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Jung-hoonLee

Thank you for taking part in the Hana Financial Group's Business Results Presentation. I am Lee Jung-hoonfrom HanaFinancial Group IR team. Thank you shareholders, analysts and other market participants who are joining in today's earnings release via phone or the Internet and let us now begin the 2014 Q3 Hana Financial Group business results presentation.

Let me first introduce the Group management, who are here with us to answer your questions. From Hana Financial Group, we have Group Chief Finance and Strategy Officer, CFO and CSO Lee Woo-kong; Group Chief Risk Management Officer, CRO Hwang Hyo-sang; From Hana Bank, Risk Management Group Head, Lee Young-jun,Business Management Group Head, Park Hyung-joon. From KEB, Planning and Management Group Head,Joo Jae-jung, Risk Management Group Head, Ann Byung-hyun are here with us.

From Hana Daetoo Securities, Business Administration Group Head Kang Seung-won, from Hana SK Card, Management Support Division Head, KoHyung-seok are here with us. We will hear the 2014 Q3 business results presentation and then have a Q&A session, which will be interactive using the phone.

Now, CFO Lee Woo-kong will deliver the 2014 Q3 Hana Financial Group earnings presentation.

Lee Woo-kong, Chief Financial Officer

Greetings. I am Lee Woo-kong, the CFO of Hana Financial Group. I'd like to walk you through the Hana Financial Group 2014, Q3 business results. Group financial highlights consists of four parts; profitability, total lending and funding, asset quality and capital adequacy. First, profitability.

Please refer to page 4.

P.4 Highlights_Profitability Net Income

Please refer to page 4. Hana Financial Group in 2014 Q3 posted KRW904.9 billion of net income on a cumulative basis, a 3.2% increase YoY. Q3 net income recorded KRW294.4 billion, a 29.5% drop QoQ. The main reason why Q3 net income dropped QoQ was because KRW106.1 billion of FX translation gains, which was recognized in Q2, because of the won appreciation did not take place in Q3. On the other hand, the won depreciated in Q3, leading to KRW56.5 billion being recognized as FX translation losses accordingly, among the ordinary operating income categories, transaction valuation gains dropped substantially compared to the previous quarter, resulting in the QoQ net income drop in Q3.

On the other hand, as for Q3 credit costs, KRW85.2 billion of one-off provisioning occurred, including one-off provisioning related to Dongbu Steel, Nexolon andMoneual. However, the recurring credit cost excluding these items, stabilized, limiting the impact from the Q3 net income drop.

As you can see on the right hand graph, major group subsidiary, Hana Bank and KEB's Q3 consolidated net income went up 25.1% and 20.1% QoQ respectively, recording KRW760.2 billion and KRW451 billion respectively.

P.5 Highlights_Profitability NIM

Next, NIM.

2014 Q3 total group NIM including Hana Bank, KEB, Hana SK Card and KEB Card recorded 1.93%, the same level as the previous quarter. Hana Bank 2014 Q3 NIM posted 1.49% a 1bp drop QoQ. KEB NIM posted 1.90%, a 14 bp drop QoQ since interest income from the credit-card assets were excluded with the KEB credit card spin-off from the KEB on September 1st, leading to the September monthly margin dropped to 1.57%. KEB Q3 pro-forma NIM, which was based on the standard before the KEB card spin-off recorded 2.05%, a 1bp increase QoQ, showing a positive flow.

P.6 Highlights_Profitability Major Indices

Please refer to page six. 2014 Q3 Group's major business indicators ROE and ROA posted 5.90% and 0.41% on a cumulative basis respectively. Cost-to-income ratio recorded 58.6%. For your reference, excluding the KRW86.8 billion of Q3 cumulative negative goodwill write-off from KEB acquisition in 2012, the Group's cost-to-income ratio recorded 56.1%.

P.7 Highlights_Scale Total Asset

Next is our loans in won. I would like to elaborate on actually major performance relying to size. The consolidated assets of 2014 Q3 and including Group's total assets posted KRW391 trillion, a 6.1% growth YoY and 0.7% drop QoQ. Hana Bank's consolidated assets as of end Q3 posted KRW190 trillion, a 6.1% growth compared to last year-end. What's note-worthy is that, both bank assets, all dropped. In the case of Hana Bank, non-core assets went down and in the case of KEB KRW3.2 trillion of card assets decreased with the KEB card spin-off. And as I mentioned, we have seen some changes.

