Good afternoon. I am park Guenhoon, Head of IR of Hana Financial Group. I'd like to welcome everyone to the Hana Financial Group's Earnings presentation. I'd like to thank shareholders, analysts, and other market participants for attending today's event via phone and the Internet.
We now begin the 2022 full year earnings presentation of Hana Financial Group. For today's earnings release, we have with us the Group's new CFO, park Jong-moo, as well as other members of the senior management from the group and subsidiaries. For today, we will first hear a presentation on the business results for 2022 and then move on to a Q&A session.
I now invite our CFO park Jong-moo to deliver the full-year business results of the Hana Financial Group in 2022. Thank you.

Greetings. It is great to be here. I am park Jong-moo, the new CFO of Hana Financial Group in 2023. At a time when uncertainty in internal and external economic conditions is deepening, and at the same time, at a juncture when interest rate expanding and shareholder returns is higher than ever, I have taken on the important responsibility of being the Group's CFO. I will do my best to listen to the voice of the market and continue smooth communication.

Before I cover 2022 annual business results, I will touch upon our capital management and shareholder return policy, which was discussed at today's BoD meeting. For your reference, this will also be included in the business report, which will be published in March.

p3. Group capital management and Shareholder return

please refer to page 3 of the material. We have established the following group capital management and shareholder return policies to improve visibility of our capital policy and shareholder value. In the case of capital management policy, to comply with regulatory ratios and to prepare for changes in the internal and external economic environment, we set our CET1 ratio range between 13% to 13.5% range, which can secure loss absorption capacity and we intend to manage it at an appropriate level.

Regarding the shareholder return rate policy, we have set a mid to long-term shareholder return ratio goal of 50% and in order to gradually achieve our target, we have set specific principles so that 50% of the CET-1 ratio, which has increased YoY will be returned to our shareholders. And going forward, if the CET-1 ratio exceeds 13.5%, we will return excess capital to our shareholders.

Along the improvement of the shareholder return ratio, we will carry out cash dividends as well as share buybacks and cancellations to pursue diversification of our shareholder return policy. Related to this, I would like to inform you about what was resolved by our BoD today regarding the 2022 shareholder return.

2022 year-end cash dividend has been decided at KRW2,550 per common share. If the resolution is confirmed at the General Shareholders' Meeting in March, the cash dividend per common share for fiscal year 2022 including the previously paid interim dividend of KRW800 will amount to KRW3,350 and the DpS will increase by KRW250 YoY.

Annual dividend payout ratio is 27% and we plan to carry out the industry's highest level of cash dividends. Apart from this, the BoD resolved today, for KRW150 billion of share buyback and cancellation. Going forward, our principle for share buyback will pursue cancellation in parallel and the dividend and share buyback ratio will depend on our group share price level, group's capital adequacy, interest rate and other factors in the financial market at that time and it will be considered comprehensively and then be determined.
For your reference, while establishing this capital management and shareholder return policy, we took into consideration comprehensively the concerns about improving shareholder value as well as the proper role of financial institutions in the economic and financial environment uncertainty, coexistence with diverse interested parties including customers, and our group's unique asset structure.

In other words, we will strive for shareholder value, and at the same time, we will contribute to the stability of the financial system through expansion of loss, absorption capacity, and maintain asset quality and also faithfully fulfill the basic functions of financial institutions such as supplying liquidity and fund brokerage to fulfill our social responsibility of enhancing our stakeholders' value.

In addition, in order to be with members of society who are experiencing economic difficulties, we will provide practical support for the soft landing and leaping forward of customers who are going through economic difficulties, and we will continue with our social return programs to solve social problems facing our society so that we can do our best to practice our group's mission of finance to grow together and share happiness.

p4. 2022 Business Highlights (1)

From now on, I will cover 2022 annual group business results. First of all, the group's financial highlights. please refer to page four of the materials. Hana Financial Group's annual net income in 2022 recorded a 2.8% YoY increase and posted KRW3,625.7 billion. Looking back on last year's performance, despite stagnant fee income and disposition and valuation income due to increased volatility in the financial market, on the back of solid asset growth and a favorable interest rate environment, general operating income increased significantly YoY. The annual C/I ratio also reached 42.9%, the lowest level ever since the establishment of our holdings company, improving our cost efficiency.

In addition, despite the large scale provisioning, which was preemptively accumulated over several quarters, key risk indicators such as delinquency ratio are being well managed and the annual credit cost ratio stopped at 0.29%. NpL coverage ratio also recorded a record high level of 187.85%, reinforcing loss absorption capacity against potential risk increase.

p5. 2022 Business Highlights (2)

please go to page five. The group's Q4 NIM for 2022 combining Hana Bank and Hana Card recorded 1.96%, a 14 bp increase QoQ. Among this, Hana Bank's NIM recorded a 12 bp increase QoQ, recording 1.74% and drove up our group NIM.

As market interest rate continued to rise, including two base rate hikes during the quarter, the asset repricing effect expanded. Meanwhile, due to early withdrawals of low rate time deposits and transferring them into high yield time deposit, we saw our NIM grow significantly QoQ. The one-off related to early withdrawal of time deposits was about at a 7bp level and the normalized Q4 NIM for the group and bank posted respectively 1.89% and 1.67% respectively.

