64 1.64 ROA 0.67 0.59 0.62 0.62 Net interest margin (Bank) 1.54 1.36 1.36 1.36 Leverage (x) 13.5 13.4 12.3 11.7 PPOP margin 1.2 1.1 1.2 1.2 ROE 9.09 7.93 7.62 7.28 ROA 0.7 0.6 0.6 0.6 Asset quality (%) ROE 9.1 7.9 7.6 7.3 NPL ratio 0.53 0.54 0.52 0.49 Liquidity Broad NPL ratio 1.18 1.22 1.19 1.16 W LDR (excl. CDs) (Bank) 95.4 95.4 95.4 95.4 NPL coverage ratio 291.5 295.9 308.8 320.6 Loans to assets 58.5 63.2 63.8 64.6 Reserves to total credits 1.5 1.6 1.6 1.6 Capital adequacy Credit cost (% of total loans) 0.29 0.36 0.38 0.39 Total CAR 14.0 14.6 14.7 14.8 Credit cost (% of total credit) 0.31 0.38 0.39 0.40 Tier 1 CAR 12.4 13.1 13.6 14.0 Per share items (W) Tier 2 CAR 1.6 1.4 1.1 0.9 EPS (reported) 7,170 6,518 6,646 6,853 Operating efficiency EPS (normalized) 7,170 6,518 6,646 6,853 Cost to income 46.1 47.2 46.5 45.6 BVPS 81,209 83,890 90,549 97,801 Cost to assets 0.9 1.0 1.0 1.0 DPS (common share) 1,850 1,700 1,800 1,900 Dividend PPOP/ share 12,639 12,081 12,459 13,001 Payout ratio 26.0 26.5 27.0 27.6 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 11 April 22, 2020 Banks

KB Financial Group (105560 KS) Earnings to improve in 2Q20

Banks 1Q20 preview: Net profit of W789.9bn For 1Q20, we expect KB Financial Group (KBFG) to post net profit attributable to (Maintain) Buy controlling interests of W789.9bn (-6.6% YoY, +47.7% QoQ), slightly below the consensus (W800.8bn based on Bloomberg and W804.5bn based on FnGuide). While core income Target Price (12M, W) 48,500 (net interest and net fee/commission income) was likely solid, we anticipate large other non-interest losses owing to the weakness of the stock market and won amid COVID-19. Share Price (04/17/20, W) 32,350 Earnings to pick up in 2Q20 Expected Return 50% In 1Q20, we estimate bank NIM fell 5bps QoQ to 1.56%. We think NIM held up slightly better than our previous forecast thanks to low-cost core deposit growth. We expect NIM

NP (20F, Wbn) 3,052 to contract another 5bps in 2Q20 and 3bps in 3Q20. We believe bank won-denominated Consensus NP (20F, Wbn) 3,009 loans expanded 3.2% QoQ in 1Q20, aided by corporate lending growth amid the COVID- 19 pandemic. For 2020, we expect loan growth of 6.1%, higher than our previous EPS Growth (20F, %) -7.5 projection. In 1Q20, we think group core income was solid, with net interest income of Market EPS Growth (20F, %) 38.4 W2.29tr (+1.7% YoY, -1.6% QoQ) and net fee/commission income of W564.1bn (+2.4% P/E (20F, x) 4.4 YoY, -11.6% QoQ). On the other hand, other non-interest income was likely hurt by losses Market P/E (20F, x) 11.9 related to: 1) massive ELS hedges; 2) investment securities; 3) the won’s weakness; and 4) KOSPI 1,914.53 a credit valuation adjustment (CVA) stemming from the widening credit spread. These Market Cap (Wbn) 13,451 losses are unlikely to recur in 2Q20. We estimate SG&A expenses at W1.53tr (+1.3% YoY, - Shares Outstanding (mn) 416 15.4% QoQ) in 1Q20, with contributions to the in-house welfare fund likely declining YoY Free Float (%) 76.9 due to the economic downturn and earnings weakness. We estimate credit costs were Foreign Ownership (%) 66.2 well-contained at W210.5bn (+9.8% YoY, +0.1% QoQ), resulting in a credit cost ratio of Beta (12M) 0.85 24bps (annualized). 52-Week Low 26,050 52-Week High 50,000 Maintain Buy and TP of W48,500; Our top pick

(%) 1M 6M 12M KBFG’s valuation has plunged to below financial crisis levels, weighed down by falling Absolute 8.4 -24.6 -29.9 bond yields and concerns about liquidity and a recession due to the spread of COVID-19. Relative -5.3 -18.2 -17.8 However, we believe the group has healthier fundamentals and stronger earnings power than it did during the financial crisis. Of note, KBFG has robust equity capital that 130 KB Financial Group KOSPI can act as a buffer against losses. As of end-2019, KBFG’s CET1 ratio stood at 13.58%, the 110 highest in the domestic sector (vs. 11.12% for SFG and 11.96% for HFG) and higher than those of global systemically important banks (G-SIBs) like JPMorgan Chase (12.4%), Bank 90 of America (11.2%), and Citigroup (11.7%). KBFG expects the Prudential acquisition to 70 lower its CET1 ratio by around 70-80bps. Based on this assumption, we believe the

50 group will continue to maintain the strongest capital position in the industry even after 4.19 8.19 12.19 4.20 the deal. Given its robust capital position, inorganic growth momentum, and portfolio diversification, we recommend KBFG as one of our top picks, along with HFG.

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 7,853 8,905 9,197 9,187 9,506 9,857 Net non-interest inc. (Wbn) 2,339 1,955 2,235 2,321 2,531 2,640 Heather Kang Operating profit (Wbn) 4,016 4,267 4,491 4,202 4,425 4,653 +822 -3774 -1903 Net profit (Wbn) 3,312 3,061 3,312 3,052 3,213 3,378 [email protected] EPS (W) 8,036 7,321 7,924 7,331 7,727 8,125 EPS growth (%) 45.6 -8.9 8.2 -7.5 5.4 5.1 P/E (x) 4.0 4.4 4.1 4.4 4.2 4.0 P/PPOP (x) 2.9 2.7 2.6 2.6 2.4 2.3 P/B (x) 0.40 0.38 0.35 0.32 0.30 0.28 ROE (%) 10.2 8.8 8.9 7.6 7.4 7.3 Dividend yield (%) 5.9 5.9 6.8 6.5 7.1 7.7 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 12 April 22, 2020 Banks

Table 11. KBFG: 1Q20 preview YoY chg. QoQ chg. (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%,%p) Net interest income 2,251.3 2,313.5 2,252.1 2,297.1 2,319.4 2,328.2 2,290.0 1.7 -1.6 Net fee/commission income 523.0 495.7 550.6 585.0 580.8 638.5 564.1 2.4 -11.6 Net other income 30.9 -330.9 62.1 17.0 -30.1 -169.0 -27.0 TTR RR Total net operating income 2,805.2 2,478.3 2,864.8 2,899.2 2,870.2 2,797.7 2,827.1 -1.3 1.1 SG&A expenses 1,330.5 1,844.2 1,513.9 1,487.0 1,455.9 1,814.3 1,534.1 1.3 -15.4 PPOP 1,474.6 634.1 1,351.0 1,412.2 1,414.3 983.3 1,293.0 -4.3 31.5 Provisions 146.4 245.9 191.7 102.0 166.1 210.3 210.5 9.8 0.1 Operating profit 1,328.2 388.1 1,159.2 1,310.2 1,248.2 773.1 1,082.5 -6.6 40.0 Non-operating income 0.7 -62.0 6.7 48.6 12.0 -24.0 7.0 4.6 TTB Pretax profit 1,328.9 326.1 1,165.9 1,358.8 1,260.1 749.1 1,089.5 -6.6 45.4 Net profit (controlling interests) 953.8 192.4 845.7 991.2 940.3 534.7 789.9 -6.6 47.7

Total assets 477,716 479,588 490,694 498,179 506,195 518,538 504,170 2.7 -2.8 Total loans/receivables 316,431 319,202 320,943 324,900 326,329 339,684 332,035 3.5 -2.3 Won-denominated loans (bank) 252,055 257,399 258,088 259,763 261,081 269,006 277,614 7.6 3.2 Total credit 311,814 316,737 316,993 319,513 323,400 334,553 344,482 8.7 3.0 Total deposits 271,155 276,770 282,733 288,423 288,637 305,593 315,015 11.4 3.1 Total shareholders' equity 35,589 35,713 35,827 37,202 38,740 39,119 39,928 11.4 2.1

(%) NIM (bank) 1.72 1.70 1.71 1.70 1.67 1.61 1.56 -0.15 -0.05 Cost-to-income ratio 47.4 74.4 52.8 51.3 50.7 64.9 54.3 1.4 -10.6 NPL (substandard & below) ratio 0.61 0.61 0.60 0.59 0.55 0.49 0.52 -0.08 0.02 NPL coverage ratio 261.1 263.3 264.4 263.6 275.3 301.8 276.9 12.5 -24.9 RoA (based on avg. value) 0.20 0.04 0.17 0.20 0.19 0.10 0.15 -0.02 0.05 RoE (based on avg. value) 2.72 0.54 2.36 2.72 2.50 1.39 2.03 -0.34 0.63 Credit cost ratio 0.05 0.08 0.06 0.03 0.05 0.06 0.06 0.00 0.00 BIS ratio 14.91 14.60 14.76 15.04 15.25 14.48 15.14 0.38 0.66 Tier 1 ratio 14.38 13.97 14.11 14.40 14.64 13.87 14.55 0.44 0.68 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on the old formula, which includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 12. KBFG: Earnings forecast revisions Revised Previous % chg. (Wbn) 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F Net interest income 9,187 9,506 9,857 9,003 9,312 9,654 2.0 2.1 2.1 Net non-interest income 2,321 2,531 2,640 2,441 2,559 2,670 -4.9 -1.1 -1.1 Total net operating income 11,508 12,037 12,497 11,443 11,872 12,323 0.6 1.4 1.4 SG&A expenses 6,352 6,448 6,545 6,322 6,417 6,514 0.5 0.5 0.5 PPOP 5,156 5,589 5,951 5,122 5,454 5,809 0.7 2.5 2.4 Provisions 954 1,164 1,299 920 1,135 1,267 3.7 2.6 2.5 Operating profit 4,202 4,425 4,653 4,202 4,320 4,542 0.0 2.4 2.4 Non-operating income 7 7 7 7 7 7 0.0 0.0 0.0 Pretax profit 4,209 4,432 4,660 4,209 4,327 4,549 0.0 2.4 2.4 Net profit (controlling interests) 3,052 3,213 3,378 3,052 3,137 3,298 0.0 2.4 2.4 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 13 April 22, 2020 Banks

Figure 1. Financial holding companies’ BIS ratios (end-2019) Figure 2. Banks’ BIS ratios (end-2019)

(%) Tier 1 capital ratio Tier 2 capital ratio CET1 ratio (%) Tier 1 capital ratio Tier 2 capital ratio CET1 ratio 20 20 18 18 15.85 15.91 16.12 16.12 15.38 15.34 16.02 16 16 1.17 14.47 14.42 14.48 2.61 2.24 2.04 2.25 14.12 13.90 13.95 14 2.23 2.44 0.62 2.50 1.52 14 12.95 13.16 14.38 2.65 1.56 1.28 12.32 12 13.80 13.32 11.89 1.99 12.75 12.80 12 13.58 1.82 1.40 10 2.04 10.96 11.46 10.96 11.41 10 11.96 8 10.30 11.12 14.68 13.30 13.88 13.15 14.08 12.90 12.90 13.77 8 9.54 9.54 9.67 6 11.97 11.47 13.86 8.39 6 12.34 12.67 4 11.13 10.92 11.17 9.85 2 4 0 KEB HanaKEB Busan Daegu 2 Kookmin Shinhan Woori IBK Kyongnam Kwangju Jeonbuk 0 KBFG SFG HFG WFG BNKFG DGBFG JBFG

Source: FSS, Mirae Asset Daewoo Research Source: FSS, Mirae Asset Daewoo Research

Table 13. KBFG: TP calculation

Sustainable ROE 6.90% Growth 2.00% Cost of equity 12.10%

Cost of equity 12.10% Rf 2.50% Beta 1.60 Market premium 6.00%

Fair P/B (x) 0.49 2020F BPS (W) 100,263 TP (W) 48,500 Source: Mirae Asset Daewoo Research estimates

Table 14. KBFG: Valuation metrics at TP of W48,500 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.60 0.57 0.52 0.48 0.45 0.42 P/E (x) 6.0 6.6 6.1 6.6 6.3 6.0 ROE (%) 10.2 8.8 8.9 7.6 7.4 7.3 EPS growth (%) 45.6 -8.9 8.2 -7.5 5.4 5.1 Dividend yield (%) 4.0 4.0 4.6 4.4 4.7 5.2 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 14 April 22, 2020 Banks

Table 15. KBFG: Quarterly earnings (Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 2,143.8 2,196.4 2,251.3 2,313.5 2,252.1 2,297.1 2,319.4 2,328.2 2,290.0 2,275.5 2,291.2 2,329.9 Net non-interest income 628.9 595.8 523.0 495.7 550.6 585.0 580.8 638.5 564.1 576.5 597.0 635.4 Net other income 10.7 0.7 30.9 -330.9 62.1 17.0 -30.1 -169.0 -27.0 40.0 40.8 -105.4 Total net operating income 2,783.4 2,792.8 2,805.2 2,478.3 2,864.8 2,899.2 2,870.2 2,797.7 2,827.1 2,892.0 2,928.9 2,859.9 SG&A expenses 1,391.7 1,352.0 1,330.5 1,844.2 1,513.9 1,487.0 1,455.9 1,814.3 1,534.1 1,508.7 1,477.1 1,832.5 PPOP 1,391.7 1,440.8 1,474.6 634.1 1,351.0 1,412.2 1,414.3 983.3 1,293.0 1,383.4 1,451.8 1,027.4 Provisions 164.5 116.8 146.4 245.9 191.7 102.0 166.1 210.3 210.5 209.7 246.6 286.7 Operating profit 1,227.2 1,324.0 1,328.2 388.1 1,159.2 1,310.2 1,248.2 773.1 1,082.5 1,173.6 1,205.3 740.7 Non-operating income 116.3 -20.9 0.7 -62.0 6.7 48.6 12.0 -24.0 7.0 10.0 11.0 -21.0 Pretax profit 1,343.4 1,303.1 1,328.9 326.1 1,165.9 1,358.8 1,260.1 749.1 1,089.5 1,183.6 1,216.3 719.7 Net profit (controlling 968.2 946.8 953.8 192.4 845.7 991.2 940.3 534.7 789.9 858.1 881.8 521.8 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Table 16. KBFG: Annual earnings (Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 6,522.8 6,415.8 6,203.2 6,402.5 7,852.8 8,904.9 9,196.8 9,186.7 9,506.2 9,856.6 Net non-interest income 1,479.2 1,382.7 1,535.0 1,584.9 2,050.0 2,243.4 2,355.0 2,373.0 2,486.8 2,629.8 Net other income -547.9 -601.7 -356.2 -542.5 289.3 -288.6 -119.9 -51.7 43.8 10.1 Total net operating income 7,454.1 7,196.8 7,381.9 7,444.9 10,192.2 10,859.7 11,431.9 11,508.0 12,036.9 12,496.6 SG&A expenses 3,983.6 4,009.7 4,523.6 5,228.7 5,628.0 5,918.5 6,271.0 6,352.4 6,448.4 6,545.3 PPOP 3,470.6 3,187.1 2,858.4 2,216.2 4,564.2 4,941.2 5,160.8 5,155.6 5,588.6 5,951.3 Provisions 1,443.6 1,228.0 1,037.2 539.3 548.2 673.7 670.2 953.5 1,163.9 1,298.6 Operating profit 2,027.0 1,959.1 1,821.1 1,676.9 4,016.0 4,267.5 4,490.6 4,202.1 4,424.7 4,652.7 Non-operating income -211.7 -57.7 343.6 951.7 123.2 34.1 43.3 7.0 7.0 7.0 Pretax profit 1,815.3 1,901.4 2,164.7 2,628.7 4,139.1 4,301.5 4,534.0 4,209.1 4,431.7 4,659.7 Net profit (controlling 1,260.5 1,400.7 1,698.3 2,143.7 3,311.9 3,061.2 3,311.8 3,051.6 3,213.0 3,378.3 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 15 April 22, 2020 Banks

