Banks Investment case remains compelling

Overweight (Maintain) NIS on new funds falls in August, due to launch of low-rate credit loans Industry Report th September 29, 2017 On September 28 , the Bank of Korea (BOK) released weighted average interest rate data for August. The net interest spread (NIS) on new funds at depository institutions (interest rate on new loans minus interest rate on new savings deposits and marketable instruments) was down 2bps MoM to 1.95% in the month, while the NIS on outstanding balances (interest Mirae Asset Daewoo Co., rate on all outstanding loans minus interest rate on all deposits) was down 1bp MoM to Ltd. [Banks/Credit card ] 2.26%.

Heather Kang The interest rate on new savings deposits and marketable instruments stood flat MoM, at +822 -3774 -1903 1.48%, but the interest rate on new loans slipped 2bps MoM to 3.43%, resulting in a [email protected] narrower NIS. While corporate loan rates remained unchanged MoM, at 3.44%, household

loan rates dipped 7bps MoM to 3.39%. Within household loans, mortgage loan rates held steady MoM, at 3.28%, but rates on credit loans plummeted 66bps MoM to 3.78%—the lowest level since data collection began. The sharp fall was largely attributable to an

increase in low-rate credit loans caused by the launch of Kookmin Bank’s Mugunghwa loan (a product offered to police officers at preferential rates) and the launch of Kakao Bank.

Bullish on NIM

For new SME loans, the interest rate in August stayed unchanged MoM at 3.64%. Rates on SME loans (which are mostly floating-rate loans tied to short-term interest rates) held up well, despite yields on three-month bank debentures (AAA) falling in the month. Since mid- September, yields on three-month debentures have been shifting back up. This should lead to higher SME loan rates in September and positively affect net interest margins (NIM).

On September 22 nd , the Korea Housing Finance Corporation (KHFC) announced a 0.1%p hike in the interest rate on its Bogeumjari loans (a long-term fixed-rate installment mortgage loan) effective October 1 st , stating that the increase was inevitable, due to rising market interest rates. Indeed, market interest rates have been moving higher (albeit modestly), which bodes well for the NIM of banks under our coverage. In addition, we continue to see upside to NIM from efforts to improve loan/deposit portfolios (e.g., increasing low-cost core deposits). It should also be noted that most of our covered banks have been tempering household loan growth by tightening credit standards since 2H16 and have set their 2017 mortgage growth targets lower than 2015-16. Curtailing preferred rates and slowing down loan growth should further prove beneficial to NIM. Moreover, unlike in the past, many banks are refraining from engaging in excessive competition to the detriment of lending rates, which is also positive for NIM.

Recent correction offers buying opportunity

The banking (financial holding) sector has pulled back over the past couple of months, which we attribute to worries over policies aimed at stabilizing the housing market and curbing household debt, in addition to pressures from profit taking. We recommend taking advantage of the recent weakness as a buying opportunity, as we believe sector fundamentals are improving. Looking ahead, we expect banks to deliver robust profits, driven by: 1) meaningful net interest income growth; 2) well-contained credit costs, due to better asset quality; and 3) SG&A savings from a leaner workforce and channel efficiencies (through focus on non-face-to-face channels). From a medium- to long-term perspective, we believe the current strategy of strengthening non-bank operations and expanding overseas (in response to the low-rate, low-growth environment) is a step in the right direction. But most importantly, we think banks are an attractive value play, offering dividend yields of over 3%, based on current share prices. We continue to recommend Hana Financial Group (HFG) and KB Financial Group (KBFG) as our top picks.

