Hana Financial Investment, "Up to 270 Billion KRW Loss in Banking Sector Due to Lime Incident"

[Asia Economy Reporter Eunmo Koo] Hana Financial Investment forecasted on the 18th that a maximum loss of up to 270 billion KRW could occur across banks due to the suspension of redemptions of Lime Asset Management funds.

Hana Financial Investment estimated the total bank loss at 274.1 billion KRW, based on the total balance of Lime redemption-delayed funds, including trade finance funds, amounting to approximately 1.7 trillion KRW, assuming a bank compensation ratio of 50%, an incomplete sales ratio of 30%, and non-recovery of Shinhan Financial Investment's total return swap (TRS) senior priority.

The expected losses by bank are Shinhan 228.2 billion KRW, Woori 28.6 billion KRW, Hana 6.5 billion KRW, BNK 6.3 billion KRW, and KB 4.5 billion KRW.

Assuming Shinhan Financial Investment recovers the TRS as senior priority, a bank compensation ratio of 50%, and an incomplete sales ratio of 10%, the estimated total bank loss is 94.8 billion KRW. In this case, the expected losses by bank are Shinhan 76.5 billion KRW, Woori 11.3 billion KRW, Hana 3.4 billion KRW, BNK 2.1 billion KRW, and KB 1.5 billion KRW.

Choi Jung-wook, a researcher at Hana Financial Investment, stated, "Shinhan Financial Group has a large balance of Lime fund sales itself, and the expected loss range could significantly increase depending on whether Shinhan Financial Investment can recover the exposure to the TRS provided for the trade finance fund as senior priority."

He added, "The regulatory authorities have judged that there is evidence that Shinhan Financial Investment conspired despite being aware of Lime Asset's concealment of insolvency and fraud allegations, and legal disputes are accelerating as sellers send content certifications to the securities firms with TRS contracts, increasing uncertainty about the possibility of senior priority recovery."

He explained, "Although TRS allows for contract senior priority recovery, if Shinhan Financial Investment fails to recover the TRS as senior priority, Shinhan Financial Group's expected loss could approach or exceed 200 billion KRW."