KB Financial Group (105560 KS/Buy/TP: W48,500)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 14,639 14,029 14,151 14,650 Cash & dues 20,838 21,844 22,458 23,092 Interest expense 5,442 4,842 4,644 4,794 Securities 129,121 134,889 138,820 142,873 Net interest income 9,197 9,187 9,506 9,857 Net loans and receivables 339,684 341,932 358,233 374,544 Net fees and commissions 2,355 2,373 2,487 2,630 Tangible assets 7,895 8,260 8,549 8,849 Net other non-interest income -120 -52 44 10 Other assets 21,000 21,472 21,842 22,229 Total net operating income 11,432 11,508 12,037 12,497 Total assets 518,538 528,396 549,901 571,587 G&A expenses 6,271 6,352 6,448 6,545 Deposits 305,593 323,112 337,087 350,992 PPOP 5,161 5,156 5,589 5,951 Borrowings 37,819 39,601 40,890 42,232 Total provision expenses 670 954 1,164 1,299 Debentures 50,936 53,360 55,335 57,397 Operating profit 4,491 4,202 4,425 4,653 Other liabilities 85,072 70,048 71,124 72,146 Net non-operating income 43 7 7 7 Total liabilities 479,419 486,121 504,436 522,766 Income before income taxes 4,534 4,209 4,432 4,660 Capital stock 2,091 2,091 2,091 2,091 Income tax expense 1,221 1,158 1,219 1,281 Hybrid securities 399 399 399 399 Net profit 3,312 3,052 3,213 3,378 Capital surplus 17,123 17,123 17,123 17,123 Net profit (ex. minority interest) 3,312 3,052 3,213 3,378 Retained earnings 19,710 22,866 26,056 29,411 Normalized net profit 3,312 3,052 3,213 3,378 Capital adjustments -1,136 -1,136 -1,136 -1,136 Other comprehensive income 348 348 348 348 Core income 11,552 11,560 11,993 12,486 Non-controlling interests 585 585 585 585 Core PPOP 5,281 5,207 5,545 5,941 Total shareholders' equity 39,119 42,276 45,465 48,820

DuPont analysis (%) Key ratios (%) Interest income 2.93 2.68 2.63 2.61 Growth (YoY) Interest expense 1.09 0.93 0.86 0.86 W loan growth (Bank) 4.5 6.1 4.7 4.5 Net interest income 1.84 1.76 1.76 1.76 Net loans & receivables growth 6.4 0.7 4.8 4.6 Net commissions income 0.47 0.45 0.46 0.47 Deposit growth 10.4 5.7 4.3 4.1 Net other non-interest income -0.02 -0.01 0.01 0.00 Shareholders' equity growth 9.5 8.1 7.5 7.4 Total net operating profit 2.29 2.20 2.23 2.23 Total assets growth 8.1 1.9 4.1 3.9 G&A expenses 1.26 1.21 1.20 1.17 Net interest income growth 3.3 -0.1 3.5 3.7 PPOP 1.03 0.99 1.04 1.06 Net fee income growth 5.0 0.8 4.8 5.7 Total provision expenses 0.13 0.18 0.22 0.23 PPOP growth 4.4 -0.1 8.4 6.5 Net non-operating income 0.01 0.00 0.00 0.00 Operating profit growth 5.2 -6.4 5.3 5.2 Income before income taxes 0.91 0.80 0.82 0.83 Net profit growth 8.2 -7.9 5.3 5.1 Income tax expense 0.25 0.22 0.23 0.23 Profitability Net profit (non-controlling) 0.00 0.00 0.00 0.00 Net interest spread (Bank) 1.64 1.52 1.52 1.52 ROA 0.66 0.58 0.60 0.60 Net interest margin (Bank) 1.67 1.51 1.51 1.51 Leverage (x) 13.4 13.1 12.5 12.0 PPOP margin 1.0 1.0 1.0 1.1 ROE 8.92 7.61 7.42 7.26 ROA 0.7 0.6 0.6 0.6 Asset quality (%) ROE 8.9 7.6 7.4 7.3 NPL ratio 0.49 0.49 0.47 0.45 Liquidity Broad NPL ratio 1.27 1.25 1.22 1.19 W LDR (excl. CDs) (Bank) 98.7 98.7 98.7 98.7 NPL coverage ratio 301.8 286.4 293.7 307.2 Loans to assets 65.5 64.7 65.1 65.5 Reserves to total credits 1.5 1.4 1.4 1.4 Capital adequacy Credit cost (% of total loans) 0.20 0.28 0.33 0.35 Total CAR 14.5 15.0 15.3 15.7 Credit cost (% of total credit) 0.20 0.27 0.31 0.33 Tier 1 CAR 13.9 14.5 14.8 15.2 Per share items (W) Tier 2 CAR 0.6 0.6 0.5 0.5 EPS (reported) 7,924 7,331 7,727 8,125 Operating efficiency EPS (normalized) 7,924 7,331 7,727 8,125 Cost to income 54.9 55.2 53.6 52.4 BVPS 92,672 100,263 107,934 116,003 Cost to assets 1.2 1.2 1.2 1.1 DPS (common share) 2,210 2,110 2,300 2,500 Dividend PPOP/ share 12,347 12,386 13,440 14,313 Payout ratio 26.0 26.9 27.9 28.8 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 16 April 22, 2020 Banks

Hana Financial Group (086790 KS) Short-term patience to pay off in the medium/long term

Banks 1Q20 preview: Net profit of W550.4bn For 1Q20, we forecast Hana Financial Group (HFG) to deliver net profit attributable to controlling interests of W550.4bn (+0.8% YoY, +57.1% QoQ), 13.0% above the Bloomberg (Maintain) Buy consensus and (W487.2bn) and 3.2% above the FnGuide consensus (W533.5bn). We believe a QoQ rise in the end-quarter US$/W rate led to one-off F/X translation losses on Target Price (12M, W) ▼ 37,500 non-monetary foreign currency assets (W120bn), while NIM was likely pressured by falling market rates. Overall, however, we expect HFG to report solid results. Share Price (04/17/20, W) 24,750 Results likely solid overall, aside from one-off factor and NIM decline Expected Return 52% Previously, we expected HFG’s bank NIM to contract 6bps, 7bps, and 2bps QoQ in 1Q20, 2Q20, and 3Q20, respectively, due to declines in bond yields and the benchmark interest NP (20F, Wbn) 2,181 rate. However, we now estimate 1Q20 NIM declined 5bps QoQ to 1.36%, slightly better Consensus NP (20F, Wbn) 2,002 than our previous forecast, thanks to: 1) a slight pickup in bond yields amid heightened EPS Growth (20F, %) -8.8 credit and liquidity concerns; and 2) sharp growth in the mix of low-cost core deposits. Market EPS Growth (20F, %) 38.4 We estimate NIM will contract another 4bps in 2Q20 and 3bps in 3Q20. We estimate P/E (20F, x) 3.4 won-denominated loans grew 1.8% QoQ in 1Q20, aided by corporate lending growth Market P/E (20F, x) 11.9 amid the COVID-19 pandemic. We expect group net interest income of W1.4tr (-1.6% YoY, KOSPI 1,914.53 -1.8% QoQ) and net fee/commission income of W532bn (+4.3% YoY, -2.9% QoQ). Specifically, lending-related fees and credit card/investment banking commissions were Market Cap (Wbn) 7,431 likely at normal levels, while brokerage commissions were likely robust. However, Shares Outstanding (mn) 300 beneficiary certificate-related commissions likely declined. We estimate SG&A expenses Free Float (%) 86.3 were well-controlled at W993bn (-7.4% YoY, -16.3% QoQ) thanks to the absence of early Foreign Ownership (%) 65.6 retirement expenses. We believe credit costs were well-contained at W180.3bn (+9.7% Beta (12M) 1.18 YoY, -54.5% QoQ), or 26bps (annualized) of total credit, with no major one-off credit 52-Week Low 18,450 events. 52-Week High 38,700 Lower TP to W37,500, but maintain Buy (%) 1M 6M 12M Absolute 16.7 -30.0 -35.7 We cut our target price to W37,500 (target P/B of 0.37x) from W39,000 (target P/B of Relative 2.0 -24.0 -24.6 0.39x), reflecting an increase in the market risk premium. Shares of HFG are undervalued, trading at a 2020F P/B of 0.24x and P/E of 3.4x—a valuation that reflects 120 Hana Financial Group KOSPI the worst-case scenario, in our view. While it is still unknown how long the COVID-19 100 outbreak will last and what its impact will be, we believe the recent sell-off—which has pushed HFG’s valuation to below financial crisis levels—is excessive, given policymakers’ 80 wide-ranging support (fiscal and monetary stimulus, as well as financial aid for SMEs and 60 micro businesses) and HFG’s improved fundamentals. Share price volatility may continue for some time due to heightened uncertainties, but we think current share prices offer a 40 4.19 8.19 12.19 4.20 good opportunity to buy on weakness or gradually accumulate shares from a medium- and long-term perspective. We continue to recommend the stock as one of our top picks, alongside KBFG, given its valuation and dividend merits.

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 5,110 5,637 5,774 5,656 5,811 6,002 Net non-interest inc. (Wbn) 2,490 1,927 2,437 2,222 2,541 2,624 Heather Kang Operating profit (Wbn) 2,718 3,152 3,259 2,987 3,232 3,297 +822 -3774 -1903 Net profit (Wbn) 2,037 2,233 2,392 2,181 2,359 2,408 [email protected] EPS (W) 6,881 7,478 7,966 7,265 7,856 8,020 EPS growth (%) 53.1 8.7 6.5 -8.8 8.1 2.1 P/E (x) 3.6 3.3 3.1 3.4 3.2 3.1 P/PPOP (x) 2.1 2.1 1.8 2.0 1.8 1.7 P/B (x) 0.30 0.27 0.26 0.24 0.23 0.21 ROE (%) 8.6 8.6 8.6 7.5 7.5 7.1 Dividend yield (%) 6.3 7.7 8.5 8.1 8.9 9.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 17 April 22, 2020 Banks

Figure 3. HFG: 12-month forward P/B band I Figure 4. HFG: 12-month forward P/B band II

(x) (W) 1.4 160,000

1.2 140,000 1.30x 120,000 1.0 1.05x 100,000 0.8 Target +2 SD 80,000 0.80x 0.6 +1 SD 60,000 Avg. P/B 0.55x 0.4 -1 SD 40,000 *-2 SD 0.30x 0.2 20,000

0.0 0 02 04 06 08 10 12 14 16 18 20 02 04 06 08 10 12 14 16 18 20

Source: Company data, Quantiwise, Mirae Asset Daewoo Research Source: Company data, Quantiwise, Mirae Asset Daewoo Research

Figure 5. HFG: 12-month forward P/E band Figure 6. HFG: 12-month forward P/PPOP band

(W) (W) 120,000 100,000 90,000 100,000 6.3x 13.00x 80,000 70,000 80,000 10.75x 5.1x 60,000 8.50x 60,000 50,000 3.9x 6.25x 40,000 40,000 2.7x 30,000 4.00x 20,000 20,000 1.5x 10,000 0 0 97 02 04 06 08 10 12 14 16 18 20 Source: Company data, Quantiwise, Mirae Asset Daewoo Research Source: Company data, Quantiwise, Mirae Asset Daewoo Research

Figure 7. HFG: 12-month forward P/B and ROE

(x) 12MF P/B (L, lower x-axis) ROE (R, upper x-axis) (%) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.2 12

1.0 10

0.8 8 +2 SD 0.6 6 +1 SD

0.4 Avg. P/B 4 -1 SD

0.2 -2 SD 2

0.0 0 09 10 11 12 13 14 15 16 17 18 19 20

Source: Company data, Quantiwise, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 18 April 22, 2020 Banks

Table 17. HFG: 1Q20 preview YoY chg. QoQ chg. (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%, %p) Net interest income 1,427.1 1,468.1 1,426.6 1,460.0 1,458.8 1,428.3 1,403.2 -1.6 -1.8 Net fee/commission income 493.7 457.4 509.8 541.0 498.5 547.9 532.0 4.3 -2.9 Net other income 18.1 -61.8 49.9 9.3 -75.5 355.8 -24.7 TTR TTR Total net operating income 1,938.9 1,863.7 1,986.4 2,010.2 1,881.7 2,332.0 1,910.4 -3.8 -18.1 SG&A expenses 1,039.4 1,075.3 1,072.8 928.9 986.6 1,186.1 993.0 -7.4 -16.3 PPOP 899.5 788.4 913.6 1,081.4 895.1 1,145.9 917.4 0.4 -19.9 Provisions 66.0 274.5 164.4 100.6 115.6 396.7 180.3 9.7 -54.5 Operating profit 833.5 513.9 749.2 980.7 779.6 749.2 737.1 -1.6 -1.6 Non-operating income 7.9 -43.8 12.9 -63.6 392.1 -191.9 37.0 187.6 TTB Pretax profit 841.3 470.0 762.1 917.1 1,171.7 557.3 774.1 1.6 38.9 Net profit (controlling interests) 589.4 341.2 546.1 658.4 836.7 350.4 550.4 0.8 57.1

