[Edaily Reporter Park Soon-yeop] Analysts have concluded that the impact on the banking sector will be limited despite the filing for rehabilitation proceedings by JoongAng Group affiliates, including JTBC, and the work-out process for the JoongAng Ilbo. This assessment is based on the fact that while the financial sector’s exposure is not insignificant, most bank loans are presumed to be secured, and the burden of additional loan loss provisions is not considered significant relative to the banks’ profit resilience.
Park Hye-jin, an analyst at Daishin Securities, maintained an “Overweight” investment rating on the banking sector on the 18th, stating, “The impact related to the JoongAng Group is expected to be minimal,” and added, “We recommend actively buying bank stocks.” She identified #Hana Financial Group and #Shinhan Financial Group as top picks.

Previously, on the 12th, following JTBC’s failure to repay 20.6 billion won in securitized loans, five companies within the JoongAng Group—JoongAng Holdings, JTBC, Contentre JoongAng, Megabox JoongAng, and JoongAng P&I—filed for rehabilitation proceedings with the court. The JoongAng Ilbo is currently pursuing a corporate restructuring process, or “workout.”
According to Daishin Securities, based on the six companies—including the five that filed for rehabilitation and the JoongAng Ilbo, which is undergoing a workout—the financial sector’s exposure totals 2.1 trillion won, comprising 855.4 billion won in loan receivables and 1.25 trillion won in market-raised funds such as corporate bonds. By affiliate, JTBC had the highest debt at 621.1 billion won.
The total debt of the JoongAng Group’s major affiliates was calculated at 2.74 trillion won. Of this, loans amounted to 1.23 trillion won, while funds raised through the market—such as corporate bonds—totaled 1.5 trillion won. By sector, the banking sector had the largest exposure to the JoongAng Group at 8007억 won, followed by securities firms at 1251억 won, finance companies at 797억 won, and savings banks at 340억 won.
However, Daishin Securities assessed that the impact of this issue on the banking sector’s profitability would be limited. It estimated that the outstanding loan balance related to the Jungang Group among the four commercial banks under its coverage stood at 450 billion won, while the exposure of securities firms was estimated at 48 billion won. Among the banks, Hana Bank—the company’s primary bank—had the highest exposure at 307 billion won.
Researcher Park explained, “Since there were no delinquencies prior to the default, the loans are presumed to have been classified as performing loans,” adding, “As the credit rating has been downgraded to ‘D’ level due to this situation and the likelihood of delinquency has increased, the loans are being conservatively classified as non-performing loans, which is expected to result in additional provisioning.”
Daishin Securities estimated the total provisioning for the entire banking sector at 1750억원. Of this amount, the additional provisioning burden for the four major commercial banks was projected to be around 530억원. By bank, it was estimated that Hana Bank would incur 300억원, Woori Bank 100억원, and KB Kookmin Bank and Shinhan Bank would each incur around 50억원 in provisions.
The reason the provision burden is viewed as limited is the collateral structure. Daishin Securities stated that it estimates more than 90% of the banking sector’s loans are secured loans. It also cited media reports that the Joongang Group is pursuing the sale of its headquarters building, valued at 5500억 won, as a potential variable. Since a significant portion of the relevant loans is secured by the headquarters building, the firm explained that if the sale proceeds, there is a possibility of loan recovery and the reversal of provisions.
Within the securities industry, potential instances of mis-selling related to retail corporate bond sales may come under scrutiny. However, Daishin Securities projected that the impact would be minimal, given that recording of conversations and investor confirmation agreements have become mandatory following the strengthening of the Financial Consumer Protection Act.
Researcher Park assessed, “The provisioning standards for financial holding companies have been significantly tightened, and since most loans related to the Jungang Group are secured loans, the impact on bank profitability will be quite limited.”
On the contrary, it is believed that bank stocks have become more attractive to investors as they have recently been left behind by the broader market. According to Daishin Securities, while the KOSPI has returned 108.55% so far this year, the banking sector’s return has been limited to 25.71%. This means bank stocks have lagged behind relative to the index’s sharp rise.
Analyst Park said, “Although bank stocks have recently been left behind despite the index’s rise, they are highly likely to post record-breaking earnings in the second quarter as well,” adding, “Considering the rise in dividend payout ratios and the low valuation—with price-to-book ratios (PBR) below 1—they currently offer high investment appeal.”
Daishin Securities also noted that there is ample potential for capital inflows driven by market expectations ahead of the second-quarter earnings announcements. The firm maintained its target prices at 190,000 won for #KB Financial, 120,000 won for Shinhan Financial Group, 143,000 won for Hana Financial Group, and 43,000 won for #Woori Financial Group.