The increase in interest-bearing assets due to the increase in demand for funds from large corporations and public institutions, coupled with the rise in NIM, led to an increase in interest income QoQ. For your reference, if you look at the right-hand side of the slide, the Korean won loans at the bank on a quarterly basis is up 2.1% and up 6.7% on a yearly basis, posting KRW274 trillion, achieving robust asset growth.

On the other hand, the group's fee income is down both on a quarterly and yearly basis.
This is due to the fall in wealth management fee, owing to the weakness in the stock market and rising uncertainties in the financial market as well, the drop in the IB commissions against the backdrop of contracting liquidity and worsening business environment. In 2023 as well, greater downward pressure on the economy is expected such low recovery in consumption, and as such, we foresee a rather challenging environment for fee income increase going forward. In response, FX and asset management, corporate finance areas in which the group has core capabilities will be further strengthened so that we continue to lay the foundation for diversified sources of income that goes beyond business boundaries.

p6. 2022 Business Highlights (3)

Next is page six. In Q4 of 2022, the group's NpL ratio posted 0.34%, down 1 bps QoQ. The delinquency ratio also posted 0.30% QoQ, down 2 bps QoQ and maintained at a fair level. Meanwhile, in Q4, we had set aside KRW480.2 billion in loan loss provisioning, up KRW303.3 billion QoQ, posting credit cost of 0.29% on an annual cumulative basis for the group. The increase in loan loss provisioning in Q4 is due to the preemptive recognition of provisions for the non-bank subsidiaries' exposure to real estate pF in addition to the KRW42.1 billion in provisions that had already been set aside by the bank. Hana Bank's Chinese unit has also set aside provisions for some of the companies that have become insolvent. However, as already noted, key asset quality indicators are maintained at a stable level. And in 2022, as the loss absorption capability has been strengthened due to credit loss provisioning, this year, even as additional credit cost is incurred due to macro factors such as economic downturn, we expect to manage it within the annual target range.

As of the end of Q4, the group's CET-1 ratio was 13.15%, and compared to the regulatory ratio, it is maintained at a fair level. During the quarter, through the payout of the year-end dividend this quarter, this caused the capital ratio to fall. However, due to the strong won, the credit RWA declined and the CET-1 ratio rose QoQ. In 2023 as well, based on preemptive and strategic risk management, we will put forward timely responses to complex macro level crisis such as an economic downturn and maintain the asset quality at a stable level.

p9. Business Results of Subsidiaries

Next, on page 9, the income by subsidiaries. Hana Bank, a key subsidiary of the group, posted KRW3,169.2 billion in annual net income for 2022, up 23.3% YoY. preemptive provisioning and cumulative FX translation losses from the weak won and also the ERp implementation and expanding digital investments led to the growing of SG&A. However, interest income and gain from evaluation and sales included, the general operating income items improved YoY to post the sound performance.

Next, Hana Securities' annual net income posted KRW126 billion, having declined from last year. Key reasons are, first, the brokerage fee and other asset management fees fell due to the weak stock market, and IB fees included, the overall fee income also came down from last year due to the worsening market environment. In addition, rising volatilities in the financial market led to decreased gains on valuation and sales over last year.

In Q4 as well, weak fee income trends continued and the trading return from the marketable securities such as bonds came down. And as the IB assets suffered valuation losses and had set aside provisions, business results were significantly down over last quarter. This year, we will focus on risk management, including preemptive response to the potential NpLs and pursue qualitative growth for each business division such as income diversification and product competitiveness. We will do our best to improve our performance over 2022. In the case of Hana Capital, despite additional provisioning in Q4, based on the increase of general operating income, we posted an annual net income of KRW298.3 billion, which is up from last year. The annual net income of Hana Card posted KRW192 billion, down from the previous period. Funding cost has increased due to the market rate hikes and the merchant fee cut led to stagnating fee income. This year, we expect the funding cost to annual credit cost management will remain challenging, but we intend to control our cost as we diversify the portfolio and the loan portfolio will be built focusing on clients with high credit rating to maintain sound asset quality and respond to unfavorable external environment. At the same time, we will expand collaboration based sales that is based on the group's overall customer base and expand digital marketing and other new business sales to diversify our sources of profit going forward. For more details of other subsidiaries, please refer to the presentation materials.

p10. NIM, p11. Non-Int. Income, p12. SG&A Expenses, p14. Group Total Assets / Total Liabilities & Equity, p15.~16. Hana Bank KRW Loan / Deposit, Hana Bank KRW Loan Composition

From page 10 to page 12, you'll find more details on the NIM, the non-interest income, and G&A. And from page 14 to 16, the group's balance sheet and Korean won loan and deposit of Hana Bank is explained. please refer to it at your leisure.

p18. Group Asset Quality

Finally, page 18, the group's asset quality. The group's total loans at the year-end of 2022 is KRW372 trillion, down 1% QoQ. The decrease in total loans is mostly due to the drop in Korean won translated amount of the FX loan assets on the back of falling exchange rate and the decline in credit exposure. The NpL amount posted KRW1,260.2 billion, down 3.4% QoQ. Among the corporate loans of Hana Bank, the NpL amount has gone up QoQ due to the downgrading of credit rating and delinquencies in other banks. For the non-bank subsidiaries as well, the NpL amount, including domestic pF loans, the real estate sector has grown, but with the increase in write-offs QoQ, the overall NpL amount has come down. As such, the group's NpL ratio is at 0.34%, slightly down QoQ. From the next page on, please refer to the presentation materials.

With this, I'd like to conclude the 2022 full-year earnings presentation of Hana Financial Group. Thank you.