Total assets 381,870 385,009 393,529 405,616 420,204 421,506 415,481 5.6 -1.4 Total loans/receivables 252,686 260,664 262,882 268,107 270,153 282,306 283,759 7.9 0.5 Won-denominated loans (bank) 200,826 202,632 204,622 210,861 214,577 218,385 222,316 8.6 1.8 Total credit 262,965 263,892 266,628 276,709 282,612 286,480 281,413 5.5 -1.8 Total deposits 241,263 248,559 249,802 257,400 264,864 272,794 256,471 2.7 -6.0 Total shareholders' equity 27,341 27,979 28,076 29,113 29,046 28,985 29,556 5.3 2.0

(%) NIM (bank) 1.55 1.56 1.55 1.54 1.47 1.41 1.36 -0.19 -0.05 Cost-to-income ratio 53.6 57.7 54.0 46.2 52.4 50.9 52.0 -2.0 1.1 NPL (substandard & below) ratio 0.61 0.59 0.62 0.56 0.48 0.48 0.55 -0.07 0.07 NPL coverage ratio 220.0 230.4 218.8 234.9 261.0 264.2 240.3 21.5 -23.8 RoA (based on avg. value) 0.16 0.09 0.14 0.16 0.20 0.08 0.13 -0.01 0.05 RoE (based on avg. value) 2.23 1.26 2.00 2.37 2.97 1.24 1.94 -0.06 0.69 Credit cost ratio 0.03 0.10 0.06 0.04 0.04 0.14 0.06 0.00 -0.07 BIS ratio 14.89 14.93 14.79 14.69 14.13 13.94 13.94 -0.85 0.00 Tier 1 ratio 13.49 13.52 13.52 13.37 12.90 12.66 12.81 -0.71 0.15 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on the old formula, which includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 18. HFG: Earnings forecast revisions

Revised Previous % chg. (Wbn) 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F Net interest income 5,656 5,811 6,002 5,448 5,675 5,906 3.8 2.4 1.6 Net non-interest income 2,222 2,541 2,624 2,270 2,587 2,660 -2.1 -1.8 -1.4 Total net operating income 7,878 8,352 8,626 7,718 8,262 8,566 2.1 1.1 0.7 SG&A expenses 4,098 4,164 4,232 4,082 4,148 4,215 0.4 0.4 0.4 PPOP 3,780 4,188 4,394 3,636 4,115 4,351 3.9 1.8 1.0 Provisions 793 956 1,097 769 933 1,072 3.1 2.5 2.3 Operating profit 2,987 3,232 3,297 2,867 3,182 3,279 4.2 1.6 0.6 Non-operating income 77 79 83 84 79 83 -8.3 0.0 0.0 Pretax profit 3,064 3,311 3,380 2,951 3,261 3,362 3.8 1.5 0.5 Net profit (controlling interests) 2,181 2,359 2,408 2,101 2,324 2,396 3.8 1.5 0.5 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 19 April 22, 2020 Banks

Table 19. HFG: TP calculation

Sustainable ROE 6.60% Growth 2.00% Cost of equity 14.38%

Cost of equity 14.38% Rf 2.50% Beta 1.98 Market premium 6.00%

Fair P/B (x) 0.37 2020F BPS (W) 101,065 TP (W) 37,500 Source: Mirae Asset Daewoo Research estimates

Table 20. HFG: Valuation metrics at TP of W37,500 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.45 0.41 0.40 0.37 0.34 0.32 P/E (x) 5.4 5.0 4.7 5.2 4.8 4.7 ROE (%) 8.6 8.6 8.6 7.5 7.5 7.1 EPS growth (%) 53.1 8.7 6.5 -8.8 8.1 2.1 Dividend yield (%) 4.1 5.1 5.6 5.3 5.9 6.3 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 20 April 22, 2020 Banks

Table 21. HFG: Quarterly earnings

(Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 1,339.5 1,402.4 1,427.1 1,468.1 1,426.6 1,460.0 1,458.8 1,428.3 1,403.2 1,410.2 1,407.8 1,434.7 Net non-interest income 549.5 568.5 493.7 457.4 509.8 541.0 498.5 547.9 532.0 542.8 528.6 537.2 Net other income 3.9 -101.9 18.1 -61.8 49.9 9.3 -75.5 355.8 -24.7 56.3 61.7 -11.9 Total net operating income 1,892.9 1,869.0 1,938.9 1,863.7 1,986.4 2,010.2 1,881.7 2,332.0 1,910.4 2,009.3 1,998.1 1,960.0 SG&A expenses 914.5 917.7 1,039.4 1,075.3 1,072.8 928.9 986.6 1,186.1 993.0 984.6 993.7 1,126.6 PPOP 978.3 951.3 899.5 788.4 913.6 1,081.4 895.1 1,145.9 917.4 1,024.7 1,004.4 833.4 Provisions 88.9 36.0 66.0 274.5 164.4 100.6 115.6 396.7 180.3 189.0 199.7 223.9 Operating profit 889.5 915.4 833.5 513.9 749.2 980.7 779.6 749.2 737.1 835.7 804.6 609.5 Non-operating income 35.7 -2.1 7.9 -43.8 12.9 -63.6 392.1 -191.9 37.0 30.0 40.0 -30.0 Pretax profit 925.1 913.2 841.3 470.0 762.1 917.1 1,171.7 557.3 774.1 865.7 844.6 579.5 Net profit (controlling 668.6 634.1 589.4 341.2 546.1 658.4 836.7 350.4 550.4 617.2 602.1 411.7 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Table 22. HFG: Annual earnings

(Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 4,485.0 4,653.9 4,538.9 4,642.1 5,109.5 5,637.2 5,773.7 5,655.9 5,811.1 6,001.9 Net non-interest income 1,592.8 1,617.8 1,696.4 1,639.9 1,876.6 2,069.0 2,097.1 2,140.6 2,270.8 2,344.7 Net other income 99.3 30.8 454.3 330.3 613.7 -141.8 339.5 81.3 270.0 279.0 Total net operating income 6,177.1 6,302.5 6,689.6 6,612.3 7,599.8 7,564.4 8,210.4 7,877.9 8,352.0 8,625.6 SG&A expenses 3,846.3 3,936.2 4,531.0 4,076.9 4,039.1 3,946.9 4,174.4 4,098.0 4,164.3 4,231.8 PPOP 2,330.8 2,366.3 2,158.6 2,535.4 3,560.7 3,617.6 4,036.0 3,779.9 4,187.6 4,393.8 Provisions 1,165.8 1,122.9 1,148.1 921.3 842.6 465.4 777.3 792.9 955.8 1,096.9 Operating profit 1,165.0 1,243.4 1,010.5 1,614.1 2,718.1 3,152.2 3,258.7 2,987.0 3,231.8 3,296.9 Non-operating income 105.3 9.1 185.9 205.9 80.5 -2.4 149.5 77.0 78.8 83.0 Pretax profit 1,270.3 1,252.6 1,196.4 1,820.0 2,798.7 3,149.7 3,408.1 3,064.0 3,310.6 3,379.9 Net profit (controlling 933.9 937.7 909.7 1,330.5 2,036.8 2,233.3 2,391.6 2,181.3 2,358.6 2,407.8 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 21 April 22, 2020 Banks

Hana Financial Group (086790 KS/Buy/TP: W37,500)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 11,118 10,236 10,302 10,690 Cash & dues 23,719 24,217 24,556 25,179 Interest expense 5,344 4,580 4,491 4,688 Securities 89,742 91,445 92,639 94,750 Net interest income 5,774 5,656 5,811 6,002 Net loans and receivables 282,306 290,804 302,810 314,919 Net fees and commissions 2,097 2,141 2,271 2,345 Tangible assets 4,852 4,909 4,967 5,027 Net other non-interest income 340 81 270 279 Other assets 20,887 21,218 21,562 21,919 Total net operating income 8,210 7,878 8,352 8,626 Total assets 421,506 432,592 446,533 461,795 G&A expenses 4,174 4,098 4,164 4,232 Deposits 272,794 262,379 273,494 284,524 PPOP 4,036 3,780 4,188 4,394 Borrowings 20,699 22,705 24,155 25,752 Total provision expenses 777 793 956 1,097 Debentures 43,661 46,897 49,248 51,835 Operating profit 3,259 2,987 3,232 3,297 Other liabilities 55,366 69,366 65,947 63,499 Net non-operating income 149 77 79 83 Total liabilities 392,521 401,348 412,845 425,610 Income before income taxes 3,408 3,064 3,311 3,380 Capital stock 1,501 1,501 1,501 1,501 Income tax expense 983 843 910 929 Hybrid securities 1,245 1,245 1,245 1,245 Net profit 2,143 2,181 2,359 2,408 Capital surplus 10,582 10,582 10,582 10,582 Net profit (ex. minority interest) 2,392 2,181 2,359 2,408 Retained earnings 15,965 18,184 20,587 23,041 Normalized net profit 2,143 2,181 2,359 2,408 Capital adjustments -315 -315 -315 -315 Other comprehensive income 0 0 0 0 Core income 7,706 7,871 7,797 8,082 Non-controlling interests 860 900 942 985 Core PPOP 3,759 3,696 3,699 3,918 Total shareholders' equity 28,985 31,244 33,688 36,185

DuPont analysis (%) Key ratios (%) Interest income 2.76 2.40 2.34 2.35 Growth (YoY) Interest expense 1.33 1.07 1.02 1.03 W loan growth (Bank) 7.8 4.4 4.3 4.2 Net interest income 1.43 1.32 1.32 1.32 Net loans & receivables growth 8.3 3.0 4.1 4.0 Net commissions income 0.52 0.50 0.52 0.52 Deposit growth 9.8 -3.8 4.2 4.0 Net other non-interest income 0.08 0.02 0.06 0.06 Shareholders' equity growth 3.6 7.8 7.8 7.4 Total net operating profit 2.04 1.85 1.90 1.90 Total assets growth 9.5 2.6 3.2 3.4 G&A expenses 1.04 0.96 0.95 0.93 Net interest income growth 2.4 -2.0 2.7 3.3 PPOP 1.00 0.89 0.95 0.97 Net fee income growth 1.4 2.1 6.1 3.3 Total provision expenses 0.19 0.19 0.22 0.24 PPOP growth 11.6 -6.3 10.8 4.9 Net non-operating income 0.04 0.02 0.02 0.02 Operating profit growth 3.4 -8.3 8.2 2.0 Income before income taxes 0.85 0.72 0.75 0.74 Net profit growth 7.1 -8.8 8.1 2.1 Income tax expense 0.24 0.20 0.21 0.21 Profitability Net profit (non-controlling) 0.01 0.01 0.01 0.01 Net interest spread (Bank) 1.44 1.27 1.27 1.27 ROA 0.59 0.51 0.54 0.53 Net interest margin (Bank) 1.49 1.32 1.32 1.32 Leverage (x) 14.6 14.6 13.9 13.4 PPOP margin 1.0 0.9 1.0 1.0 ROE 8.63 7.46 7.48 7.09 ROA 0.6 0.5 0.5 0.5 Asset quality (%) ROE 8.6 7.5 7.5 7.1 NPL ratio 0.48 0.50 0.49 0.47 Liquidity Broad NPL ratio 1.32 1.30 1.17 1.03 W LDR (excl. CDs) (Bank) 94.4 94.4 94.4 94.4 NPL coverage ratio 264.2 269.8 278.6 302.0 Loans to assets 67.0 67.2 67.8 68.2 Reserves to total credits 1.3 1.3 1.4 1.4 Capital adequacy Credit cost (% of total loans) 0.28 0.27 0.32 0.35 Total CAR 13.9 14.0 14.4 14.7 Credit cost (% of total credit) 0.27 0.28 0.32 0.35 Tier 1 CAR 12.7 13.0 13.5 14.0 Per share items (W) Tier 2 CAR 1.3 1.1 0.9 0.7 EPS (reported) 7,966 7,265 7,856 8,020 Operating efficiency EPS (normalized) 7,139 7,265 7,856 8,020 Cost to income 50.8 52.0 49.9 49.1 BVPS 93,673 101,065 109,067 117,240 Cost to assets 1.0 0.9 0.9 0.9 DPS (common share) 2,100 2,000 2,200 2,350 Dividend PPOP/ share 13,442 12,589 13,947 14,634 Payout ratio 25.8 26.7 27.2 28.5 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 22 April 22, 2020 Banks

Industrial Bank of Korea (024110 KS) 1Q20 results to be decent

1Q20 preview: Net profit of W467.4bn For 1Q20, we project Industrial Bank of Korea (IBK) to post consolidated net profit of Banks W467.4bn (-15.5% YoY, +81.1% QoQ), which is 3.1% above the Bloomberg consensus (W453.2bn) and 2.7% above the FnGuide consensus (W455.2bn). Other than seasonal factors (e.g., contribution to the employee welfare fund and dividend income), we do not (Maintain) Buy believe there were any major one-off items. We believe total loans grew 2.1% QoQ, with SME loans likely growing 2.3% QoQ. For 2020, we forecast loan growth of 6.5%, higher Target Price( 12M, W) ▼ 10,000 than our previous estimate.

Share Price (04/17/20, W) 7,880 We estimate NIM contracted 5bps QoQ to 1.69%, weighed down by declines in bond yields and the benchmark interest rate. Due to the same factors, as well as ultra- Expected Return 27% low/preferential rate loan programs for self-employed businesses, we expect NIM to contract another 5bps in 2Q20 and 4bps in 3Q20. In 1Q20, we estimate net interest NP (20F, Wbn) 1,514 income was W1.4tr (+0.4% YoY, -1.1% QoQ) and net commission income was W110bn Consensus NP (20F, Wbn) 1,434 (-0.5% YoY, -32.4% QoQ). We estimate SG&A expenses came in at W586.1bn (+1.0% YoY , EPS Growth (20F, %) -9.0 -4.7% QoQ), leading to a cost-to-income ratio of 37.4% (+1.4%p YoY, -1.3%p QoQ). We Market EPS Growth (20F, %) 38.4 estimate credit costs at W338.3bn (+19.3% YoY, -41.0% QoQ), or 43bps (annualized; P/E (20F, x) 3.6 +5bps YoY, -29bps QoQ) of total credit. Market P/E (20F, x) 11.9 Concerns over asset quality deterioration and sharp rise in provisions KOSPI 1,914.53 overblown Market Cap (Wbn) 4,548 Amid fears of a recession sparked by the COVID-19 pandemic, there are concerns that Shares Outstanding (mn) 762 IBK’s loan quality could deteriorate, given the bank’s more public nature relative to peers Free Float (%) 46.6 and role in supporting the economy. Indeed, IBK is increasing the size of its ultra- Foreign Ownership (%) 17.7 low/preferential interest rate loan programs for small and self-employed businesses. We Beta (12M) 0.90 note, however, that such loans are virtually risk-free (100% guaranteed by the 52-Week Low 5,870 government, up from 90%) and thus do not affect IBK’s asset soundness and 52-Week High 14,650 provisioning burden. (%) 1M 6M 12M Absolute 17.4 -38.2 -46.2 Of course, concerns over SME insolvency are heightened in times of economic hardship. Relative 2.6 -32.9 -36.9 While uncertainties are indeed high and SME loans do require close monitoring, we believe IBK’s risk of asset deterioration is low, given the government’s wide-ranging 110 Industrial Bank of Korea KOSPI support (fiscal and monetary stimulus, as well as financial aid for SMEs and micro 90 businesses) and IBK’s portfolio management focused on prime-quality loans.

