P3. 2021 Business Highlights (1)

Please refer to Page 3. Hana Financial grew posting KRW3,526.1 billion, up 33.7% Y-o-Y in the full-year net income for 2021. In Q3, the group had already exceeded the previous year's yearly net income of KRW2,637.2 billion and net income for Q4 posted KRW844.5 billion, up 58.5% Y-o-Y, once again proving group’s sound capability to generate profit.

In 2021, Hana Financial group saw its profit generation capacity upgraded, achieving record-high net income driven by strengthened core earnings on the back of diversified business portfolio and stable risk management in response to the continuing volatility in the capital market, owing to the protracted pandemic situation.

This year as well, we will make continued efforts to realize stable earnings and implement ESG-focused business practices and enhance our shareholder value.

Now let me go through the business results in more detail. In 2021, the group's core earnings posted KRW9,300.6 billion, up 15.2% Y-o-Y. The NIM improved Y-o-Y reflecting the rise in market rate on the back of BOK rate hike, as well as our internal efforts toward portfolio improvement. In addition, by focusing on high-quality assets reflecting the market demand, solid loan growth were well maintained resulting in improved interest income Y-o-Y.

At the same time, card fees and asset management-related fees grew, leading to greater contribution from non-banking subsidiary and thus, the group's fee income achieved a two-digit growth Y-o-Y, posting the highest group core earnings in our history.

Next is SG&A posted KWR 4,050.5 billion, up 3.4% Y-o-Y. This is mostly due to the base effect of the one-off recognition of bank's performance pay expenses in Q1 and increase of general and administrative costs, owing to the inclusion of Hana Insurance as a Group subsidiary. Through group wide efforts to raise cost efficiencies, supply related expenses declined Y-o-Y and a stable SG&A of KWR 4 Trillion level was posted. The group's annual CI ratio is 44%, down 1.3% Y-O-Y.

general and administrative costs, owing to the inclusion of Hana Insurance as a Group subsidiary. Through group wide efforts to raise cost efficiencies, supply related expenses declined Y-o-Y and a stable SG&A of KWR 4 Trillion level was posted. The group's annual CI ratio is 44%, down 1.3% Y-O-Y.

Finally, the group's credit cost ratio posted 15 bp, up slightly over the previous quarter, however, on a Y-O-Y basis, it is down 12 bp, maintaining more than sufficient buffer through stable management. This is due mostly to the base effect from setting aside the large amount of counter-cyclical provision and also due to partial normalization of the shipping industry if there was right back from a number of individual companies related provisioning.

Also, in Q4, loss of social capacity was a further bolstered due to the preemptive provision and to respond to economic uncertainties in 2022, including the spread of the Omicron. We will be continuing to maintain stable asset quality through preemptive risk management against uncertainties, both at home and abroad.

P4. 2021 Business Highlights (2)

Next on Page 4. Group's Q4 NIM including Hana Bank and Hana Card is up 7 bps Q-o-Q to post 1.71%. In the case of Hana Bank's NIM, it is up 7 bps Q-o-Q to post 1.47%. The asset repricing effect, following BOK rate hike was positively reflected and NIM improved significantly.

At present, I do believe it is rather premature to elaborate in any detail or the outlook for NIM for this year. But given that additional benchmark rates were raised in the last month as well as last year, the asset repricing is expected to be maintained till the first half of the year.

Also, in response to the continuing inflationary pressures, the U.S. fed has shifted gears to a more hawkish policy line, thus the market is expecting multiple rate hikes by the fed this year. And should such Central Banks’ stands to normalize monetary policy be reflected in the market rate, we believe NIM will continue to steadily improve this year.

Next. If you look at your right-hand side of the slide, the bank loans in KRW won is up 0.9% Q-o-Q and 7.3% YTD to post KRW257 trillion. As such, based on the simultaneous growth of their profitability on asset side, the group's interest income posted meaningful improvement both quarterly as well as on a Y-o-Y basis.

Meanwhile, in the case of a fee income this quarter, it is down Q-o-Q due to the declining in the underrating fee and other fees. However, on a yearly basis, solid improvement has been made YTD. For your information with regards to the fee income in consideration of maintaining consistency in the group's accounting practices and to allow for peer comparability, some of the fee income of Hana Card has been reclassified into interest income.

