Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hana Financial Group Inc (XKRX:086790, Financial) reported a 2.4% year-over-year increase in net income for the first half of 2024, reaching KRW2,068.7 billion.
- The group's fee income saw a significant year-over-year increase of 12.6%, driven by growth in credit card fees, investment banking fees, and asset fees.
- The credit cost ratio remained stable at 0.24% year-to-date, the lowest since late 2022, due to pre-emptive provisioning and write-backs.
- The group's return on equity (ROE) remained in double digits for two consecutive quarters, supported by consistent net income levels.
- Hana Financial Group Inc (XKRX:086790) plans to focus on risk-weighted asset (RWA) control and profitability in the second half of 2024, aiming to improve interest income based on risk-adjusted return metrics.
Negative Points
- The group's net interest margin (NIM) decreased by 8 basis points quarter-over-quarter to 1.69%, with Hana Bank's NIM dropping by 9 basis points.
- Second quarter interest income fell by 2.7% quarter-over-quarter, and first half interest income decreased by 0.6% year-over-year.
- Non-interest income in the second quarter decreased by 22% quarter-over-quarter, impacted by FX translational losses and decreased valuation gains.
- The group's CET-1 ratio declined by 10 basis points quarter-over-quarter to 12.79%, with plans to recover to target levels in the second half.
- Hana Financial Group Inc (XKRX:086790) anticipates a limited level of additional loan asset growth in the second half, focusing instead on portfolio rebalancing and efficient management of pre-emptively secured loan assets.
Q & A Highlights
Q: Can you provide more details on your capital ratio and shareholder return plans, especially regarding CET-1 targets and potential share buybacks?
A: Our CET-1 target is 13% by the end of Q3, and we aim to exceed last year's level by Q4 through RWA management. We announced a KRW300 billion share buyback and cancellation plan earlier this year, with cancellations completing in August. We will consider further buybacks based on share prices, market conditions, and business performance. While our buyback scale is smaller than peers, it effectively improves key metrics like EPS. We are also considering shareholder feedback, with 70% preferring increased buybacks over dividends.
Q: What are your plans for shareholder returns and credit cost management in the second half?
A: We are reviewing various measures for shareholder returns, including DPS increases and share buybacks. We aim for an even distribution of dividends and buybacks. Regarding credit costs, the current low level is due to reversals and low provisioning. However, we expect credit costs to rise to about 30bp by year-end due to potential real estate valuation changes and overseas project reviews.
Q: How is Hana Asset Trust managing risks related to guaranteed completion trusts, and what are the expectations for Hana Securities' turnaround?
A: Hana Asset Trust is managing risks well, with exposure at four times its capital, compared to peers at eight times. We have a task force to handle potential litigation and construction delays. For Hana Securities, we aim for a turnaround by 2025 or 2026, targeting over KRW400 billion in net income and an 8-9% ROE, aligning with the previous three-year average.
Q: Are there any strategic changes or M&A plans to enhance non-banking performance, and how are you addressing real estate PF risks?
A: Our strategy remains unchanged; we aim to strengthen competitiveness in insurance and securities, focusing on internal synergy and capital efficiency. We may consider M&A or alliances if needed. Regarding real estate PF, we have provisioned KRW40 billion in the first half and expect a similar amount in the second half. Our exposure is mostly senior, minimizing burden.
Q: Can you provide guidance on credit costs, value plans, and loan growth for the second half?
A: Credit costs are expected to rise due to household and SOHO loan delinquencies, with a mid-30bp target. Our value plan will focus on COE and implementable systems, with details to be announced later. Loan growth has already met nominal GDP targets in the first half, and we will focus on RWA management and portfolio rebalancing, aiming for a 1.5% NIM.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
