Hana Financial Group (086790 KS) No reason not to buy, given fundamentals
Banks 2Q19 review: Robust net profit of W658.4bn For 2Q19, Hana Financial Group (HFG) reported net profit attributable to controlling Results Comment interests of W658.4bn (+3.8% YoY, +20.6% QoQ), 2-4% above consensus estimates (W636.7bn based on FnGuide and W642.1bn based on Bloomberg) and in line with our July 29, 2019 expectation (W661bn). Major one-off items in the quarter included: 1) W36.6bn in F/X translation losses on non-monetary foreign currency assets due to a higher US$/W rate; 2) a W71bn reversal of loss provisions related to Hanjin Heavy I&C (097230 KS/CP: W5,330); and 3) W13.1bn in loss provisions related to an auto parts supplier. Even after (Maintain) Buy adjusting for these items, we estimate underlying net profit was still around the mid- W600bn level. Target Price (12M, W) 58,500 Interim dividend hike part of effort to enhance shareholder value Share Price (07/26/19, W) 35,350 HFG is the only financial holding company that has continued to pay out interim dividends. For 2019, the group declared an interim dividend of W500 per share Expected Return 65% (current yield of 1.4%), an increase from W300 in 2017 and W400 in 2018. The group’s dividend payout ratio (interim and final dividends combined) was 22.5% in 2017 and
25.5% in 2018. Given HFG’s enhanced earnings stability and improved CET1 ratio, as NP (19F, Wbn) 2,469 well as management’s commitment to raise dividend payout to 30% over the medium Consensus NP (19F, Wbn) 2,341 and long term, we expect dividend payout ratio to rise to 26.0% in 2019, 26.1% in 2020, and 26.4% in 2021, which translate into dividend yields (interim and final dividends EPS Growth (19F, %) 9.6 combined) of 6.2%, 6.8%, and 7.4%, respectively. These dividend yields—the highest Market EPS Growth (19F, %) -24.8 within our coverage—should stand out during periods of heightened uncertainties. P/E (19F, x) 4.3 Market P/E (19F, x) 12.6 Equity investment in BIDV KOSPI 2,066.26 On July 22nd, HFG announced that KEB Hana Bank had agreed to acquire a 15% stake in Market Cap (Wbn) 10,614 the Bank for Investment and Development of Vietnam (BIDV), Vietnam’s largest bank Shares Outstanding (mn) 300 by assets (W66.3tr as of end-2018), for W1.02tr (P/B of 2.48x based on end-2018 Free Float (%) 88.4 estimates) through a private placement. The group said the bank made the strategic Foreign Ownership (%) 68.9 investment to facilitate its entry into the Vietnamese market and lay the foundation for Beta (12M) 0.77 medium- to long-term growth. We are encouraged by the bank’s move to secure a 52-Week Low 34,750 medium/long-term growth driver and diversify its portfolio away from domestic assets 52-Week High 46,400 by advancing into a market with relatively high economic growth, strong potential for financial demand, favorable dynamics, and good profitability. Looking ahead, we see (%) 1M 6M 12M potential for collaboration with non-banking operations, including brokerage, Absolute -5.7 -7.8 -20.3 insurance, and leasing, as well as other areas like fintech. Relative -3.2 -2.9 -11.7 Improved earnings power and ROE, along with strongest dividend appeal 120 Hana Financial Group KOSPI We believe HFG has narrowed its fundamental gaps with Shinhan Financial Group 110 (SFG; 055550 KS//Buy/TP: W60,000/CP: W43,650) and KB Financial Group (KBFG; 100 105560 KS/Buy/TP: W65,000/CP: W43,800), making its valuation even more attractive. 90 Trading at a 2019F P/B of 0.37x and 2020F P/B of 0.34x based on our estimates, the 80 stock looks undervalued relative to its earnings power and profitability (our ROE 70 forecasts are 8.9-9.0%). Despite macro concerns, we maintain HFG as our top pick in 7.18 11.18 3.19 7.19 light of its earnings stability and attractive dividends.
