[Click eStock] "Hana Financial Group, Solid Fundamentals... Positive Partnership with SKT"

[Asia Economy Reporter Lee Jung-yoon] Korea Investment & Securities maintained a buy rating and a target price of 56,000 KRW on Hana Financial Group on the 25th, citing solid interest income and soundness indicators, as well as a positive strategic partnership with SK Telecom.

In the second quarter of this year, Hana Financial Group's controlling net profit was 825.1 billion KRW, falling 9% short of consensus estimates. This was due to weak trading gains. The net interest margin (NIM) rose 9 basis points (1bp=0.01 percentage point) from the previous quarter to 1.59%, and the guidance for the fourth quarter is also high at 1.69%, which is viewed positively. The bank's won-denominated loans increased by 2.0% quarter-on-quarter, with corporate loans rising 4.5% during the same period.

The group's loan loss ratio increased by 8bp quarter-on-quarter to 0.27%. Excluding an additional COVID-19 related provision of 1.2243 trillion KRW, the normalized loan loss ratio remained steady at 0.13% compared to the previous quarter. Fee income rose 7% to 486.9 billion KRW, showing favorable results, driven by a 53% increase in card fee income during the same period. Trading losses amounted to 162.7 billion KRW, decreasing by 365.8 billion KRW from the previous quarter, affected by foreign exchange translation losses of 84.6 billion KRW, valuation losses of 70 billion KRW on securities holdings in the Bank for Investment and Development of Vietnam (BIDV), and valuation losses related to shares held from initial public offerings (IPO) and bonds.

Hana Financial Group's interest income and soundness indicators are assessed to be at a solid level. Yoon Yeo-hoon, a researcher at Korea Investment & Securities, said, "Although non-interest income was disappointing, except for some parts of the securities division, related performance is expected to rebound in the second half of the year." He added, "Also, the interim dividend per share (DPS) was increased by 100 KRW from the same period last year to 800 KRW, which reflects confidence in the fundamentals."

Furthermore, the strategic partnership with SK Telecom is also viewed positively. They plan to strengthen cooperation in digital transformation using AI and cloud, new businesses (such as the metaverse), and combined telecommunications and financial products and services. As part of the partnership, Hana Financial Group will acquire the remaining 15% stake in Hana Card held by SK Telecom for 330 billion KRW, and Hana Card has decided to acquire shares worth 100 billion KRW in total from SK Square and SK Telecom. In return, SK Telecom plans to purchase Hana Financial Group shares worth 330 billion KRW during trading hours by early 2024 using a special money trust, which is expected to help stabilize supply and demand.