New Loan Growth (Incl. Mortgage Loans) Disappointing
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY; revise down target price 5.3% to KRW36,000
We maintain BUY on KakaoBank but revise down our TP by 5.3% to KRW36,000, as (1) new loan growth (incl. mortgage loans) disappointed, though overall loan growth outpaces rivals, and (2) non-interest income and platform revenue stagnated. We cut 2025E KRW-based loan balance (KRW46.2tn→KRW44.8tn) and lift CIR (29.9%→32.2%). Our RIM-derived TP reflects (1) 2.5% RFR, 7.16% ERP and 3.2% TGR; (2) revisions to 2025E KRW-based loan balance and CIR; and (3) 2.1% NIM and 41bps CCR. We lower 2022E standalone NP by 3.9% to KRW283.4bn given the tepid 2Q22 earnings and raised CIR. Still, we remain bullish, as expanded limits on mortgage loans/coverage regions as well as consumer targeting should translate into growth in 2H22 despite 2Q22 mortgage loans of KRW146.0bn (cumulative KRW192.0bn) missing expectations.
2Q22 review: Standalone NP (attributable to controlling interests) of KRW57.0bn below market consensus, KB estimate
2Q22 standalone NP (to control. int.) declined 17.7% YoY to KRW57.0bn, below the market consensus/our estimate of KRW74.1bn/KRW65.3bn. We attribute this to:
(1) larger-than-expected additional provisions of KRW12.6bn in anticipation of an economic slowdown;
(2) weaker-than-expected platform revenue; and
(3) larger-than-expected SG&A.
2Q22 KRW-based loans totaled KRW26.8tn (+3.3% QoQ, +16.0% YoY) and NIM rose 7bps QoQ (+39bps YoY) to 2.29%, in line with expectations. However, platform revenue declined 14.9% QoQ and non-interest income (incl. fees) deteriorated (-KRW1.2bn in 1Q22→–KRW5.4bn in 2Q22). CCR rose 20.7bps QoQ to 70bps on additional provisions of KRW12.6bn. SG&A grew 14.6% QoQ to KRW90.6bn on higher labor costs (i.e., IT hires).