Hana Financial Group (086790 KS ) Both profits and dividend payout increase
Banks 4Q18 review: Net profit of W348.1bn Results Comment For 4Q18, Hana Financial Group (HFG) announced net profit (attributable to controlling February 1, 2019 interests) of W348.1bn (-29.8% YoY, -40.9% QoQ), which was 4% below our estimate (W362.7bn), but in line with the consensus (W353.3bn based on FnGuide and W347.9bn based on Bloomberg). Credit costs were higher than our projection, with one-off provisions totaling a massive W110.9bn, including: 1) an additional W58.6bn for Hanjin Heavy I&C, due to an increase in the collateral and provision coverage ratio (Maintain) Buy to 98%; 2) W24.3bn for a Chinese telecom company at the group’s Chinese subsidiary; 3) an additional W12.3bn for Dongbu Steel; and 4) W15.7bn related to penalties for Target Price (12M, W) 58,500 reserve shortfalls. Other major one-time items included: 1) W80.2bn in SG&A expenses (pension provisions) related to the integration of human resource/pay/benefit systems Share Price (01/31/19, W) 39,950 (which had been maintained separately after the bank merger); 2) W24.9bn in donations (Foundation for Young Entrepreneurs, etc.); and 3) W9.6bn in F/X-translation Expected Return 46% losses on non-monetary foreign currency assets. Excluding these items , we estimate underlying net profit was in the W500bn range. Core income i ndicators were healthy,
with bank net interest margin (NIM) gaining 1bp QoQ, and won-denominated loans NP (18F, Wbn) 2,240 growing 0.9% QoQ (+7.7% from end-2017). Consensus NP (18F, Wbn) 2,245 Final DPS higher than expected at W1,500; efforts to return shareholder EPS Growth (18F, %) 9.0 value are encouraging Market EPS Growth (18F, %) 5.3 HFG declared a final dividend of W1,500 per share for 2018 (total dividend of W1,900, P/E (18F, x) 5.3 including interim dividend of W400), higher than our expectation (W1,400) and the Market P/E (18F, x) 9.2 consensus (W1,322). Based on interim and final dividends combined, this implies a KOSPI 2,204.85 dividend yield of 4.9% (0.9% for interim dividend plus 4% for final dividend) and a 2018 Market Cap (Wbn) 11,995 dividend payout ratio of 25.5% (up from 18.5% in 2014, 21.1% in 2015, 23.4% in 2016, Shares Outstanding (mn) 300 and 22.5% in 2017). Given HFG’s enhanced earnings stability, improved CET1 ratio, and Free Float (%) 88.0 ma nagement’s commitment to raise dividend payout to 30% over the long term, we Foreign Ownership (%) 70.2 expect a payout ratio of 25.8% in 2019-20 . Based on our forecasts, this translates into Beta (12M) 0.84 compelling dividend yields (interim and final dividends combined) of 5.4 % for 2019 and 52-Week Low 34,750 5.8% for 2020. 52-Week High 53,200 Maintain Buy and TP of W58,500 (%) 1M 6M 12M We continue to recommend HFG as our top pick. Despite visible fundamental Absolute 10.2 -11.0 -23.3 improvements across earnings power, asset quality, and capital adequacy, we believe Relative 2.0 -7.4 -10.7 HFG’s stock has declined excessively and is undervalued in absolute terms. The stock also looks attractive from a dividend perspective. 110 Hana Financial Group KOSPI 100 HFG has the biggest global profits and highest percentage of group commission 90 income among financial holding companies. The group has a relatively low exposure 80 to non-banking operations, but given its much-strengthened CET1 ratio and earnings 70 power, we think it could potentially seek M&A opportunities to diversify its non-bank 60 operations. This could lead to further improvements in fundamentals and enterprise 50 1.18 5.18 9.18 1.19 value.
