Banking shares rally on Corporate Value-up Program

Banking shares in Korea are on an upswing after being grouped as some of the most undervalued stocks, on the back of the government’s Corporate Value-up Program aimed at boosting the stock market.

According to the Korea Exchange, KB Financial Group, the country’s largest banking group, has gained more than 40 percent on the benchmark KOSPI this year.

In particular, it went up nearly 20 percent over the past two weeks after the Financial Services Commission furnished details on the Corporate Value-up Program in February.

It focuses on improving corporate governance, enhancing self-regulatory requirements and other relevant measures to tackle the so-called Korea discount — a lower valuation of Korean stocks compared to global peers.

Shinhan Financial Group, the country’s second-largest banking group, has also advanced more than 25 percent this year.

Such a rally, according to the industry sources, fueled optimism that the average price-to-book ratio (PBR) of banking groups can improve from the current 0.4.

PBR measures whether a company’s share price is undervalued, with a number below 1 indicating that the stock may be trading below its fair value.

In the meantime, CEOs of banking groups as well as their employees are enjoying a surge in the value of company stocks they have purchased.

Shinhan Financial Group Chairman Jin Ok-dong, for instance, bought 5,000 Shinhan stocks at 34,350 won per share last June in a gesture to help boost its price. As it is traded at around 48,000 won, he recorded an investment return of over 40 percent.

Woori Financial Group Chairman Yim Jong-yong also purchased 10,000 Woori stocks at 11,880 won last September, which now trades at around 15,000 won.