Hana Financial Joins the First 3 Trillion Won Club, "The First Year to Overcome Undervaluation... Dividend Payout Ratio Expanded to 30%" (Comprehensive)

Last Year's Net Profit 3.5 Trillion Won... Record High
Balanced Growth in Banking and Non-Banking Sectors... Effective Stable Cost Management
Dividend Payout Ratio Expansion, Active Consideration of Treasury Stock Cancellation and Repurchase

[Asia Economy Reporter Minwoo Lee] Hana Financial Group has surpassed an annual net profit of 3 trillion KRW for the first time since the establishment of its holding company. Both banking and non-banking sectors showed balanced growth, while stable cost management played a key role. Along with this, the group announced an active shareholder return policy, setting a dividend payout ratio target of 30% this year and positively considering quarterly dividends. Through this, they intend to make this year the first year of breaking away from undervaluation.

◆First entry into the 3 trillion club since the holding company launch= Hana Financial Group announced on the 10th that its consolidated net profit for Q4 last year was a provisional 854.6 billion KRW, a 56.8% increase compared to the same period last year. On an annual basis, it totaled 3.5816 trillion KRW, a 33.4% increase from the previous year, surpassing 3 trillion KRW for the first time since the holding company was established. Based on controlling shareholder net profit, Q4 recorded 844.5 billion KRW and the annual figure was 3.5261 trillion KRW.

Meanwhile, consolidated revenue for Q4 last year was 7.6043 trillion KRW, and operating profit was 1.1209 trillion KRW. Revenue decreased by 48.8% year-on-year, while operating profit increased by 17.7%.

Hana Financial Group explained, "Despite proactive provisioning considering the prolonged COVID-19 pandemic, diversification of the business portfolio was effective," adding, "The balanced growth of banking and non-banking sectors and stable cost management contributed to these results."

Core profit, which combines interest income (7.4372 trillion KRW) and fee income (1.8634 trillion KRW), totaled 9.3006 trillion KRW, a 15.2% increase from the previous year. The group's net interest margin (NIM) for Q4 was 1.71%. Return on equity (ROE) was 10.89%, and return on assets (ROA) was 0.74%.

The cost-to-income ratio (CIR) fell by 1.3 percentage points (p) year-on-year to 44.0%, marking a decline for seven consecutive years. The group's BIS ratio (Basel Committee on Banking Supervision capital adequacy ratio) was estimated at 16.29%. Total group assets increased by 10.07% year-on-year to 653.4447 trillion KRW.

Given the high likelihood of a base rate hike this year and the continued upward trend in market interest rates, NIM is expected to rise moderately. Corporate loan growth is also anticipated to continue. Nam Gung-won, Vice President of Hana Bank, said during the earnings conference call, "Considering the financial authorities' strengthened total volume regulation on household loans this year, household loans are expected to grow by 2-3%, and corporate loans by 4-5%, focusing on high-quality assets," adding, "We will increase investments in the IT sector and consider mergers and acquisitions (M&A) if necessary."

◆Quarterly dividends, treasury stock cancellation and repurchase... proactive shareholder return policy announced= The board of directors of Hana Financial Group resolved a year-end cash dividend of 2,400 KRW per share. Including the interim dividend of 700 KRW already paid, the total cash dividend per common share for the 2021 fiscal year is 3,100 KRW. The resulting annual dividend payout ratio is expected to be 26%, the same level as before COVID-19 in 2019.

This year, the group plans to implement a more proactive shareholder return policy. First, it plans to raise the dividend payout ratio to 30%. Vice President Nam said, "As the only financial holding company to introduce interim dividends and lead shareholder return policies, we will positively consider quarterly dividends," adding, "We will explore various methods to ensure that dividends are not just split payments but have a real shareholder return and stock price boosting effect."

They also expressed willingness to consider treasury stock cancellation or repurchase. Vice President Nam explained, "Hana Financial Group holds about 8.7 million shares of treasury stock worth 300 billion KRW, and distributable profits are about 4.4 trillion KRW, making treasury stock cancellation feasible," adding, "Treasury stock has sufficient value for various uses such as mergers and acquisitions, but we will positively consider cancellation based on investor suggestions to enhance shareholder value and by referencing other companies' cases." He continued, "Treasury stock repurchase will also be considered in consultation with authorities when economic instability caused by COVID-19 eases, based on sufficient loss absorption capacity."

◆Hana Bank net profit 2.5 trillion KRW... up 27% YoY= The main affiliate, Hana Bank, posted provisional Q4 consolidated revenue of 5.5011 trillion KRW and operating profit of 866 billion KRW. Revenue decreased by 52.3% year-on-year, while operating profit increased by 21.0%. Net profit for the same period rose 74.03% to 622.3 billion KRW. Annual net profit was 2.5757 trillion KRW.

Despite non-cash foreign exchange losses due to exchange rate increases, loan growth based on real demand such as small and medium enterprise loans continued, and cost reduction efforts were reflected.

Core banking income, including interest income (6.1506 trillion KRW) and fee income (720.2 billion KRW), increased by 14.1% year-on-year.

Asset quality indicators also continued to improve. The NPL coverage ratio, which is the ratio of loan loss provisions against non-performing loans (NPL), rose 33.8 percentage points to 163.9%. The NPL ratio dropped 8 basis points (bp, 1bp=0.01%) from 2020 to 0.26%, and the delinquency ratio fell 3bp to 0.16%.

Total assets, including trust assets (70.1517 trillion KRW), increased by 8.31% year-on-year to 500.3453 trillion KRW.

◆Non-bank affiliates such as securities, card, and capital also show growth= Among affiliates excluding the bank, Hana Financial Investment recorded the largest net profit of 506.6 billion KRW. Overall profit increased by 23.3% year-on-year due to growth in asset management fees and other income.

The largest net profit increase was seen in Hana Card, which rose 62.2% year-on-year to 250.5 billion KRW. This was driven by increased payment fees and cost efficiency.

Hana Capital's net profit also increased by 53.5% compared to 2020, reaching 272 billion KRW, attributed to an increase in high-quality retail assets.

Additionally, Hana Asset Trust posted a net profit of 92.7 billion KRW, and Hana Life Insurance recorded 24.3 billion KRW, increasing 14.7% and 8.6% respectively year-on-year.

This content was produced with the assistance of AI translation services.