The outcome of South Korea’s presidential election is likely to be a positive for the country’s banks, analysts said.

Opposition party candidate Yoon Suk-yeol won a tight race by less than 250,000 votes on Thursday, taking around 48.6 percent of the ballots by riding on public anger over the incumbent administration’s practices. Some of those policies had resulted in a sharp spike in housing prices in Seoul.

In a research note, Daiwa said the election result will remove regulatory uncertainty, with the new government set to de-regulate the property and banking sectors.

Easing Loan-to-Value Restrictions

The investment bank cited Yoon’s pledge to ease the loan-to-value ratio to 80 percent for first-time home buyers, compared with the current 40 percent for properties valued at less than KRW900 million, or around $729,000. For non-first home buyers, the loan-to-value ratio is likely to be 70 percent, Daiwa estimated.

Daiwa said it also expected the new government would ease the debt-to-service ratio from its current 40 percent for debt of more than KRW200 million.

The Japanese investment bank also pointed to Yoon’s caution against using public debt to create jobs, and said that would likely prevent a supply-driven treasury-rate spike.

Household Loan Growth

When it comes to the stocks of individual banks, Daiwa tipped KB Financial as its top pick, with the potential for upside for Hana Financial Group and Woori Financial Group.

CGS-CIMB, in a research note Thursday, agreed the incoming administration’s policies on household loans would ease, particularly for loan-to-value limits.

“Per the new administration’s pledges, we think household loan growth could exceed the current government’s guidance” for the second half of this year, CGS-CIMB said. For 2022, the brokerage has forecast the aggregate household loan balance would rise by 4.6 percent from 2021, in line with the current financial authority’s guidance.

Retail Investment Positives

In addition, CGS-CIMB said the new administration’s pledges will be supportive for retail investors, such as promises to abolish the capital gains tax, including for cryptocurrencies, and to maintain reasonable transaction-tax levels in the stock market.  

“We think fee income should remain resilient as retail investors should be more active in the stock market and cryptocurrency market going forward,” CGS-CIMB said.

CGS-CIMB said KakaoBank has 100 percent exposure to household loans, and launched mortgage products in the first quarter of this year. In addition, among traditional banks, Woori Financial Group would likely be the largest beneficiary due to its highest exposure to the banking business, the brokerage said.

Some Caveats

Within the brokerage’s coverage universe, KBFG and Shinhan Financial Group have the largest market share in the stock brokerage segment, while Hana Financial Group also operates a brokerage business, the note said.  

To be sure, some of Yoon’s other campaign promises, such as cutting the minimum wage, removing limits on working hours and abolishing the ministry for gender equality, may have negative economic impacts.