CIR/Capital Efficiency Improvements Disappointing
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY but slash target price 36.7% to KRW38,000
We maintain BUY on KakaoBank but slash our TP by 36.7% to KRW38,000. Loan growth stands out compared to that of peers but should fall short of expectations on disappointing CIR/capital efficiency improvements. Still, our positive stance is justified given the following:
(1) In a bid to encourage competition among banks, discussions on introducing a one-stop platform for refinancing and savings brokerage have been reopened, though details are vague; this should create an opportunity for KakaoBank to bolster loan growth.
(2) Expectations have been buttressed by expanded limits on mortgage loans and coverage regions, as well as consumer targeting.
Our RIM-based TP assumes (1) 2.2% RFR, 7.16% ERP and 3.2% growth rate, (2) changes to 2025E KRW-based loan balance (KRW59.8tn→KRW46.2tn) and CIR (22.8%→29.9%) and (3) 2.1% NIM and 41bps CCR.
2Q22 forecast: Standalone NP attributable to controlling interests at KRW65.3bn; 21% below market consensus
We forecast 2Q22 standalone NP (to control. int.) at KRW65.3bn (-5.8% YoY), which is 21% below the market consensus. We expect 2Q22 KRW-based bank loans of KRW27tn (+3.6% QoQ, +16.3% YoY) to exceed that of peers. NIM should rise 7bps QoQ (+39bps YoY) to 2.29%, leading to a 49.5% YoY surge in NII. However, NP should fall YoY on:
(1) stalled growth in commission/platform income due to expense recognition and
(2) additional provisioning in anticipation of an economic downturn.
We estimate 2Q22 CCR will rise 38bps YoY to 67bps, with additional provisions of ~KRW10.0bn.