Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Bank stocks regain appeal to investors due to rate hikes, loan resumption
Korean banks' automated teller machines are set up at a building in Seoul in this file photo. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Korean bank stocks are regaining their luster due to mounting expectations over the incoming administration's easing of lending regulations, which are expected to generate synergies with imminent rate hikes to be implemented by the U.S. Fed.
Shares of major financial holding firms closed higher on Tuesday, as expectations offset geopolitical uncertainties in Eastern Europe. Shares of KB Financial Group, the largest financial holding firm by market capitalization, increased 1.61 percent from the previous day.
The so-called big four financial firms ― including KB ― also ended higher the same day, even if the benchmark KOSPI closed down almost 1 percent.
The fresh upward momentum came about a month after most bank shares had nosedived from mid-February, as investors lost their confidence in the benchmark KOSPI due to multiple uncertainties represented by the war in Ukraine and the presidential election here. With both ruling and opposition candidates maintaining a neck-and-neck rivalry on the eve of the election, investors remained negative on local bank stocks, as was shown by their steep falls in valuation at the time.
However, after Yoon Suk-yeol of the main opposition People Power Party was elected as the country new president last week, expectations have been growing that banks will face a more favorable business environment after his administration takes over in May.
Yoon's major pledges included the alleviation of tough loan restrictions, which raise hopes that the next administration will map out policies in a more market-friendly manner. Banks will then be able to reap more profits by resuming sales of loan products with less restrictions at a time when the key rates are on a gradual rise.
Even if the Bank of Korea recently decided to freeze the benchmark rate at 1.25 percent, the central bank is widely expected to increase it further to around the 2 percent range by the end of next year, in line with the Fed's monetary normalization.
Analysts also expected the normalization of lending restrictions to help investors regain their interest in Korean bank stocks.
“Deregulation in lending rules will increase banks' loan growth rates,” IBK Investment & Securities economist Kim Eun-gab said. “Even if this has a limited impact on household loans, demand for corporate loan products will be on the rise. The shift in the regulatory stance may not bring a significant change to the loan growth rate in a short period of time, but the change in the market environment, in itself, will have a positive influence on investor sentiment on bank stocks.”