Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
How regional financial groups defy slump with upbeat outlook
Headquarters of BNK Financial Group, JB Financial Group and iM Financial Group / Courtesy of each group
By Lee Yeon-woo
Despite an economic downturn weighing on regional financial holding companies, brokerage firms have begun raising their target prices this year, industry officials said Monday.
Regional banks, the core subsidiaries of these groups, have been grappling with rising delinquency rates, particularly in the construction sector. Meanwhile, a continuing population decline in regional areas has limited the reach of their offline retail networks.
Yet analysts are revising forecasts upward, citing improved earnings driven by lower credit loss provisions, stronger shareholder return policies and new business initiatives aimed at diversification.
According to financial tracker FnGuide, securities firms have issued 27 target price upgrades for BNK Financial Group, 24 for JB Financial Group and 30 for iM Financial Group so far this year.
The upgrades reflect growing investor confidence in firmer earnings fundamentals in the first half of this year.
BNK Financial Group, based in Busan, posted the highest net profit among the top three at 475.8 billion won ($345.7 million) — though that marked a 3.4 percent decline from the previous year.
JB Financial Group, based in Jeonju, North Jeolla Province, reported a record-high net profit of 370.4 billion won, with a modest year-on-year increase of 0.1 percent.
The Daegu-based iM Financial Group saw the strongest growth, with its consolidated net profit more than doubling to 309.3 billion won compared to the same period last year.
Kim Do-ha, an analyst at Hanwha Investment & Securities, said the profitability gap between major commercial bank holding companies and their regional counterparts is expected to narrow.
"Credit loss provisions, which had surged previously amid concerns over real estate project financing in regional areas, are anticipated to decline," Kim said. "As the earnings gap narrows, the advantage commercial banks have held in shareholder returns is also expected to diminish over time."
Indeed, all three groups have signaled stronger commitments to shareholder returns.
BNK Financial Group aims for a 50 percent shareholder return ratio by 2027 and JB Financial Group is targeting 45 percent by 2026. Meanwhile, iM Financial Group plans to reach 40 percent by 2027, alongside a 150 billion won share buyback and cancellation program.
As part of these efforts, BNK and JB recently approved share repurchase and cancellation programs worth 60 billion won and 30 billion won, respectively, while iM Financial Group announced a 20 billion won program.
Looking ahead, the groups are expected to focus on improving the quality of growth through business expansion.
On June 25, BNK Financial Group's Kazakhstan-based subsidiary, BNK Capital, received final approval for a banking license — marking the first full entry by a Korean financial institution into the country's banking sector.
On July 24, JB Financial Group announced its entry into the Indonesian market through the acquisition of KB Bukopin Finance, a company specializing in vehicle and heavy equipment financing.
Following its transition to a commercial bank, iM Financial Group is expanding into the Seoul metropolitan area, while also pursuing operation in ASEAN markets.