Korea Investment Holding Co. has consistently maintained a high share price thanks to the daring investments made by Vice Chairman Kim Nam-goo.
The price of its common shares has jumped around 60 percent since early this year, the highest among its rival securities firms, powered by the popularity of Kakao Bank, an online bank in which Korea Investment is a majority stakeholder. Shares of Kakao Bank have risen steadily since last month when the online bank was first launched. The positive performance of Woori Bank’s common stock also has been a great help in boosting the share price of the securities firm, which it holds a 4 percent stake in the former.
The bank’s hot streak since in the first quarter has been owed to an outstanding run by its investment banking sector. It’s expected continue to do well through the rest of the year.
Compared to the end of last year, its shares have risen 64.2 percent, from 41,900 won rising to 68,800 won per share. KIH shares have performed far better than those of its rival brokerage firms, including Mirae Asset Daewoo (up 47.1 percent) and NH Investment Securities (up 41.4 percent). It also beat KB Finance’s 37.9 percent rise, which includes KB Securities as an affiliate.
The only securities firm whose share price jumped bigger than KIH’s was Hanwha Securities, which saw an increase of 71.5 percent. KIH holds a 58 percent stake in Kakao Bank, whose shares jumped considerably since it launched its business on July 27. The number of subscribers broke the 1 million mark just five days after its opening day, giving KIH a boost along the way.
KIH did very well financially in the first half, with its Q1 operating profit rising to 196.5 billion won from 89.7 billion won in the same period, with net profit rising to 144.2 billion won in the quarter, the best quarterly result in its history. The momentum continued through the second quarter to around 90 billion won, up 70 percent YoY.
Korea Investment Securities, an affiliate of KIH, bought a 4 percent stake in Woori Bank, paying 12,000 won per share last September. Its shares have since risen to 18,900 won, an almost 50 percent increase, with total earnings from the shares coming to 180 billion won.
Industry sources said Vice Chairman Kim’s daring management of the company has paid dividends. He had a big say in acquiring large stakes in both Kakao Bank and Woori Bank, which was a big step on the way to expanding the company’s operation into the banking sector, catching the eyes of the stock market and boosting the price of Korea Investment’s shares.
The company expects its share price to rise further in the second half when its investment banking operation catches the attention of the market.
An official of Korea Investment Securities still see room for growth for the share price of KIH when the IB activities catch fire and log about 130 billion won in net profit.
Korea Investment Holdings Co., Ltd. is a holding company engaged in the management of its subsidiaries. The Company’s subsidiaries include Korea Investment & Securities Co., Ltd.; Korea Investment Partners Co. Ltd.; Korea Investment Mutual Savings Bank; KIARA CAPITAL; Korea Value Asset Management Co., Ltd.; Korea Investment Trust Management Co.; KIS Vietnam and KIARA ADVISORS; among others. Through its subsidiaries, the company mainly provides securities brokerage, asset management, deposits and loans, investment management, investment banking, venture capital, savings bank, private equity investment, consulting and other financial services.
Kakao Bank enjoyed explosive popularity after its launch, with the number of accounts opened topping 1 million just five days after the launch. It had extended loans worth 323 billion won ($287.14 million) and received 344 billion won as of mid- August. Despite its successful start, not only UBS analysts but also others at domestic securities firms doubt the bank's short-term profitability.
"In order to draw customers, Kakao Bank slashed the margin between lending and savings interests, as well as cutting profits from fees," Hanwha Investment and Securities analyst Kim So-hye said. "Also, its huge marketing costs will make it difficult for the bank to reach its break-even point within three years."
Kakao Bank started with 300 billion won capital, but Kim estimated it now has less than 200 billion won, putting itself in desperate need of a capital injection from Kakao. Kakao is playing the leading role in Kakao Bank, but the info-tech company's share in the bank remains at 10 percent, because of Korea's law separating banking from commerce. Korea Investment Holdings has a 58 percent share in the bank.