Mirae Asset Daewoo Co., Ltd. Fiscal year-end 12/16 12/17 12/18 12/19F 12/20F 12/21F Net interest inc. (Wbn) 4,642 5,110 5,637 5,953 6,248 6,490 [ Banks/Credit Cards] Net non-interest inc. (Wbn) 1,970 2,490 1,937 2,218 2,352 2,490 Operating profit (Wbn) 1,614 2,718 3,162 3,524 3,741 3,991 Heather Kang +822-3774-1903 Net profit (Wbn) 1,330 2,037 2,240 2,469 2,679 2,870 [email protected] EPS (W) 4,495 6,881 7,501 8,223 8,924 9,559
EPS growth (%) 44.4 53.1 9.0 9.6 8.5 7.1 P/E (x) 7.9 5.1 4.7 4.3 4.0 3.7 P/PPOP (x) 4.2 3.0 2.9 2.5 2.3 2.2
P/B (x) 0.47 0.44 0.40 0.37 0.34 0.31 ROE (%) 6.0 8.8 8.9 9.0 8.9 8.7 Dividend yield (%) 3.0 4.4 5.4 6.2 6.8 7.4 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
Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
July 29, 2019 Hana Financial Group
Good core income and well-maintained credit costs and asset quality indicators In 2Q19, bank-level won-denominated loans grew 3.0% QoQ (+4.1% YTD). Despite efforts to improve the loan portfolio, bank net interest margin (NIM) slipped 1bp QoQ to 1.54% due to a steep fall in bond yields. Group NIM, however, gained 1bp QoQ to 1.81%, thanks to the credit card subsidiary’s reduction of zero-interest-rate installment assets. Group net interest income was W1.46tr (+4.1% YoY, +2.3% QoQ). Group net commission income was W541bn (-4.8% YoY, +6.1% QoQ), with well-balanced growth across wealth management fees (trust and bancassurance), advisory fees, and banking fees (leases). SG&A expenses were efficiently managed, at W928.9bn (+1.2% YoY, -13.4% QoQ), leading to a cost-to-income ratio of 46.2% (-2.9%p YoY, -7.8%p QoQ). Credit costs (which had one big reversal item and one provisioning item) remained very well-contained, at W100.6bn (+179.7% YoY, -38.8% QoQ), or 15bps (annualized; +9bps YoY, -10bps QoQ) of total credit. New NPL formation was W282.3bn (+38.4% YoY, -2.3% QoQ), or 41bps (+9bps YoY, -3bps QoQ) of total credit. We forecast the group’s 2019, 2020, and 2021 credit cost ratios at 25bps, 29bps, and 30bps, respectively (vs. 49bps, 39bps, 34bps, and 18bps in 2015-18).
Group NPL ratio fell to 0.56% (-15bps YoY, -6bps QoQ), and NPL coverage ratio (including credit loss reserves) also improved to 234.9% (+25.3%p YoY, +16.0% QoQ). Bank delinquency ratio fell to 0.25% (-5bps YoY, -4bps QoQ), largely due to the recovery of a SOHO loan (which pushed up the delinquency ratio in 1Q19) through a collateral sale.
Group CET1 ratio (preliminary) stood at 12.61% (-27bps YoY, -27bps QoQ) at end-2Q19 (interim dividends reflected). Based on 2Q19 preliminary estimates, HFG has the second- highest CET1 ratio within our coverage, after KBFG (14.14%). The group has steadily improved its CET1 ratio from 8.63% at end-2013 and 9.18% at end-2014.
