Banking:Rise in Cofix rate to spur NIM improvement
Banks’ cost of funds index (Cofix) rate on new funds in October was up 10bps fromSeptember and 15bps from August. The Cofix rate should rise again in Novembergiven that yields on 1-year KTBs have leapt 32bps from September levels.
The recent jump in market interest rates should renew growth in banks’ NIMs from4Q. Comparable growth in interest rates in 2H16 led NIM at KB Financial Group andHana Financial Group to rise 13bps and 14bps, respectively, over 1Q-3Q17.
While all three of Korea’s biggest financial groups should enjoy NIM growth, ourtop pick is KBFG. We also like HFG for its sector-high earnings sensitivity tointerest rate hikes.