Mirae Asset Daewoo Co., Ltd. Fiscal year-end 12/15 12/16 12/17 12/18P 12/19F 12/20F Net interest inc. (Wbn) 4,539 4,642 5,110 5,637 6,061 6,341 [ Banks/Credit Cards ] Net non-interest inc. (Wbn) 2,151 1,970 2,490 1,937 2,075 2,250 Operating profit (Wbn) 1,011 1,614 2,718 3,162 3,491 3,726 Heather Kang +822 -3774 -1903 Net profit (Wbn) 910 1,330 2,037 2,240 2,506 2,678 [email protected] EPS (W) 3,114 4,495 6,881 7,501 8,346 8,920
EPS growth (%) -3.7 44.4 53.1 9.0 11.3 6.9 P/E (x) 12.8 8.9 5.8 5.3 4.8 4.5 P/PPOP (x) 5.6 4.7 3.4 3.3 2.9 2.6
P/B (x) 0.53 0.53 0.50 0.45 0.41 0.38 ROE (%) 4.2 6.0 8.8 8.9 9.0 8.8 Dividend yield (%) 1.6 2.6 3.9 4.8 5.4 5.8 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates
February 1, 2019 Hana Financial Group
4Q18 review and 2019 outlook
In 4Q18, bank won-denominated loans grew 0.9% QoQ (+7.7% from end-2018). In 2019, we forecast won-denominated loan growth to decelerate to 3.7% YoY, but the strong asset base expansion in 2018 should contribute to interest income growth in 2019.
4Q18 bank net interest margin (NIM) edged higher 1bp QoQ to 1.56%. Looking ahead, we expect NIM to gain 1bp to 1.57% in 1Q19 on the back of the recent rise in short-term (three- month and six-month) bank debentures and COFIX rates; we assume NIM will remain at that level through 4Q20.
We forecast 2019 group net interest income and net commission income at W6.06tr (+7.5% YoY) and W2.1tr (+1.7%), respectively. We forecast 2019 SG&A expenses at W3.98tr (+0.8%), reflecting a W100bn decline in depreciation/amortization expenses (negative goodwill related to the bank merger and additional IT depreciation). This would imply a cost-to- income ratio of 48.9%, down from 53.1% in 2017 and 52.1% in 2018. We conservatively estimate 2019 credit costs at W664.6bn (+42.8%), or 25bps of total credit, versus. 34bps in 2017 and 18bps in 2018.
Driven by robust top-line growth and cost-saving effects, we forecast 2019 net profit to grow 11.9% YoY to W2.51tr and ROE to expand 0.13%p YoY to 9%.
Asset quality indicators and capital ratios are well-managed
In 4Q18, the Group NPL ratio fell 19bps YoY and 2bps QoQ (-20bps YoY, -2bps QoQ for bank) to 0.59% (0.52% for bank), while the bank delinquency ratio improved to 0.25% (-4bps YoY, - 4bps QoQ).
Group BIS ratio, tier 1 ratio, and CET-1 ratio (preliminary) stood at 14.9% (-6bps YoY, +2bps QoQ), 13.53% (+24bps YoY, +4bps QoQ), and 12.86% (+12bps YoY, -12bps QoQ), respectively. Despite the higher-than-expected dividend payout ratio, group-level CET-1 ratio was well- managed, at 12.86%.