P.8 Highlights_Scale KRW Loan

Next, our loans in won. The total loans in won balance combining Hana Bank and KEB Bank as of end-Q3, rose 3.4% compared to last year-end, posting KRW163.2 trillion, the same as the previous quarter. In the case of Hana Bank at the end of Q3, SME focusedloan growth and shrinking of large conglomerateloans that to portfolio adjustment, recording KRW109.8 trillion of loans in won balance.

In the case of KEB, SME loans went up 14.4% compared to last year-end, but household loans dropped 4.6% comparedto last year-end. Through continuous expansion of SME loans, KRW53.4 trillion loans in won where real life a 5.8% increase compared to late last year.

P.9 Highlights_Scale Deposit (Avg.Balance)

Next page, the Group's consolidated 2014 Q3 deposit average balance, a combination of Hana Bank and KEB went up 2.8% compared to late last year and 0.1% QoQ, posting KRW184.5 trillion. Q3 Hana Bank’s deposit average balance posted KRW115.3 trillion, a 2.5% increase compared to late last year and KEB's deposit average balance posted KRW69.1 trillion, a 3.5% increase compared to late last year.

P.10 Highlights_Asset Quality NPL Ratios

Next, I would like to elaborate on asset quality and NPL loans. The Group's 2014 Q3-end NPL ratio recorded 1.44, a 2bp increase QoQ.

As you can see on the chart on the right, Hana Bank and KEB's Bank NPL ratio went up 1bp and 2bpQoQ respectively, leading to the rise in the Group's NPL ratio. Although new NPLs went down QoQ, Q3 write-offs and sell-offs were small in size, leading to a 2bpQoQ increase in NPL ratio.

P.11 Highlights_Asset Quality Delinquency

Next page, delinquency. The Group's 2014 Q3-end delinquency ratio posted 0.77%, a 9bp increase QoQ. Hana Bank's delinquency ratio recorded 0.65%, a 14 bp increase QoQ and KEB's delinquency ratio posted 0.52%, a 4bpdrop QoQ.

Group’s delinquency rise was mainly due to Hana Bank Delinquency. Q3 delinquency amount increase as a result of restructuring of some marginal corporation such as Pantech as well as delinquency from loans to Vogo fund due to no NPL sell-offin Q3, delinquency rate relatively went up. As was mentioned in the delinquency amount related to Q3 large corporation restructuring, taking into account that the delinquency will not be normalized soon. In Q4, we’ll improve our year end asset quality through strategic sell-offs and write-off including partial write-off within provision that amounts.

P.12 Highlights_Asset Quality Credit Cost

Next page, Q3-end Group cumulative credit cards posted 0.48%, the same as the previous quarter. As you can see on the graph on the right, Hana Bank's credit cards posted 0.34%, a 3bp increase QoQ due to KRW44 billion of provisioning for Dongbu Steel. KEB's credit cost even including one off credit cost provisioning including provisioning related to Moneualreceivership posted 0.56%, a 3bp drop QoQ resulting in the Group's credit cost level being maintained at the previous level.

P.13 Highlights_Capital Adequacy Group

Next, capital adequacy. Group's 2014 Q3 expected BIS ratio and Tier 1 ratio went up 37 bp and 21 bp respectively, posting 12.56% and 9.74% respectively. A major factor behind the Q3 BIS ratio rise was because of the limited risk-weighted asset growth with capital expansion and efficient asset management, following the KRW300 billion issuance of Hana Bank FX subordinated bonds. Moreover in October, KEB successfully issued KRW300 million worth of FX subordinated bonds, which is expected to contribute to the improvement of capital adequacy in Q4.

P.14 Highlights_Capital Adequacy Hana Bank

Page 14, Hana Bank's expected BIS ratio and Tier 1 ratio went up 65 bp and 32 bp respectively QoQ, posting 14.44% and 11.16% respectively.

