[비즈한국] The exodus of foreign investors from the domestic stock market continues. Foreign ownership of total market capitalization has failed to recover to the 30% level since August 2024, and the total value held by foreigners has shrunk from 738 trillion won at the end of 2023 to 666 trillion won in January 2025. Sensing a crisis, the government has pushed forward a 'Value-Up Program' to resolve the 'Korea Discount' and introduced the 'Korea Value-Up Index,' comprised of 105 undervalued, high-quality stocks. Each week, we select one stock from the Korea Value-Up Index to analyze its management status, corporate value enhancement strategies, and determine if it is a promising stock that can prevent the 'fall of the domestic market.'
As of 2:00 PM on March 31 (stock price 78,900 won), KB Financial ranked 6th among the components of the Korea Value-Up Index. This is because Hanwha Aerospace012450, which had held the 6th spot, announced a 3.6 trillion won capital increase on March 20, causing its stock price to plummet. Hanwha Aerospace, having fallen below the 30 trillion won market cap mark, slipped to 7th place.
KB Financial, the nation's No. 1 financial holding company, is a major beneficiary of the Value-Up Program. Financial stocks are considered classic examples of undervalued stocks in the domestic market. As the leader in the financial sector, KB Financial's stock price rose significantly last year following the government's Value-Up policy.
KB Financial's stock price rose from 69,500 won on March 29, 2024, to 101,200 won on December 3, 2024, but has been on a downward trend since. As a result, while the 1-year return is 11.9%, the 6-month return has turned to –6.1% and the 3-month return to –7.4%. Its Price-to-Book Ratio (PBR) moved accordingly. KB Financial's PBR rose from 0.56x on March 29, 2024, to 0.67x on December 3, 2024, but as of March 28, it had fallen to 0.52x, even lower than it was a year ago.
The company unveiled its corporate value enhancement plan quickly, just like other financial holding companies. KB Financial issued a pre-announcement of its Value-Up plan on May 27, 2024, and released the full plan on October 24. The core of KB Financial's Value-Up plan is shareholder returns linked to its Common Equity Tier 1 (CET1) ratio, a first in the industry. The 2025–2027 Value-Up plan mainly consists of: △Using capital exceeding the year-end CET1 ratio of 13% for the following year's shareholder returns △Targeting a Return on Equity (ROE) of 10% or more △Targeting a CET1 ratio of 13% or more.
The shareholder return policy linked to the CET1 ratio is divided into two phases. The first phase uses capital exceeding the 13% year-end CET1 ratio for shareholder returns in the following year, while maintaining a mid-13% level using accumulated capital throughout the year to ensure sustainability. The second phase involves using any excess capital for additional share buybacks and cancellations if the CET1 ratio exceeds 13.5% in the second half of the year. At the same time, the company plans to buy back and cancel more than 10 million shares per year on average until it reaches a PBR of 1x, while gradually increasing quarterly dividends per share. As of the end of 2024, KB Financial's CET1 ratio was 13.5%.
The company also established a policy to determine shareholder return methods based on PBR levels. For a PBR between 0.5x and 1x, it will increase the proportion of share buybacks and cancellations; once the PBR reaches 1x or higher, it will implement flexible shareholder returns, such as increasing reinvestment in core businesses. Specifically, it compares ROE with earnings yield (net profit relative to stock price); if the earnings yield is higher than the ROE, it proceeds with share buybacks and cancellations. Subsequently, if dividends per share increase naturally, it plans to gradually expand the scale of cash dividends by considering dividend yield (dividends relative to stock price) and market interest rates.
Despite such plans, market sentiment toward KB Financial has recently been cool. Although it hit record-breaking earnings last year, critics argue that the level of shareholder returns was below expectations. KB Financial recorded a net profit of 5.0782 trillion won in 2024. This was a 10.5% increase compared to 2023 (4.595 trillion won), marking the first time it surpassed 5 trillion won in net profit in history. This was thanks to strong performance in the non-banking sector.
Looking at individual affiliates, Kookmin Bank's net profit decreased from 3.262 trillion won in 2023 to 3.252 trillion won in 2024. However, during the same period, KB Insurance's net profit rose from 713 billion won to 840 billion won, KB Securities from 390 billion won to 586 billion won, and KB Kookmin Card from 351 billion won to 403 billion won. As a result, the earnings contribution of the non-banking sector increased from 33% in 2023 to 40% in 2024.
Despite KB Financial's record earnings in 2024, its CET1 ratio fell to 13.51%, down 0.08 percentage points from 13.59% in 2023. During the 4th-quarter earnings conference call held on February 5, questions were raised about the decline in the CET1 ratio, asking "Why didn't you defend it?" In response, KB Financial explained, "The CET1 ratio declined due to an increase in risk-weighted assets (assets adjusted for risk level) following the rise in the exchange rate," adding, "We believed that artificially defending it could have a negative impact on our profit-generating capability."
KB Financial will conduct share buybacks and cancellations worth approximately 520 billion won in the first half of 2025. It plans to purchase and cancel all shares by May 5. In the second half, it will decide on additional buybacks and cancellations based on the excess in the CET1 ratio. The total target for shareholder returns this year is 1.76 trillion won. The plan is to return as much as the CET1 ratio exceeds 13%.
While KB Financial maintains that it will implement flexible shareholder return policies depending on the situation, the securities industry has flooded the company with comments about 'disappointing shareholder returns.' The day after the earnings announcement (February 6), the stock price fell 6.7% from the previous day (91,000 won to 84,900 won), reflecting the market's disappointment.
Jeong Jun-seop, an analyst at NH Investment & Securities, pointed out, "While their status as a leading bank remains unchanged, adjustments are needed to ease uncertainty regarding shareholder returns," adding, "Efforts to manage risk-weighted assets are lacking compared to competitors." Kim Do-ha, an analyst at Hanwha Investment & Securities, predicted, "KB Financial's share buyback and cancellation target for the first half (520 billion won) was smaller than expected, and an additional 600 billion won in buybacks may be possible in the second half."
As concerns mounted, all affiliate CEOs and holding company executives of KB Financial announced on February 11 that they had purchased 20,000 shares of KB Financial in the open market, demonstrating their commitment to enhancing corporate value. KB Financial stated, "We plan to manage the CET1 ratio through earnings growth in the first and second quarters and the management of risk-weighted assets, and we intend to achieve the industry's highest total shareholder return rate by implementing additional shareholder returns in the second half."