September 29, 2017 Banks

Table 1. Banks’ weighted average rate in Aug. 2017 (new funds basis) New funds (%, %p) Aug16 Sep16 Oct16 Nov16 Dec16 Jan17 Feb17 Mar17 Apr17 May17 Jun17 Jul17 Aug17 MoM chg. Interest Deposits 1.31 1.35 1.41 1.51 1.56 1.51 1.49 1.49 1.48 1.48 1.49 1.48 1.48 0.00 rates Savings deposits 1.31 1.33 1.39 1.49 1.54 1.47 1.44 1.45 1.44 1.44 1.46 1.43 1.45 0.02 Marketable 1.35 1.40 1.49 1.60 1.67 1.65 1.65 1.64 1.62 1.61 1.61 1.61 1.61 0.00 instruments Loans 3.23 3.27 3.29 3.36 3.44 3.51 3.45 3.48 3.42 3.45 3.44 3.45 3.43 -0.02 Corporate loans 3.38 3.37 3.38 3.45 3.54 3.55 3.49 3.53 3.42 3.45 3.45 3.44 3.44 0.00 Large corp. 3.03 3.01 3.02 3.05 3.16 3.20 3.09 3.23 3.05 3.11 3.08 3.10 3.09 -0.01 SME 3.56 3.60 3.61 3.68 3.77 3.79 3.75 3.72 3.68 3.66 3.68 3.64 3.64 0.00 Household loans 2.95 3.03 3.08 3.20 3.29 3.39 3.38 3.43 3.41 3.47 3.41 3.46 3.39 -0.07 Mortgages 2.70 2.80 2.89 3.04 3.13 3.16 3.19 3.21 3.21 3.26 3.22 3.28 3.28 0.00 NIS Total 1.92 1.92 1.88 1.85 1.88 2.00 1.96 1.99 1.94 1.97 1.95 1.97 1.95 -0.02 Corporate loans 2.07 2.02 1.97 1.94 1.98 2.04 2.00 2.04 1.94 1.97 1.96 1.96 1.96 0.00 Large corp. 1.72 1.66 1.61 1.54 1.60 1.69 1.60 1.74 1.57 1.63 1.59 1.62 1.61 -0.01 SME 2.25 2.25 2.20 2.17 2.21 2.28 2.26 2.23 2.20 2.18 2.19 2.16 2.16 0.00 Household loans 1.64 1.68 1.67 1.69 1.73 1.88 1.89 1.94 1.93 1.99 1.92 1.98 1.91 -0.07 Mortgages 1.39 1.45 1.48 1.53 1.57 1.65 1.70 1.72 1.73 1.78 1.73 1.80 1.80 0.00 Source: BOK, Mirae Asset Daewoo Research

Table 2. Banks’ weighted average rate in Aug. 2017 (outstanding balance basis) Outstanding balance (%, %p) Aug16 Sep16 Oct16 Nov16 Dec16 Jan17 Feb17 Mar17 Apr17 May17 Jun17 Jul17 Aug17 MoM chg. Interest Deposits 1.21 1.20 1.18 1.17 1.16 1.15 1.15 1.13 1.13 1.13 1.11 1.12 1.13 0.01 rates Demand deposits 0.35 0.34 0.36 0.35 0.32 0.31 0.33 0.30 0.29 0.30 0.27 0.26 0.29 0.03 Transferable savings 0.40 0.40 0.38 0.39 0.39 0.37 0.37 0.38 0.37 0.38 0.38 0.37 0.36 -0.01 deposits Savings deposits 1.63 1.61 1.60 1.59 1.59 1.58 1.57 1.57 1.56 1.55 1.55 1.55 1.56 0.01 Marketable 1.97 1.94 1.91 1.89 1.89 1.88 1.86 1.85 1.84 1.82 1.81 1.81 1.80 -0.01 instruments Loans 3.37 3.34 3.33 3.34 3.35 3.37 3.38 3.39 3.39 3.39 3.38 3.39 3.39 0.00 Corporate loans 3.52 3.49 3.49 3.51 3.53 3.54 3.55 3.55 3.55 3.54 3.53 3.52 3.53 0.01 Large corp. 3.33 3.30 3.29 3.29 3.33 3.33 3.33 3.34 3.32 3.30 3.29 3.27 3.26 -0.01 SME 3.57 3.55 3.55 3.56 3.58 3.60 3.61 3.61 3.61 3.60 3.59 3.59 3.59 0.00 Household loans 3.21 3.18 3.17 3.17 3.18 3.19 3.21 3.22 3.23 3.24 3.24 3.25 3.26 0.01 Microcredit loans 5.07 5.04 5.03 5.02 5.02 5.02 5.02 5.00 5.00 4.97 4.95 4.95 4.96 0.01 NIS Total 2.16 2.14 2.15 2.17 2.19 2.22 2.23 2.26 2.26 2.26 2.27 2.27 2.26 -0.01 Corporate loans 2.31 2.29 2.31 2.34 2.37 2.39 2.40 2.42 2.42 2.41 2.42 2.40 2.40 0.00 Large corp. 2.12 2.10 2.11 2.12 2.17 2.18 2.18 2.21 2.19 2.17 2.18 2.15 2.13 -0.02 SME 2.36 2.35 2.37 2.39 2.42 2.45 2.46 2.48 2.48 2.47 2.48 2.47 2.46 -0.01 Household loans 2.00 1.98 1.99 2.00 2.02 2.04 2.06 2.09 2.10 2.11 2.13 2.13 2.13 0.00 Microcredit loans 3.86 3.84 3.85 3.85 3.86 3.87 3.87 3.87 3.87 3.84 3.84 3.83 3.83 0.00 Source: BOK, Mirae Asset Daewoo Research