Mirae Asset Daewoo Research 2 February 1, 2019 Hana Financial Group
Table 1. HFG: 4Q18 review YoY chg. QoQ chg. (Wbn) 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18P (%, %p) (%, %p) Net interest income 1,258.0 1,301.7 1,358.0 1,339.5 1,402.4 1,427.1 1,468.1 8.1 2.9 Net fee & commission income 460.2 479.6 486.8 549.5 568.5 493.7 457.4 -6.0 -7.3 Net other income -25.6 20.0 336.8 3.9 -101.9 18.1 -52.3 TTR TTR Total net operating income 1,692.6 1,801.2 2,181.6 1,892.9 1,869.0 1,938.9 1,873.2 -14.1 -3.4 SG&A expenses 914.0 992.6 1,253.8 914.5 917.7 1,039.4 1,075.3 -14.2 3.5 PPOP 778.6 808.6 927.8 978.3 951.3 899.5 797.9 -14.0 -11.3 Provisions 81.7 127.4 210.9 88.9 36.0 66.0 274.5 30.1 315.8 Operating profit 696.9 681.2 716.9 889.5 915.4 833.5 523.4 -27.0 -37.2 Non-operating income 47.4 18.7 -25.2 35.7 -2.1 7.9 -43.8 RR TTR Pretax profit 744.4 699.9 691.6 925.1 913.2 841.3 479.5 -30.7 -43.0 Net profit 538.9 510.0 495.8 668.6 634.1 589.4 348.1 -29.8 -40.9
Total assets 349,046 363,321 360,089 368,903 373,243 381,870 385,009 6.9 0.8 Total loans & receivables 232,010 239,440 238,943 242,057 246,452 252,686 260,664 9.1 3.2 Won-denominated loans (bank) 182,894 187,229 188,161 191,604 195,765 200,826 202,632 7.7 0.9 Total credit 241,041 247,274 245,893 250,485 257,788 262,965 263,891 7.3 0.4 Total deposits 223,069 229,481 232,166 233,605 235,587 241,263 248,559 7.1 3.0 Total shareholders' equity 24,280 24,716 24,828 25,288 25,984 26,474 27,115 9.2 2.4
(%) NIM (Bank) 1.48 1.52 1.53 1.57 1.57 1.55 1.56 0.03 0.01 Cost-to-income ratio 54.0 55.1 57.5 48.3 49.1 53.6 57.4 -0.1 3.8 NPL (substandard & below) ratio 0.80 0.73 0.78 0.76 0.71 0.61 0.59 -0.19 -0.02 NPL coverage ratio 212.3 212.0 207.9 200.0 209.6 220.0 230.4 22.5 10.4 RoAE 0.16 0.14 0.14 0.18 0.17 0.16 0.09 -0.05 -0.07 RoAA 2.34 2.17 2.08 2.76 2.54 2.31 1.33 -0.75 -0.97 Credit cost 0.03 0.05 0.09 0.04 0.01 0.03 0.10 0.02 0.08 BIS ratio 14.97 14.89 14.97 14.84 14.85 14.89 14.90 -0.06 0.02 Tier-1 ratio 13.27 13.25 13.29 13.45 13.40 13.49 13.53 0.24 0.04 CET1 ratio 12.73 12.72 12.74 12.92 12.88 12.98 12.86 0.12 -0.12 Note: ROA, ROE, and credit cost data are not annualized; NPL coverage ratio is based on the old formula (including credit loss reserves); TTR = Turn to red; RR = Remain in red Source: Company data, Mirae Asset Daewoo Research
Table 2. HFG: Earnings forecast revisions
Revised Previous % chg. (Wbn) 2018P 2019F 2020F 2018F 2019F 2020F 2018P 2019F 2020F Net interest income 5,637 6,061 6,341 5,637 6,073 6,336 0.0 -0.2 0.1 Net non-interest income 1,937 2,075 2,250 1,981 2,112 2,290 -2.2 -1.8 -1.8 Total net operating income 7,574 8,136 8,591 7,619 8,185 8,626 -0.6 -0.6 -0.4 SG&A expenses 3,947 3,980 4,039 3,994 3,989 4,039 -1.2 -0.2 0.0 PPOP 3,627 4,156 4,552 3,625 4,196 4,588 0.1 -1.0 -0.8 Provisions 465 665 826 442 662 832 5.2 0.4 -0.7 Operating profit 3,162 3,491 3,726 3,182 3,534 3,756 -0.6 -1.2 -0.8 Non-operating income -2 21 26 11 29 36 NA -27.6 -27.8 Pretax profit 3,159 3,512 3,752 3,194 3,563 3,792 -1.1 -1.4 -1.0 Net profit (controlling interests) 2,240 2,506 2,678 2,255 2,542 2,706 -0.6 -1.4 -1.0 Source: Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 3 February 1, 2019 Hana Financial Group
