[THE INVESTOR] Following the better-than-expected third quarter results, JB Financial Group has even stronger fundamentals for next year, and is likely to post 300 billion won (US$268 million) net profit next year, according to analysts on Nov. 7.
Daishin Securities analyst Jeffery Choi forecast that JB Financial’s net profit is likely to exceed 300 billion won in 2019 as its subsidiaries continue to outperform. Kwangju Bank’s profits are expected to be fully included from the fourth quarter of this year and Jeonbuk Bank’s earnings continue to improve.
JB Financial completed a comprehensive share swap with Kwangju Bank on Oct. 9 to become its sole owner.
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The group last week reported 285 billion won in net profit, which is only 2.5 billion less than its guideline for the entire year. In terms of controlling stake, net profit grew 21.9 percent in the third quarter from a year earlier, which the group has maintained above the 20 percent threshold since 2016.
Backed by strong growth momentum, the company is expected to improve other key measures such as common equity tier-1 ratio, analysts said.
Low CET1 ratio, the ratio of a bank’s core equity capital to its total risk-weighted assets, has weighed down on the group as a discount factor for its share value, but “such worries are expected to ease with the ratio bound to increase to 10 percent,” KB Securities analyst Yoo Seung-chang said in a recent report.
Its current CET1 of 9.02 percent is expected to reach 9.3 percent by the year-end and 10 percent in 2019, according to MERITZ Securities analyst Eun Kyung-wan.
With the improved CET1 ratio, Eun and other analysts said the group can strengthen shareholder returns.
“The firm’s improving capital ratio should allow it to enhance shareholder value via payout ratio hikes and strengthen NIM and top-line growth via more active lending to small and medium enterprises,” said Jae-woong Won, NH Investment & Securities analyst. “Against this backdrop, JB is set to see further improvement in its fundamentals next year.”
Despite strong growth momentum and promising prospects for 2019, the company’s shares are still undervalued, they said.
The share price of JB with a price-to-book ratio of 0.31, is the lowest among peers and considering that the prospects of discount factors are easing, the shares seem to be undervalued, KB Securities’ Yoo added.
JB Financial shares closed at 5,780 won on Nov. 5. The securities firms suggested a target price ranging from 7,000 won (MERITZ Securities) to 9,500 won (IBK Securities) in their recent reports.
By Park Ga-young (email@example.com