*Notes on interest rate statistics

The interest rates on outstanding deposits/loans are weighted averages of the interest rates applied to the stock of all deposits/loans, as of the end of the month. These statistics provide information about changes in the interest rate margins and profitability of banks.

The interest rates on new deposits/loans are weighted averages of the interest rates specified in new agreements during the reference month. These statistics show the current lending and deposit interest rate trend, providing useful information for customers in making financial decisions. Savings deposits exclude demand deposits and transferable savings deposits, while loans exclude overdrafts and other revolving loans.

Mirae Asset Daewoo Research 2 September 29, 2017 Banks

Figure 1. Depository banks’ weighted average net interest spread (for new funds)

(%)(%) 3.0 Net interest spread(L) Loans(R) Savings deposits(R) 9.0

8.0 2.5 7.0

2.0 6.0

5.0 1.5 4.0

1.0 3.0

2.0 0.5 1.0

0.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: BOK, Mirae Asset Daewoo Research

Figure 2. Depository banks’ weighted average net interest spread (for outstanding balance)

(%) 4.0 Net interest spread (L) Deposits (R) Loans (R) 9.0

3.5 8.0 7.0 3.0 6.0 2.5 5.0 2.0 4.0 1.5 3.0 1.0 2.0

0.5 1.0

0.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: BOK, Mirae Asset Daewoo Research

Figure 3. Depository banks’ net interest spread

(%) 3.3 NIS on outstanding balance NIS on new funds

3.1

2.9

2.7

2.5

2.3

2.1

1.9

1.7

1.5 2009 2010 2011 2012 2013 2014 2015 2016

Source: BOK, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 3 September 29, 2017 Banks

Figure 4. Depository banks’ lending rates (for new funds)

(%) Loans 10.0 Household mortgage 9.0 Large corporations

8.0 SMEs Household non-secured 7.0

6.0

5.0

4.0

3.0

2.0 2003 2005 2007 2009 2011 2013 2015 2017

Source: BOK, Mirae Asset Daewoo Research

Figure 5. Depository banks deposit rates (for new funds)

(%) 7.0 CDs Savings deposits 6.0 Marketable instruments Time deposits 5.0

4.0

3.0

2.0

1.0 2003 2005 2007 2009 2011 2013 2015 2017

Source: BOK, Mirae Asset Daewoo Research

Figure 6. Bank debentures (AAA) rates (3M, 6M, 1Y, 2Y) Figure 7. Bank debentures (AAA) rates (3M, 6M, 1Y, 2Y)

