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Good afternoon, everyone. I am Lee Junghoon, Head of IR at Hana Financial Group. We'd like to thank shareholders, analysts and other market participants for taking part via phone or Internet in today's event despite your busy schedule.



And now we'll begin 2020 Q3 Hana Financial Group's earnings presentation. First, let me introduce the members of our senior management joining us today. First, from Hana Financial Group, our CFO, Lee Hoo-Seung is with us; our CRO, Hwang Hyo-Sang; and our CSO, Ahn Seun-Jong, are here with us.



Next, from Hana Bank, our Vice President, Lee Seung-Lyul from the Business Strategy Group is here. From Hana Financial Investment, Vice President, Lee Sang-hoon is with us. Finally, from Hana Card, Managing Director, Kim Tae-Hong from Business Planning Division is with us. First, we will invite our CFO, Lee Hoo-Seung, for a presentation of the business results, and afterwards hold a Q&A session via phone. We will now commence the 2020 Q3 earnings presentation of Hana Financial Group to be delivered by our CFO, Lee Hoo-Seung.

Good afternoon, everyone. Greetings to all the investors, market participants, research analysts, and thank you all for your deep interest in Hana Financial Group.



I'm Lee Hoo-Seung, CFO of Hana Financial Group. It's been already three months since we had our last earnings presentation. Although the hardships stemming from COVID-19 continue, still this doesn't take away from the fact that autumn is indeed a beautiful season. I hope you can all make good use of this weekend to really enjoy the beautiful fall colors.



Most of all, I must tell you how pleased I am to have been able to meet your expectations with a balanced and healthy business performance. And so without further ado, let me walk you through the business results of 2020 Q3 of the Hana Financial Group.



Now, please refer to Page 3 of your presentation deck. First of all, the Group's financial highlights. Net income of Hana Financial Group in Q3 came to KRW760.1 billion, up 10.3% Q-o-Q. Also on a Y-T-D Q3 basis, net income of KRW2,106.1 billion was posted, up 3.2% over the same period last year when one-off gains from sale of fixed assets was recognized.



Next, as a result of continued recurring cost rationalization efforts of the group after one-off retirement expenses, including wage peak ERP, which was recognized in Q4, Q1 and group SG&A expenses dropped 12.1% YoY and was stably controlled. Q1 cost to income ratio also greatly dropped YoY improving our cost efficiency.



As the COVID-19 pandemic continues, uncertainties are found, both in home and abroad. The first part, Hana Financial Group focused on shoring up its sales through the expansion of untapped channels and improving each subsidiaries' ability to generate profit on the back of enhanced competitiveness.



As a result, financial indices across the board has stabilized and healthy results were achieved for the quarter, following a solid first half. Recently, we see this phrase with corona often in the news media. This signifies that COVID-19 is no longer a black swan event, but has become a constant in the business environment.

Next on Page 4, Hana Bank and Hana Card included the Group's 2020 Q3 NIM, is down 4bps Q-o-Q to stand at 1.58%. Hana Card's NIM is maintained at the previous quarter's level, but Hana Bank's NIM is 1.33%, down 4 bps Q-o-Q. The main reason for this is a downward pressure on the bank as SME loans grow in the midst of asset repricing taking place in the back of BOK rate cut in the first half.



However, given the global policy rate cut and plunge in the market rate, in the immediate aftermath of COVID-19 on a yearly basis, a fair trend is being maintained. And without any additional BOK rate cut in the fourth quarter, we will be able to confirm the growth. As the low interest rate regime is set to continue for the time being to support the economy, the bank's NIM will be proactively managed through funding portfolio improvement and expansion of digital-based high-quality assets.



The Group's Q3 interest income is up 2.6% Q-o-Q, with growing contribution from nonbank subsidiaries and the partial offsetting of the falling NIM through sound growth in loan assets. In the case of the quarterly fee income, along with the growth from non-bank segments, some of the bank fee items have seen a recovery, leading to an increase of 9.6% Q-o-Q. If you look at the right-hand side of the slide, the bank's loan in Korean won is up 3.4% Q-o-Q and up 7.4% YTD. KRW234 trillion has been posted.

Next on Page 5. As of the end of Q2 2020, the group's NPL ratio stood at 0.45%, down 2bps QTD. And the delinquency rate posted 0.31% same as the end of Q1. The bank's delinquency rate was the same as the QTD level, and a group delinquency rate increase with recent inclusion of the delinquent assets of Hana Insurance. However, on the back of the government financial assistance and internal risk management efforts, the overall nonbanking subsidiaries delinquency rate declined, sustaining the stable trend of the group's asset quality indicators. Meanwhile, the group's first half cumulative credit cost ratio posted 0.27%, up 14 bps QTD, due to the large pre-emptive provision reflecting fluctuations in the economic situation.



