KB regains leading market cap status from KakaoBank

KB Financial Group Chairman Yoon Jong-kyoo delivers a speech at the company's headquarters in Seoul, Friday, during an online meeting with the group's executives. Courtesy of KB Financial Group

Kakao Pay falls behind Shinhan after stock option scandal

By Park Jae-hyuk

KB Financial Group has won back the status of being Korea's leading financial firm in terms of market capitalization, overtaking KakaoBank for the first time since the internet-only bank's listing on the benchmark KOSPI market last August.

During Tuesday's trading session, KB's stock price closed at 60,000 won ($50), raising its market cap by 3.81 percent to 24.9 trillion won. KakaoBank's stock price fell to 49,350 won, dragging down its market cap by 3.42 percent to 23.4 trillion won.

KB's market cap ranking shifted just a few days after KB Chairman Yoon Jong-kyoo stated regret over the fact that market participants viewed his company as less valuable than the online bank.

“Despite the significant gap in terms of the size of assets and profits, the internet-only bank is considered more valuable on the market than the leading financial group, KB,” he said in his New Year's address. “We should be humble to the market's assessment, proving KB's value as a financial platform provider and our preparedness, amid the difficult conditions.”

KakaoBank was once the eighth-largest company on the KOSPI in terms of market cap, as the total value of its outstanding shares reached 44 trillion won last August. Although its stock price continued to decline since then, it maintained the status of leading financial firm until Monday.

Investor sentiment, however, has especially worsened over Kakao and its affiliates, since Kakao Pay CEO Ryu Young-joon and seven other executives hinted at their distrust in their company's valuation by exercising their stock options only a month after the fintech firm's initial public offering last November.

Although Ryu made an apology and decided not to take the position of Kakao co-CEO that was given to him late last year, the measures were not effective enough to calm retail investors.

Market insiders have been more skeptical about Kakao and its affiliates, following the government's plan to impose tougher regulations on big tech firms engaging in the financial industry.

In contrast, conventional financial firms have been regarded as more attractive to investors, due to the Bank of Korea's interest rate hikes and the U.S. Fed's tapering to tame inflation, according to securities analysts.

Goldman Sachs analyst Park Sin-young downgraded KakaoBank from “neutral” to “sell,” with a target price of 52,000 won, down 36 percent from its previous target price of 82,000 won. The analyst reiterated a “conviction buy” rating and 80,000 won price target for KB.

Daishin Securities analyst Park Hye-jin expected KB's annual earnings last year to surpass 4.4 trillion won, saying that its return-on-equity (ROE) will be 9.6 percent, which is similar to its ROE in 2017, when its stock price was at its all-time high.

Other financial groups took advantage of these opportunities.

Shinhan Financial Group overtook Kakao Pay in market cap, as the group's stock price closed at 39,000 won, Tuesday, raising the total value of its outstanding shares by 1.17 percent to 20.1 trillion won. Although the market cap of Kakao's mobile payment unit bounced back 0.67 percent to 19.7 trillion won that day, the figure was far below its historic high of 32 trillion won.

Hana Financial Group Chairman Kim Jung-tai also urged employees to make efforts to catch up with KakaoBank and Kakao Pay on the stock market.

“It is often said that a company's stock price reflects its future value. KakaoBank's market cap was once close to 45 trillion won, and Kakao Pay's was near 33 trillion won,” he said in his New Year's address. “We own more assets and generate larger profits as a financial group engaging in all sectors of finance, such as banking, brokerage, credit card, capital and insurance. However, our market cap is even smaller than one-fifth of theirs.”