NH Investment & Securities has assessed that Korea Financial Group is taking a step closer to completing its financial holding portfolio through the acquisition of KDB Life. However, reflecting adjustments in performance estimates due to rising market interest rates, the target stock price has been lowered from 340,000 won to 300,000 won, while maintaining a 'Buy' rating.
In a report on the 28th, Yoon Yoo-dong, a researcher at NH Investment & Securities, stated, "As negotiations for the insurance company acquisition continue, the scale of the acquisition funding will be crucial. It is important to pay attention to the acquisition price, the scale of additional capital input, and whether the existing dividend payout ratio in the mid-20% range can be maintained."
Korea Financial Group was selected as the preferred bidder for KDB Life on August 13. Recently, KDB Life decided to implement a capital reduction during the sale negotiations to restructure its finances, while Korea Financial Group is also preparing to issue corporate bonds worth up to 500 billion won in October. The market is paying attention to the possibility that the funds from the bond issuance will be used for the insurance company acquisition.
NH Investment & Securities has lowered its performance estimates for Korea Financial Group in light of rising market interest rates. The target price calculation applies a target price-to-book ratio (PBR) of 1.3 times. The average return on equity (ROE) for the next three years is assumed to be 16.0%, with a cost of equity (CoE) of 10.5%.
The third-quarter performance is also expected to be somewhat disappointing. NH Investment & Securities estimates that Korea Financial Group's consolidated net income attributable to shareholders for the third quarter will be 460.5 billion won, a decrease of 31.7% year-on-year and 53.8% quarter-on-quarter. This figure falls below market consensus. The slowdown in trading volume growth and the expansion of investment by affiliates are expected to lead to a decline in investment asset profits due to rising interest rates.
However, the increased customer base and competitiveness of financial products are viewed positively. Korea Investment & Securities' market share in exchange-traded funds (ETFs) has decreased from 27.0% at the end of the second quarter to 19.4% recently, but it remains high compared to the past 10% range and retains the top position among securities firms. The balances of issued notes and comprehensive investment accounts (IMAs) are also at industry-leading levels, around 20 trillion won and 3 trillion won, respectively.
Yoon noted, "The significant increase in customer base and competitiveness of financial products during the upward market is positive. If the insurance company acquisition completes the financial holding portfolio, it will further strengthen the foundation for long-term growth."
The value fluctuations of overseas unlisted investment assets are cited as short-term performance variables. Korea Investment Partners is known to have previously invested $10 million in SpaceX, $8 million in Quantinuum, and $10 million in Anthropic. NH Investment & Securities anticipates that the combined investment profits of securities and Korea Investment Partners will decrease compared to the previous quarter due to the impact of value adjustments on some investment assets.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.