iM Financial Group announced on July 27 that conditions are ready for converting iM Securities into a full subsidiary, with timing currently being coordinated. CFO Cheon Byeong-gyu stated at the Q2 earnings conference call that preparations are sufficient, as uncertainties related to preferred shares issued during the iM Securities acquisition have been mostly resolved. The decision on acquiring remaining shares will consider iM Financial's market valuation comprehensively. This move aligns with the company's 2024 value-up plan targeting 9% ROE by 2027, alongside expanded shareholder returns including an additional KRW 30 billion share buyback approved by the board on July 27.
iM Financial Group Coordinates Timing for iM Securities Full Subsidiary Conversion
CFO Cheon Byeong-gyu stated at the July 27 conference call that the company is "sufficiently prepared" timing-wise for the full subsidiary conversion. He explained that when the securities firm was initially acquired, capital was raised through preferred shares, and there were various judgments regarding whether those preferred shares corresponded to controlling shareholder stakes. "This part has been almost settled," Cheon said. The company will comprehensively review iM Financial's current market valuation level before proceeding, though no exact timeline has been determined.
Company Targets 9% ROE by 2027 Through Non-Bank Subsidiaries
iM Financial presented a 9% ROE achievement target by 2027 when it announced its value-up plan in 2024. The company's average ROE over the past five years was approximately 7.5%, with expectations of reaching approximately 8% this year. CFO Cheon stated that to achieve 9% ROE by next year, the company is increasing the contribution of non-bank subsidiaries as the first priority. "The target ROE for securities and capital is set at a much higher level than the current holding company's overall ROE, and we expect visible results from the second half of this year and next year," he said.
For the securities subsidiary, the company assessed that despite capital market activation, retail market share remains lower than major firms, preventing trading volume increases from sufficiently translating into profits. The company plans to expand commission revenue related to offline operations in the Daegu-Gyeongbuk and Yeongnam regions, digital services, and overseas stocks.
Board Approves Additional KRW 30 Billion Share Buyback on July 27
The iM Financial board approved an additional KRW 30 billion share buyback and cancellation on July 27. This brings the total share buyback and cancellation amount for 2024 to KRW 70 billion. The company plans to determine additional shareholder return measures at year-end considering profit levels and share price conditions. With the current price-to-book ratio (PBR) remaining at approximately 0.4 times, the company is placing more weight on additional share buybacks and cancellations rather than cash dividends.
CFO Cheon explained that "if tax-free dividends are applied, an approximately 18% dividend increase effect occurs even while maintaining the same dividend level." He added, "Considering this, we are placing weight on additional share buybacks and cancellations."
CET1 Ratio Reaches 12.27% at End of Q2
iM Financial's common equity tier 1 (CET1) ratio reached 12.27% at the end of Q2, up 25bp from the previous quarter. The company plans to achieve the first target of 12.3% set in its 2024 value-up plan early and stably.
iM Bank Adjusts Portfolio Strategy for NIM Improvement
iM Bank has been adjusting its loan portfolio's interest rate fluctuation cycle since the end of 2022 during the interest rate decline period, reducing the proportion of 3-month products and increasing the proportion of 6-month products. Since the end of last year, the bank has been increasing the proportion of 3-month products again in preparation for market interest rate increases.
iM Bank CFO Shin Su-hwan stated, "We are operating a portfolio strategy to slightly increase interest rate sensitivity during the interest rate increase period." He added, "If the current trend continues, the bank's NIM at year-end is expected to be approximately 1.84%, up about 2bp from the current 1.82%."
NPL Coverage Ratio Stands at 82% Based on Loan Loss Reserves
Asset soundness showed different movements as non-performing loans (NPL) increased despite stable delinquency rates. iM Financial explained that while NPL increased due to corporate rehabilitation applications and other factors, new defaults stemming from actual borrower financial deterioration or delinquency are decreasing.
CRO Park Byeong-su stated, "NPL due to corporate rehabilitation or restructuring increased compared to the previous year, but actual financial deterioration or delinquency decreased considerably." He added, "Although defaults increased, the overall trend is downward stabilization."
The NPL coverage ratio stands at approximately 82% based on loan loss reserves. However, when including loan loss provisions, it reaches approximately 137%, and the collateral ratio for bank corporate loans is also approximately 85%. CRO Park stated, "The overall collateral ratio is high," while adding, "We aim to improve the NPL ratio to 100% by year-end."
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FAQ
What did iM Financial Group announce on July 27 regarding iM Securities?
iM Financial Group announced that conditions are ready for converting iM Securities into a full subsidiary, with timing currently being coordinated. CFO Cheon Byeong-gyu stated at the Q2 earnings conference call that preparations are sufficient, as uncertainties related to preferred shares issued during the iM Securities acquisition have been mostly resolved.
What is iM Financial Group's ROE target by 2027?
iM Financial Group targets achieving 9% ROE by 2027, as presented in its 2024 value-up plan. The company's average ROE over the past five years was approximately 7.5%, with expectations of reaching approximately 8% this year. The company plans to increase the contribution of non-bank subsidiaries including securities and capital to achieve this target.
How much share buyback did iM Financial Group approve on July 27?
The iM Financial board approved an additional KRW 30 billion share buyback and cancellation on July 27, bringing the total share buyback and cancellation amount for 2024 to KRW 70 billion. With the current PBR at approximately 0.4 times, the company is placing more weight on share buybacks rather than cash dividends.
