Meritz Financial Group's Buyback Blitz: A Last Chance to Capitalize on Undervaluation Before the Window Closes?

Meritz Financial Group (KOSE:A138040), South Korea's first financial holding company, has emerged as a poster child for shareholder-centric capital allocation in 2025. Over the past two years, the firm has deployed over KRW 2 trillion ($1.46 billion) in equity buybacks, slashing its share count and boosting earnings per share (EPS) in a deliberate strategy to unlock undervalued equity. But with its KRW 550 billion ($397 million) buyback program set to expire in March 2026, investors now face a critical crossroads: act quickly to capitalize on what could be the final catalyst for price appreciation—or risk missing out on a rare opportunity in a consolidating financial sector.

The Buyback Timeline: Aggressive Execution, Strategic Prioritization

Meritz's buyback strategy has been methodical. After announcing a KRW 500 billion tranche in March 2024, the company completed purchases of 6.1 million shares (3.26% of total shares) by March 2025, expending the full authorized amount. A second tranche of KRW 500 billion, announced in September 2024, added another 4.6 million shares (2.53%) by year-end 2024. This brought total repurchases since 2023 to 30.86 million shares, reducing issued shares by nearly 15% and driving a 194% cumulative total shareholder return (TSR) through April 2025.

But the most compelling action lies in the current KRW 550 billion buyback, announced in 2025 with an expiration date of March 25, 2026. As of March 2025, Meritz had already repurchased 13.1 million shares under this program, spending KRW 328.5 billion, leaving KRW 221.5 billion in remaining capacity. Crucially, the company has prioritized buybacks over capital expansion: while its subsidiary Meritz Securities raised KRW 50 billion via a June 2025 rights offering, the parent company has kept its focus on returning capital to shareholders.

Why the Expiring Buyback Matters: Undervaluation and Catalyst Power

The expiration date creates a clear deadline for Meritz's remaining buyback capacity. With just over KRW 221 billion left to deploy, the company faces pressure to accelerate purchases to maximize the program's impact. This urgency is amplified by two factors:

1. Undervalued Equity: Meritz trades at a 0.7x price-to-book ratio, far below its historical average of 1.2x and below peers like Shinhan Financial (0.9x). Buybacks can directly address this discount by reducing shares and increasing per-share metrics.
2. Technical Catalyst: The stock's 7.88% YTD gain in 2025 and strong momentum (up 175% since the buyback spree began) suggest investor confidence. A final push on buybacks could trigger a short-covering rally ahead of the March 2026 deadline.

The Investment Thesis: Time is Running Out

For income-focused investors, Meritz's buybacks complement its 1.5% dividend yield, creating a dual-engine return mechanism. But the most compelling argument lies in the buyback's expiring window:

• Catalyst Risk: If Meritz fails to utilize the remaining KRW 221 billion before March 2026, the unspent funds may never be redeployed. The company has hinted at shifting capital allocation post-2026 toward comparing internal investment returns with shareholder payouts, which could dilute buyback momentum.
• Valuation Floor: With shares down 12% from their March 2025 peak of 127,400 won, the stock now offers a margin of safety for buyers. The buyback program's expiration creates a clear “use-it-or-lose-it” scenario that could force Meritz's hand to accelerate purchases, providing a floor for prices.

Final Verdict: Act Before the Window Closes

Meritz Financial Group's buyback strategy has been a masterclass in shareholder value creation. With 15% fewer shares outstanding since 2023 and a proven track record of deploying capital efficiently, the firm has set a high bar for financial institutions in Asia. However, the ticking clock on its KRW 550 billion buyback program adds a critical urgency.

Investors should consider adding a position in Meritz before year-end 2025, aiming for a 10–15% discount to current prices. The stock's technicals (e.g., a 200-day moving average at 105,000 won) and the buyback catalyst make this a high-conviction idea. As the expiration looms, Meritz's management has little to lose and everything to gain by maximizing the remaining buyback capacity—making this a rare asymmetric opportunity in a conservative industry.

Risk Warning: While the buyback expiration creates a catalyst, external risks like a slowdown in Korean credit demand or regulatory changes could pressure the stock. Monitor quarterly buyback updates and EPS growth closely.