P.15 Highlights_Capital Adequacy KEB

In the case of KEB, the expected BIS ratio and Tier 1 ratio posted went up 78 bp and 63 bp respectively QoQ, posting 14.13% and 11.97% respectively.

P.17 Group Consolidated Earnings

I would now like to cover the Group's business performance in more detail. Please refer to the Group's consolidated statements on page 17.

First the Group's general operating income. Among the Group's general ordinary income items, with the portfolio adjustments, centering on SME loan growth as well as the strong NIMs flow due to the core deposit growth, interest income went up 4.8% YoY and 0.1% QoQ.

Q3 fee income is KRW438.4 billion and dropped 2.5% QoQ due to Q2 one off of large M&A advisory fee income fade out. Fee income rose 3.4% YoY, continuing an upward trend with the lowest point in 2013 of Q3.

Regarding disposition valuation gains and losses, a total of KRW70.51 billion of one-off losses took place, including KRW56.5 billion of FX translation losses, following the won depreciation as well as KRW18.6 billion ofVogo Fund in other securities' impairment losses. Although KRW59.5 billion of investment securities, disposition gains including SK C&C offset most of the Q3 one off losses, with the paid out of Q2 KRW106.1 billion of FX translation gains, dispositions valuation gains went down 30.9% QoQ.

Accordingly, Q3 Group's general operating income went down 5.6% QoQ, but with the overall improvement of interest income and fee income on a cumulative basis, went up 4.5% YoY in Q3.

Q3 SG&A only went up 0.3% QoQ, posting KRW958 billion and is being managed within an appropriate level. Even on a Q3 cumulative basis, it only went up 1.6% YoY, showing that SG&A management is being continued with cost efficiency.

Q3 credit cost despite the KRW85.2 billion of one-off provisioning including Dongbu Steel KRW44 billion, NexolonKRW17.2 billion won and MonuelKRW24 billion, stopped at KRW27.2 billion increased QoQ, resulting in a credit cost level that it is the same as the previous quarter.

P.18 Business Results of Subsidiaries

Subsidiaries’ business results on page 18. Hana Bank's cumulative net income for the quarter on a consolidated basis is KRW760.2 billion, as was mentioned and that of KEB is KRW451 billion.

I would like to bring your attention to Hana Daetoo Securities' net income increase of 455% QoQ to KRW34.4 billion. This is because Q2 SG&A expenses related to early retirement plan did not take place and because securities disposition gains improved. Hana SK Card recorded surplus net income of KRW9.5 billion in Q3, due to increased card sales and disposition gains on loans.

Please refer to the table for the other subsidiaries.

P19. NIM

Page 19, the Group's NIM.

As was mentioned, the NIM for the Group combining the Banks and the credit card company is the same as the previous quarter, at 1.93%.

Despite the BOK rate cutin August, the effect on the August and September NIM was minimal. This is because there had been a continuous efforts to reduce the portion of three months floating rate loss to shift the loan portfolio to grow more SME loans and to change the funding structure by increasing the portion of core low interest rate assets.

There was another interest rate cut in October, and it seems as if interest income recovery will not be easy for the time being, we will continue to manage NIM at an appropriate level by managing the time deposit funding rate and increasing the percentage of well performing SME loans.

P.20 Non-Interest Income / SG&A Expense

Page 20, non-interest income and SG&A expenses.

The cumulative Group's non-interest income in Q3 grew 3.7% YoY and decreased 7.7% QoQ.

As seen from the graph on the top right, the Group's fee income recorded KRW438 billion in Q3, decreasing by 12 billion QoQ, but it had bottomed out in Q3 last year and is continuing its rally. Asset management fees recorded KRW124.2 billion, up 5% QoQ. Non-monetary translation loss due to weak Korean won caused the disposition and valuation gain to go down by to 30.9% to KRW172.9 billion.

SG&A increased only 0.3% QoQ to KRW958 billion, and the Group's cost to income ratio grew slightly QoQ to 58.6%.

P.22 Group Total Assets/Total Liabilities & Equity

As of quarter-end, the Group's total assets stood at KRW311.9 trillion and if the trust asset of KRW79.1 trillion is included, the total asset amounts to KRW391 trillion.

