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Thank you for taking part in Hana Financial Group Business Results Presentation.

I am Lee Junghoon, IR Team Leader at Hana Financial Group.

Thank you shareholders, analysts and other market participants for joining in today via phone and the Internet. I would like to express my deepest gratitude to you and let us now begin the 2016 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, Vice Chairman, Kim Byoung-ho; Executive Vice President and CFO, Kwark Cheol-seung are here with us. Our CRO and Vice President Hwang Hyo-sang is also here with us. Next from KEB Hana Bank, Executive Vice President in charge of Planning and Management Group Lee Seung-lyul is here with us. From Hana Financial Investment EVP Lee Sang-hoon is here with us. Last but not least from Hana Card, EVP in charge of Management and Strategy division and CSO, Song Jong-geun is here with us.

Today we will first hear introductory remarks from our Vice Chairman, then CFO, Kwark Cheol-seung will deliver a presentation on business performance, then we will have a Q&A session via phone. First, I would like to invite our Vice Chairman, Kim Byoung-ho for introductory remarks.

Distinguished participants, I express my gratitude to all the investors, analysts and market participants for participating in today's earnings release. In Q3, we had uncertainty in the financial industry because we had the possibility of interest rate hike and Korean shipping company's insecurities and concern about the hard Brexit and financial crisis has been of concern.

And there was a decision by Korean Financial Services Commission that their decision to recognize a loan loss reserve that's part of common capital stock, which will enable Korean banks to have environment for local and global competitiveness, but still we will need to be more competitive.

Amidst these difficulties, Hana Financial Group in Q3 is very happy to announce business results that have drastically improved, continued from the first half of this year. We had the liability and asset rebalancing that was continued, so we had a very good capital adequacy results and we are sure that we have no concern for capital adequacy.

In particular, we have cost cutting, that is very thorough and risk management, so our profitability has exceeded the expectations of the market, it is truly remarkable our results. In particular, we have KEB Hana Bank and through a successful IT integration, we have the efficient management and we have the distribution of our resources, so that we can have good synergy.

With regards to capital adequacy and profitability, which is a source of concern for the market, we will intend to make continuous improvement. So the achievements that we have achieved up until now is quite significant and we will do our best to enhance the results going forward. We will make our best efforts going forward. So we ask for your

continued support and interest for our group.

Next, for more details on the business results, CFO, Kwark Cheol-seung will make a presentation. Thank you very much.



Thank you very much, Vice Chairman. Now I would like to invite our CFO Kwark Cheol-seung for the business results presentation of 2016 Q3.

Greetings. I would like to walk you through the 2016 Q3 Hana Financial Group business results.



P 3. 2016.3Q Financial Highlights (1)

First, 2016 Q3 Group financial highlights. Please go to page three. Hana Financial Group's 2016 Q3 cumulative net income recorded KRW1, 240.1 billion, a 23.6% growth YoY. Actually, it was the highest quarterly net income since the first quarter of 2012. And in Q3, we had net income, which was KRW450.1 billion, a 27.8% growth QoQ.

The following are the major highlights in Q3. First, with a spread management through a loan portfolio adjustment and core low cost deposit growth, NIM was defended despite the BOK rate cuts.

Core income, a sum of interest income and fee income declined 0.7% QoQ, but ordinary operating income went up 3.9% QoQ with FX translation gains.

Second, SG&A which was stably managed in the first half of this year continued to stabilize and is being managed within KRW1 trillion in Q3.

Third, in the case of provisioning despite one-off provision related issues such as marine shipping industry restructuring with the continuous downward stabilization of recurring provisions, credit cost ratio was improved to be under 40 bp. Likewise through profitability improvement efforts as well as efforts to reduce SG&A and provisioning, a net income of over KRW450 billion was posted despite one-off provisioning.

On the bottom right of the page, the group's cumulative ROE and ROA in Q3 posted 7.37% and 0.52% respectively. Major indicators stabilized including group's cost-income ratio posting 54.8%.

P 4. 2016.3Q Financial Highlights (2)

Next, please refer to page four. First, we have the NIM. Group's 2016 Q3 NIM combining KEB Hana Bank and Hana Card declined 1 bp QoQ recording 1.80%. Despite the BOK base rate cut in June, NIM was defended stably through spread management including loan portfolio quality improvement and core low cost deposit growth.

