A Jack-of-all-trades
The author is an analyst of NH Investment & Securities. He can be reached at junsup@nhqv.com. -- Ed.
KBFG is truly a jack-of-all-trades, boasting highly competitive banking services, outstanding performance at its non-banking affiliates, and a stake in Kakao Bank. Against this backdrop, we offer KBFG as our sector top pick.
Initiate at Buy with TP of W74,000; suggest as top pick
We initiate coverage on KB Financial Group (KBFG) with a TP of W74,000, derived by applying a target P/B of 0.66x (2021~2023 average ROE of 9.7%, COE of 7.5%, 50% discount rate) to 2021E BPS of W112,396. We present a Buy rating in light of: 1) the firm’s solid earnings outlook; and 2) an anticipated base rate upcycle. Given its competitiveness in non-banking areas, investment value, and attractive platform business, we offer KBFG as our sector top pick.
Reasosn for selectionas banking sector top pick
KBFG’s strengths lie in it having: 1) the highest profit sensitivity to NIM improvement among three financial holding companies (KBFG, SFG, HFG); and 2) the strongest non-banking portfolio among major financial holding companies (as it possesses stakes in top-tier securities and property/casualty firms); and 3) its stake in Kakao Bank (8.02% after IPO). Given such, we view KBFG’s shares as offering an appealing investment vehicle for investors seeking to widen the banking industry portions in their portfolios.
Amongst commercial banks, KB Bank attracts the largest number of app MAUs, with a figure of 7.85mn (versus 6.71mn at Shinhan Bank, 4.70mn at Woori Bank, and 3.48mn at Hana Bank). This lofty MAU implies is more advanced than its rivals in terms of financial platform activities.
See 2021E NP of W4,286bn (+24% y-y)
We forecast 2021 NP of W4,286bn backed by improving NIM, sound loan growth, and non-banking earnings improvement. KBFG’s DPS should recover to the 2019 level of 26% this year, before rising gradually from next year.
While KBFG’s share price has climbed almost 40% from its low point in 2H20, its shares are still trading below a P/B of 0.5x (0.46x). Standing at 5.5%, its DY also looks attractive.