Figure 1. HFG: Bank NIM trend (1) Figure 2. HFG: Bank NIM trend (2)
(%) (%) 2.10 1.70 2.00 1.97 2.00 1.60 1.90 1.50 1.80 1.70 1.40 1.70
1.30 1.60 1.56 1.57 1.57 1.52 1.49 1.20 1.50 1.47 1.39 1.39 1.10 1.40 1.00 1.30 1 Q16 2 Q16 3 Q16 4 Q16 1 Q17 2 Q17 3 Q17 4 Q17 1 Q18 2 Q18 3 Q18 4 Q18 1Q19F 2Q19F 3Q19F 4Q19F 0102 0112 0122 0132 0142 0152 0162 0172 0182 2019F 2020F
Note: Figures before merger with KEB are based on Hana Bank Note: Figures before merger with KEB are based on Hana Bank Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Figure 3. COFIX and 91-day CD trends Figure 4. Bank debenture yield (AAA, 3M)
(%) 2.0
1.9
1.8
1.7
1.6
1.5
1.4
1.3 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18 1/19
Source: KOSCOM, Mirae Asset Daewoo Research Source: KOSCOM, Mirae Asset Daewoo Research
Figure 5. HFG: Net interest income trend and forecast Figure 6. HFG: Net fee income trend and forecast
(Wbn) (Wbn) 1,600 600 1,500 550 1,400 500 1,300 1,200 450
1,100 400 1,000 350 900 800 300 700 1 Q12 3 Q12 1 Q13 3 Q13 1 Q14 3 Q14 1 Q15 3 Q15 1 Q16 3 Q16 1 Q17 3 Q17 1 Q18 3 Q18 1Q19F 250 1 Q12 3 Q12 1 Q13 3 Q13 1 Q14 3 Q14 1 Q15 3 Q15 1 Q16 3 Q16 1 Q17 3 Q17 1 Q18 3 Q18 1Q19F
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 4 February 1, 2019 Hana Financial Group
Figure 7. HFG: Core earnings (net interest income + net fee income) trend
(Wbn) 9,000 Core income (Net interest income+Net fee & commission income) 8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F
Source: Company data, Mirae Asset Daewoo Research
Table 3. HFG: Non-interest income (Wbn, %) 2018 2017 YoY 4Q18 3Q18 QoQ Fee income 2,224.1 2,026.0 9.8 491.1 525.9 -6.6 Credit card 830.1 806.3 3.0 198.0 209.5 -5.5 Banking fees 475.0 452.9 4.9 109.4 118.8 -7.9 Guarantees 71.4 68.5 4.2 18.1 17.9 1.6 Loans & other 175.5 172.4 1.8 32.0 43.3 -26.3 F/X 183.1 184.5 -0.8 46.3 45.5 1.8 Operating leases 45.1 27.4 64.2 12.9 12.0 7.4 Asset management fees 662.7 593.2 11.7 151.7 149.0 1.8 Beneficiary cert. sales 149.7 135.4 10.5 34.0 36.8 -7.7 Wrap & operation 48.0 59.4 -19.3 9.6 9.4 2.6 Brokerage 144.4 125.9 14.8 27.6 28.3 -2.6 Trust 287.4 230.9 24.5 70.6 67.1 5.3 Bancassurance 33.2 41.6 -20.2 9.8 7.3 34.2 M&A advisory 141.7 77.4 83.1 29.2 26.2 11.1 Other 114.5 96.2 19.0 2.9 22.3 -87.1 Disposition/valuation 375.2 1,017.9 -63.1 66.1 153.2 -56.9 Other operating income -662.6 -535.1 NA -152.1 -167.3 NA Total 1,936.7 2,508.8 -22.8 405.0 511.7 -20.8 Note: Company IR materials (standards for some fee income and disposal/valuation gains differ from those for financial statements) Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 5 February 1, 2019 Hana Financial Group