Despite the 1 bp quarterly drop in NIM, interest income increased on the back of household and SME loan growth posting KRW1, 145.9 billion, a 0.1% increase QoQ.

Credit card fee income increased with growth in credit purchase, but loan related fee income and advisory fee income declined resulting in fee income posting KRW438.8 billion, a 2.7% drop QoQ. Accordingly core earnings a sum of interest income and fee income posted KRW1, 584.8 billion, a 0.7% drop QoQ. Bank loans in won posted minus growth in the first half on the back of Korea Housing Financial Corporation or KHFC loan transfer and large corporate loan reduction. However, in Q3 bank loans in won posted KRW172 trillion, a 2.0% growth QoQ with household loan growth centering on home mortgage loans as well as SME loan growth, including SOHO loans in Q3.

P 5. 2016.3Q Financial Highlights (3)

Let's now go to page five. 2016 Q3 group NPL ratio and delinquency ratio recorded 1.11% and 0.57% respectively, falling 12 bp and 10 bp respectively maintaining a continuous downward stabilization trend. In the case of provisioning despite the one-off provisioning, including restructuring of shipping industry due to preemptive risk management efforts, provisioning was stabilized at the recurring level and along with some write-backs, the group's credit cost ratio posted 0.39%, a 5 bp drop QoQ.

The group's capital adequacy in Q3 on the back of aggressive management efforts of risk-weighted assets, including reduction of large corporate exposures led to the group's CET1 ratio of 11.57%, a 22 bp increase QoQ maintaining a continual growth trend.

P 7. Group Consolidated Earnings

Next is the breakdown of the group's profitability, please refer to the Group consolidated income statement on page seven.

Let me now elaborate on the group's general operating income. The group's interest income in the general operating income went up 0.1% QoQ, a 2.0% growth YoY through continuous SME-centered growth leading to portfolio improvement effect and reduction in funding cost through core low cost deposit growth. Fee income dropped 2.7% QoQ since although credit card fees increased with credit purchases increase, loan and advisory related fees declined.

Fee income decreased 10.0% YoY because of the merchant fee rate reduction applied from early this year.

Q3 dispositions and valuation gains grew 52.7% QoQ but dropped 32.6% YoY on the back of KRW125.4 billion of FX translation gains following the strong won in Q3. SG&A showed a 2.1% decline QoQ and 7.4% drop YoY. This was due to the synergy coming from group-wide cost cutting efforts and bank integration efforts. SG&A is managed stably within KRW1 trillion in each quarter.

Provisioning including provisions for credit losses went down 34.7% QoQ and 3.8% YoY despite KRW100 billion of one-off provisioning including KRW85.8 billion of provisioning for Hanjin Shipping and related SPC following Hanjin Shipping's court receivership filings and KRW14.2 billion following the bankruptcy of On Corporation because of the downward stabilization of recurring provisioning and KRW34.1 billion of Hyundai Merchant Marine debt equity swap.

Non-operating income went down 55.6% YoY on the back of recognition of Hyundai Cement securities related equity losses, subject to equity method as well as the removal of the impairment write-back, which occurred in the previous quarter resulting in our net loss in Q3.

P 8. Business Results of Subsidiaries

Next on page eight, business results of subsidiaries. The group's major subsidiary KEB Hana Bank's cumulative net income for Q3 of 2016 is KRW1,260.8 billion increasing 181.0% YoY.

For your reference, in September 1st, 2015, the former Korea Exchange Bank merged with the former Hana Bank with KEB, as a surviving entity and as such, the cumulative net income in Q3 of 2015 includes only the performance of the former KEB before the integration, therefore accurate comparison on YoY basis is difficult.

As such, the simple sum of former Hana Bank and the former KEB performance data before and after the integration has been included under the item, formerly Hana Bank plus formerly KEB for your reference. Even based on a simple sum of the performances of the two banks, the integrated banks' separate net income on a YoY basis grew 23.4%.

Hana Card's Q3 net income is down 39.2% QoQ owing to the removal of gains from the disposition of loans during the previous quarter. However, the cumulative net income in Q3 despite the cut in merchant fees is up 134% YoY to reach KRW59.3 billion on the back of internal cost saving efforts.

Also, the third quarter cumulative net income of Hana Financial Investment is KRW57.9 billion, down 47.6% YoY because in the case of last year, it had been a bull market overall. In Q3 due to one-off losses in disposition valuation and other operating income, it is down 46.7% QoQ. Please refer to the presentation materials for details and other subsidiaries.

