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| KakaoBank's head office in Pangyo, Gyeonggi Province / Courtesy of KakaoBank |
By Lee Min-hyung
Bank stocks will regain momentum for an additional rally by the end of 2021 after KakaoBank's inclusion in the KOSPI 200 Financials Index, Friday, according to industry watchers.
The much-hyped listing of the internet-only lender grabbed the attention of investors last month. Up until now, they have paid less attention to conventional bank stocks despite their optimistic growth outlooks amid signs of a benchmark rate hike.
But KakaoBank's inclusion in a series of KOSPI indices ― such as the KOSPI 200, KOSPI 200 Financials and the KRX Bank Index ― as of Friday, is expected to add momentum to reduce KakaoBank's post-initial public offering effect and help traditional banks recapture the attention of investors, according to market analysts.
"Conventional bank stocks remained weak in July and August due to the supply-demand imbalance between shares of KakaoBank and other banks," Daishin Securities economist Park Hye-jin said.
But the trend is showing signs of abating and investors are advised to zero in on traditional bank shares once again on a series of favorable factors in the market ― such as the interest rate hike by the Bank of Korea, and their interim dividend offering, according to the analyst.
"The central bank already raised the key rate by 25 basis points and is set to increase it once more by the end of the year in line with the U.S. Fed's signal of tapering," Park said. Shinhan Financial Group came to terms with authorities over its quarterly dividend payment and this is also a clear indication that bank stocks have de facto cleared away any concerns over the interim dividend despite the pandemic, the analyst added.
Banks' net interest margins are also expected to expand through the end of the year, as they are on track to increase loan interest rates in accordance with the central bank's rate hike. If the monetary authority pushes for an additional rate hike possibly in October or November, chances are that banks can achieve high quarterly earnings during the October to December period.
IBK Investment & Securities analyst Kim Eun-gab also said banks' profitability will improve in the short run amid the rate hike momentum.
"There stands an ample possibility that banks will enhance their profitability at a time when household loans are on the rise amid the key rate hike," he said.