Mirae Asset Daewoo Research 2 July 29, 2019 Hana Financial Group
Table 1. 2Q19 review YoY QoQ (Wbn) 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19P (%, %p) (%, %p) Net interest income 1,358.0 1,339.5 1,402.4 1,427.1 1,468.1 1,426.6 1,460.0 4.1 2.3 Net fee & commission income 486.8 549.5 568.5 493.7 457.4 509.8 541.0 -4.8 6.1 Net other income 336.8 3.9 -101.9 18.1 -52.3 49.9 9.3 TTB -81.4 Total net operating income 2,181.6 1,892.9 1,869.0 1,938.9 1,873.2 1,986.4 2,010.2 7.6 1.2 SG&A expenses 1,253.8 914.5 917.7 1,039.4 1,075.3 1,072.8 928.9 1.2 -13.4 PPOP 927.8 978.3 951.3 899.5 797.9 913.6 1,081.4 13.7 18.4 Provisions 210.9 88.9 36.0 66.0 274.5 164.4 100.6 179.7 -38.8 Operating profit 716.9 889.5 915.4 833.5 523.4 749.2 980.7 7.1 30.9 Non-operating income -25.2 35.7 -2.1 7.9 -43.8 12.9 -63.6 RR TTR Pretax profit 691.6 925.1 913.2 841.3 479.5 762.1 917.1 0.4 20.3 Net profit (controlling interests) 495.8 668.6 634.1 589.4 348.1 546.1 658.4 3.8 20.6
Total assets 360,089 368,903 373,243 381,870 385,009 393,529 405,616 8.7 3.1 Total loans & receivables 238,943 242,057 246,452 252,686 260,664 262,882 268,107 8.8 2.0 Won-denominated loans (bank) 188,161 191,604 195,765 200,826 202,632 204,622 210,861 7.7 3.0 Total credit 245,893 250,485 257,788 262,965 263,892 266,628 276,709 7.3 3.8 Total deposits 232,166 233,605 235,587 241,263 248,559 249,802 257,400 9.3 3.0 Total shareholders' equity 24,828 25,288 25,984 26,474 27,115 27,381 28,568 9.9 4.3
(%) NIM (bank) 1.53 1.57 1.57 1.55 1.56 1.55 1.54 -0.03 -0.01 Cost-to-income ratio 57.5 48.3 49.1 53.6 57.4 54.0 46.2 -2.9 -7.8 NPL (sub-standard & below) ratio 0.78 0.76 0.71 0.61 0.59 0.62 0.56 -0.15 -0.06 NPL coverage ratio 207.9 200.0 209.6 220.0 230.4 218.8 234.9 25.3 16.0 RoAE 0.14 0.18 0.17 0.16 0.09 0.14 0.16 -0.01 0.02 RoAA 2.08 2.76 2.54 2.31 1.33 2.06 2.42 -0.12 0.37 Credit cost ratio 0.09 0.04 0.01 0.03 0.10 0.06 0.04 0.02 -0.03 BIS ratio 14.97 14.84 14.85 14.89 14.93 14.79 14.69 -0.17 -0.10 Tier 1 ratio 13.29 13.45 13.40 13.49 13.52 13.52 13.36 -0.04 -0.16 CET1 ratio 12.74 12.92 12.88 12.98 12.86 12.88 12.61 -0.27 -0.27 Note: ROA, ROE, and credit cost data are non-annualized. Source: Company data, Mirae Asset Daewoo Research estimates
Table 2. Earnings forecast revisions
Revised Previous % chg. (Wbn) 2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F Net interest income 5,953 6,248 6,490 5,968 6,264 6,540 -0.3 -0.3 -0.8 Net non-interest income 2,218 2,352 2,490 2,158 2,300 2,422 2.7 2.3 2.8 Total net operating income 8,171 8,601 8,980 8,126 8,564 8,963 0.5 0.4 0.2 SG&A expenses 3,978 4,041 4,105 3,990 4,042 4,107 -0.3 0.0 0.0 PPOP 4,192 4,560 4,875 4,136 4,522 4,856 1.4 0.8 0.4 Provisions 668 819 883 691 804 869 -3.3 1.8 1.7 Operating profit 3,524 3,741 3,991 3,445 3,718 3,987 2.3 0.6 0.1 Non-operating income -75 4 19 -11 16 18 N/A -75.0 5.6 Pretax profit 3,449 3,745 4,010 3,434 3,734 4,005 0.4 0.3 0.1 Net profit (controlling interests) 2,469 2,679 2,870 2,465 2,669 2,864 0.2 0.4 0.2 Source: Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 3 July 29, 2019 Hana Financial Group
Figure 1. HFG: Bank NIM trend (1) Figure 2. HFG: Bank NIM trend (2)
