Banking shares rebound on foreign buying spree

By Anna J. Park

Korea's major financial group shares have turned bullish as they recorded better-than-expected earnings results despite the COVID-19 pandemic. Foreign investors in particular responded with a buying spree, contributing to the stocks' upward trend

Foreign investors injected over 30 billion won each to purchase stocks of Hana and Shinhan financial groups this week.

Hana Financial Group logged a net profit of 657 billion won during the first quarter, a 20.3 percent increase from the same period last year. The surprising year-on-year increase was due to a rise in income from non-banking and overseas operations, the group said in a statement.

Shinhan Financial Group kept its leading status with the largest quarterly profit of 932 billion won, up 1.5 percent from the same period last year.

The share price for Shinhan closed at 30,550 won Wednesday, up over 10 percent from 27,150 won last Friday, while that for Hana jumped nearly 20 percent to end at 27,600 won during the same period.

“Despite a decrease of net interest margin (NIM) following a fall in key interest rates, the increase in loan demand and the economy's solid fundamentals led to sound performances in the financial groups' profits,” Kim Ji-young, analyst at Kyobo Securities, wrote in her latest report.

“The fact that the full-scale fallout from COVID-19 started to impact the financial industry from March also contributed to the sturdy quarterly results,” she added.

Foreign investors net purchased over 18.1 billion won ($14.8 million) of KB Financial Group shares Wednesday, with its closing price of 34,750 won logging a 1.76 percent increase from the previous trading day. This week alone, its stock price jumped by 11.7 percent from last Friday. On Monday, foreign investors also bought shares worth over 38.1 billion won.

KB posted a net profit of 729 billion won during the first quarter, a 13.7 percent decrease from the same period last year. However, market analysts say the result was expected amid the virus-stricken market uncertainty.

“Overall, the business environment for financial groups is considered favorable, despite the ongoing volatility in foreign exchange and stock markets. Bank loans to domestic conglomerates are increasing, as the corporate bond market has tightened due to COVID-19,” an unnamed market insider said.

Market watchers expect the financial groups' stock prices will continue their upward trend for a while, based on the country's financial support policies and the ameliorating local situation with regard to COVID-19.

Meanwhile, the financial groups' affiliated brokerage houses mostly logged poor results in net profits, due to ELS hedge costs and those related to the Lime Asset Management scandal.