Here in America, you're considered a pretty big bank if you control 5% of the country's deposits. So what does that make South Korea's KookminBank
Amazingly enough, this actually looks like a pretty well-run bank. Sure, it had troubles with problem lending a few years ago, but that's not all that uncommon with foreign banks -- particularly in economies where the government likes to periodically interfere (either explicitly or implicitly) to achieve political ends.
Looking at first-quarter results, Kookmin is certainly leveraging the healthy economy of South Korea. Revenue was up only about 7%, but tight expense control (also somewhat rare for overseas banks) and lower bad debt costs allowed it to parlay that into more than 130% growth in reported net income. Returns also improved significantly, with return on assets coming in at nearly 1.8% and return on equity exceeding 24%.
Going deeper, Kookmin's net interest margin was stable compared with the fourth quarter, and stable at a pretty reasonable level (near 4%). Non-interest income, though, was down and is dwarfed by the interest income here.
On the balance sheet, loan growth was kind of sluggish, which I find odd given that government statistics suggested good loan growth in the quarter. Management called it a seasonal matter, though, and I'd be inclined to agree. What's more, deposit growth was pretty solid as core deposits grew nearly 12% from last year's level.
My biggest gripe here is that Asian markets by and large have been hot, and so too have the Korean banks -- Kookmin is up about 125% in the last year, while Woori
If you think that the South Korean economy can sustain this pace of growth, Kookmin's valuation doesn't look all that bad -- not enough to entice me to buy, but not bad. Just remember, though, that chasing the hot money can sometimes leave you feeling a little singed if you're not as nimble as the rest of the herd in getting out.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).