Figure 8. HFG: Credit cost trend (quarterly)
(Wbn) (%) 700 Provisioning expenses (L) Credit cost, % of total credit (R) 0.7
600 0.6
500 0.5
400 0.4
300 0.3
200 0.2
100 0.1
0 0.0
-100 -0.1 1Q06 2Q07 3Q08 4Q09 1Q11 2Q12 3Q13 4Q14 1Q16 2Q17 3Q18
Note: Credit cost ratio is not annualized. Source: Company data, Mirae Asset Daewoo Research
Figure 9. HFG: New NPL formation
(Wbn) 1,000 New NPL formation (L) % of total credit (R) 0.5%
800 0.4%
600 0.3%
400 0.2%
200 0.1%
0 0.0%
-200 -0.1%
-400 -0.2% Q114Q 121Q 122Q 123Q 124Q 131Q 132Q 133Q 134Q 141Q 142Q 143Q 144Q 151Q 152Q 153Q 154Q 161Q 162Q 163Q 164Q 171Q 172Q 173Q 174Q 181Q 182Q 183Q 184Q
Source: Company data, Mirae Asset Daewoo Research
Figure 10. HFG: Credit cost trend (annual)
(Wbn) Provisioning expenses (L) Credit cost vs. total credit (R) (%) 1,800 1.20
1,600 1.00 1,400
1,200 DSME provisioning 0.80 (W350bn) 1,000 0.60 800
600 0.40
400 0.20 200
0 0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F
Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 6 February 1, 2019 Hana Financial Group
Figure 11. HFG: Cost-to-income ratio (including and excluding depreciation/amortization expenses)
(%) 70 67.7
65 62.3 62.5 61.7 65.2 60 59.6 55 58.8 58.9 53.1 52.1 50.8 48.9 50 47.0 50.9 50.4 45 48.6 46.7 40
35
30 2012 2013 2014 2015 2016 2017 2018 2019F 2020F
Source: Company data, Mirae Asset Daewoo Research
Figure 12. HFG: ROE trend and forecasts
(%)
10.0 Average: 8.9%
8.0
6.0 Average: 5.8%
4.0
2.0
0.0 2013 2014 2015 2016 2017 2018 2019F 2020F
Source: Company data, Mirae Asset Daewoo Research
Figure 13. HFG: CET1 ratio
(%) 14.0 12.92 12.88 12.98 12.86
12.0 12.72 12.74 10.0 12.41 12.73 11.35 11.52 11.77 8.0 10.38
6.0 9.44 9.60 9.79 9.18 9.50 4.0
2.0
0.0 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 7 February 1, 2019 Hana Financial Group
Figure 14. HFG: Earnings breakdown by subsidiary in 2 017 Figure 15. HFG: Earnings breakdown by subsidiary in 20 18 (before reflecting consolidation adjustments and other (before reflecting consolidation adjustments and other factors) factors)
Hana Capital Hana Savings Hana Capital Hana Life Hana Savings Hana Life 1.9% Bank 4.8% 0.8% Bank 0.6% 0.7% KEB Hana Card 0.7% KEB Hana Card 3.6% 3.7% Hana Financial Hana Financial Investments Investments 6.1% 6.1%
Bank KEB Hana Bank 87.0% 84.0%
Net income Ownership Net income Net income Ownership Net income (Wbn) % (Wbn) % (a) (b) (a) x (b) (a) (b) (a) x (b) Bank 2,103.5 2,103.5 87.0 Bank 2,092.8 2,092.8 84.0 KEB Hana Bank 2,103.5 100.0 2,103.5 87.0 KEB Hana Bank 2,092.8 100.0 2,092.8 84.0 Non-bank 374.5 313.5 13.0 Non-bank 414.9 398.9 16.0 Hana Financial Investments 146.3 100.0 146.3 6.1 Hana Financial Investments 152.1 100.0 152.1 6.1 KEB Hana Card 106.4 85.0 90.4 3.7 KEB Hana Card 106.7 85.0 90.7 3.6 Hana Capital 90.4 50.1 45.3 1.9 Hana Capital 120.4 100.0 120.4 4.8 Hana Life 13.8 100.0 13.8 0.6 Hana Life 19.5 100.0 19.5 0.8 Hana Savings Bank 17.6 100.0 17.6 0.7 Hana Savings Bank 16.2 100.0 16.2 0.7 Total 2,478.0 2,417.0 100.0 Total 2,507.7 2,491.7 100.0