The Group's CET1 ratio as of quarter end is expected to record 12.07%, up 4 bps Q-o-Q. This is before applying the Basel III credit RWA calculation. Continuing from last quarter, enhanced Group earnings and well-managed risk weighted assets led to strengthened capital ratios.



And now let me walk you through the Group's business results by item. Please refer to the Group's consolidated earnings on Page 7. The Group's cumulative interest income in Q3 stood at KRW4,331.2 billion, maintaining the same level Y-o-Y. The cumulative Q3 fee income recorded KRW1,688.4 billion, up 6.1% Y-o-Y. Improvement was most noticeable in credit card fee income, which had suffered last year due to merchant fee cuts. The Group's cumulative Q3 disposition valuation gain increased 110.2% Y-o-Y to KRW667.3 billion. Thanks to the strong Korean won, whose strength began from the previous quarter, Q3 saw KRW40 billion worth of non-monetary translation gain, on top of which, improved returns from securities management resulted in a significant increase in the Group's disposition valuation gain Y-o-Y.



Moving on to Page 8, business results for the subsidiaries. Hana Bank's net income for Q3 went up 16.3% Q-o-Q, recording KRW591.4 billion. However, due to the base effect related to the one-off disposition gain of fixed assets in Q3 last year, the bank's cumulative net income decreased 7.6% Y-o-Y to KRW1,654.4 billion. Hana Financial Investment's cumulative net income in Q3 was up 36.2% Y-o-Y to KRW288 billion. Amidst the overall business results improvement, security, brokerage fees and IP advisory fees drove up the interest income. Hana Capital's cumulative net income in Q3 increased 65.2% Y-o-Y to KRW127.1 billion, thanks to interest income growth backed by interest rate bearing assets.



Lastly, Hana Card realized cumulative net income of KRW114.4 billion, a huge improvement Y-o-Y, thanks to the increase in credit card fees. In this quarter, the bank's recurring business results were well maintained and the non-banks continued to improve their performance. Please refer to the material for other subsidiaries.

Pages 9 through 11 outline the details about NIM, non-interest income and SG&A, explained earlier. Also, please refer to Page 13 for the Group's total assets, liabilities and equity.



And also, please refer to Page 13, for the group's total assets, liabilities and equity.





Now on Page 14, Hana Bank's loan and deposit in Korean won. As of Q3 end 2020, the bank's loans in won stood at KRW234.5 trillion, up 3.4% Q-o-Q. The asset growth can be broken down as follows. Corporate loans grew 3.0% Q-o-Q to KRW112.9 trillion, out of which large corporate loan decreased slightly Q-o-Q to KRW15.3 trillion and SME loans grew 3.9% Q-o-Q to KRW95.8 trillion, driven by expansion in funding support. Household loans grew 3.8% Q-o-Q to KRW121.6 trillion, as Jeonse loans was the main driver. .



As of quarter end, deposits in won stood at KRW240.3 trillion, down 0.7% Q-o-Q. Abundant liquidity in the market flowed into low-cost deposit and MMDA. But because of the decrease in time deposit, the balance amount of deposit in won fell slightly Q-o-Q. .



However, the average balance is at a similar level to the previous quarter. The LCF weight in Q3 increased to 38.7%, up from the previous quarter. For your reference, the graph on the bottom right shows the LDR in Q3 to be 100.5%. Please refer to Page 15 for Hana Bank's loan composition. .



And now moving on to Page 17, the Group's asset quality. As of quarter end, the Group's total credit grew 3.2% Q-o-Q to KRW311 trillion. NPL decreased 4.9% Q-o-Q to KRW1.3 trillion, bringing down the Group's NPL ratio to 0.41%. This was a 4 bps drop from the previous quarter. The top right shows the Group's new NPL formation in Q3 was KRW181.2 billion, down from the previous quarter. This is because the NPL decreased in some of the non-bank subsidiaries.



Let me elaborate on the bank's asset quality on Page 18. Please refer to Page 18, Hana Bank's total credit in Q2 end has grown 1.6% QTD to KRW260.7 trillion, and NPL decreased by 4.6% to KRW0.9 trillion. NPL ratio fell by 2 bps QTD to 0.35% and the NPL coverage ratio has significantly increased to 120.9%. Hana Bank's delinquency ratio at the end of Q2 was 0.21% same as the previous quarter end.



Corporate loan and household loan delinquency ratios came down slightly, thanks to asset growth and reduction of delinquent assets. Please refer to the Group's and bank's provision on Pages 19 and 20.



Finally, capital adequacy on Page 21. We expect the Group's BIS ratio and Tier 1 ratio to be 14.36% and 13.13%, respectively and CET1 ratio to be 12.07%, respectively. And this is before applying the Basel III calculation. The Group's capital ratio and ability to absorb losses continue to improve, thanks to stable management of RWA and robust quarterly net income.



This concludes the earnings presentation for Hana Financial Group Q3 2020. Thank you.