KB Financial and Peers Approve 4.3 Trillion Won in Buybacks

What the Relative Strength of KB Financial and Bank Stocks Signals

When assessing financial holding companies such as KB Financial, the first figure to check is not the dividend yield but the performance gap versus the broader market. According to Korea Exchange (KRX) data reported by Maeil Business Newspaper Securities, the KOSPI fell 17.32% from July 1 through September 29, while the bank index rose 13.18% and the insurance index gained 12.30%. This does not indicate broad-based strength across financial stocks, but rather defensive resilience concentrated in banks and insurers.

Over the same period, the bank and insurance indexes outperformed the KOSPI by 30.50 and 29.62 percentage points, respectively. Shareholder returns refer to policies through which companies return capital to shareholders via dividends or share repurchases and cancellations. The confirmed factors at this point are relative performance and the decisions to repurchase and cancel shares; no forecasts for future share prices or dividend yields have been provided.

Why Banks and Insurers Diverged From Securities Firms

Grouping these companies solely under the financial industry sector obscures their sharply different performances. From July 1 through September 29, the securities index fell 21.31%, a steeper decline than the KOSPI. The fact that stock-market trading value and investor deposits have both declined since June should also be considered alongside the securities index’s performance.

Daishin Securities analyst Kwon Soon-ho said, “During periods when investors are taking a wait-and-see approach, it is important to assess dividend appeal alongside the potential for earnings improvement.” Separating what is known from what is not, the relative strength of banks and insurers is evident in the data, but no specific figures were provided for the declines in trading value and investor deposits. There is also insufficient evidence to attribute the weakness in securities stocks to any single figure.

From Long-Term Rates to Bank Valuations

As of September 23, the yield on 10-year U.S. government bonds stood at 5.11%, while the yield on 10-year South Korean government bonds was 4.39%. Hana Securities analyst Choi Jung-wook said, “The risk of rising interest rates may actually highlight the defensive appeal of bank stocks.” The confirmed facts at present are that these interest-rate figures and the bank index’s relative performance were observed concurrently.

The next consideration is valuation. As of September 25, the banking industry sector’s projected PBR for this year was 0.72 times, while its PER was 8.2 times. Individual PBRs were 0.94 times for KB Financial, 0.83 times for Shinhan Financial Group, 0.72 times for Hana Financial Group, and 0.63 times for Woori Financial Group. Even within the same industry sector, the market assigns different valuations relative to asset value.

The 4.3 Trillion Won Approved by the Four Major Financial Groups

The scale of shareholder returns is the second key factor differentiating individual stocks. KB Financial approved 1.9 trillion won in share repurchases and cancellations this year, while Shinhan Financial approved 1.4 trillion won. Hana Financial approved 700 billion won and Woori Financial approved 350 billion won, bringing the combined total for the four major financial groups to 4.3 trillion won.

It is important to distinguish decisions from completed execution. The confirmed fact is that the four financial groups decided to repurchase and cancel shares this year; whether and when those transactions will be completed remains unknown. The available information also does not provide specific medium- to long-term shareholder-return ratio targets.

Impact on KB Financial, Shinhan, Hana Financial, and Woori Financial

• KB Financial: Its PBR was 0.94 times as of September 25, and it approved 1.9 trillion won in share repurchases and cancellations this year. It is the key stock among the four financial groups for which both figures are available.
• Shinhan Financial Group: Its PBR was 0.83 times as of September 25. Shinhan Financial approved 1.4 trillion won in share repurchases and cancellations this year.
• Hana Financial Group: Its PBR was 0.72 times as of September 25, matching the banking industry sector’s projected PBR for this year, while Hana Financial approved 700 billion won.
• Woori Financial Group: Its PBR was 0.63 times as of September 25, and it approved 350 billion won in share repurchases and cancellations this year.
• Insurance and securities: The insurance index rose 12.30% over the same period, while the securities index fell 21.31%. This shows why financial stocks cannot be viewed as moving in a single direction.

Four Things Investors Should Monitor Next

• Check the four major financial groups’ upcoming disclosures to determine whether and when this year’s approved share repurchases and cancellations are completed.
• Monitor whether subsequent moves in 10-year U.S. and South Korean government bond yields support Choi Jung-wook’s defensive thesis for bank stocks.
• If stock-market trading value and investor deposits recover, compare whether the gap between the securities index and the bank and insurance indexes narrows.
• Review future disclosures for specific medium- to long-term shareholder-return ratio targets from each financial group.

What Could Sustain or End the Relative Strength

The defensive case for bank stocks remains intact if interest-rate risk continues to enhance their appeal and the approved shareholder-return measures are executed. At the same time, the market has already recorded the bank index’s 30.50-percentage-point outperformance and the insurance index’s 29.62-percentage-point outperformance. The fact that relative strength has occurred should be distinguished from any forecast that it will continue.

The triggers for the opposite scenario are clear. If the execution of share repurchases and cancellations is not confirmed, or if trends in trading value and investor deposits reverse, leadership within the financial industry sector could shift again. The next assessment should be guided not by vague expectations of high dividends, but by financial-group disclosures, the direction of long-term interest rates, and the performance gaps among the bank, insurance, and securities indexes.

This article was automatically summarized and analyzed based on the original news report. View the original article (Maeil Business Newspaper Securities)