Of these HanaBank's and KEB's assets including trust assets recorded KRW190 trillion and KRW144 trillion respectively.

The Group's total liabilities are KRW290 trillion and total equity KRW21.9 trillion.

P.23 KRW Loans / Deposit_Hana Bank

Page 23, Hana Bank's loan and deposits in won.

As of quarter end, the balance amount of loans in won was KRW109.8 trillion, up 2.2% year-to-date and down 0.2% QoQ. And the breakdown is as follows.

By rebalancing the loan structure, large corporate loans amounted to KRW16.4 trillion, down 1.2% year-to-date and down 4.0% QoQ. SME loans amounted to KRW36.2 trillion, up 5.2% YoY and up 2.4% QoQ.

Household loans recorded KRW56 trillion, up 2.4% YoY and up 0.1% QoQ. Total household loan growth seems stagnant because low margin loans, including collective loans and loans previous to registration decreased as it had been planned.

Deposits amounted to KRW115.3 trillion, up 2.5% YoY. Core low interest rate deposits increased 12.6% YoY and 5.1% QoQ, showing stable funding structure.

P.24 KRW Loans / Deposit_KEB

Page 24 KEB's loans and deposits in won.

The balance amount of loans in won was KRW53.4 trillion, up 5.8% YoY and up 0.3% QoQ. Large corporate loan was KRW11.6 trillion, up 9.7% YoY and down 2.7% QoQ. SME loan was KRW19.7 trillion, up 14.4% YoY and up 3.1% QoQ, continuing the growth momentum in the SME loans.

Household loans stood at KRW20.9 trillion, down 4.6% YoY and down 0.9% QoQ, because of decrease in mortgage loans.

Deposits amounted to KRW69.1 trillion, up 3.5% YoY. As is the case with Hana Bank, core deposits increased 8.5% YoY and 3.9% QoQ, showing improved funding structure.

P.26 Asset Quality_Group

The Group's total credit stood at KRW232 trillion and NPL amounted to KRW3.3 trillion. Total credit increased by KRW633 billion QoQ, and NPL increased by KRW60 billion QoQ. NPL ratio recorded 1.44% up 2bpQoQ. NPL coverage ratio was 120.3%.

The graph on the top right shows the Group's new NPL formation of KRW326 billion, which is moderate compared to previous quarters. The NPLs have been formed before write-off, sale, and debt-to-equity swap.Of those, new NPL formation in the two bank is KRW179 billion and the new NPL formation in the other subsidiaries is KRW147 billion.

The Bank's asset quality will be further explained in the next slide.

P.27 Asset Quality_Hana Bank

Page 27, Hana Bank's asset quality. Hana Bank's total credit was KRW126.8 trillion, and NPL amount increased KRW19 billion to KRW1.7 trillion.

This brought up the NPL ratio by 1bp to 1.34% QoQ and NPL coverage ratio was 121.2%.

P.28 Asset Quality_KEB

Page 28, KEB's asset quality.

KEB's total credit was KRW82.8 trillion, and NPL amount reduced by KRW16 billion QoQ to KRW1.1 trillion. NPL ratio increased by 2bpQoQ to 1.29% and NPL coverage ratio was 113.9%.

P.29 Provision

Page 29, provisioning. The Group's credit cost was the same as Q2, at 0.48% and it was 0.34% for Hana Bank and 0.56% for KEB.

P.31 Capital Adequacy_Group

Page 31, capital adequacy for the Group.

The Group's estimated BIS ratio and Tier 1 ratio are 12.56% and 9.74% respectively. The Group's common equity Tier 1 ratio is expected to reach 9.26%, debt to equity ratio of 32.19% and double leverage ratio, 126.45%.

P32. Capital Adequacy_Bank

Capital adequacy for the Bank's on page 32. Hana Bank's estimated BIS ratio and Tier 1 ratio are 14.44% and 11.16% respectively, and KEB's estimated BIS ratio and Tier 1 ratio, are 14.13% and 11.97% respectively.

Please refer to the appendix for the other of major invoices.

This concludes the Q3 business results presentation of Hana Financial Group. Thank you for listening.