70 Cut TP to W10,000

50 We raised our net profit forecasts for 2020, 2021, and 2022 by 0.2%, 1.4%, and 1.5%,

30 respectively, in light of: 1) a possible increase in SME loan provisioning; 2) smaller-than- 4.19 8.19 12.19 4.20 expected NIM declines; and 3) and resilient loan growth. That said, we lower our target price to W10,000 (target P/B of 0.30x) from W11,500 to reflect growing uncertainties and risks. From a medium/long-term perspective (looking beyond the current uncertainties), we believe the stock is undervalued, trading at 2020F P/B of 0.23x and P/E of 3.6x.

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 5,260 5,632 5,752 5,712 5,951 6,203 Net non-interest inc. (Wbn) 340 626 561 538 607 613 Heather Kang Operating profit (Wbn) 2,028 2,396 2,228 2,108 2,214 2,227 +822 -3774 -1903 Net profit (Wbn) 1,501 1,754 1,619 1,514 1,598 1,611 [email protected] EPS (W) 2,282 2,666 2,425 2,208 2,268 2,286 EPS growth (%) 29.4 16.8 -9.1 -9.0 2.7 0.8 P/E (x) 3.5 3.0 3.2 3.6 3.5 3.4 P/PPOP (x) 1.3 1.1 1.2 1.2 1.1 1.1 P/B (x) 0.26 0.25 0.23 0.23 0.22 0.20 ROE (%) 8.0 8.6 7.4 6.5 6.4 6.1 Dividend yield (%) 7.8 8.8 8.5 7.6 8.2 8.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 23 April 22, 2020 Banks

Table 23. IBK: 1Q20 preview YoY QoQ (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%, %p) Net interest income 1,429.3 1,448.6 1,406.6 1,470.5 1,446.8 1,428.1 1,412.0 0.4 -1.1 Net fee/commission income 96.2 117.8 110.5 128.2 112.9 162.7 110.0 -0.5 -32.4 Net other income 67.8 -32.7 91.2 0.2 -39.3 -5.1 43.0 -52.9 TTB Total net operating income 1,593.4 1,533.7 1,608.3 1,598.9 1,520.3 1,585.7 1,565.0 -2.7 -1.3 SG&A expenses 529.7 604.9 580.3 653.7 560.4 615.1 586.1 1.0 -4.7 PPOP 1,063.6 928.7 1,028.0 945.2 959.9 970.6 978.9 -4.8 0.9 Provisions 361.7 522.1 283.6 368.4 450.2 573.7 338.3 19.3 -41.0 Operating profit 701.9 406.6 744.4 576.8 509.7 396.9 640.7 -13.9 61.4 Non-operating income -1.3 6.4 13.3 14.9 8.9 -24.7 9.0 -32.2 TTB Pretax profit 700.7 413.0 757.7 591.7 518.6 372.3 649.7 -14.3 74.5 Net profit 520.3 302.1 553.4 427.0 380.7 258.0 467.4 -15.5 81.1

Total assets 285,667 289,509 299,229 305,221 311,614 318,111 315,254 5.4 -0.9 Total loans/receivables 212,660 214,523 220,723 224,872 230,102 239,321 243,236 10.2 1.6 Won-denominated loans (bank) 192,097 192,989 197,421 201,617 204,555 206,310 210,643 6.7 2.1 Total credit 204,765 206,226 209,972 214,782 218,399 219,994 224,614 7.0 2.1 Total deposits 106,135 109,556 109,611 112,292 112,112 117,991 119,879 9.4 1.6 Total shareholders' equity 20,836 21,094 21,834 22,291 22,749 22,777 23,248 6.5 2.1

(%) NIM (bank) 1.95 1.95 1.90 1.89 1.81 1.74 1.69 -0.21 -0.05 Cost-to-income ratio 33.2 39.4 36.1 40.9 36.9 38.8 37.4 1.4 -1.3 NPL (substandard & below) ratio 1.34 1.32 1.30 1.26 1.36 1.28 1.33 0.03 0.05 NPL coverage ratio 170.2 167.6 169.8 173.8 166.9 170.1 169.0 -0.8 -1.1 RoA (based on avg. value) 0.18 0.11 0.19 0.14 0.12 0.08 0.15 -0.04 0.07 RoE (based on avg. value) 2.54 1.45 2.59 1.95 1.70 1.14 2.04 -0.55 0.90 Credit cost ratio 0.13 0.18 0.09 0.12 0.14 0.18 0.11 0.01 -0.07 BIS ratio 14.57 14.50 14.55 14.50 14.78 14.45 14.94 0.38 0.49 Tier 1 ratio 11.96 11.90 12.23 12.23 12.19 11.95 12.33 0.10 0.38 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on the old formula, which includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 24. IBK: Earnings forecast revisions Revised Previous % chg. (Wbn) 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F

Net interest income 5,712 5,951 6,203 5,583 5,804 6,060 2.3 2.5 2.4 Net non-interest income 538 607 613 619 673 670 -13.1 -9.9 -8.4 Total net operating income 6,250 6,558 6,817 6,202 6,477 6,730 0.8 1.2 1.3 SG&A expenses 2,476 2,545 2,635 2,496 2,566 2,655 -0.8 -0.8 -0.8 PPOP 3,774 4,012 4,182 3,706 3,912 4,075 1.8 2.6 2.6 Provisions 1,666 1,798 1,956 1,618 1,744 1,898 2.9 3.1 3.0 Operating profit 2,108 2,214 2,227 2,088 2,168 2,176 1.0 2.1 2.3 Non-operating income -8 2 7 10 19 26 -179.0 -90.5 -73.9 Pretax profit 2,100 2,216 2,233 2,098 2,186 2,202 0.1 1.3 1.4 Net profit (controlling interests) 1,514 1,598 1,611 1,512 1,576 1,587 0.2 1.4 1.5 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 24 April 22, 2020 Banks

Table 25. IBK: TP calculation

Sustainable ROE 5.80% Growth 2.00% Cost of equity 14.80%

Cost of equity 14.80% Rf 2.50% Beta 2.05 Market premium 6.00%

Fair P/B (x) 0.30 2020F BPS (W) 34,160 TP (W) 10,000 Source: Mirae Asset Daewoo Research estimates

Table 26. IBK: Valuation metrics at TP of W10,000 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.33 0.31 0.30 0.29 0.27 0.26 P/E (x) 4.4 3.8 4.1 4.5 4.4 4.4 ROE (%) 8.0 8.6 7.4 6.5 6.4 6.1 EPS growth (%) 29.4 16.8 -9.1 -9.0 2.7 0.8 Dividend yield (%) 6.2 6.9 6.7 6.0 6.5 6.7 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 25 April 22, 2020 Banks

Table 27. IBK: Quarterly earnings (Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 1,353.0 1,401.3 1,429.3 1,448.6 1,406.6 1,470.5 1,446.8 1,428.1 1,412.0 1,416.7 1,429.8 1,453.8 Net fee income 109.2 128.0 96.2 117.8 110.5 128.2 112.9 162.7 110.0 112.2 113.3 130.3 Net other income 103.6 36.4 67.8 -32.7 91.2 0.2 -39.3 -5.1 43.0 7.6 38.4 -17.0 Total net operating income 1,565.9 1,565.7 1,593.4 1,533.7 1,608.3 1,598.9 1,520.3 1,585.7 1,565.0 1,536.5 1,581.6 1,567.1 SG&A expenses 540.4 623.6 529.7 604.9 580.3 653.7 560.4 615.1 586.1 679.8 582.8 627.4 PPOP 1,025.5 942.1 1,063.6 928.7 1,028.0 945.2 959.9 970.6 978.9 856.6 998.8 939.8 Provisions 327.8 351.9 361.7 522.1 283.6 368.4 450.2 573.7 338.3 388.9 448.7 489.9 Operating profit 697.7 590.2 701.9 406.6 744.4 576.8 509.7 396.9 640.7 467.7 550.1 449.9 Non-operating income 0.6 -2.7 -1.3 6.4 13.3 14.9 8.9 -24.7 9.0 15.1 -12.0 -20.0 Pretax profit 698.3 587.5 700.7 413.0 757.7 591.7 518.6 372.3 649.7 482.8 538.1 429.9 Net profit (controlling 510.2 421.6 520.3 302.1 553.4 427.0 380.7 258.0 467.4 348.2 388.9 310.0 interest s) Source: Company data, Mirae Asset Daewoo Research estimates

Table 28. IBK: Annual earnings (Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 4,256.5 4,511.0 4,630.9 4,876.2 5,260.0 5,632.3 5,752.0 5,712.4 5,951.0 6,203.2 Net fee income 358.4 345.9 405.6 375.4 407.2 451.2 514.2 465.8 491.2 507.6 Net other income -309.9 -299.2 -277.1 -311.1 -67.7 175.2 47.1 72.0 115.4 105.8 Total net operating income 4,305.0 4,557.7 4,759.5 4,940.6 5,599.5 6,258.6 6,313.3 6,250.2 6,557.7 6,816.6 SG&A expenses 2,012.3 2,005.5 2,096.7 2,154.6 2,188.5 2,298.7 2,409.5 2,476.1 2,545.5 2,634.5 PPOP 2,292.7 2,552.2 2,662.8 2,786.0 3,411.0 3,959.9 3,903.8 3,774.1 4,012.2 4,182.0 Provisions 1,150.3 1,163.9 1,163.1 1,253.4 1,382.7 1,563.5 1,675.9 1,665.7 1,798.2 1,955.5 Operating profit 1,142.4 1,388.3 1,499.7 1,532.6 2,028.3 2,396.4 2,227.9 2,108.3 2,214.0 2,226.5 Non-operating income 36.6 -45.0 -30.2 -15.4 -74.7 3.0 12.3 -7.9 1.8 6.8 Pretax profit 1,179.1 1,343.3 1,469.5 1,517.2 1,953.6 2,399.5 2,240.2 2,100.5 2,215.8 2,233.3 Net profit (controlling 848.5 1,026.6 1,143.0 1,157.5 1,501.4 1,754.2 1,619.1 1,514.4 1,598.0 1,610.7 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 26 April 22, 2020 Banks

Industrial Bank of Korea (024110 KS/Buy/TP: W10,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 9,489 9,157 9,434 9,931 Cash & dues 11,267 12,308 13,446 13,914 Interest expense 3,737 3,444 3,483 3,728 Securities 57,931 63,285 69,133 71,541 Net interest income 5,752 5,712 5,951 6,203 Net loans and receivables 239,321 253,432 268,515 283,330 Net fees and commissions 514 466 491 508 Tangible assets 2,155 2,292 2,438 2,593 Net other non-interest income 47 72 115 106 Other assets 7,437 7,909 8,411 8,946 Total net operating income 6,313 6,250 6,558 6,817 Total assets 318,111 339,226 361,943 380,323 G&A expenses 2,409 2,476 2,545 2,635 Deposits 117,991 123,249 126,473 128,491 PPOP 3,904 3,774 4,012 4,182 Borrowings 30,750 31,333 36,435 40,014 Total provision expenses 1,676 1,666 1,798 1,956 Debentures 123,988 126,342 146,910 161,345 Operating profit 2,228 2,108 2,214 2,227 Other liabilities 22,605 34,121 26,338 23,066 Net non-operating income 12 -8 2 7 Total liabilities 295,334 315,045 336,156 352,916 Income before income taxes 2,240 2,100 2,216 2,233 Capital stock 3,376 3,523 3,523 3,523 Income tax expense 626 578 609 614 Hybrid securities 2,730 2,730 2,730 2,730 Net profit 1,619 1,514 1,598 1,611 Capital surplus 688 805 805 805 Net profit (ex. minority interest) 1,619 1,514 1,598 1,611 Retained earnings 15,347 16,487 18,094 19,713 Normalized net profit 1,619 1,514 1,598 1,611 Capital adjustments 0 0 0 0 Other comprehensive income 521 521 521 521 Core income 6,266 6,178 6,442 6,711 Non-controlling interests 115 115 115 115 Core PPOP 3,857 3,702 3,897 4,076 Total shareholders' equity 22,777 24,181 25,787 27,406

DuPont analysis (%) Key ratios (%) Interest income 3.12 2.79 2.69 2.68 Growth (YoY) Interest expense 1.23 1.05 0.99 1.00 W loan growth (Bank) 6.9 6.5 6.1 5.7 Net interest income 1.89 1.74 1.70 1.67 Net loans & receivables growth 11.6 5.9 6.0 5.5 Net commissions income 0.17 0.14 0.14 0.14 Deposit growth 7.7 4.5 2.6 1.6 Net other non-interest income 0.02 0.02 0.03 0.03 Shareholders' equity growth 8.0 6.2 6.6 6.3 Total net operating profit 2.08 1.90 1.87 1.84 Total assets growth 9.9 6.6 6.7 5.1 G&A expenses 0.79 0.75 0.73 0.71 Net interest income growth 2.1 -0.7 4.2 4.2 PPOP 1.29 1.15 1.14 1.13 Net fee income growth 14.0 -9.4 5.5 3.3 Total provision expenses 0.55 0.51 0.51 0.53 PPOP growth -1.4 -3.3 6.3 4.2 Net non-operating income 0.00 0.00 0.00 0.00 Operating profit growth -7.0 -5.4 5.0 0.6 Income before income taxes 0.74 0.64 0.63 0.60 Net profit growth -7.7 -6.5 5.5 0.8 Income tax expense 0.21 0.18 0.17 0.17 Profitability Net profit (non-controlling) 0.00 0.00 0.00 0.00 Net interest spread (Bank) 1.76 1.57 1.56 1.56 ROA 0.53 0.46 0.46 0.43 Net interest margin (Bank) 1.83 1.64 1.63 1.63 Leverage (x) 13.9 14.1 14.1 14.0 PPOP margin 1.3 1.1 1.1 1.1 ROE 7.42 6.48 6.43 6.08 ROA 0.5 0.5 0.5 0.4 Asset quality (%) ROE 7.4 6.5 6.4 6.1 NPL ratio 1.28 1.29 1.29 1.29 Liquidity Broad NPL ratio 2.99 2.85 2.80 2.75 W LDR (excl. CDs) (Bank) 0.0 0.0 0.0 0.0 NPL coverage ratio 170.1 173.3 177.0 179.9 Loans to assets 75.2 74.7 74.2 74.5 Reserves to total credits 2.1 2.2 2.3 2.3 Capital adequacy Credit cost (% of total loans) 0.70 0.66 0.67 0.69 Total CAR 14.6 14.9 14.9 15.2 Credit cost (% of total credit) 0.76 0.71 0.72 0.74 Tier 1 CAR 12.2 12.3 12.4 12.8 Per share items (W) Tier 2 CAR 2.3 2.6 2.5 2.4 EPS (reported) 2,425 2,208 2,268 2,286 Operating efficiency EPS (normalized) 2,425 2,208 2,268 2,286 Cost to income 38.2 39.6 38.8 38.6 BVPS 33,567 34,160 36,440 38,739 Cost to assets 0.8 0.7 0.7 0.7 DPS (common share) 670 600 650 670 Dividend PPOP/ share 5,846 5,502 5,695 5,936 Payout ratio 23.6 26.3 27.1 28.0 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 27 April 22, 2020 Banks