(%) Bank debentures (AAA, 3M) Bank debentures (AAA, 6M) (%) Bank debentures (AAA, 3M) Bank debentures (AAA, 6M) 5.0 Bank debentures (AAA, 1Y) Bank debentures (AAA, 2Y) 2.0 Bank debentures (AAA, 1Y) Bank debentures (AAA, 2Y)

4.5 1.9 4.0 1.8 3.5 1.7 3.0 1.6 2.5 1.5 2.0

1.5 1.4

1.0 1.3 2010 2010 2011 2012 2012 2013 2014 2014 2015 2016 2016 2017 Mar17 Apr17 May17 Jun17 Jul17 Aug17 Sep17 Source: KOSCOM, Mirae Asset Daewoo Research Source: KOSCOM, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 September 29, 2017 Banks

Table 3. KHFC’s current Bogeumjari loan rates by product and maturity (as of October 1 st 2017) (%) Products 10 years 15 years 20 years 30 years Akkim e-Bogeumjari Loan 2.90 3.00 3.10 3.15 u- Bogeumjari Loan 3.00 3.10 3.20 3.25 t- Bogeumjari Loan 3.00 3.10 3.20 3.25 Note: 1) Akkim e-Bogeumjari Loan refers to KHFC’s mortgage loan offered at an interest rate 0.1%-point lower than the regular Bogeumjari loans, due to its online agreement. This online mortgage loan is available at Shinhan Bank, Woori Bank, and KEB Hana Bank. 2) u-Bogeumjari Loan refers to KHFC’s flagship mortgage loan (available online through the KHFC website). 3) t-Bogeumjari Loan is KHFC’s offline mortgage loan, taken out at commercial banks, and offers the same interest rate as that of the u-Bogeumjari Loan. This loan is available at Industrial Bank of Korea, Daegu Bank, Woori Bank, Jeju Bank, Standard Chartered Bank Korea, KB Kookmin Bank, and KEB Hana Bank. Source : KHFC, Mirae Asset Daewoo Research

Table 4. Valuation table ShinhanFG KBFG HFG IBK BNKFG DGBFG JBFG KwangjuB Samsung Card Code 055550 105560 086790 024110 138930 139130 175330 192530 029780 Rating Buy Buy Buy Buy Buy Buy Buy Buy Hold Target price (W) 63,500 73,000 61,000 18,500 13,000 14,500 7,800 16,000 Share price (W) 50,400 55,400 47,900 14,350 10,100 10,350 5,970 12,050 35,850 Upside (Downside) 26.0 31.8 27.3 28.9 28.7 40.1 30.7 32.8 Market capital (Wbn) 23,900 23,163 14,179 8,036 3,292 1,751 928 618 4,154 Foreign investor ownership (%) 69.3 68.3 73.3 19.5 50.5 62.8 40.8 13.7 12.2 P/B (x) 2015 0.79 0.75 0.64 0.55 0.44 0.50 0.43 0.45 0.62 2016 0.77 0.75 0.63 0.53 0.49 0.48 0.41 0.42 0.63

2017F 0.72 0.68 0.59 0.48 0.45 0.45 0.37 0.39 0.62

2018F 0.67 0.63 0.55 0.46 0.42 0.42 0.33 0.36 0.61

2019F 0.61 0.59 0.50 0.42 0.40 0.38 0.30 0.33 0.58

P/E (x) 2015 10.3 12.6 15.4 8.2 5.2 5.5 6.6 10.7 12.4 2016 8.7 10.0 10.7 8.1 6.6 6.1 6.3 6.0 11.9

