[Click eStock] "Hanguk Capital, Attention Needed on Earnings and Credit Rating Upgrade"

[Asia Economy Reporter Eunmo Koo] An analysis suggests that attention should be paid to the performance and credit rating upgrade of Hanguk Capital.

Hanguk Capital operates financial businesses such as corporate finance, lease finance, and retail finance under the Specialized Credit Finance Business Act. Established in 1989, it welcomed the Military Mutual Aid Association as its major shareholder in 2001. As a secondary financial institution without deposit functions, it raises funds through corporate bonds and commercial paper (CP) issuance. As of the third quarter of 2020, its total assets amounted to KRW 2.5501 trillion.

In the third quarter of this year, net interest income increased by 10.1% year-on-year to KRW 31.2 billion, operating profit rose by 85.0% to KRW 11.5 billion, and net profit grew by 73.4% to KRW 8.7 billion. The cumulative operating profit for the first three quarters reached KRW 30.7 billion, and net profit was KRW 24.0 billion, surpassing last year's performance.

It is evaluated that attention should be paid to the rise in performance and credit rating. On the 30th, KB Securities researcher Sang-guk Lim stated in a report, “Stable business expansion is expected due to portfolio weight adjustment and an increase in the Military Mutual Aid Association's funding support limit,” adding, “The portfolio is diversifying from the existing lease finance-centered portfolio to corporate finance and retail finance, and the parent company Military Mutual Aid Association's funding support limit has been raised to KRW 500 billion (previously KRW 300 billion).”

It is also assessed that cost reduction in fund procurement and expansion of operating profit are possible due to the credit rating upgrade. On the 27th, Hanguk Capital's unsecured bond credit rating was upgraded from A- to A, and the credit rating upgrade lowers the funding interest rate by about 40 basis points. When raising KRW 1 trillion in funds, this translates to a cost saving of approximately KRW 4 billion. Medium- to long-term growth drivers are also expected through new business ventures such as rental services and the used car finance market. Hanguk Capital started rental and used commercial vehicle businesses last year, and the used passenger car business is expected to expand significantly from next year.

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