Korean Bank Earnings: ROEs Stable Above 9% Despite Credit Headwinds; Shares Cheap

We maintain our fair value estimates for Shinhan Financial, Hana Financial, and Woori Financial after their third-quarter earnings announcements. We continue to view all the Korean banks in our coverage as significantly undervalued. Shinhan, Hana, and Woori trade at 0.36 times, 0.34 times, and 0.31 times book value respectively, which imply earnings multiples of only 3 to 4 times given their returns on equity of 9%-10% and dividend yields of 6.5% to 8.5% given payout ratios of around 26%. Our estimates of KRW 54,000 for Shinhan, KRW 65,000 for Hana, and KRW 18,000 for Woori put their fair price/book ratios at 0.56 times book value for Shinhan, 0.54 times for Hana, and 0.47 times for Woori, representing around 50% upside to our fair values for all three.