BNK Financial Group (138930 KS) Lackluster loan growth is a downer

1Q20 preview: Net profit of W143.1bn Banks For 1Q20, we forecast BNK Financial Group (BNKFG) to post net profit attributable to controlling interests of W143.1bn (-19.2% YoY, +333.7% QoQ), 5.4% above the Bloomberg consensus (W135.8bn) but 1.8% below the FnGuide consensus (W145.8bn). We believe (Maintain) Buy there were no major one-off items in the quarter (vs. the reversal of credit cost and loan disposal gains in 1Q19). Target Price (12M, W) ▼ 6,000 A slowdown in NIM declines vs. weakness in loan growth Share Price (04/17/20, W) 4,800 In 1Q20, we estimate NIM held up relatively well, with quarterly declines limited to only 2-3bps for both Busan Bank and Kyongnam Bank, supported by a wider lending-deposit Expected Return 25% spread from the repricing of time deposits and the higher number of working days in March (for the credit card business). We are positive on the slowdown in the pace of NIM NP (20F, Wbn) 525 contraction, given that during 1Q-4Q19, NIM fell by 8bps, 6bps, 7bps, and 5bps QoQ at Consensus NP (20F, Wbn) 473 Busan Bank and 8bps, 5bps, 8bps, and 9bps QoQ at Kyongnam Bank. Despite moderate EPS Growth (20F, %) -6.5 corporate loan growth, we believe overall loan growth slipped 0.4% QoQ at Busan Bank Market EPS Growth (20F, %) 38.4 and 1.0% QoQ at Kyongnam Bank, as a result of the repayment of group loans for P/E (20F, x) 3.0 interim payments. We estimate group net interest income at W528.2bn (-5.3% YoY, -0.1% Market P/E (20F, x) 11.9 QoQ) and net fee/commission income at W55.4bn (+2.8% YoY, +11.1% QoQ). We estimate KOSPI 1,914.53 SG&A expenses were well-controlled at W311.8bn (+1.2% YoY, -7.3% QoQ), leading to a cost-to-income ratio of 51.1% (+3.6%p YoY, -9.4%p QoQ). We estimate credit costs Market Cap (Wbn) 1,564 amounted to W92.5bn (-0.4% YoY, -39.2% QoQ), or 45bps (annualized) of total credit. Shares Outstanding (mn) 326 Free Float (%) 83.6 Amid concerns over a tight liquidity of bonds issued by non-banking financial Foreign Ownership (%) 49.6 institutions, BNK Capital secured additional W350bn and W200bn credit lines from Busan Beta (12M) 1.07 Bank and Kyongnam Bank, respectively. We believe BNK Securities and BNK Asset 52-Week Low 3,650 Management fared worse than expected in 1Q20, due to a slump in global stock 52-Week High 7,890 markets.

(%) 1M 6M 12M Absolute 11.8 -33.1 -34.1 Cut TP to W6,000 Relative -2.4 -27.4 -22.7 We revised our 2020 and 2021 net profit forecasts for BNKFG downwards by 5.3% and

120 BNK Financial Group KOSPI 6.3%, respectively, reflecting growing economic uncertainties, BNKFG’s lackluster loan growth and the upward adjustments to our credit cost projections. Consequently, we 100 lower our target price to W6,000 (target P/B of 0.22x) from W8,300. 80

60

40 4.19 8.19 12.19 4.20

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 2,281 2,344 2,187 2,126 2,199 2,275 Net non-interest inc. (Wbn) -5 173 325 381 384 400 Heather Kang Operating profit (Wbn) 594 750 807 753 761 798 +822 -3774 -1903 Net profit (Wbn) 403 502 562 525 532 558 [email protected] EPS (W) 1,237 1,540 1,725 1,612 1,631 1,712 EPS growth (%) -19.6 24.6 12.0 -6.5 1.2 5.0 P/E (x) 3.9 3.1 2.8 3.0 2.9 2.8 P/PPOP (x) 1.4 1.2 1.3 1.3 1.2 1.2 P/B (x) 0.22 0.21 0.19 0.18 0.17 0.16 ROE (%) 5.8 6.8 7.1 6.2 5.9 5.9 Dividend yield (%) 4.8 6.3 7.5 7.1 7.7 8.3 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 28 April 22, 2020 Banks

Table 29. BNKFG: 1Q20 preview YoY QoQ (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%, %p) Net interest income 587.7 586.9 557.9 552.4 547.9 528.6 528.2 -5.3 -0.1 Net fee/commission income 57.5 36.2 53.9 71.0 71.6 49.9 55.4 2.8 11.1 Net other income 10.1 -55.4 36.9 36.0 28.3 -22.2 27.0 -26.8 TTR Total net operating income 655.3 567.7 648.7 659.5 647.7 556.4 610.7 -5.9 9.8 SG&A expenses 281.3 409.3 308.1 319.8 309.3 336.2 311.8 1.2 -7.3 PPOP 374.0 158.3 340.6 339.7 338.4 220.2 298.9 -12.2 35.7 Provisions 105.4 182.6 92.8 92.8 94.3 152.1 92.5 -0.4 -39.2 Operating profit 268.6 -24.3 247.8 246.9 244.1 68.1 206.4 -16.7 203.2 Non-operating income -0.3 -23.0 0.8 -1.7 -0.2 -12.3 -1.4 TTR RR Pretax profit 268.3 -47.3 248.5 245.2 243.9 55.8 205.0 -17.5 267.6 Net profit 181.7 -37.3 177.1 174.1 178.0 33.0 143.1 -19.2 333.7

Total assets 100,033 98,794 102,253 104,216 104,884 104,539 104,367 2.1 -0.2 Total loans/receivables 78,755 77,630 80,088 81,607 81,636 80,657 80,898 1.0 0.3 Won-denominated loans (bank) 68,382 69,091 69,509 70,508 70,801 71,581 71,738 3.2 0.2 Total credit 77,962 78,059 78,970 79,731 80,840 81,127 81,355 3.0 0.3 Total deposits 72,549 73,380 74,877 74,686 76,111 76,610 77,059 2.9 0.6 Total shareholders' equity 8,473 8,425 8,591 8,870 9,150 9,181 9,276 8.0 1.0

(%) NIM (bank) 2.30 2.24 2.16 2.10 2.03 1.98 1.93 -0.23 -0.05 Cost-to-income ratio 42.9 72.1 47.5 48.5 47.8 60.4 51.1 3.6 -9.4 NPL (substandard & below) ratio 1.25 1.37 1.26 1.20 1.18 1.04 1.04 -0.22 0.00 NPL coverage ratio 150.7 141.3 148.5 154.8 156.6 163.6 164.4 15.9 0.8 RoA (based on avg. value) 0.73 -0.15 0.70 0.67 0.68 0.13 0.55 -0.16 0.42 RoE (based on avg. value) 9.58 -1.95 9.19 8.83 8.78 1.60 6.87 -2.32 5.27 Credit cost ratio 0.14 0.23 0.12 0.12 0.12 0.19 0.11 0.00 -0.07 BIS ratio 13.40 13.15 13.37 13.32 13.19 12.95 13.47 0.09 0.52 Tier 1 ratio 11.21 10.98 11.20 11.23 11.32 11.13 11.17 -0.03 0.04 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on the old formula, which includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 30. BNKFG: Earnings forecast revisions Revised Previous Chg. (%, %p) (Wbn) 2020F 2021F 2020F 2021F 2020F 2021F Net interest income 2,126.5 2,199.2 2,177.3 2,272.1 -2.3 -3.2 Net non-interest income 381.3 384.2 413.7 387.5 -7.8 -0.8 Total net operating income 2,507.8 2,583.5 2,591.0 2,659.6 -3.2 -2.9 SG&A expenses 1,304.0 1,331.1 1,335.7 1,363.3 -2.4 -2.4 PPOP 1,203.8 1,252.4 1,255.3 1,296.3 -4.1 -3.4 Provisions 450.9 491.1 413.2 436.8 9.1 12.4 Operating profit 753.0 761.2 842.2 859.5 -10.6 -11.4 Non-operating income 2.1 2.5 -17.1 -16.7 -112.5 -115.0 Pretax profit 755.1 763.7 825.1 842.8 -8.5 -9.4 Net profit (controlling interests) 525.4 531.7 554.9 567.7 -5.3 -6.3 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 29 April 22, 2020 Banks

Table 31. BNKFG: TP calculation

Sustainable ROE 5.70% Growth 3.00% Cost of equity 15.10%

Cost of equity 15.10% Rf 2.50% Beta 2.10 Market premium 6.00%

Fair P/B (x) 0.22 2020F BPS (W) 26,874 TP (W) 6,000 Source: Mirae Asset Daewoo Research estimates

Table 32. BNKFG: Valuation metrics at TP of W6,000 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.28 0.26 0.24 0.22 0.21 0.20 P/E (x) 4.9 3.9 3.5 3.7 3.7 3.5 ROE (%) 5.8 6.8 7.1 6.2 5.9 5.9 EPS growth (%) -19.6 24.6 12.0 -6.5 1.2 5.0 Dividend yield (%) 3.8 5.0 6.0 5.7 6.2 6.7 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 30 April 22, 2020 Banks

Table 33. BNKFG: Quarterly earnings (Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 582.0 586.9 587.7 586.9 557.9 552.4 547.9 528.6 528.2 526.9 531.2 540.1 Net fee income 55.8 54.5 57.5 36.2 53.9 71.0 71.6 49.9 55.4 71.8 85.2 56.1 Net other income 31.0 -16.3 10.1 -55.4 36.9 36.0 28.3 -22.2 27.0 40.0 32.4 13.3 Total net operating income 668.7 625.1 655.3 567.7 648.7 659.5 647.7 556.4 610.7 638.8 648.9 609.5 SG&A expenses 280.4 293.7 281.3 409.3 308.1 319.8 309.3 336.2 311.8 333.4 305.9 352.8 PPOP 388.3 331.4 374.0 158.3 340.6 339.7 338.4 220.2 298.9 305.3 342.9 256.7 Provisions 104.3 109.9 105.4 182.6 92.8 92.8 94.3 152.1 92.5 84.5 108.4 165.4 Operating profit 284.0 221.5 268.6 -24.3 247.8 246.9 244.1 68.1 206.4 220.8 234.5 91.3 Non-operating income -2.6 -5.2 -0.3 -23.0 0.8 -1.7 -0.2 -12.3 -1.4 2.6 0.5 0.5 Pretax profit 281.4 216.3 268.3 -47.3 248.5 245.2 243.9 55.8 205.0 223.4 235.0 91.8 Net profit (controlling 207.3 150.3 181.7 -37.3 177.1 174.1 178.0 33.0 143.1 156.4 164.9 61.0 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Table 34. BNKFG: Annual earnings (Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 1,154.5 1,427.2 2,034.0 2,140.4 2,280.6 2,343.5 2,186.8 2,126.5 2,199.2 2,274.7 Net fee income 85.1 114.2 204.5 168.1 159.7 203.9 246.4 268.6 252.1 260.1 Net other income -24.3 430.7 -42.3 -96.1 -164.7 -30.7 79.0 112.7 132.1 140.3 Total net operating income 1,215.3 1,972.1 2,196.2 2,212.3 2,275.6 2,516.8 2,512.2 2,507.8 2,583.5 2,675.0 SG&A expenses 573.8 751.5 1,103.6 1,122.2 1,137.7 1,264.7 1,273.4 1,304.0 1,331.1 1,358.8 PPOP 641.5 1,220.6 1,092.6 1,090.2 1,137.9 1,252.0 1,238.9 1,203.8 1,252.4 1,316.2 Provisions 228.8 279.5 396.4 377.9 543.6 502.2 432.0 450.9 491.1 517.8 Operating profit 412.7 941.1 696.2 712.3 594.3 749.8 806.9 753.0 761.2 798.4 Non-operating income -9.9 -22.1 3.9 -23.9 -36.6 -31.2 -13.5 2.1 2.5 1.8 Pretax profit 402.9 919.1 700.1 688.4 557.7 718.6 793.4 755.1 763.7 800.1 Net profit (controlling 304.5 809.8 485.5 501.6 403.1 502.1 562.2 525.4 531.7 558.1 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 31 April 22, 2020 Banks

BNK Financial Group (138930 KS/Buy/TP: W6,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 3,629 3,436 3,505 3,625 Cash & dues 4,148 4,360 4,472 4,586 Interest expense 1,442 1,309 1,306 1,351 Securities 17,228 18,057 18,498 18,951 Net interest income 2,187 2,126 2,199 2,275 Net loans and receivables 80,657 83,119 86,538 90,098 Net fees and commissions 246 269 252 260 Tangible assets 1,202 1,262 1,327 1,396 Net other non-interest income 79 113 132 140 Other assets 1,303 1,334 1,367 1,400 Total net operating income 2,512 2,508 2,583 2,675 Total assets 104,539 108,133 112,202 116,431 G&A expenses 1,273 1,304 1,331 1,359 Deposits 76,610 79,408 82,654 86,032 PPOP 1,239 1,204 1,252 1,316 Borrowings 5,079 5,315 5,442 5,574 Total provision expenses 432 451 491 518 Debentures 10,186 10,652 11,022 11,408 Operating profit 807 753 761 798 Other liabilities 3,337 2,951 2,775 2,618 Net non-operating income -14 2 3 2 Total liabilities 95,358 98,476 102,046 105,789 Income before income taxes 793 755 764 800 Capital stock 1,630 1,630 1,630 1,630 Income tax expense 194 208 210 220 Hybrid securities 708 708 708 708 Net profit 562 525 532 558 Capital surplus 787 787 787 787 Net profit (ex. minority interest) 562 525 532 558 Retained earnings 5,192 5,667 6,167 6,653 Normalized net profit 562 525 532 558 Capital adjustments 0 0 0 0 Other comprehensive income -33 -33 -33 -33 Core income 2,433 2,395 2,451 2,535 Non-controlling interests 897 897 897 897 Core PPOP 1,160 1,091 1,120 1,176 Total shareholders' equity 9,181 9,656 10,156 10,642

