KB considered most stable financial firm despite dividend uncertainty
KB Financial Group Chairman Yoon Jong-kyoo speaks during a shareholders' meeting at its headquarters on Yeouido in Seoul on Nov. 20. Yonhap
By Lee Min-hyung
With financial authorities pressing banks to reduce this year's dividends, local financial stocks have failed to make any astonishing year-end rebounds even the day before the dividends date scheduled on Tuesday.
In Korea, banks' share prices have been stuck in a box pattern for the past decade.
Even if the benchmark KOSPI is setting a new record high amid its unceasing rally after the pandemic-induced crash in March, major bank shares have remained in the doldrums. Typically, their price surges around December amid investors' hopes for relatively high dividends from bank shares.
But with regulators repeating their demand on banks to reduce the year-end dividends, investors are paying less attention to bank stocks.
Market analysts, however, said this was widely predicted, and their dismal stock performance indicates the market woes over the dividend issue have already been reflected. They said attention should be directed to how banks will be able to defend against possible stock falls after the dividend season ends.
Among the local financial firms, they picked KB Financial Group as the most stable financial holding firm that can minimize the potential risk after the ex-dividend date.
“KB Financial Group will not suffer from any significant stock fall after the ex-dividend, and expectations are it will regain the spotlight as the leading stock among banks,” Hana Financial Investment analyst Choi Chung-uk said.
The group's recent acquisition of the Prudential Life Insurance Company of Korea also bodes well for the group's 2021 earnings performance, and foreign investors are likely to resume the purchase of KB shares on hopes that the group will be able to defend well against falling net interest margins, compared with that of its rivals, according to the analyst.
Last year, bank shares fell by 9.3 percent for 10 trading days after the ex-dividend date, while the figure jumped by 4.8 percent for 10 trading days before the date.
But this is not the case this year, as their stock prices have already declined by 2.4 percent for the past 10 trading days amid widening controversies over regulators' pressure on dividend offerings, according to the analyst.
He said chances are bank shares will not experience any additional, surprising falls after the date, as uncertainties over the dividends are being cleared away after remarks from the chief of the Financial Supervisory Service last week, according to the economist.
Shares of KB bottomed out at around the 26,000-won range in mid-March amid the virus-induced market crash here. It has since bounced back to around a similar level as before the pandemic shock started intensifying fears and uncertainties on the local capital market.
Hyundai Motor Securities economist Kim Jin-sang also remained optimistic over KB's 2021 outlook in its earnings and stock performance.
“KB's earnings performance will be solid next year with an estimated net interest margin growth of 4.9 percent from a year ago,” the analyst said. The group has already piled up enough allowance for bad debts this year amid the pandemic shock, so chances are the group will not have to spend much more on such factors having little to do with its core businesses, according to him.
Starting 2021, KB will also enjoy an earnings growth on the effect of its aggressive acquisitions of Prudential and Cambodia's Prasac Microfinance, the analyst said.
KB also cleared away uncertainties over the top management after its Chairman Yoon Jong-kyoo extended his term for another three years.
“Despite the temporary cut in the dividend payout ratio, the company is an attractive dividend stock here.”
Given the group's potential earnings growth, the brokerage house also revised up KB's target stock price to 56,000 won.
On Monday, KB closed at 45,600 won, up 150 won or 0.33 percent from the previous trading day.