NICE Ratings Upgrades Hana Securities' Credit Rating Outlook to 'Stable'

Nice Investors Service (NICE Ratings) announced on April 23 that it has upgraded the outlook for Hana Securities' unsecured bond credit rating from 'Negative' to 'Stable'. The senior and subordinated unsecured bond credit ratings remain at 'AA' and 'AA-', respectively.

NICE Ratings cited several reasons for the upgrade in Hana Securities' rating outlook: a recovery in profitability, the limited possibility of a sharp deterioration in asset quality, and the maintenance of strong capital adequacy supported by capital increases such as rights offerings.

Jung Wonha, a lead researcher at NICE Ratings, stated, "Although the company posted a loss in 2023 due to customer loss compensation related to operations, proactive recognition of losses and provisioning for alternative investments, it succeeded in returning to profitability last year." He emphasized, "Last year, profits in the investment banking (IB) division increased, mainly due to debt guarantees, and the performance of the trading (proprietary trading and financial) division improved significantly compared to the previous year, resulting in a return on assets (ROA) of 0.4% and a net income of 212.8 billion KRW."

He added, "Considering the proactive recognition of losses and provisioning for alternative investments, the stability of commission trading and asset management income, and the securing of IB division profits through the expansion of debt guarantees centered on high-quality business sites, we believe it is possible to maintain the current level of profitability."

Since 2018, Hana Securities has strengthened its capital through approximately 3 trillion KRW in rights offerings (1.2 trillion KRW in 2018 and 500 billion KRW annually from 2020 to 2022), as well as the issuance of 150 billion KRW in hybrid capital securities in 2023 (acquired by Hana Financial Group). The researcher noted, "In the medium to short term, there is a possibility of increased profit volatility and higher credit loss burdens due to a deteriorating business environment," but also assessed, "The company is expected to maintain a certain level of capital adequacy based on its expanded equity capital."

NICE Ratings identified Hana Securities' domestic and overseas alternative investment exposure and the potential deterioration in profitability and soundness as key review items. He stated, "Given the company's investment asset composition, there remains a possibility of further deterioration in asset quality and profitability due to a slowdown in the domestic and overseas real estate markets," and added, "We will continue to monitor fluctuations in the domestic and overseas real estate markets and the resulting scale of non-performing alternative investments."

Nonetheless, he emphasized, "Considering the easing of downward pressure on the real estate market due to the trend of interest rate cuts, as well as the company's proactive recognition of losses and provisioning related to alternative investments, the possibility of a sharp deterioration in profitability and asset quality due to changes in market conditions is limited."