DuPont analysis (%) Key ratios (%) Interest income 3.57 3.23 3.18 3.17 Growth (YoY) Interest expense 1.42 1.23 1.19 1.18 W loan growth (Bank) 3.6 3.0 4.1 4.1 Net interest income 2.15 2.00 2.00 1.99 Net loans & receivables growth 3.9 3.1 4.1 4.1 Net commissions income 0.24 0.25 0.23 0.23 Deposit growth 4.4 3.7 4.1 4.1 Net other non-interest income 0.08 0.11 0.12 0.12 Shareholders' equity growth 9.0 5.2 5.2 4.8 Total net operating profit 2.47 2.36 2.35 2.34 Total assets growth 5.8 3.4 3.8 3.8 G&A expenses 1.25 1.23 1.21 1.19 Net interest income growth -6.7 -2.8 3.4 3.4 PPOP 1.22 1.13 1.14 1.15 Net fee income growth 20.8 9.0 -6.1 3.1 Total provision expenses 0.43 0.42 0.45 0.45 PPOP growth -1.1 -2.8 4.0 5.1 Net non-operating income -0.01 0.00 0.00 0.00 Operating profit growth 7.6 -6.7 1.1 4.9 Income before income taxes 0.78 0.71 0.69 0.70 Net profit growth 12.0 -6.5 1.2 5.0 Income tax expense 0.19 0.20 0.19 0.19 Profitability Net profit (non-controlling) 0.04 0.02 0.02 0.02 Net interest spread (Bank) 2.34 2.15 2.15 2.15 ROA 0.55 0.49 0.48 0.49 Net interest margin (Bank) 2.07 1.90 1.90 1.90 Leverage (x) 12.8 12.5 12.2 12.0 PPOP margin 1.2 1.1 1.1 1.2 ROE 7.07 6.17 5.90 5.87 ROA 0.6 0.5 0.5 0.5 Asset quality (%) ROE 7.1 6.2 5.9 5.9 NPL ratio 1.04 1.05 1.03 1.02 Liquidity Broad NPL ratio 2.55 2.49 2.41 2.33 W LDR (excl. CDs) (Bank) 98.4 98.4 98.4 98.4 NPL coverage ratio 163.6 166.8 169.8 172.8 Loans to assets 77.2 76.9 77.1 77.4 Reserves to total credits 1.7 1.7 1.8 1.8 Capital adequacy Credit cost (% of total loans) 0.60 0.61 0.64 0.65 Total CAR 12.9 13.9 14.0 14.0 Credit cost (% of total credit) 0.53 0.54 0.56 0.57 Tier 1 CAR 11.1 11.4 11.7 11.8 Per share items (W) Tier 2 CAR 1.8 2.4 2.3 2.2 EPS (reported) 1,725 1,612 1,631 1,712 Operating efficiency EPS (normalized) 1,725 1,612 1,631 1,712 Cost to income 50.7 52.0 51.5 50.8 BVPS 25,415 26,874 28,406 29,897 Cost to assets 1.2 1.2 1.2 1.2 DPS (common share) 360 340 370 400 Dividend PPOP/ share 3,801 3,693 3,842 4,038 Payout ratio 20.9 21.1 22.7 23.4 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 32 April 22, 2020 Banks

DGB Financial Group (139130 KS) Steep NIM decline is a concern

Banks 1Q20 preview: Net profit of W85.4bn For 1Q20, we expect DGB Financial Group (DGBFG) to deliver consolidated net profit attributable to controlling interests of W85.4bn (-17.7% YoY, +54.5% QoQ), 2.1% above (Maintain) Buy the Bloomberg consensus (W83.7bn) and in line with the FnGuide consensus (W86bn). Given stable credit costs, we do not expect the bank to report any irregular items, aside Target Price(12M, W) ▼ 6,700 from Hi Investment & Securities’ ELS hedging costs.

Share Price (04/17/20, W) 4,950 Steep fall in NIM

Expected Return 35% DGBFG’s bank NIM suffered persistent quarterly declines last year, falling 5bps, 6bps, 11bps, and 9bps from 1Q19 to 4Q19. In 1Q20, we estimate NIM declined another 7bps

NP (20F, Wbn) 288 QoQ to 1.86%, weighed down by declines in bond yields and the benchmark interest Consensus NP (20F, Wbn) 270 rate. Among banks (financial holding companies) under our coverage, DGBFG has the highest NIM sensitivity to fluctuations in short-term yields. This is due to its relatively EPS Growth (20F, %) -12.1 high exposure to floating-rate loans, especially those tied to yields on short-term AAA Market EPS Growth (20F, %) 38.4 bank debentures (26% are tied to three-month yields, 15% to six-month yields, and 52% P/E (20F, x) 2.9 to 12-month yields). In 1Q20, won-denominated loans likely grew a robust 4.3% QoQ, Market P/E (20F, x) 11.9 supported by: 1) efforts to expand household loans as part of a portfolio restructuring KOSPI 1,914.53 strategy (which is negative to NIM); and 2) the introduction of a dedicated sales force Market Cap (Wbn) 837 targeting quality SMEs in the Seoul metropolitan area. Due to a steep fall in NIM, we Shares Outstanding (mn) 169 estimate 1Q20 group net interest income shrank to W328.6bn (-6.4% YoY, -7.4% QoQ). Free Float (%) 90.3 Net fee/commission income likely contracted 17.0% QoQ (+16.9% YoY) to W67.7bn. Foreign Ownership (%) 47.4 Meanwhile, contrary to expectations, we believe the bank managed to maintain asset Beta (12M) 1.22 quality at stable levels, with credit costs of W45.6bn (-1.7% YoY, +24.6% QoQ), resulting in 52-Week Low 3,420 a credit cost ratio of 40bps (annualized; -5bps YoY, +8bps QoQ). 52-Week High 8,690 Maintain Buy, but cut TP to W6,700 (%) 1M 6M 12M With the economy slowing down, business insolvency risks have increased among SMEs Absolute 22.8 -31.5 -42.4 operating in the Daegu/North Gyeongsang Province region. However, we think the Relative 7.3 -25.7 -32.4 chances of such risks developing into a full-blown crisis are slim, given policymakers’

110 DGB Financial Group KOSPI wide-ranging support, including fiscal and monetary stimulus and disaster relief loans (which have extremely low credit risk; government guaranteeing 95-100%). We advise 90 investors to closely monitor asset quality indicators to be released in 3Q20 and beyond. 70 In light of heightened economic uncertainties, the bank’s NIM decline, and potential 50 credit cost increases, we cut our 2020 and 2021 net profit forecasts by 4.8% and 2.1%,

30 respectively, and hence lower our target price from W9,000 to W6,700 (target P/B of 4.19 8.19 12.19 4.20 0.24x).

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 1,275 1,394 1,412 1,348 1,433 1,499 Net non-interest inc. (Wbn) -6 -63 139 260 271 284 Heather Kang Operating profit (Wbn) 411 334 432 442 496 534 +822 -3774 -1903 Net Profit (Wbn) 302 384 327 288 322 347 [email protected] EPS (W) 1,787 2,268 1,936 1,702 1,905 2,051 EPS growth (%) 5.0 26.9 -14.6 -12.1 11.9 7.6 P/E (x) 2.8 2.2 2.6 2.9 2.6 2.4 P/PPOP (x) 1.4 1.6 1.4 1.3 1.2 1.1 P/B (x) 0.21 0.20 0.19 0.18 0.16 0.15 ROE (%) 8.0 9.5 7.6 6.2 6.5 6.6 Dividend yield (%) 6.9 7.3 8.3 7.5 8.5 9.3 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 33 April 22, 2020 Banks

Table 35. DGBFG: 4Q19 preview YoY QoQ (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%, %p) Net interest income 348.8 354.7 351.0 355.4 351.2 354.6 328.6 -6.4 -7.4 Net fee/commission income 23.8 52.6 57.9 67.2 65.2 81.6 67.7 16.9 -17.0 Net other income -36.9 -68.6 -16.8 -10.7 -41.3 -64.1 -4.4 RR RR Total net operating income 335.7 338.6 392.1 411.8 375.1 372.0 391.9 0.0 5.3 SG&A expenses 172.1 318.2 213.2 226.3 231.2 279.4 218.2 2.3 -21.9 PPOP 163.6 20.4 178.8 185.5 143.8 92.6 173.7 -2.9 87.4 Provisions 54.2 70.9 46.4 45.7 39.9 36.6 45.6 -1.7 24.6 Operating profit 109.4 -50.5 132.4 139.8 103.9 56.0 128.1 -3.3 128.5 Non-operating income 1.1 153.2 12.4 -0.5 2.3 -7.9 1.0 -91.9 TTB Pretax profit 110.5 102.8 144.8 139.3 106.2 48.2 129.1 -10.9 167.8 Net profit (controlling interests) 80.4 104.9 103.8 97.8 70.6 55.3 85.4 -17.7 54.5

Total assets 59,331 65,041 68,782 69,466 69,740 72,403 74,094 7.7 2.3 Total loans/receivables 39,931 40,827 41,812 43,019 43,760 46,587 48,425 15.8 3.9 Won-denominated loans (bank) 35,085 35,466 35,796 36,906 37,683 39,408 41,102 14.8 4.3 Total credit 39,532 41,228 41,682 42,996 43,678 45,814 45,737 9.7 -0.2 Total deposits 38,183 38,729 39,610 40,415 41,046 42,758 44,548 12.5 4.2 Total shareholders' equity 4,735 5,064 5,129 5,251 5,433 5,434 5,521 7.6 1.6

(%) NIM (bank) 2.25 2.24 2.19 2.13 2.02 1.93 1.86 -0.33 -0.07 Cost-to-income ratio 51.3 94.0 54.4 55.0 61.6 75.1 55.7 1.3 -19.4 NPL (substandard & below) ratio (bank) 0.78 0.90 0.94 0.88 0.79 0.73 0.79 -0.16 0.06 NPL coverage ratio (bank) 170.6 150.9 148.6 155.7 168.9 180.2 160.9 12.3 -19.3 RoA (based on avg. value) 0.14 0.17 0.16 0.14 0.10 0.08 0.12 -0.04 0.04 RoE (based on avg. value) 1.92 2.44 2.37 2.19 1.54 1.20 1.83 -0.54 0.63 Credit cost ratio 0.14 0.17 0.11 0.11 0.09 0.08 0.10 -0.01 0.02 BIS ratio 13.45 12.82 12.79 12.81 12.75 12.34 12.64 -0.15 0.30 Tier 1 ratio 11.90 11.32 11.33 11.28 11.30 10.93 10.89 -0.44 -0.04 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on an older formula that includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 36. DGBFG: Earnings forecast revisions Revised Previous Chg. (%, %p) (Wbn) 2020F 2021F 2020F 2021F 2020F 2021F Net interest income 1,347.7 1,432.6 1,435.2 1,514.3 -6.1 -5.4 Net non-interest income 259.9 271.0 174.9 182.1 48.6 48.8 Total net operating income 1,607.6 1,703.6 1,610.1 1,696.4 -0.2 0.4 SG&A expenses 971.2 997.3 951.0 976.6 2.1 2.1 PPOP 636.5 706.3 659.1 719.8 -3.4 -1.9 Provisions 194.6 210.2 185.0 201.1 5.2 4.5 Operating profit 441.9 496.1 474.2 518.8 -6.8 -4.4 Non-operating income 1.5 -1.5 1.5 -1.5 0.0 0.0 Pretax profit 443.4 494.6 475.7 517.3 -6.8 -4.4 Net profit (controlling interests) 287.9 322.3 302.4 329.0 -4.8 -2.1 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 34 April 22, 2020 Banks

Table 37. DGBFG: TP calculation

Sustainable ROE 5.90% Growth 3.00% Cost of equity 15.10%

Cost of equity 15.10% Rf 2.50% Beta 2.10 Market premium 6.00%

Fair P/B (x) 0.24 2020F BPS (W) 28,173 TP (W) 6,700 Source: Mirae Asset Daewoo Research estimates

Table 38. DGBFG: Valuation metrics at TP of W6,700 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.29 0.27 0.25 0.24 0.22 0.21 P/E (x) 3.7 3.0 3.5 3.9 3.5 3.3 ROE (%) 8.0 9.4 7.6 6.2 6.5 6.6 EPS growth (%) 5.0 26.9 -14.6 -12.1 11.9 7.6 Dividend yield (%) 5.1 5.4 6.1 5.5 6.3 6.9 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 35 April 22, 2020 Banks

Table 39. DGBFG: Quarterly earnings (Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 342.5 347.9 348.8 354.7 351.0 355.4 351.2 354.6 328.6 334.7 338.5 346.0 Net fee income 23.0 20.8 23.8 52.6 57.9 67.2 65.2 81.6 67.7 73.6 74.2 85.6 Net other income -36.2 -41.5 -36.9 -68.6 -16.8 -10.7 -41.3 -64.1 -4.4 -10.7 -17.6 -8.5 Total net operating income 329.3 327.3 335.7 338.6 392.1 411.8 375.1 372.0 391.9 397.6 395.2 423.0 SG&A expenses 151.8 168.0 172.1 318.2 213.2 226.3 231.2 279.4 218.2 230.4 237.4 285.1 PPOP 177.6 159.3 163.6 20.4 178.8 185.5 143.8 92.6 173.7 167.2 157.7 137.9 Provisions 48.2 13.7 54.2 70.9 46.4 45.7 39.9 36.6 45.6 44.9 48.2 55.8 Operating profit 129.4 145.6 109.4 -50.5 132.4 139.8 103.9 56.0 128.1 122.3 109.5 82.0 Non-operating income -1.8 1.7 1.1 153.2 12.4 -0.5 2.3 -7.9 1.0 1.0 0.5 -1.0 Pretax profit 127.5 147.3 110.5 102.8 144.8 139.3 106.2 48.2 129.1 123.3 110.0 81.0 Net profit (controlling 91.8 106.4 80.4 104.9 103.8 97.8 70.6 55.3 85.4 81.1 71.3 50.1 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Table 40. DGBFG: Annual earnings (Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 941.7 1,021.9 1,160.5 1,202.1 1,275.1 1,394.0 1,412.1 1,347.7 1,432.6 1,498.9 Net fee income 72.7 67.1 78.1 69.6 80.4 120.2 271.8 301.1 314.7 328.8 Net other income -27.2 -50.0 -45.1 -49.9 -86.5 -183.2 -133.0 -41.2 -43.6 -45.2 Total net operating income 987.2 1,039.1 1,193.5 1,221.8 1,269.1 1,331.0 1,551.0 1,607.6 1,703.6 1,782.5 SG&A expenses 507.9 544.0 627.2 639.0 676.9 810.0 950.2 971.2 997.3 1,024.3 PPOP 479.3 495.0 566.3 582.8 592.2 520.9 600.8 636.5 706.3 758.2 Provisions 140.3 171.1 223.3 195.9 181.2 187.0 168.6 194.6 210.2 224.0 Operating profit 339.0 323.9 343.0 386.9 411.0 333.9 432.2 441.9 496.1 534.2 Non-operating income -9.7 0.0 0.4 0.9 0.0 154.2 6.3 1.5 -1.5 -1.5 Pretax profit 329.3 323.9 343.4 387.8 411.0 488.1 438.5 443.4 494.6 532.7 Net profit (controlling 238.3 229.7 294.1 287.7 302.2 383.5 327.4 287.9 322.3 346.9 interests) Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 36 April 22, 2020 Banks