(%) (%) 2.10 2.10 2.00 2.00 1.97 2.00 1.90 1.90 1.80 1.80 1.70 1.70 1.70 1.60 1.60 1.56 1.52 1.53 1.50 1.49 1.50 1.50 1.47 1.50 1.40 1.39 1.39 1.40 1.30 2010 2011 2012 2013 2014 2015 3Q19F 4Q19F 1Q20F 1.20 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 2019F 2020F 2021F 2011 1.30 2010 2012 2013 2014 2015 2016 2017 2018
Note: Figures before merger with KEB are based on Hana Bank data only. Note: Figures before merger with KEB are based on Hana Bank data only. Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Figure 3. HFG: Net interest income trend and forecasts Figure 4. HFG: Net fee income trend and forecasts
(Wbn) (Wbn) 1,700 600 1,600 550 1,500 1,400 500 1,300 450 1,200
1,100 400
1,000 350 900 800 300 3Q19F 1Q20F 1Q15 700 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19F 1Q20F 250 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Figure 5. HFG: Core earnings (net interest income + net fee income)
(Wbn) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F
Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 4 July 29, 2019 Hana Financial Group
Table 3. HFG: Non-interest income (Wbn, %) 2Q19 2Q18 YoY (%) 1Q19 QoQ (%) Fee income 590.0 609.5 -3.2 544.9 8.3 Credit cards 198.3 206.2 -3.8 197.0 0.7 Banking 138.5 125.1 10.7 121.6 13.9 Guarantees 17.8 18.2 -2.2 17.5 1.7 Loans/other 53.4 49.9 7.0 49.2 8.6 F/X 53.1 46.5 14.2 41.6 27.5 Operating leases 14.2 10.5 35.2 13.2 7.3 Asset management 182.0 184.4 -1.3 162.2 12.2 Beneficiary cert. sales 40.5 38.5 5.2 40.1 1.0 Wrap/operations 10.2 15.8 -35.4 10.3 -0.6 Brokerage 28.0 41.7 -32.9 27.2 2.7 Trusts 93.1 80.8 15.2 75.3 23.6 Bancassurance 10.2 7.5 36.0 9.3 9.3 M&A advisory 57.1 54.7 4.4 53.0 7.7 Other 14.2 39.2 -63.8 11.0 28.7 Disposal/valuation gains 88.0 22.0 300.0 168.4 -47.8 Other operating profit -127.7 -178.7 RR -153.4 RR Total 550.3 452.9 21.5 559.8 -1.7 Note: Based on company IR materials (standards for some fee income and disposal/valuation gains differ from those in financial statements) Source: Company data, Mirae Asset Daewoo Research
Table 4. HFG: Low-cost deposit trend (Wbn, %, %p) 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 YoY QoQ Total 210,689 216,070 218,959 219,815 223,022 228,249 235,534 236,235 243,990 9.4 3.3 Low-cost deposits 74,722 74,521 77,349 78,712 78,372 76,329 78,274 81,780 83,313 6.3 1.9 Core deposits 49,134 49,837 49,655 51,291 52,121 51,068 52,620 54,474 55,600 6.7 2.1 MMDA 25,588 24,684 27,694 27,421 26,251 25,262 25,655 27,306 27,713 5.6 1.5 Time deposits 103,228 107,074 105,103 106,214 110,577 117,005 119,921 119,261 122,229 10.5 2.5 Installment deposits 7,836 7,977 8,217 7,943 7,422 7,478 7,422 7,194 7,094 -4.4 -1.4 Marketable deposits 2,126 3,113 3,439 2,782 3,494 2,847 6,083 5,074 5,689 62.8 12.1 Deposits in foreign currencies 22,774 23,385 24,851 24,163 23,157 24,590 23,833 22,926 25,665 10.8 11.9 Core deposits as % of total 35.5 34.5 35.3 35.8 35.1 33.4 33.2 34.6 34.1 -1.0 -0.5 Core deposits as % of won- 39.8 38.7 39.8 40.2 39.2 37.5 37.0 38.3 38.2 -1.1 -0.2 denominated deposits Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 5 July 29, 2019 Hana Financial Group
Figure 6. HFG: Credit cost trend (quarterly)
(Wbn) (%) 700 Provisioning expenses (L) 0.7 % of total credit (R) 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 non-annualized. Source: Company data, Mirae Asset Daewoo Research
Figure 7. HFG: New NPL formation
(Wbn) 1,000 New NPL formation (L) 0.5% % of total credit (R) 800 0.4%