2017F 7.1 6.8 7.7 6.6 5.9 5.4 5.4 4.4 12.0

2018F 7.5 7.3 7.2 6.1 5.5 4.9 4.8 4.3 12.0

2019F 7.1 6.9 6.7 5.7 5.2 4.4 4.4 4.0 11.4

P/PPOP (x) 2015 6.1 7.5 6.5 3.5 2.3 2.8 1.8 5.9 6.3 2016 5.7 9.7 5.6 3.4 3.0 3.0 2.0 3.7 5.8

2017F 5.0 4.9 4.3 3.0 2.7 2.7 1.8 2.6 5.5

2018F 4.7 4.6 4.1 2.8 2.5 2.5 1.6 2.5 5.4

2019F 4.5 4.4 3.8 2.7 2.4 2.2 1.5 2.3 5.1

Div. yield (%) 2015 2.4 1.8 1.4 3.1 1.5 2.7 0.8 1.7 4.2 2016 2.9 2.3 2.2 3.3 2.3 2.9 0.8 1.7 4.2

2017F 3.6 3.6 3.3 4.4 3.0 3.6 1.7 1.7 4.5

2018F 3.8 3.8 3.9 4.9 3.5 4.3 2.0 1.7 4.7

2019F 4.2 4.2 4.4 5.2 4.0 4.8 2.2 1.7 5.0

ROE (%) 2015 7.9 6.1 4.2 7.0 9.1 9.2 5.7 4.3 5.1 2016 9.0 7.2 6.0 6.6 7.9 8.0 6.4 7.2 5.3

2017F 10.5 10.2 7.9 7.6 7.9 8.5 7.2 9.1 5.2

2018F 9.2 9.0 7.9 7.7 8.0 9.0 7.3 8.6 5.1

2019F 9.0 8.8 7.9 7.7 7.9 9.1 7.2 8.5 5.2

ROA (%) 2015 0.7 0.5 0.3 0.5 0.6 0.6 0.3 0.3 1.8 2016 0.7 0.6 0.4 0.5 0.5 0.6 0.3 0.5 1.7

2017F 0.8 0.8 0.5 0.5 0.6 0.6 0.4 0.6 1.5

2018F 0.7 0.8 0.5 0.6 0.6 0.6 0.4 0.6 1.4

2019F 0.7 0.8 0.6 0.6 0.6 0.7 0.4 0.6 1.4

EPS growth (%) 2015 13.7 21.2 -3.7 11.0 -43.9 10.1 -85.1 7.3 -49.1 2016 18.2 25.6 44.4 0.7 -20.6 -9.8 4.8 78.7 4.7 2017F 23.5 46.6 38.2 23.1 10.4 11.7 16.7 35.2 -0.5 2018F -5.5 -5.6 7.8 8.7 8.2 12.1 12.9 2.6 -0.6 2019F 5.9 5.2 7.2 6.8 5.7 10.0 12.9 7.2 -0.6 PPOP margin (%) 2015 1.2 0.9 0.8 1.1 1.4 1.3 0.9 0.8 3.5 2016 1.1 0.6 0.8 1.2 1.9 1.3 1.1 0.6 5.7

2017F 1.1 1.2 0.7 1.2 1.3 1.2 1.0 0.8 2.9

2018F 1.2 1.2 1.0 1.2 1.3 1.3 1.2 1.0 3.1

2019F 1.2 1.2 1.0 1.2 1.3 1.3 1.2 1.0 3.1 Source: KRX, Quantiwise, Mirae Asset Daewoo Research Note: Data based on 09/28/2017 ( foreign investor ownership based on 09/17/2017)

