[Edaily Reporter Kim Hyung-il ] HANWHA INVESTMENT & SECURITIES assessed that while BNK Financial Group Inc.(138930)posted third-quarter earnings that fell short of market expectations, the recent decline in its stock price has been excessive. In line with the downward revision of earnings estimates, the firm adjusted its target price from 21,000 won to 19,000 won but maintained its “Buy” rating.

On the 27th, Kim Do-ha, an analyst at HANWHA INVESTMENT & SECURITIES, analyzed that BNK Financial Group Inc.’s third-quarter net income attributable to controlling shareholders was 210.5 billion won, a 28% decrease year-over-year. Although this represented a 5% increase from the previous quarter, it fell short of HANWHA INVESTMENT & SECURITIES’ estimate and the market consensus by 6% and 15%, respectively.

The main reasons for the weak performance were cited as a decline in gains on securities and the burden of ordinary provisions. While interest income and fee income exceeded estimates, gains on securities fell by 158 billion won compared to the previous quarter, weighing on earnings. Ordinary provisions were also 10% higher than estimated, causing operating profit to fall 17% short of expectations. There were no non-recurring factors.

The net interest margin (NIM) fell by 0.03 percentage points for the holding company and 0.04 percentage points for the bank compared to the previous quarter. For both entities, the spread between lending rates and funding rates narrowed by a margin similar to the NIM decline. The bank’s won-denominated loans remained flat compared to the previous quarter, with household loans decreasing by 1% and corporate loans remaining flat. However, they have grown by more than 5% since the beginning of the year.

The burden of loan losses also persisted. The third-quarter credit cost ratio (CCR) stood at 0.64%, remaining higher than the average quarterly level even excluding non-recurring factors. HANWHA INVESTMENT & SECURITIES assumed that 30 billion won of previously set aside provisions would be reversed during the fourth quarter, but estimated that the annual provisioning amount would exceed BNK Financial Group Inc.’s planned figure in the low 700 billion won range.

Analyst Kim pointed out that loan loss provisions were a common factor behind BNK Financial Group Inc.’s failure to meet market expectations for two consecutive quarters. He explained that, amid growing concerns over the soundness of loans to small and medium-sized enterprises, BNK Financial Group Inc.—which has strong characteristics as a regional bank—is inevitably sensitive to the burden of loan losses. Indeed, the stock price fell 14% the previous day.

However, analysts assess that this recent stock price decline reflects an excessive reaction to concerns over deteriorating earnings. They note that the decline in gains on securities—which accounted for the largest portion of the current quarter’s weak performance—is a non-recurring factor, making it difficult to interpret this as a sustained erosion of profits.

HANWHA INVESTMENT & SECURITIES raised its 2027 estimate for loan loss provisions by 10% and lowered its estimate for net income attributable to controlling shareholders by 7%. Accordingly, it lowered its target price as well, though the adjustment was less than 10%. Considering that regional bank stocks have recently underperformed the broader market and the banking sector due to concerns over loan losses, the firm believes that further downside potential is limited and that the current stock price has already fallen excessively.