600 0.3%
400 0.2%
200 0.1%
0 0.0%
-200 -0.1% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 2Q18 3Q18 4Q18 1Q19 2Q19 -400 4Q11 1Q12 2Q12 4Q14 1Q15 3Q17 4Q17 1Q18 -0.2%
Note: New NPL ratio is non-annualized. Source: Company data, Mirae Asset Daewoo Research
Figure 8. HFG: Credit cost trend (annual)
(Wbn) (%) 1,800 Provisionsing expenses (L) 1.20 1,600 % of total credit (R) 1.00 1,400 DSME provisioning 1,200 (W350bn) 0.80 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 2021F
Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 6 July 29, 2019 Hana Financial Group
Figure 9. HFG: NPL ratio trend
(%) 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4
0.2 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Source: Company data, Mirae Asset Daewoo Research
Figure 10. HFG: ROE trend and forecasts
(%) 10.0
8.0
6.0
4.0
2.0
0.0 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F
Source: Company data, Mirae Asset Daewoo Research
Figure 11. HFG: CET1 ratio
(%) 14.0 12.74 12.92 12.88 12.99 12.86 12.88 12.61 12.0
12.72 10.0 12.41 12.73 11.77 11.35 11.52 8.0 10.38 9.79 6.0 9.50 9.44 9.60 8.63 9.18 4.0
2.0
0.0
Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 7 July 29, 2019 Hana Financial Group
Figure 12. HFG: Earnings breakdown by subsidiary in 2Q18 Figure 13. HFG: Earnings breakdown by subsidiary in 2Q19 (before reflecting consolidation adjustments and other (before reflecting consolidation adjustments and other factors) factors)
Hana Capital Hana Life Hana Savings Hana Capital Hana Life 0.4% Bank 4.7% 0.8% 4.5% Hana Savings 0.7% KEB Hana Card KEB Hana Card Bank 3.2% 1.9% 0.7% Hana Financial Hana Financial Investment Investment 9.4% 12.9%
Banking 81.8% Banking 79.1%
Net profit Ownership Net profit (Wbn) (%) Net profit Ownership Net profit (a) (b) (a) x (b) (Wbn) (%) (a) (b) (a) x (b) Banking 561.4 561.4 81.8 Banking 554.0 554.0 79.1 KEB Hana Bank 561.4 100.0 561.4 81.8 KEB Hana Bank 554.0 100.0 554.0 79.1 Non-banking 129.1 125.2 18.2 Non-banking 149.0 146.7 20.9 Hana Financial Investment 64.6 100.0 64.6 9.4 Hana Financial Investment 90.3 100.0 90.3 12.9 KEB Hana Card 26.1 85.0 22.2 3.2 KEB Hana Card 15.4 85.0 13.1 1.9 Hana Capital 30.7 100.0 30.7 4.5 Hana Capital 32.6 100.0 32.6 4.7 Hana Life 2.7 100.0 2.7 0.4 Hana Life 5.8 100.0 5.8 0.8 Hana Savings Bank 5.0 100.0 5.0 0.7 Hana Savings Bank 4.9 100.0 4.9 0.7 Total 690.5 686.6 100 Total 703.0 700.7 100
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Figure 14. HFG: Dividend payout ratio and DPS Figure 15. HFG: Dividend yield trend
(W) (%) (%) 3,000 DPS (L) Dividend payout ratio (R) 30 8.0 Dividend yield (based on current share price) 7.4 6.8 7.0 2,500 25 Dividend yield (based on respective year-end 6.2 6.0 share price) 5.4 2,000 20 5.0 4.4 1,500 15 4.0 3.0 1,000 10 3.0 2.0 1.8 2.0 1.7 1.7 1.3 500 5 1.1 1.1 1.0 0.6
0 0 0.0
Note: Interim and final dividends combined. Notes: Interim and final dividends combined; blue bars represent dividend yield based Source: Company data, Mirae Asset Daewoo Research on July 26, 2019 closing price (W35,350) Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 8 July 29, 2019 Hana Financial Group
Table 5. HFG: Quarterly earnings