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Figure 16. HFG: Annual dividend payout ratio and DPS Figure 17. HFG: Annual dividend yield
(W) DPS (Interim+Year-end) (L) (%) (%) 2,500 Dividend payout ratio (Interim+Year-end) (R) 30 7.0 Dividend yield (interim+year-end) (based on current share price) 6.0 5.8 25 5.4 2,000 Dividend yield (interim+year-end) (based 5.0 on respective year-end share price) 4.8 20 1,500 3.9 4.0 15
1,000 3.0 2.6 10 1.8 2.0 1.5 1.5 1.6 500 1.1 5 1.0 1.0 1.0 0.5
0 0 0.0
Source: Company data, Mirae Asset Daewoo Research Note: Blue bars are dividend yield based on Jan 31, 2018 closing price (W39,950) Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 8 February 1, 2019 Hana Financial Group
Table 4. HFG: Quarterly earnings
(Wbn) 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18P 1Q19F 2Q19F 3Q19F Net interest income 1,183.8 1,191.9 1,258.0 1,301.7 1,358.0 1,339.5 1,402.4 1,427.1 1,468.1 1,461.6 1,504.8 1,535.8 Net non-interest income 426.1 450.0 460.2 479.6 486.8 549.5 568.5 493.7 457.4 522.7 524.9 527.8 Net other income -213.6 282.5 -25.6 20.0 336.8 3.9 -101.9 18.1 -52.3 -32.0 -19.2 -13.3 Total net operating income 1,396.3 1,924.4 1,692.6 1,801.2 2,181.6 1,892.9 1,869.0 1,938.9 1,873.2 1,952.3 2,010.6 2,050.3 SG&A expenses 1,216.3 878.7 914.0 992.6 1,253.8 914.5 917.7 1,039.4 1,075.3 938.1 943.3 1,030.9 PPOP 179.9 1,045.7 778.6 808.6 927.8 978.3 951.3 899.5 797.9 1,014.2 1,067.3 1,019.4 Provisions 168.1 422.6 81.7 127.4 210.9 88.9 36.0 66.0 274.5 136.7 144.9 158.1 Operating profit 11.8 623.1 696.9 681.2 716.9 889.5 915.4 833.5 523.4 877.5 922.4 861.3 Non-operating income 122.8 39.7 47.4 18.7 -25.2 35.7 -2.1 7.9 -43.8 27.0 13.0 17.0 Pretax profit 134.6 662.8 744.4 699.9 691.6 925.1 913.2 841.3 479.5 904.5 935.4 878.3 Net profit 90.4 492.1 538.9 510.0 495.8 668.6 634.1 589.4 348.1 643.9 668.4 626.9 Source: Company data, Mirae Asset Daewoo Research
Table 5. HFG: Annual earnings
(Wbn) 2011 2012 2013 2014 2015 2016 2017 2018P 2019F 2020F Net interest income 3,206.1 4,598.7 4,485.0 4,653.9 4,538.9 4,642.1 5,109.5 5,637.2 6,061.4 6,340.9 Net non-interest income 978.2 1,552.2 1,592.8 1,617.8 1,696.4 1,639.9 1,876.6 2,069.0 2,103.3 2,191.6 Net other income 217.8 1,263.3 99.3 30.8 454.3 330.3 613.7 -132.2 -28.5 58.4 Total net operating income 4,402.1 7,414.1 6,177.1 6,302.5 6,689.6 6,612.3 7,599.8 7,573.9 8,136.1 8,591.0 SG&A expenses 2,107.6 3,769.8 3,846.3 3,936.2 4,531.0 4,076.9 4,039.1 3,946.9 3,980.3 4,038.7 PPOP 2,294.4 3,644.3 2,330.8 2,366.3 2,158.6 2,535.4 3,560.7 3,627.1 4,155.8 4,552.3 Provisions 562.0 