Bank Of America Downgrades KB Financial On Weaker EPS Momentum

KB Financial Group Inc. KB faces challenges to gain leading positioning within a competitive landscape.

The Analyst

Bank of America analyst Bryan Song downgraded KB from Buy to Neutral and lowered the price target $61.

The Thesis

This downgrade reflects inferior key earnings drivers in relation to peers, as well as a slowdown in earnings per share growth.

“Recent earnings suggest sound earnings flow, but growing regulatory risks and weakening earnings dynamics should lower investor appetite for a market leader like KBFG. We see a change in relative stock positioning with the revival of main competitor SFG via successful inorganic growth,” Song said in a note.

Song reported KB demonstrated a mere 3-percent earnings growth in the first half of 2018, compared to the 10-percent growth in 2017. “KBFG’s core earnings growth seemed to slow. Also, after sizable headcount reduction in 2015-16, progress in cost savings is also slowing,” Song said.

Overall, the company will likely maintain its top capital position, in addition to retaining sound profitability. According to Song, analysts are unlikely to see substantial dividend hikes in the future, but rather a rotation into stronger earnings per share growth.

Price Action

KB shares were down 4.7 percent at $44.91 Thursday afternoon.

Related Links

Asset Management Startup Pagaya Raises $14M From Former American Express CEO, Others

A New Dynamic Approach To Multi-Factor ETFs