Korea Banks BoK’s expected hike with more hawkish stance, hinting at faster hikes ahead; NIM upside on higher ROE

Research evidence excerpt

Korea Banks BoK’s expected hike with more hawkish stance, hinting at faster hikes ahead; NIM upside on higher ROE

J P M O R G A N Asia Pacific Equity Research

16 July 2026

Korea Banks

BoK’s expected hike with more hawkish stance, hinting

at faster hikes ahead; NIM upside on higher ROE

As expected, the BoK raised its base rate by 25bps (to 2.75%) on July 16 after a long- Diversified Banks

ACheld on-hold decision. While the governor guided to data-dependent hikes ahead, the Jihyun Cho

policy tone sounded more hawkish, hinting at faster and larger rate hikes ahead. The (82-2) 758-5480

meeting was framed around (1) a more upbeat economic outlook with stronger jihyun.cho@jpmorgan.com

exports and a domestic recovery in consumption; (2) greater inflationary pressures Tae Wook Kim

from both the supply and demand sides; and (3) increased policy need to address (82-2) 758-5719

financial stability risks from rising household debt and housing prices. Therefore, we taewook.kim@jpmorgan.com

J.P. Morgan Securities (Far East) Limited, Seoul

expect steeper rate hikes towards a terminal rate of 3.75% (vs. previously 3.5%), with Branch

two 25bps hikes in Aug/Nov 2026 and another two hikes in Feb/May 2027. This

backdrop is positive for NII in financial groups with widening NIM and steady 4-5%

loan growth. While credit cost management should be more critical to contain the loss,

we expect more prudent risk management for credit cost control in large FGs. Despite

the large market volatility, we view fee income expansion momentum as intact, given

structural changes in household asset allocations, lifting ROE towards 11-12% in the

medium term. Altogether, we remain OW on KB/Shinhan/Hana for an extended

re-rating on higher sustainable ROE.

• A 25bp hike, as expected.