(Wbn) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19P 3Q19F 4Q19F Net interest income 1,191.9 1,258.0 1,301.7 1,358.0 1,339.5 1,402.4 1,427.1 1,468.1 1,426.6 1,460.0 1,509.8 1,556.8 Net non-interest income 450.0 460.2 479.6 486.8 549.5 568.5 493.7 457.4 509.8 541.0 531.2 524.1 Net other income 282.5 -25.6 20.0 336.8 3.9 -101.9 18.1 -52.3 49.9 9.3 12.1 40.2 Total net operating income 1,924.4 1,692.6 1,801.2 2,181.6 1,892.9 1,869.0 1,938.9 1,873.2 1,986.4 2,010.2 2,053.1 2,121.0 SG&A expenses 878.7 914.0 992.6 1,253.8 914.5 917.7 1,039.4 1,075.3 1,072.8 928.9 964.5 1,012.3 PPOP 1,045.7 778.6 808.6 927.8 978.3 951.3 899.5 797.9 913.6 1,081.4 1,088.6 1,108.7 Provisions 422.6 81.7 127.4 210.9 88.9 36.0 66.0 274.5 164.4 100.6 165.7 237.7 Operating profit 623.1 696.9 681.2 716.9 889.5 915.4 833.5 523.4 749.2 980.7 922.9 871.0 Non-operating income 39.7 47.4 18.7 -25.2 35.7 -2.1 7.9 -43.8 12.9 -63.6 19.0 -43.0 Pretax profit 662.8 744.4 699.9 691.6 925.1 913.2 841.3 479.5 762.1 917.1 941.9 828.0 Net profit 492.1 538.9 510.0 495.8 668.6 634.1 589.4 348.1 546.1 658.4 673.1 591.2 Source: Company data, Mirae Asset Daewoo Research
Table 6. HFG: Annual earnings
(Wbn) 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F Net interest income 4,598.7 4,485.0 4,653.9 4,538.9 4,642.1 5,109.5 5,637.2 5,953.1 6,248.1 6,489.6 Net non-interest income 1,552.2 1,592.8 1,617.8 1,696.4 1,639.9 1,876.6 2,069.0 2,106.1 2,204.1 2,319.3 Net other income 1,263.3 99.3 30.8 454.3 330.3 613.7 -132.2 111.5 148.3 171.0 Total net operating income 7,414.1 6,177.1 6,302.5 6,689.6 6,612.3 7,599.8 7,573.9 8,170.7 8,600.5 8,979.9 SG&A expenses 3,769.8 3,846.3 3,936.2 4,531.0 4,076.9 4,039.1 3,946.9 3,978.4 4,040.6 4,105.3 PPOP 3,644.3 2,330.8 2,366.3 2,158.6 2,535.4 3,560.7 3,627.1 4,192.3 4,560.0 4,874.6 Provisions 1,627.0 1,165.8 1,122.9 1,148.1 921.3 842.6 465.4 668.5 819.2 883.5 Operating profit 2,017.4 1,165.0 1,243.4 1,010.5 1,614.1 2,718.1 3,161.7 3,523.8 3,740.8 3,991.2 Non-operating income -25.1 105.3 9.1 185.9 205.9 80.5 -2.4 -74.7 4.0 19.0 Pretax profit 1,992.2 1,270.3 1,252.6 1,196.4 1,820.0 2,798.7 3,159.3 3,449.1 3,744.8 4,010.2 Net profit 1,621.5 933.9 937.7 909.7 1,330.5 2,036.8 2,240.2 2,468.8 2,679.2 2,870.1 Source: Company data, Mirae Asset Daewoo Research
Mirae Asset Daewoo Research 9 July 29, 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) 12/18 12/19F 12/20F 12/21F Year-end 12 (Wbn) 12/18 12/19F 12/20F 12/21F Interest income 10,341 11,239 11,465 11,891 Cash & dues 24,307 24,106 24,252 25,185 Interest expense 4,704 5,286 5,217 5,401 Securities 78,935 86,145 86,681 89,573 Net interest income 5,637 5,953 6,248 6,490 Net loans and receivables 260,664 272,067 282,527 293,357 Net fees and commissions 2,069 2,106 2,204 2,319 Tangible assets 3,747 4,368 4,426 4,485 Net other non-interest income -132 112 148 171 Other assets 17,356 25,572 25,995 26,433 Total net operating income 7,574 8,171 8,601 8,980 Total assets 385,009 412,257 423,880 439,033 G&A expenses 3,947 3,978 4,041 4,105 Deposits 248,559 245,203 254,858 264,892 PPOP 3,627 4,192 4,560 4,875 Borrowings 19,182 20,676 20,808 21,554 Total provision expenses 465 668 819 883 Debentures 41,018 42,446 42,695 43,916 Operating profit 3,162 3,524 3,741 3,991 Other liabilities 49,133 74,368 73,212 73,426 Net non-operating income -2 -75 4 19 Total liabilities 357,893 382,693 391,574 403,788 Income before