1,627.0 1,165.8 1,122.9 1,148.1 921.3 842.6 465.4 664.6 825.8 Operating profit 1,732.4 2,017.4 1,165.0 1,243.4 1,010.5 1,614.1 2,718.1 3,161.7 3,491.2 3,726.5 Non-operating income -16.6 -25.1 105.3 9.1 185.9 205.9 80.5 -2.4 21.0 26.0 Pretax profit 1,715.8 1,992.2 1,270.3 1,252.6 1,196.4 1,820.0 2,798.7 3,159.3 3,512.2 3,752.5 Net profit 1,222.4 1,621.5 933.9 937.7 909.7 1,330.5 2,036.8 2,240.2 2,505.7 2,678.2 Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 9 February 1, 2019 Hana Financial Group
Hana Financial Group (086790 KS/Buy/TP: W58,500)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year end 12 (Wbn) 12/17 12/18P 12/19F 12/20F Year end 12 (Wbn) 12/17 12/18P 12/19F 12/20F Interest income 8,932 10,341 11,189 11,635 Cash & dues 21,851 24,307 24,904 26,044 Interest expense 3,823 4,704 5,128 5,294 Securities 79,408 78,935 80,707 84,016 Net interest income 5,110 5,637 6,061 6,341 Net loans and receivables 238,943 260,664 263,056 273,380 Net fees and commissions 1,877 2,069 2,103 2,192 Tangible assets 3,628 3,747 3,805 3,864 Net other non-interest income 614 -132 -29 58 Other assets 16,260 17,356 17,672 18,005 Total net operating income 7,600 7,574 8,136 8,591 Total assets 360,089 385,009 390,144 405,308 G&A expenses 4,039 3,947 3,980 4,039 Deposits 232,166 248,559 244,345 254,208 PPOP 3,561 3,627 4,156 4,552 Borrowings 18,792 19,182 19,644 20,511 Total provision expenses 843 465 665 826 Debentures 36,444 41,018 41,803 43,244 Operating profit 2,718 3,162 3,491 3,726 Other liabilities 47,859 49,133 54,609 54,798 Net non-operating income 81 -2 21 26 Total liabilities 335,261 357,893 360,401 372,761 Income before income taxes 2,799 3,159 3,512 3,752 Capital stock 1,480 1,501 1,505 1,505 Income tax expense 682 877 966 1,032 Hybrid securities 444 980 980 980 Net profit 2,117 2,282 2,546 2,721 Capital surplus 10,463 10,603 10,603 10,603 Net profit (ex. minority interest) 2,037 2,240 2,506 2,678 Retained earnings 12,268 14,231 16,814 19,575 Normalized net profit 2,037 2,240 2,506 2,678 Capital adjustments -15 -15 -15 -15 Other comprehensive income -766 -864 -864 -864 Core income 6,282 6,986 7,706 8,165 Non-controlling interests 954 679 720 762 Core PPOP 2,205 2,947 3,759 4,184 Total shareholders' equity 24,828 27,115 29,743 32,547
DuPont analysis (%) Key ratios (%) Interest income 2.52 2.78 2.89 2.93 Growth (YoY) Interest expense 1.08 1.26 1.32 1.33 Won loan growth (Bank) 5.3 7.7 3.8 4.1 Net interest income 1.44 1.51 1.56 1.59 Net loans & receivables growth 4.5 9.1 0.9 3.9 Net commissions income 0.53 0.56 0.54 0.55 Deposit growth 4.4 7.1 -1.7 4.0 Net other non-interest income 0.17 -0.04 -0.01 0.02 Shareholders' equity growth 6.1 9.2 9.7 9.4 Total net operating profit 2.15 2.03 2.10 2.16 Total assets growth 3.4 6.9 1.3 3.9 G&A expenses 1.14 1.06 1.03 1.02 Net interest income growth 10.1 10.3 7.5 4.6 PPOP 1.01 0.97 1.07 