1Q22 Preview: To Show NP of W721.6bn, -13.5% y-y
The author is an analyst of NH Investment & Securities. He can be reached at junsup@nhqv.com. -- Ed.
With uncertainties towards HFG being resolved rapidly, it is time to switch focus to its attractive valuation.
Uncertainties resolving quickly, paving way for share price growth
A set of uncertainties have been suppressing HFG’s share price growth as of late. But, we believe that the related factors have now resolved or are already baked into share price. In detail: 1) Although HFG’s exposure to Russia-Ukraine war effects is larger than that for peers, any related losses should prove limited as most of the loan exposure is secured by collateral, and as bond-related losses are to be modest; 2) Given a recent stabilizing in forex market conditions, worries over losses on forex valuations are to fade; and 3) With Mr. Ham having finally been officially appointed as group CEO at a recent shareholder meeting, governance-related concerns should now be removed.
Given such, we consider it time to leave the uncertainty factors behind, anticipating shareholder’s return expansion going forward. As of the present, HFG holds 2.9% of its total shares as treasury stocks (W420bn). Considering that both KBFG and SFG have recently announced treasury stock buyback/cancellation programs, we expect HFG to also seek to provide additional shareholder’s return via treasury stocks cancellation.
HFG’s shares are currently trading at a 2022E P/B of 0.41x, the lowest level amongst major domestic banking players. With the above-described uncertainties either now dissipating or already being reflected in share price, the company’s appealing valuation should come into the spotlight.
1Q22 preview: To show NP of W721.6bn, -13.5% y-y
We expect HFG to report 1Q22 NP of W721.6bn (-13.5% y-y). Although earnings likely fell y-y on both one-off costs for bank and card ERP (W170bn~W180bn) and forex losses (W30bn~W35bn), we believe that the firm’s earnings fundamentals remain solid.
NIM is to come in similar q-q. Of note, 4Q21 NIM showed a 2bp improvement on the booking of overdue interest gains. If stripping out this factor, 1Q22E NIM improved in practical terms. We estimate overall 1Q22 loan growth of 1.1% q-q (with credit loans likely decreasing q-q, but mortgage and corporate loans both upping q-q). We see credit cost of 0.19%.