DGB Financial Group (139130 KS/Buy/TP: W6,700)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 2,195 2,136 2,179 2,266 Cash & dues 2,826 3,006 3,039 3,073 Interest expense 783 788 746 768 Securities 19,388 20,430 20,912 21,413 Net interest income 1,412 1,348 1,433 1,499 Net loans and receivables 46,587 50,224 52,678 55,007 Net fees and commissions 272 301 315 329 Tangible assets 990 1,035 1,083 1,132 Net other non-interest income -133 -41 -44 -45 Other assets 2,612 2,733 2,858 2,990 Total net operating income 1,551 1,608 1,704 1,782 Total assets 72,403 77,427 80,570 83,616 G&A expenses 950 971 997 1,024 Deposits 42,758 46,214 48,479 50,607 PPOP 601 636 706 758 Borrowings 7,043 7,470 7,651 7,840 Total provision expenses 169 195 210 224 Debentures 5,590 6,317 5,607 4,863 Operating profit 432 442 496 534 Other liabilities 11,727 11,851 12,930 14,084 Net non-operating income 6 2 -2 -2 Total liabilities 67,119 71,851 74,667 77,394 Income before income taxes 439 443 495 533 Capital stock 846 846 846 846 Income tax expense 99 122 136 146 Hybrid securities 149 149 149 149 Net profit 307 288 322 347 Capital surplus 1,562 1,562 1,562 1,562 Net profit (ex. minority interest) 327 288 322 347 Retained earnings 2,124 2,416 2,742 3,061 Normalized net profit 307 288 322 347 Capital adjustments 0 0 0 0 Other comprehensive income -58 -58 -58 -58 Core income 1,684 1,649 1,747 1,828 Non-controlling interests 811 811 811 811 Core PPOP 734 678 750 803 Total shareholders' equity 5,285 5,577 5,903 6,222

DuPont analysis (%) Key ratios (%) Interest income 3.20 2.85 2.76 2.76 Growth (YoY) Interest expense 1.14 1.05 0.95 0.94 W loan growth (Bank) 11.1 8.5 5.3 4.8 Net interest income 2.06 1.80 1.81 1.83 Net loans & receivables growth 14.1 7.8 4.9 4.4 Net commissions income 0.40 0.40 0.40 0.40 Deposit growth 10.4 8.1 4.9 4.4 Net other non-interest income -0.19 -0.06 -0.06 -0.06 Shareholders' equity growth 7.5 5.5 5.9 5.4 Total net operating profit 2.26 2.15 2.16 2.17 Total assets growth 11.3 6.9 4.1 3.8 G&A expenses 1.38 1.30 1.26 1.25 Net interest income growth 1.3 -4.6 6.3 4.6 PPOP 0.87 0.85 0.89 0.92 Net fee income growth 126.1 10.8 4.5 4.5 Total provision expenses 0.25 0.26 0.27 0.27 PPOP growth 15.3 5.9 11.0 7.3 Net non-operating income 0.01 0.00 0.00 0.00 Operating profit growth 29.4 2.2 12.3 7.7 Income before income taxes 0.64 0.59 0.63 0.65 Net profit growth -14.6 -12.1 11.9 7.6 Income tax expense 0.14 0.16 0.17 0.18 Profitability Net profit (non-controlling) 0.05 0.05 0.05 0.05 Net interest spread (Bank) 2.42 2.13 2.13 2.13 ROA 0.45 0.38 0.41 0.42 Net interest margin (Bank) 2.07 1.82 1.82 1.82 Leverage (x) 15.9 16.2 16.0 15.6 PPOP margin 0.9 0.9 0.9 0.9 ROE 7.55 6.23 6.54 6.61 ROA 0.5 0.4 0.4 0.4 Asset quality (%) ROE 7.6 6.2 6.5 6.6 NPL ratio 0.90 0.91 0.89 0.87 Liquidity Broad NPL ratio 1.60 1.58 1.50 1.42 W LDR (excl. CDs) (Bank) 95.6 95.6 95.6 95.6 NPL coverage ratio 148.6 153.2 157.8 162.4 Loans to assets 64.3 64.9 65.4 65.8 Reserves to total credits 1.3 1.4 1.4 1.4 Capital adequacy Credit cost (% of total loans) 0.36 0.39 0.40 0.41 Total CAR 12.3 12.7 12.9 13.0 Credit cost (% of total credit) 0.37 0.41 0.42 0.43 Tier 1 CAR 10.9 10.9 11.1 11.2 Per share items (W) Tier 2 CAR 1.4 1.8 1.8 1.8 EPS (reported) 1,936 1,702 1,905 2,051 Operating efficiency EPS (normalized) 1,817 1,702 1,905 2,051 Cost to income 61.3 60.4 58.5 57.5 BVPS 26,446 28,173 30,103 31,986 Cost to assets 1.3 1.3 1.2 1.2 DPS (common share) 410 370 420 460 Dividend PPOP/ share 3,552 3,763 4,176 4,482 Payout ratio 21.2 21.7 22.0 22.4 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 37 April 22, 2020 Banks

JB Financial Group (175330 KS) Clear valuation merits

Banks 1Q20 preview: Net profit of W92bn For 1Q20, we forecast JB Financial Group (JBFG) to post net profit attributable to controlling interests of W92bn (-0.6% YoY, +92.8% QoQ), 2.0-4.0% above the consensus (Maintain) Buy (W88.5bn based on Bloomberg; W90.2bn based on FnGuide). We believe the bank did not record any major one-off item in the quarter. Target Price (12M, W) ▼ 6,600 Weaker-than-expected loan growth vs. stable credit cost management Share Price (04/17/20, W) 4,410 In 1Q20, we estimate won-denominated loans grew 1.5% QoQ at Jeonbuk Bank and Kwangju Bank, which is slightly behind our annualized growth forecast of 7.0%. We Expected Return 50% attribute the slower-than-anticipated growth to the banks’ efforts to control lending amid deepening concerns over an economic downturn stemming from COVID-19. We NP (20F, Wbn) 339 estimate group NIM contracted 4bps QoQ, due to a likely 2bp decline in margins from Consensus NP (20F, Wbn) 319 the money market deposit account held by Gwangju Metropolitan City (short-term EPS Growth (20F, %) -4.9 deposits were not converted to loans but rather put into money market funds). We Market EPS Growth (20F, %) 38.4 estimate group net interest income of W311.5bn (+3.4% YoY, +0.7% QoQ), SG&A expenses of W156.5bn (+2.3% YoY, -23.5% QoQ), cost-to-income ratio of 48.4% (flat P/E (20F, x) 2.6 YoY, -15.5%p QoQ), credit costs of W40.8bn (+0.4% YoY, +4.6% QoQ), and credit cost ratio Market P/E (20F, x) 11.9 of 43bps (annualized; -1bp YoY, +2bps QoQ). KOSPI 1,914.53 Meanwhile, although financial companies are facing growing risks of a liquidity crunch, Market Cap (Wbn) 869 we note that JB Woori Capital has secured liquidity through line of credit (LOC) extension Shares Outstanding (mn) 197 agreements with Jeonbuk Bank and Kwangju Bank (W185bn for Kwangju Bank and Free Float (%) 86.0 W155bn for Jeonbuk Bank). Foreign Ownership (%) 40.3 Beta (12M) 0.72 Retain Buy, but lower TP to W6,600 52-Week Low 3,375 In light of heightened economic uncertainties and potential credit cost increases, we are 52-Week High 6,030 cutting our 2020 and 2021 net profit forecasts by 3.9% and 3.1%, respectively, and hence (%) 1M 6M 12M lowering our target price from W8,000 to W6,600 (target P/B of 0.34x). Absolute 14.4 -19.4 -22.8 In 2020 and 2021, we expect JBFG to report ROEs of 9.2% and 9.0%, respectively—higher Relative -0.1 -12.5 -9.4 than any other bank (financial holding company) or credit card company under our

110 JB Financial Group KOSPI coverage. The bank’s stock looks cheap, currently trading at a 2020F P/B of 0.23x and P/E 100 2.6x. 90 80 The bank’s CET1 ratio is 9.67% (+65bps YoY), which is also higher than its peers’ (9.54% 70 for both BNKFG and DGBFG). In addition to its valuation merits, we believe the bank 60 presents a compelling investment case in that it has faithfully fulfilled its promise to 50 shareholders in terms of profit growth, CET1 ratio improvements, and dividend 4.19 8.19 12.19 4.20 payments over the past three to four years.

Fiscal year-end 12/17 12/18 12/19 12/20F 12/21F 12/22F

[Banks/Credit Cards ] Net interest inc. (Wbn) 1,162 1,255 1,233 1,276 1,324 1,378 Net non-interest inc. (Wbn) -24 -2 62 53 57 62 Heather Kang Operating Profit (Wbn) 350 417 485 477 516 542 +822 -3774 -1903 Net Profit (Wbn) 185 243 342 339 366 384 [email protected] EPS (W) 1,191 1,538 1,807 1,719 1,860 1,948 EPS growth (%) 25.2 29.2 17.5 -4.9 8.3 4.7 P/E (x) 3.7 2.9 2.4 2.6 2.4 2.3 P/PPOP (x) 1.7 1.4 1.4 1.3 1.2 1.2 P/B (x) 0.28 0.28 0.25 0.23 0.20 0.19 ROE (%) 7.8 8.7 10.3 9.2 9.0 8.6 Dividend Yield (%) 2.3 4.1 6.8 7.5 8.6 9.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests. Source: Company data, Mirae Asset Daewoo Research estimates Mirae Asset Daewoo Research 38 April 22, 2020 Banks

Table 41. JBFG: 1Q20 preview YoY chg. QoQ chg. (Wbn) 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F (%, %p) (%, %p) Net interest income 321.0 323.0 301.1 310.4 311.8 309.3 311.5 3.4 0.7 Net fee/commission income 4.6 -6.1 15.6 14.8 13.3 8.4 16.5 5.5 95.6 Net other income -4.9 -0.8 -0.3 1.7 5.8 2.8 -4.4 RR TTR Total net operating income 320.6 316.1 316.5 326.8 330.9 320.6 323.6 2.3 0.9 SG&A expenses 152.4 213.8 153.0 149.2 157.5 204.6 156.5 2.3 -23.5 PPOP 168.2 102.3 163.4 177.6 173.4 116.0 167.1 2.3 44.1 Provisions 41.6 57.1 40.6 21.0 44.8 39.0 40.8 0.4 4.6 Operating profit 126.6 45.3 122.8 156.6 128.6 77.0 126.3 2.9 64.2 Non-operating income 1.2 0.0 4.7 -1.7 -1.8 -2.9 2.2 -53.1 TTB Pretax profit 127.8 45.3 127.5 154.9 126.8 74.1 128.5 0.8 73.5 Net profit (controlling interests) 72.6 32.1 92.6 111.5 90.1 47.7 92.0 -0.6 92.8

Total assets 47,169 46,779 46,605 46,537 46,750 47,530 45,894 -1.5 -3.4 Total loans/receivables 37,523 36,915 36,535 36,810 36,256 37,109 37,888 3.7 2.1 Won-denominated loans (both banks) 31,929 31,034 30,521 30,684 30,648 31,397 31,872 4.4 1.5 Total credit 38,177 37,192 36,989 37,252 37,014 37,914 38,179 3.2 0.7 Total deposits 34,419 33,994 33,757 33,256 33,505 34,175 33,933 0.5 -0.7 Total shareholders' equity 3,451 3,456 3,521 3,893 3,786 3,820 3,939 11.9 3.1

(%) NIM (Jeonbuk Bank) 2.36 2.43 2.35 2.49 2.50 2.46 2.45 0.10 -0.01 Cost-to-income ratio 47.5 67.6 48.4 45.7 47.6 63.8 48.4 0.0 -15.5 NPL (substandard & below) ratio 0.92 0.92 0.88 0.81 0.83 0.88 0.87 -0.01 -0.01 NPL coverage ratio 166.8 164.7 175.5 189.6 187.2 169.9 170.1 -5.4 0.2 RoA (based on avg. value) 0.15 0.07 0.20 0.24 0.19 0.10 0.20 0.00 0.10 RoE (based on avg. value) 2.73 1.10 2.93 3.31 2.57 1.38 2.61 -0.32 1.23 Credit cost ratio 0.11 0.15 0.11 0.06 0.12 0.10 0.11 0.00 0.00 BIS ratio 12.92 12.73 12.87 13.97 13.39 13.16 13.47 0.60 0.31 Tier 1 ratio 10.62 10.42 10.65 11.82 11.35 11.17 11.45 0.80 0.29 Notes: ROA, ROE, and credit cost data are non-annualized; NPL coverage ratio is based on the old formula, which includes credit loss reserves. Source: Company data, Mirae Asset Daewoo Research estimates

Table 42. JBFG: Earnings forecast revisions Revised Previous Chg. (%, %p) (Wbn) 2020F 2021F 2020F 2021F 2020F 2021F Net interest income 1,276.0 1,324.3 1,276.1 1,329.7 0.0 -0.4 Net non-interest income 53.3 57.2 67.6 61.6 -21.1 -7.1 Total net operating income 1,329.3 1,381.5 1,343.7 1,391.2 -1.1 -0.7 SG&A expenses 680.8 677.7 680.2 677.1 0.1 0.1 PPOP 648.5 703.8 663.5 714.1 -2.2 -1.4 Provisions 171.9 187.4 168.6 182.2 1.9 2.8 Operating profit 476.7 516.4 494.9 531.9 -3.7 -2.9 Non-operating income -0.8 -0.6 -0.8 -0.6 0.0 0.0 Pretax profit 475.9 515.7 494.1 531.2 -3.7 -2.9 Net profit (controlling interests) 338.5 366.5 352.3 378.2 -3.9 -3.1 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 39 April 22, 2020 Banks