P 9. NIM, P 10. Non-Int. Income, P 11. SG&A Expenses

From page 9 to 11, you'll find more details on the NIM, non-interest income and SG&A explained earlier. Please refer to the presentation material.

P 13. Group Total Assets / Total Liabilities & Equity

Next page 13, the group's total assets, liabilities and equity. As of the end of Q3, 2016, the group's total assets stand KRW331.8 trillion; and if the group's trust assets of KRW84 trillion is included, the total assets come to KRW416 trillion. The group's total assets including the trust asset of KEB Hana Bank is a KRW339.7 trillion, the group's total liabilities come to KRW308.1 trillion and shareholders' equity is KRW23.7 trillion.

P 14. KEB Hana Bank KRW Loan / Deposit

Next page 14, KEB Hana Bank Korean won loans and deposit. As of the end of Q3 2016, the Korean won loan of KEB Hana Bank grew 0.3% YTD and 2.0% in QoQ to reach KRW172.4 trillion. If one looks at the loan growth by segment, loans to large companies fell 14.9% YTD coming to KRW16.1 trillion and SME loans is up 2.1% YTD to reach 53.8%.

Under the portfolio rebalancing strategy that has been undertaken since 2014, loans to large companies have declined while SOHO and SME loans continued to grow.

In the case of household loans due to increase of Korea Housing Financial Corporation, new mortgage loans and decline in the loan balance transfers, it grew 3.5% YTD to stand at KRW90.8 trillion.

Deposits fell 0.4% YTD to post KRW195.8 trillion especially Korean won core deposits were up 5.5% YTD while time deposit, which is our costly source of funding grew only 1.2% YTD exhibiting a healthy funding structure improvement. For your reference as can be seen on the bottom of the right-hand graph, the loan to deposit ratio as of the end of Q3 2016 is 99.2%.

P 16. Group Asset Quality

Next on page 16, the group's asset quality. The total credit at the end of Q3 2016 is KRW226.9 trillion and NPL are KRW2.5 trillion, the total credit fell 2.7% YTD and the NPL amount fell 15.3% YTD. As such at the end of Q3, the group's NPL ratio is 1.11%, down 16 bp YTD.

On the top on the right hand side of the page during Q3, new NPL formed, in short NPLs before write-off and sales or debt to equity swap is KRW242.2 billion. During the third quarter with the restructuring of the shipping industry entering into its final phases, the decline in new defaults continues and new NPL amount has been quite stable.

For the asset quality of the bank, let me move to the next page.

P 17. KEB Hana Bank Asset Quality

Page 17, the asset quality of KEB Hana Bank. As of the end of Q3 2016 KEB Hana Bank's total credit is down 3.5% YTD, standing at KRW201.9 trillion; and NPL amount have fell 18.0% YTD posting KRW2.1 trillion. Therefore, the NPL ratio comes to 1.02%, down 19 bp YTD and the NPL coverage ratio is 143.1%, up 14.1 percentage point YTD. The delinquency rate of KEB Hana Bank is 0.42%, down 12 bp QoQ maintaining a stable trend.

P 18. Provision Analysis

Next page 18, provisions. The group's credit cost ratio at the end of Q3 2016 fell 5 bp QoQ on a cumulative basis realizing 0.39%; and KEB Hana Bank's credit cost ratio also fell 5 bp QoQ to realize 0.32%. As such the credit loss provision, as you can see on the bottom of the page fell KRW109.7 billion QoQ and managed stably.

P 19. Capital Adequacy

And finally, page 19 capital adequacy. As of the end of Q3 2016, the group's expected BIS and Tier 1 ratio is 14.63% and 12.12% respectively. The CET1 ratio is 11.57%, obtained sustained management of risk-weighted assets.

The CET1 ratio is up 178 bp YTD and up 22 bp QoQ showing a steady rising trend. Going forward through selective expansion of our assets, we will continue to improve our portfolio into a highly capital efficient one and through efforts to enhance profit, while keeping costs down. We expect to raise capital adequacy, as well as the CET1 ratio.

For more details on individual subsidiaries performance and key financial figures, please refer to the attached materials.

With this, we'll now conclude the earnings presentation of Hana Financial Group of Q3 2016. Thank you.