Mirae Asset Daewoo Research 5 September 29, 2017 Banks

Table 5. Banks, card: Institutions and foreigners’ net purchase (sales) trend (2017 monthly) (Wbn) Total of nine Samsung Total of ten ShinhanFG KBFG HFG Woori IBK BNKFG DGBFG JBFG Kwangju banks Card companies Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit Forei Instit gner ution gner ution gner ution gner ution gner ution gner ution gner ution gner ution gner ution gner ution gner ution gner ution Jan 36 -36 124 -9 98 -39 46 -21 60 -78 -3 -6 7 0 7 -8 6 -1 380 -198 8 -12 388 -209 Feb 15 11 -3 44 36 13 4 20 4 -41 9 -14 0 15 3 -1 4 0 73 47 5 3 78 50 Mar 56 -82 276 -183 157 -127 14 -16 -6 -58 16 2 14 -4 -9 21 2 2 520 -446 7 -20 527 -466 Apr 95 -71 -5 49 54 -13 69 10 4 0 27 -6 3 8 4 -1 0 0 251 -24 1 -1 252 -25 May 55 17 120 -73 20 2 27 -22 -2 -9 16 -2 38 -44 8 -6 1 -2 283 -139 15 -13 298 -153 Jun 74 -62 212 -150 107 -49 33 128 66 -4 26 -3 3 -13 2 -7 0 -3 524 -162 20 -38 544 -201 Jul 43 64 407 75 12 48 60 29 3 48 7 7 10 -2 6 -1 2 -5 549 264 8 -4 558 260 Aug 44 3 72 -91 54 -42 167 -54 62 -24 10 -22 -7 3 9 -8 4 -3 414 -237 -5 -11 409 -249 Sept -50 22 -17 38 -83 81 -32 34 4 -7 0 -5 -7 0 0 -2 0 -1 -185 160 -11 3 -196 162 Total 368 -134 1,187 -299 454 -126 388 108 194 -171 109 -49 62 -38 29 -14 18 -14 2,809 -736 48 -94 2,858 -830 Source: KRX, Quantiwise, Mirae Asset Daewoo Research Note: Data is based on 09/28 /2017

Table 6. Banks, card: Stock performance and net increase in foreigners’ stake Samsung Company ShinhanFG KBFG HFG Woori IBK BNKFG DGBFG JBFG Kwangju Card Absolute 1 week -1.8 -1.1 -2.0 -1.7 -2.1 -1.9 -3.7 -0.5 -3.6 -1.0 performance 1 month -5.6 -3.0 -4.4 -6.6 -8.0 -0.5 -9.6 -4.5 -6.2 -6.2 (%) 3 month 1.0 -1.6 7.8 -1.9 2.5 -5.6 -10.0 -3.1 -6.6 -8.1 6 month 5.4 12.2 27.4 34.1 16.7 8.5 -7.2 2.4 9.1 -9.1 1 year 24.9 44.8 67.2 50.0 18.6 17.2 14.0 0.8 26.1 -30.4 YTD 11.4 29.4 53.3 38.8 13.0 16.4 5.9 3.3 11.6 -9.7 Performance 1 week -0.4 0.3 -0.7 -0.3 -0.7 -0.6 -2.3 0.9 -2.2 0.4 relative to 1 month -5.7 -3.1 -4.5 -6.7 -8.1 -0.6 -9.7 -4.6 -6.4 -6.3 KOSPI (%p) 3 month 1.4 -1.2 8.2 -1.5 2.9 -5.2 -9.6 -2.7 -6.2 -7.7 6 month -4.3 2.5 17.7 24.4 7.0 -1.2 -16.9 -7.3 -0.6 -18.8 1 year 9.3 29.3 51.6 34.4 3.0 1.6 -1.6 -14.8 10.5 -46.0 YTD -5.7 12.3 36.2 21.7 -4.1 -0.8 -11.2 -13.8 -5.5 -26.8 Net increase in 1 week -0.1 -0.1 -0.3 -0.1 -0.1 0.0 0.0 0.0 0.0 -0.1 foreigners’ 1 month -0.3 -0.2 -0.7 -0.1 0.0 -0.1 -0.4 0.1 0.0 -0.3 stake (%p) 3 month -0.1 1.8 -0.3 1.7 0.7 0.3 -0.2 1.3 0.8 -0.2 6 month 0.9 3.2 1.0 2.7 1.6 2.3 2.0 2.7 0.8 0.5

1 year 3.2 1.3 6.9 3.3 2.5 2.8 1.6 7.3 5.7 -2.0 YTD 1.5 5.3 3.9 3.5 2.4 3.2 3.2 3.1 3.0 1.0 Source: Quantiwise, Mirae Asset Daewoo Research Note: Based on 09/28/2017 , except for n et change in foreign holdings (9/27 /2017 )