This is a nothing more than an accounting reclassification between interest income and fee income and thus has no impact on the net income of either the group or the Hana Card. For more details, please refer to Page 28.

P5. 2021 Business Highlights (3)

Next is Page 5. The group's NPL ratio in 2021 posted 0.32%, down 8 bps YTD and 1 bps of Q-o-Q. Delinquency ratio following last quarter posted 0.28%, despite the protracted situation, on the back of group-wide efforts to manage risks, overall NPL ratio is maintained at a stable level. The group's 2021 cumulative credit cost ratio posted 0.15%, down 12 bps YTD.

Even if the covid19 related high preemptive provisioning in 2020 is excluded, the recurring credit cost ratio is down 2 bps as thus, showing a downward adjustment in the overall asset quality indicators.

Going forward and responding to your uncertainty, both at home and abroad to enterprise-wide risk management, we will continue to do our best to maintain healthy asset quality. Finally, as of the end of Q4, the group's CET1 ratio was down 28 bps Q-o-Q and expected to post 13.78%. This is due to the payout of the 2021 year-end dividend and despite the drop in CET1 ratio during the quarter, we have maintained the highest level of capital adequacy among our peers.

P7. Group Consolidated Earnings

Next is the group's business results by item. First, on Page 7, the group consolidated income statements. Among the general operating income of Hana Financial Groups in 2021, the interest income grew 15.5% Y-o-Y to posted KRW7,437.2 billion. Thanks to this strong business performance at major non-bank subsidiaries, such as credit card, brokerage, IB-related fees. The annual fee income is up 14.3% Y-o-Y to post KRW1,863.4 billion.

Next, the group’s gain on valuation and disposal was down 56.9% Y-o-Y to post KRW504.7 billion. The main reason for this is in non-monetary FX transaction losses at KRW154.6 billion, which occurred because of the weak KRW trend that continued throughout the year. Other reasons include market rate rising due to progressive normalization of the economy and inflationary pressures in Korea that slowed down the AFS performance and gains on valuation.

Finally, the yearly SG&A is up 3.4% Y-o-Y to post the KRW4,050.5 billion, despite a solid earnings improvement trend, the ordinary SG&A was controlled to within the target set within the early business plan and the CI ratio was downward just at 44% demonstrating once again the group’s capacity to control costs.

P8. Business Results of Subsidiaries

Next, on Page 8. Subsidiaries business results. Hana Bank, major subsidiary of the group posted an annual net income of KRW2,570.4 billion in 2021, up 27.9% Y-o-Y. This was mainly attributable to solid interest income from NIM improvement. Stable SG&A and the fading of large-scale counter-cyclical loan loss provisions partially offset the weakened disposition and valuation gain achieving the highest performance ever.

Next, the annual net income of Hana Financial investment was KRW506.6 billion, up 23.3% Y-o-Y. Improvements in overall earnings fundamentals were positively reflected such as an increase in core earnings, fueled by improved asset management fees. Hana Card's annual net income also increased by 62.2% Y-o-Y to reach KRW250.5 billion.

Lastly, Hana Capital's accumulated net income for the year was KRW272 billion, an increase of 53.5%, due to the overall increase in general operating profit and the fading of the provisioning effect. For other subsidiaries, please refer to the document.

P9. NIM, P 10. Non-Int. Income, P 11. SG&A Expenses

Pages 9 through 11 discuss the details of NIM, Non-Interest Income and SG&A that I mentioned earlier.

P13. Group Total Assets / Total Liabilities & Equity

Page 13 deals with the group's total assets, liabilities and equity. Please refer to the document at your leisure.

P14. Hana Bank KRW Loan / Deposit, P15. Hana Bank KRW Loan Composition

Next, on Page 14. I will talk about Hana Bank's loans and deposits in Korean Won. As of the end of 2021, Hana Banks loans in won stood at KRW257 trillion, an increase of 0.9% Q-o-Q and 7.3% Y-o-Y. Looking at loan growth by sector, corporate loans amounted to KRW126 trillion, an increase of 3.2% Q-o-Q driving the growth.