Figure 8. Financial holding companies’ BIS ratios (end-2019) Figure 9. Banks’ BIS ratios (end-2019)

(%) Tier 1 capital ratio Tier 2 capital ratio CET1 ratio (%) Tier 1 capital ratio Tier 2 capital ratio CET1 ratio 20 20 18 18 15.85 15.91 16.12 16.12 15.38 15.34 16.02 16 16 1.17 14.47 14.42 14.48 2.61 2.24 2.04 2.25 14.12 13.90 13.95 14 2.23 2.44 0.62 2.50 1.52 14 12.95 13.16 14.38 2.65 1.56 1.28 12.32 12 13.80 13.32 11.89 1.99 12.75 12.80 12 13.58 1.82 1.40 10 2.04 10.96 11.46 10.96 11.41 10 11.96 8 10.30 11.12 14.68 13.30 13.88 13.15 14.08 12.90 12.90 13.77 8 9.54 9.54 9.67 6 11.97 11.47 13.86 8.39 6 12.34 12.67 4 11.13 10.92 11.17 9.85 2 4 0 KEB HanaKEB Busan Daegu 2 Kookmin Shinhan Woori IBK Kyongnam Kwangju Jeonbuk 0 KBFG SFG HFG WFG BNKFG DGBFG JBFG

Source: FSS, Mirae Asset Daewoo Research Source: FSS, Mirae Asset Daewoo Research

Table 43. JBFG: TP calculation

Sustainable ROE 7.10% Growth 3.00% Cost of equity 15.10%

Cost of equity 15.10% Rf 2.50% Beta 2.10 Market premium 6.00%

Fair P/B (x) 0.34 2020F BPS (W) 19,550 TP (W) 6,600 Source: Mirae Asset Daewoo Research estimates

Table 44. JBFG: Valuation metrics at TP of W6,600 2017 2018 2019 2020F 2021F 2022F P/B (x) 0.42 0.41 0.37 0.34 0.31 0.28 P/E (x) 5.5 4.3 3.7 3.8 3.5 3.4 ROE (%) 7.8 8.7 10.3 9.2 9.0 8.6 EPS growth (%) 25.2 29.2 17.5 -4.9 8.3 4.7 Dividend yield (%) 1.5 2.7 4.5 5.0 5.8 6.4 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 40 April 22, 2020 Banks

Table 45. JBFG: Quarterly earnings (Wbn) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20F 2Q20F 3Q20F 4Q20F Net interest income 300.3 310.4 321.0 323.0 301.1 310.4 311.8 309.3 311.5 317.0 322.7 324.8 Net fee income 8.7 3.3 4.6 -6.1 15.6 14.8 13.3 8.4 16.5 14.8 13.5 2.7 Net other income -4.9 -1.5 -4.9 -0.8 -0.3 1.7 5.8 2.8 -4.4 -2.0 6.8 5.3 Total net operating income 304.1 312.2 320.6 316.1 316.5 326.8 330.9 320.6 323.6 329.9 343.0 332.8 SG&A expenses 144.3 143.5 152.4 213.8 153.0 149.2 157.5 204.6 156.5 152.5 161.1 210.7 PPOP 159.9 168.7 168.2 102.3 163.4 177.6 173.4 116.0 167.1 177.3 182.0 122.1 Provisions 44.6 39.1 41.6 57.1 40.6 21.0 44.8 39.0 40.8 41.9 48.6 40.6 Operating profit 115.3 129.6 126.6 45.3 122.8 156.6 128.6 77.0 126.3 135.5 133.4 81.5 Non-operating income 0.2 -1.6 1.2 0.0 4.7 -1.7 -1.8 -2.9 2.2 0.0 0.0 -2.9 Pretax profit 115.4 128.0 127.8 45.3 127.5 154.9 126.8 74.1 128.5 135.4 133.3 78.6 Net profit (controlling interests) 64.2 74.1 72.6 32.1 92.6 111.5 90.1 47.7 92.0 96.8 96.0 53.7 Source: Company data, Mirae Asset Daewoo Research estimates

Table 46. JBFG: Annual earnings (Wbn) 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F Net interest income 433.4 565.3 977.0 1,019.1 1,162.5 1,254.7 1,232.6 1,276.0 1,324.3 1,378.2 Net fee income 16.2 2.3 19.4 16.8 13.5 10.5 52.1 47.5 46.8 48.0 Net other income 0.9 3.0 -6.5 -1.2 -37.3 -12.1 10.1 5.8 10.4 14.1 Total net operating income 450.5 570.6 990.0 1,034.6 1,138.7 1,253.1 1,294.8 1,329.3 1,381.5 1,440.4 SG&A expenses 238.8 338.5 560.5 589.7 626.4 653.9 664.4 680.8 677.7 695.5 PPOP 211.8 232.1 429.5 445.0 512.3 599.1 630.4 648.5 703.8 744.9 Provisions 112.2 150.5 233.0 192.4 162.4 182.3 145.5 171.9 187.4 203.0 Operating profit 99.6 81.6 196.4 252.6 349.9 416.8 484.9 476.7 516.4 541.9 Non-operating income -6.6 498.0 2.8 9.3 -2.8 -0.3 -1.6 -0.8 -0.6 0.0 Pretax profit 93.0 579.6 199.3 261.8 347.1 416.5 483.3 475.9 515.7 541.8 Net profit (controlling interests) 60.2 549.0 114.7 142.7 185.1 243.1 341.9 338.5 366.5 383.8 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 41 April 22, 2020 Banks

JB Financial Group (175330 KS/Buy/TP: W6,600)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Year-end 12 (Wbn) 12/19 12/20F 12/21F 12/22F Interest income 1,893 1,864 1,917 1,985 Cash & dues 2,711 2,716 2,691 2,667 Interest expense 660 588 593 607 Securities 4,892 4,980 4,887 4,796 Net interest income 1,233 1,276 1,324 1,378 Net loans and receivables 37,109 39,789 41,710 43,723 Net fees and commissions 52 47 47 48 Tangible assets 444 307 267 258 Net other non-interest income 10 6 10 14 Other assets 2,373 214 138 116 Total net operating income 1,295 1,329 1,381 1,440 Total assets 47,530 48,006 49,694 51,562 G&A expenses 664 681 678 696 Deposits 34,175 35,443 36,131 36,853 PPOP 630 649 704 745 Borrowings 1,585 1,586 1,520 1,455 Total provision expenses 145 172 187 203 Debentures 6,506 6,185 6,058 6,031 Operating profit 485 477 516 542 Other liabilities 1,428 568 1,337 2,125 Net non-operating income -2 -1 -1 0 Total liabilities 43,693 43,783 45,045 46,464 Income before income taxes 483 476 516 542 Capital stock 985 985 985 985 Income tax expense 121 115 125 131 Hybrid securities 403 403 403 403 Net profit 342 339 366 384 Capital surplus 403 403 403 403 Net profit (ex. minority interest) 342 339 366 384 Retained earnings 1,445 1,828 2,229 2,651 Normalized net profit 342 339 366 384 Capital adjustments -53 -70 -70 -70 Other comprehensive income 350 372 397 423 Core income 1,285 1,323 1,371 1,426 Non-controlling interests 350 372 397 423 Core PPOP 620 643 693 731 Total shareholders' equity 3,836 4,223 4,649 5,098

DuPont analysis (%) Key ratios (%) Interest income 4.01 3.90 3.93 3.92 Growth (YoY) Interest expense 1.40 1.23 1.21 1.20 W loan growth (Bank) 1.2 6.9 5.1 5.1 Net interest income 2.61 2.67 2.71 2.72 Net loans & receivables growth 0.5 7.2 4.8 4.8 Net commissions income 0.11 0.10 0.10 0.10 Deposit growth 0.5 3.7 1.9 2.0 Net other non-interest income 0.02 0.01 0.02 0.03 Shareholders' equity growth 10.5 10.1 10.1 9.7 Total net operating profit 2.75 2.78 2.83 2.85 Total assets growth 0.0 0.0 0.0 0.0 G&A expenses 1.41 1.43 1.39 1.37 Net interest income growth -1.8 3.5 3.8 4.1 PPOP 1.34 1.36 1.44 1.47 Net fee income growth 397.9 -8.8 -1.6 2.8 Total provision expenses 0.31 0.36 0.38 0.40 PPOP growth 5.2 2.9 8.5 5.8 Net non-operating income 0.00 0.00 0.00 0.00 Operating profit growth 16.4 -1.7 8.3 4.9 Income before income taxes 1.03 1.00 1.06 1.07 Net profit growth 40.7 -1.0 8.3 4.7 Income tax expense 0.26 0.24 0.26 0.26 Profitability Net profit (non-controlling) 0.04 0.05 0.05 0.05 Net interest spread (Bank) 2.72 2.69 2.67 2.67 ROA 0.73 0.71 0.75 0.76 Net interest margin (Bank) 2.45 2.43 2.42 2.42 Leverage (x) 14.2 13.0 12.1 11.3 PPOP margin 1.3 1.4 1.4 1.5 ROE 10.31 9.23 9.05 8.60 ROA 0.7 0.7 0.8 0.8 Asset quality (%) ROE 10.3 9.2 9.0 8.6 NPL ratio 0.88 0.86 0.84 0.81 Liquidity Broad NPL ratio 1.86 2.05 1.98 1.89 W LDR (excl. CDs) (Bank) 98.8 98.3 98.3 98.3 NPL coverage ratio 169.9 172.1 173.9 175.8 Loans to assets 78.1 82.9 83.9 84.8 Reserves to total credits 1.5 1.5 1.5 1.4 Capital adequacy Credit cost (% of total loans) 0.30 0.29 0.30 0.30 Total CAR 13.2 13.3 13.9 14.8 Credit cost (% of total credit) 0.38 0.43 0.45 0.47 Tier 1 CAR 11.2 11.4 12.0 13.0 Per share items (W) Tier 2 CAR 2.0 1.9 1.8 1.8 EPS (reported) 1,807 1,719 1,860 1,948 Operating efficiency EPS (normalized) 1,807 1,719 1,860 1,948 Cost to income 51.3 51.2 49.1 48.3 BVPS 17,698 19,550 21,588 23,730 Cost to assets 1.4 1.4 1.4 1.3 DPS (common share) 300 330 380 420 Dividend PPOP/ share 3,332 3,292 3,573 3,781 Payout ratio 17.1 18.9 20.2 21.3 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 42 April 22, 2020 Banks

APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price Shinhan Financial Group(055550) 07/05/2018 Buy 21,000 03/17/2020 Buy 41,000 02/06/2018 Buy 22,000 01/22/2020 Buy 54,000 BNK Financial Group(138930) 10/22/2019 Buy 57,000 04/20/2020 Buy 6,000 12/04/2018 Buy 60,000 02/03/2020 Buy 8,300 10/19/2018 Buy 62,000 01/30/2020 After 1yr 07/05/2018 Buy 59,000 01/30/2019 Buy 8,900 02/08/2018 Buy 63,500 12/04/2018 Buy 10,500 KB Financial Group(105560) 07/05/2018 Buy 12,000 03/17/2020 Buy 48,500 03/28/2018 Buy 13,500 12/06/2019 Buy 63,000 DGB Financial Group(139130) 10/22/2019 Buy 61,500 04/20/2020 Buy 6,700 04/23/2019 Buy 65,000 02/03/2020 Buy 9,000 01/17/2019 Buy 70,500 10/23/2019 Buy 9,600 12/04/2018 Buy 75,000 08/01/2019 Buy 11,000 07/05/2018 Buy 78,000 01/30/2019 Buy 12,000 02/05/2018 Buy 85,000 12/04/2018 Buy 13,000 Hana Financial Group(086790) 10/21/2018 Buy 14,000 04/20/2020 Buy 37,500 07/05/2018 Buy 13,500 03/17/2020 Buy 39,000 01/24/2018 Buy 15,500 01/22/2020 Buy 49,000 JB Financial Group(175330) 10/22/2019 Buy 51,000 04/20/2020 Buy 6,600 01/21/2019 Buy 58,500 02/04/2020 Buy 8,000 12/04/2018 Buy 62,000 08/04/2019 Buy 8,600 07/05/2018 Buy 64,000 07/01/2019 Buy 8,300 01/31/2018 Buy 70,000 01/24/2019 Buy 8,000 Industrial Bank of Korea(024110) 12/04/2018 Buy 8,200 04/20/2020 Buy 10,000 10/21/2018 Buy 8,500 03/05/2020 Buy 11,500 08/01/2018 Buy 8,100 02/03/2020 Buy 14,000 07/05/2018 Buy 7,700 10/22/2019 Buy 16,000 02/08/2018 Buy 8,000 01/22/2019 Buy 19,500 12/04/2018 Buy 20,500

(W) Shinhan Financial Group (W) KB Financial Group (W) Hana Financial Group (W) Industrial Bank of Korea 80,000 100,000 80,000 25,000

80,000 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 Apr 18 Apr 19 Apr 20 Apr 18 Apr 19 Apr 20 Apr 18 Apr 19 Apr 20 Apr 18 Apr 19 Apr 20

(W) BNK Financial Group (W) DGB Financial Group (W) JB Financial Group 15,000 20,000 10,000

8,000 15,000 10,000 6,000 10,000 4,000 5,000 5,000 2,000

0 0 0 Apr 18 Apr 19 Apr 20 Apr 18 Apr 19 Apr 20 Apr 18 Apr 19 Apr 20

Mirae Asset Daewoo Research 43 April 22, 2020 Banks

Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price ( ─), Target price (▬), Not covered ( ■), Buy ( ▲), Trading Buy (■), Hold ( ●), Sell ( ◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 82.04% 12.57% 5.39% 0.00% Investment Banking Services 80.77% 11.54% 7.69% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2020)

Disclosures As of the publication date, Mirae Asset Daewoo 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 Daewoo 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 Daewoo Co., Ltd. (“Mirae Asset Daewoo”) 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 Daewoo, 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 division. 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 Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, 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 Daewoo 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 Daewoo 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 it 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 Daewoo 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 Daewoo, 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 Daewoo 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 Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, 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 Daewoo 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 Daewoo.

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 Daewoo 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

Mirae Asset Daewoo Research 44 April 22, 2020 Banks

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Mirae Asset Daewoo Research 45 April 22, 2020 Banks

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