income taxes 3,159 3,449 3,745 4,010 Capital stock 1,501 1,501 1,501 1,501 Income tax expense 877 946 1,030 1,103 Hybrid securities 980 1,245 1,245 1,245 Net profit 2,282 2,503 2,715 2,907 Capital surplus 10,603 10,589 10,589 10,589 Net profit (ex. minority interest) 2,240 2,469 2,679 2,870 Retained earnings 14,231 16,233 18,939 21,840 Normalized net profit 2,240 2,469 2,679 2,870 Capital adjustments -15 -336 -336 -336 Other comprehensive income -864 -545 -545 -545 Core income 6,986 7,706 8,059 8,452 Non-controlling interests 679 877 913 950 Core PPOP 2,947 3,759 4,081 4,412 Total shareholders' equity 27,115 29,564 32,306 35,244
DuPont analysis (%) Key ratios (%) Interest income 2.78 2.82 2.74 2.76 Growth (YoY) Interest expense 1.26 1.33 1.25 1.25 W loan growth (Bank) 7.7 5.2 4.0 4.0 Net interest income 1.51 1.49 1.50 1.50 Net loans & receivables growth 9.1 4.4 3.8 3.8 Net commissions income 0.56 0.53 0.53 0.54 Deposit growth 7.1 -1.4 3.9 3.9 Net other non-interest income -0.04 0.03 0.04 0.04 Shareholders' equity growth 9.2 9.0 9.3 9.1 Total net operating profit 2.03 2.05 2.06 2.08 Total assets growth 6.9 7.1 2.8 3.6 G&A expenses 1.06 1.00 0.97 0.95 Net interest income growth 10.3 5.6 5.0 3.9 PPOP 0.97 1.05 1.09 1.13 Net fee income growth 10.3 1.8 4.7 5.2 Total provision expenses 0.13 0.17 0.20 0.21 PPOP growth 1.9 15.6 8.8 6.9 Net non-operating income 0.00 -0.02 0.00 0.00 Operating profit growth 16.3 11.5 6.2 6.7 Income before income taxes 0.85 0.87 0.90 0.93 Net profit growth 10.0 10.2 8.5 7.1 Income tax expense 0.24 0.24 0.25 0.26 Profitability Net profit (non-controlling) 0.01 0.01 0.01 0.01 Net interest spread (Bank) 1.51 1.48 1.45 1.45 ROA 0.60 0.62 0.64 0.67 Net interest margin (Bank) 1.56 1.53 1.50 1.50 Leverage (x) 14.8 14.5 13.9 13.1 PPOP margin 1.0 1.1 1.1 1.1 ROE 8.91 8.96 8.92 8.74 ROA 0.6 0.6 0.6 0.7 Asset quality (%) ROE 8.9 9.0 8.9 8.7 NPL ratio 0.59 0.52 0.49 0.47 Liquidity Broad NPL ratio 1.55 1.37 1.23 1.09 W LDR (excl. CDs) (Bank) 98.5 97.9 97.9 97.9 NPL coverage ratio 230.4 270.4 279.6 286.2 Loans to assets 67.7 66.0 66.7 66.8 Reserves to total credits 1.4 1.4 1.4 1.4 Capital adequacy Credit cost (% of total loans) 0.18 0.25 0.29 0.30 Total CAR 14.9 15.0 15.9 16.6 Credit cost (% of total credit) 0.18 0.25 0.29 0.30 Tier 1 CAR 13.5 13.8 14.9 15.8 Per share items (W) Tier 2 CAR 1.4 1.2 1.0 0.8 EPS (reported) 7,501 8,223 8,924 9,559 Operating efficiency EPS (normalized) 7,501 8,223 8,924 9,559 Cost to income 52.1 48.7 47.0 45.7 BVPS 88,049 95,546 104,560 114,222 Cost to assets 1.0 1.0 1.0 0.9 DPS (common share) 1,900 2,200 2,400 2,600 Dividend PPOP/ share 12,145 13,963 15,188 16,236 Payout ratio 25.5 26.0 26.1 26.4 Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 10 July 29, 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 40,000 10/24/2017 Buy 62,500 07/23/2017 Buy 61,000 20,000
0 Jul 17 Jul 18 Jul 19
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 83.14% 8.72% 8.14% 0.00% Investment Banking Services 77.78% 11.11% 11.11% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2019)
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 July 29, 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 July 29, 2019 Hana Financial Group
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Mirae Asset Daewoo Research 13