Daegu Bank(005270): Good-bye to rugged 3Q06
- Company update
- Riterate BUY and TP of KRW19,200
The bank posted weaker-than-expected earnings as it set aside bonus compensation in advance.
The bank’s enterprise loans only increased 1.2% q/q, but its household loans grew 4.0% q/q.
Weak NIM is attributable to delayed loan interest rate hike, decline in return on reinvested securities, and decline in low-cost deposits.
NIM should improve from September on the back of hike in loan interest rate.
The bank should strategically maximize non-interest income to offset possible NIM drop.
4Q06 NP should come in above our estimate since 1) labor-related costs were accounted in advance 2) additional provision for bad debts are estimated at about KRW10bn.
Although there is possibility of further drop in NIM, both 4Q06 and FY06 NP should come in line with our expectation and dividend yield will be higher than that of FY05. Therefore, we reiterate our BUY call. |
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