Mirae Asset Daewoo Research 6 September 29, 2017 Banks

APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price BNK Financial Group (138930) 07/19/2017 Buy 13,000 07/31/2016 Buy 9,000 02/07/2017 Buy 12,000 01/25/2016 Buy 8,400 01/02/2017 No Coverage 10/14/2015 Buy 8,500 01/25/2016 Buy 13,600 10/21/2014 Buy 10,000 11/25/2015 Buy 17,107 KB Financial Group (105560) 07/20/2017 Buy 73,000 11/17/2015 Buy 18,261 07/10/2017 Buy 70,000 08/04/2015 Buy 20,183 04/21/2017 Buy 63,500 Hana Financial Group(086790) 07/23/2017 Buy 61,000 04/16/2017 Buy 62,000 07/11/2017 Buy 56,000 02/01/2017 Buy 58,500 04/22/2017 Buy 49,000 01/02/2017 No Coverage 04/12/2017 Buy 47,500 10/21/2016 Buy 54,800 01/23/2017 Buy 45,000 01/25/2016 Buy 49,600 01/02/2017 No Coverage 2015.09.11 AFTER 1YR 10/23/2016 Buy 42,000 Kwangju Bank (192530) 09/07/2017 Buy 16,000 01/25/2016 Buy 35,300 DGB Financial Group (139130) 03/09/2017 Buy 14,500 05/28/2015 Buy 44,000 02/07/2017 Buy 13,500 Samsung Card (029780) 06/26/2017 Hold 01/02/2017 No Coverage 01/26/2017 Trading Buy 44,500 01/25/2016 Buy 15,100 Shinhan Financial Group (055550) 07/21/2017 Buy 63,500 02/05/2015 Buy 16,776 04/21/2017 Buy 61,000 Industrial Bank of Korea (024110) 07/23/2017 Buy 18,500 04/13/2017 Buy 60,000 07/18/2017 Buy 17,500 02/02/2017 Buy 59,000 04/17/2017 Buy 16,000 01/02/2017 No Coverage 02/06/2017 Buy 17,000 10/21/2016 Buy 57,000 01/02/2017 No Coverage 01/25/2016 Buy 54,500 01/25/2016 Buy 17,300 11/25/2015 Buy 59,300 11/25/2015 Buy 20,000 05/28/2015 Buy 57,000 2015.10.21 AFTER 1YR 19,500 JB Financial Group (175330) 09/07/2017 Buy 7,800 10/21/2014 Buy 19,500 01/02/2017 No Coverage

(W) BNK Financial Group (W) Hana Financial Group (W) Samsung Card (W) Shinhan Financial Group 25,000 80,000 60,000 80,000

20,000 50,000 60,000 60,000 40,000 15,000 40,000 30,000 40,000 10,000 20,000 20,000 20,000 5,000 10,000

0 0 0 0 9 15 9 16 9 17 9 15 9 16 9 17 9 15 9 16 9 17 9 15 9 16 9 17

(W) JB Financial Group (W) KB Financial Group (W) Kwangju Bank (W) DGB Financial Group 12,000 80,000 20,000 20,000

10,000 60,000 15,000 15,000 8,000

6,000 40,000 10,000 10,000

4,000 20,000 5,000 5,000 2,000

0 0 0 0 9 15 9 16 9 17 9 15 9 16 9 17 9 15 9 16 9 17 9 15 9 16 9 17

(W) Industrial Bank of Korea 25,000

20,000

15,000

10,000

5,000

0 9 15 9 16 9 17

Mirae Asset Daewoo Research 7 September 29, 2017 Banks

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 69.67% 17.06% 13.27% 0.00% Investment Banking Services 70.73% 17.07% 12.20% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2017)

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for single stock futures backed by shares of Samsung Card as an underlying asset, and 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 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.

Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Daewoo is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a

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member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Daewoo. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Mirae Asset Securities (HK) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

Mirae Asset Daewoo Research 9 September 29, 2017 Banks

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