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| Bank of Korea Governor Lee Ju-yeol attends a monetary policy board meeting at its headquarters in Seoul, April 15. Yonhap |
By Lee Min-hyung
Korean bank stocks went on an unusual bullish run Thursday on expectations their profit bottom lines will see a boost following recent warnings by the U.S. treasury secretary over possible rate hikes.
Bank stocks have made few headlines here as their profit structures are simple, dull and focused on the local market, compared to other stocks particularly in the areas of IT and biotechnology. Only a few ― mostly older ― people invest in financial stocks simply to make a short-term profit. Most investors prefer bank stocks' stable performance and regular dividend offerings.
But major shares of the nation's top-tier financial holding firms received rare positive attention from investors after their prices soared by a surprising margin from the previous trading day. Recent remarks from U.S. Treasury Secretary Janet Yellen have sparked a sense of hope that Korean banks can also benefit from the possible interest rise in the U.S.
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KB Financial Group, the nation's largest financial holding firm here, reached a record-high share price in January 2018 at around 68,000 won ($60), but it then remained on a downward trajectory until the outbreak of the coronavirus pandemic early last year.
For the past month, KB shares showed little fluctuation, but its stock price jumped by 7.88 percent on Thursday. Shares of other financial firms ― such as Shinhan, Hana and Woori ― also advanced.
Shinhan Financial Group shares rose by 4.46 percent, or 1,750 won, during the same period. Shares of Woori Financial Group also jumped by 4.29 percent, and Hana Financial Group shares also rose by 5.94 percent.
Of particular note was the price rise of Industrial Bank of Korea (IBK) which has had a valuation that for months illustrated a "boxed-in pattern" at around the 9,000-won range. IBK shares rose by 6.62 percent on Thursday, topping the 10,000-won mark for the first time in a year.
The Bank of Korea (BOK) declined to comment on any possibility of its own possible benchmark rate hike in response to Yellen's remark.
Last month, BOK Governor Lee Ju-yeol made it clear that the central bank did not have any short-term plans to hike key rates due to lingering economic uncertainties surrounding the COVID-19 spread here.
Analysts said the outlook for bank shares in 2021 would be determined by the timing of the interest rate hike.
"The key point lies in when and how much the central bank will raise the benchmark rate," DB Financial Investment economist Lee Byung-gun said. "Another factor that affects the future of bank shares is the dividend issue."
The aforementioned major financial groups plan to increase dividend payments by offering them more regularly. But details have yet to be fixed, as watchdogs want banks not to engage in active shareholder return policies due to the lingering virus uncertainty here.
Other experts also said bank shares would remain robust until the end of the second quarter thanks to their growing net interest margins.
"But banks' profit growth will be limited after the second quarter," SK Securities analyst Koo Kyung-hoi said.
