Kakao Bank: Solid 2Q results within market expectations; subdued growth outlook not justifying valuation premium - Neutral

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

06 August 2026

Kakao Bank

Solid 2Q results within market expectations; subdued

growth outlook not justifying valuation premium Neutral

Neutral

323410.KS, 323410 KS

Price (05 Aug 26):W21,550

Price Target (Jun-27):W24,000

2Q26 net profit came in at W141bn (-25% q/q and +12% y/y), in line with Street

estimates, but still above our expectations. We view the stronger interest income

as positive with a 13bps NIM expansion, while NIM movement is likely to

moderate going forward on increasing secured loans and more active funding/

lending efforts. Well-controlled credit costs also gave us some relief with largely

stable asset quality readings. However, subdued loan growth (~3% in 1H26 vs. 9%

in 2025) and slow net fee/platform income growth remain a drag for any further

re-rating. On the other hand, longer-term initiatives (i.e. stablecoins, overseas

expansion, M&A opportunities, etc.) will likely take a long time to translate into

meaningful earnings to revamp the growth outlook. Altogether, we see limited

incremental positives to further widen its valuation premium from 1.5x 12MF P/B

(vs. 9% ROE) and retain Neutral.

2Q26 earnings details. Net profit came in at W141bn (-25% q/q and +12%

y/y), in line with Street estimates. Net interest income strengthened with a

~13bps NIM expansion despite muted loan growth at +1% q/q. Fee & platform

income also increased on resilient fee income while trading gains weakened in

a rising rate environment. Credit costs were also well-controlled at 0.47% (vs.

0.52% in 2Q25) with largely stable asset quality readings: NPL ratio at 0.54%

(+1bp q/q) and delinquency rate at 0.51% (flat q/q). However, SG&A costs

surged 18% y/y to offset further earnings upside owing to IT investments and

elevated depreciation costs on a recently-built data center.

Non-bank portfolio expansion. In June 2026, KakaoBank announced that it

would acquire Mastern Capital to strengthen corporate banking and expand

non-bank lending such as installment financing and leasing. Management

expects to get FSC’s approval for the deal within 2026 and targets to launch

new services for an earnings turnaround in 2027.…