As the demand for funds from non-audited SMEs and SOHO borrowers continued, SME loans maintained sound growth with an increase of 2.9% compared to the previous quarter end. And large corp loans grew 0.8% Q-o-Q, reflecting raw material price hikes, and pre-emptive financing for additional market interest rate hikes.

Financial institution and other loans also increased Q-o-Q due to year-end short-term funding demand from some public companies. In the case of household loans, in order to comply with the household loan cap imposed by the financial authorities, it decreased 1.2% compared to the end of the previous quarter by temporarily managing the limit of household loan products during Q4, but on an annual basis, growth was driven by actual demand centered on Jeonse loans and high-quality credit loans as it increased by about 4% Q-o-Q, achieving a good growth rate compared to the target set at the beginning of the year.

In addition, as to the growth prospects of loan in won, in 2022, we plan to maintain a balanced loan growth strategy that maintains asset quality and profitability management. By segment, we expect a little more contribution from corporate loans than from household loans. Total loans in won are expected to grow at a level corresponding to the domestic GDP growth rate.

As of the end of 2021, deposits in won stood at KRW268 trillion, an increase of 2.2% Q-o-Q. Term deposits and MMDA decreased slightly due to year-end withdrawal of short-term funds by large corporations and public institutions and low-cost core deposits grew by 2.5% compared to the end of the previous quarter, thanks to abundant market liquidity, enabling a stable funding structure.

However, as CD funding increased for the purpose of managing the LCR ratio, the proportion of low-cost deposits remained at the same level as the previous quarter. For your reference, as you can see at the bottom of the graph on the right, the loan to deposit ratio as of the end of 2021 is 99.2%. Page 15 shows Hana Bank's loans price sector. Please refer to the material for details.

P17 Group Asset Quality, P18. Hana Bank Asset Quality

Next, Page17. Group's asset quality. As of the end of 2021, the group's total loans amounted to KRW345 trillion, an increase of 9.7% Y-o-Y, and the amount of NPL loans decreased by 11.9% Y-o-Y to KRW1,112.6 billion. As a result, the group's NPL ratio was 0.32%, which is 8 bps lower Q-o-Q.

If you look at the upper right-hand corner of the page, the amount of new NPL formation in the fourth quarter was KRW146.4 billion, even though household and some overseas operations NPL increased slightly Q-o-Q. It was mostly offset by the decrease in corporate NPL due to decreased amount of new default, maintaining the same level as the previous quarter. We will discuss the asset quality of bank in more detail on the next page, page 18.

Hana Bank's total loans at the end of 2021 is KRW295 trillion, an increase of 9.0% compared to the end of the previous quarter. NPL stood at KRW757.1 billion as a result of the NPL ratio is 0.26%, which is an 8 bps decrease compared to the end of the previous year, just like the group's ratio has fallen.

As of the end of the year, the NPL coverage ratio is 163.9%. Hana Bank's delinquency ratio at the end of 2021 is 0.16%, down 8 bps from the end of the previous year. Despite the strong increase in loan assets, the corporate delinquency ratio has been stabilizing downward throughout the year, leading to the stabilization of the overall delinquency rate.

P19, P20. Provision Analysis, P21. Capital Adequacy

Pages 19 and 20 cover loan loss provisions of the group and the bank. Please refer to the materials.

Lastly on Page 21. Capital adequacy. By the end of 2021, the group's BIS ratio and Tier 1 ratio are expected to be 16.29% and 15.15%, respectively and the CET1 ratio is expected at 13.78%. Although the capital ratio decreased slightly compared to the end of the previous quarter due to the year-end dividends, the highest capital adequacy of the industry was again demonstrated, while maintaining a robust level of CET1 ratio after the early introduction of Basel III.

Accordingly, the annual dividend payout ratio is expected to be at the level of 26% and the dividend yield based on the closing price in 2021 is approximately 7%. Despite the difficult situation under the pandemic, the dividend payout ratio recovered to the pre-COVID 2019 level, due to the improved business performance and recorded the highest dividend yield in the industry. Hana Financial Group will continue to do its best to continuously increase shareholder value based on stable business performance and capital adequacy.

This concludes the 2021 Hana Financial Group's annual earnings presentation. Thank you very much.