1.15 Net fee income growth 14.4 10.3 1.7 4.2 Total provision expenses 0.24 0.13 0.17 0.21 PPOP growth 40.4 1.9 14.6 9.5 Net non-operating income 0.02 0.00 0.01 0.01 Operating profit growth 68.4 16.3 10.4 6.7 Income before income taxes 0.79 0.85 0.91 0.94 Net profit growth 53.1 10.0 11.9 6.9 Income tax expense 0.19 0.24 0.25 0.26 Profitability Net profit (non-controlling) 0.02 0.01 0.01 0.01 Net interest spread (Bank) 1.45 1.51 1.51 1.51 ROA 0.58 0.60 0.65 0.67 Net interest margin (Bank) 1.49 1.56 1.57 1.57 Leverage (x) 15.3 14.8 14.0 13.1 PPOP margin 1.0 1.0 1.1 1.1 ROE 8.79 8.91 9.04 8.81 ROA 0.6 0.6 0.6 0.7 Asset quality (%) ROE 8.8 8.9 9.0 8.8 NPL ratio 0.78 0.59 0.57 0.56 Liquidity Broad NPL ratio 1.80 1.56 1.45 1.32 W LDR (excl. CDs) (Bank) 98.8 98.5 98.5 98.5 NPL coverage ratio 207.9 230.4 235.8 238.1 Loans to assets 66.4 67.7 67.4 67.5 Reserves to total credits 1.4 1.4 1.4 1.3 Capital adequacy Credit cost (% of total loans) 0.35 0.18 0.25 0.30 Total CAR 15.0 14.9 15.1 15.2 Credit cost (% of total credit) 0.34 0.18 0.25 0.30 Tier 1 CAR 13.3 13.5 13.9 14.3 Per share items (W) Tier 2 CAR 1.7 1.4 1.2 0.9 EPS (reported) 6,881 7,501 8,346 8,920 Operating efficiency EPS (normalized) 6,881 7,501 8,346 8,920 Cost to income 53.1 52.1 48.9 47.0 BVPS 80,654 88,049 96,665 105,863 Cost to assets 1.1 1.0 1.0 1.0 DPS (common share) 1,550 1,900 2,150 2,300 Dividend PPOP/ share 12,029 12,145 13,842 15,162 Payout ratio 22.5 25.5 25.8 25.8 Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 10 February 1, 2019 Hana Financial Group
APPENDIX 1
Important Disclosures & Disclaimers 2-Year Rating and Target Price History
Company (Code) Date Rating Target Price (W) Hana Financial Group Hana Financial Group (086790) 01/21/2019 Buy 58,500 80,000 12/04/2018 Buy 62,000 07/05/2018 Buy 64,000 60,000 01/31/2018 Buy 70,000 10/24/2017 Buy 62,500 40,000 07/23/2017 Buy 61,000 20,000 07/11/2017 Buy 56,000
04/22/2017 Buy 49,000 0 04/12/2017 Buy 47,500 Jan 17 Jan 18 Jan 19 01/23/2017 Buy 45,000
Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell ( ◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 81.28% 9.63% 9.09% 0.00% Investment Banking Services 84.61% 3.85% 11.54% 0.00% * Based on recommendations in the last 12-months (as of December 31, 2018)
Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Hana Financial Group as an underlying asset; other than this, Mirae Asset Daewoo has no other special interests in the covered companies.
Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.
Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial
Mirae Asset Daewoo Research 11 February 1, 2019 Hana Financial Group
situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo.
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Mirae Asset Daewoo Research 12 February 1, 2019 Hana Financial Group
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