By Lee Min-hyung
Shinhan Financial Group and KB Financial Group have been in a neck-and-neck race to become a leading financial group over the past few years.
In sales and net profits, Shinhan, the nation's largest financial holding firm by total assets and market capitalization, has solidified its leading position since 2019 following its takeover of ING Life Korea, currently Orange Life, but in the stock market, KB, the second-largest group, has outperformed its long-time rival.
Amid lingering uncertainties weighing on stock prices, Shinhan Financial Group has continued on a downward spiral, while KB has managed to hold ground.
Shinhan shares started plunging from the end of December 2019 amid the dismal outlook for the nation's economic rebound and prolonged low interest rate.
The firm's stock value climbed to as high as 46,150 won ($39.95) as of Dec. 16, but it started declining over the past few weeks. The company closed at 41,750 won, Monday, on the Seoul bourse.
Shares of KB whose corporate value slightly falls behind Shinhan, however, did not report turbulent ups and downs during the same period.
On Tuesday, KB shares closed at 47,850 won per stock, up 1,150 won or 2.46 percent, while Shinhan shares inched up by 100 won or 0.24 percent to 41,850 won.
KB was able to avoid a significant drop in its valuation, as the company was not involved in a series of recent scandals surrounding mis-selling of some financial products. The company also remained agile in pushing ahead with policies for investors, according to experts.
In December, the company went all-out to enhance its shareholder value by cancelling more than 2.3 million shares worth 100 billion won. This was the first time that the nation's financial holding firms have engaged in such an act, and this has left an impression that the company will remain committed to strengthening trust with investors here and abroad, market insiders pointed out.
"The movement came as a surprise to investors, as few people expected the firm to actually take the step for the first time among the financial players here," DB Financial Investment analyst Lee Byung-gun said.
The company, however, failed to make outstanding progress in its stock valuation, as the outlook for the external economic environment remains murky and is expected to take a turn for the worse in the near future.
The pessimism came amid the year-long economic slowdown which led the Bank of Korea to maintain a monetary policy by keeping the key interest rate at record lows.
"Major financial and banking players are generally expected to report a decline in their net income margin (NIM) in the fourth quarter," Hyundai Motor Securities analyst Kim Jin-sang said. The NIM is a key indicator to evaluate banks' profitability.
The weakening valuation of Shinhan shares is also attributable to its recent involvement in sales of troubled hedge fund Lime Asset Management. Some victims have filed a lawsuit against the CEOs of financial firms, including Shinhan, which was involved in the scandal.
Despite the contradictory stock trend, Shinhan remained one of the most profitable financial players as of the end of the third quarter. The company reported a third-quarter net profit of 981.6 billion won. KB came in second with a net profit of 940.3 billion won during the same period.