We Raise Our FVEs on Three Korean Banks as Inflation Translates to More Policy Hikes and Higher NIMs

Korea’s major banking groups reported strong first-quarter earnings, with KB generating annualized ROE of 12.5%, Shinhan 12.4%, Woori 13.6%, and Hana 11.0% per our estimates, above our assumed cost of equity of 10%-11%. We raise our fair-value estimate for KB by 6% from KRW 71,000 to KRW 75,000 (equivalent to 0.66 times book value, our fair-value estimate for Shinhan by 4% from KRW 52,000 to KRW 54,000 (also 0.66 times book value), our fair-value estimate for Woori by 15% from KRW 15,650 to KRW 18,000 (0.55 times book value) and maintain our fair-value estimate of KRW 62,000 for Hana, equivalent to 0.59 times book value. There’s more than 20% upside from Friday’s closing price to our fair-value estimates for Shinhan, KB and Hana, and slightly more than 10% upside for Woori.