Hana Financial Group Inc. Q3 FY2026 earnings call

• Earnings Stability & Diversification: Management emphasized that despite one-off factors, the group has sustained ~KRW 1.2 trillion quarterly net income for three quarters, indicating improved underlying earnings capacity. Revenue diversification is progressing, with fee income share rising to 22.3%.
• Capital & ROE: CET1 ratio increased 18 basis points QoQ to 13.45%, driven by RWA rationalization (FX appreciation, operational risk regulation easing) outweighing dividend/buyback impacts. ROE remained stable at 10.6%.
• Shareholder Returns: Aggressive return policy approved: KRW 250 billion share buyback/cancellation and KRW 1,165/share dividend. Total YTD buybacks reached KRW 950 billion (+26% YoY). Tax-exempt dividends for retail investors will be implemented starting from the 2026 year-end payout.
• Asset Quality & Risk Management: NPL ratio stable at 0.93%. Coverage ratio improved to 90.2% QoQ. Delinquency ratio rose to 0.70% due to large corporate exposure classification; excluding this, it was 0.63%. Management highlighted proactive risk management amid higher rates.
• Operational Efficiency: Cost control efforts maintained the C/I ratio improvement despite an additional KRW 90.6 billion education tax burden. Bonus-related labor costs normalized in Q3 after Q2 peaks.

The transcript does not provide a granular breakdown of revenue contribution percentages for each distinct product segment (e.g., Banking vs. Securities). However, it highlights the following financial performance metrics:

• Group Net Income: KRW 1.2214 trillion in Q3 2026, representing a 2.4% quarter-over-quarter increase and maintaining stability around KRW 1.2 trillion for three consecutive quarters.
• Group Core Earnings: Cumulative net interest income and fee income totaled KRW 9.626 trillion year-to-date through Q3, a 14.2% year-over-year increase. Fee income proportion rose to 22.3% from 19.6% YoY.
• Interest Income: Group Q3 interest income was KRW 2.6749 trillion (16.2% QoQ increase, largely due to Hana Life accounting effects). Excluding this, growth was ~9.3% YoY. Hana Bank’s cumulative interest income grew 14.1% YoY to KRW 6.7773 trillion.
• Fee Income: Q3 fee income was KRW 655.4 billion (20% QoQ decline due to subdued trading), but YTD fee income grew 29.8% YoY to KRW 2.1428 trillion. Key drivers included brokerage fees (+142.2% YoY) and M&A/advisory fees (+55.6% YoY).
• G&A Expenses: Q3 G&A was KRW 1.2144 trillion, down 5.9% QoQ due to lower bonus payouts. YTD C/I ratio improved by 0.4 percentage points to 38.4%.
• Provisioning Expenses: Q3 provisioning was KRW 356.2 billion, down 17.4% QoQ. YTD credit cost ratio remained stable at 0.30%.

• NIM Outlook: Management expects Net Interest Margin (NIM) to rebound in Q4 2026. Q3 was identified as the low point due to seasonal funding shifts and rate hikes. Improvement is anticipated as loan yields uplift faster than funding costs in Q4.
• CET1 Ratio: The group targets maintaining a CET1 ratio of approximately 13%. For Q4, they expect to maintain levels similar to Q3, subject to FX fluctuations and efficient RWA increases. No specific investment plans are expected to drive significant changes.
• Credit Costs: While the original outlook was 35 basis points, current run-rate is 30 basis points. Management anticipates a slight potential increase but aims to keep credit costs within manageable realms, expecting asset selloffs in Q4 to improve coverage ratios to triple digits.
• Shareholder Return Framework: The 'Value-Up' program continues. Management is evaluating feedback to potentially shift the mix toward more buybacks versus cash dividends or adjusting dividend formulas to use average 3-year earnings, though no final decision on 2027 TSR guidance was finalized.

• Interest Rate Sensitivity: Rising benchmark rates have increased funding costs, particularly for time deposits and short-term borrowings, compressing NIM in the short term.
• Market Volatility Impact: Subdued stock market activity negatively impacted fee income (brokerage/trading). Additionally, rising bond yields caused disposition/valuation gains to drop 15% YoY YTD.
• Asset Quality Uncertainties: Exposure to large corporations led to a temporary spike in delinquencies. The NPL market remains subdued, delaying some asset selloffs until Q4.
• Regulatory & Accounting Changes: New education taxes added KRW 90.6 billion in costs. Changes in operational risk regulations and variable insurance accounting standards introduced volatility in OCI and capital ratios, requiring careful management to maintain transparency and stability.

Q: Korea Investment Securities asked about Q4 NIM reversal expectations and the NPL coverage ratio trajectory given it remains below 100%.

A: Hana Bank CFO Young-Seok Jeong stated Q3 was the NIM low point due to seasonal funding shifts and rate hike impacts. He expects a rebound in Q4 as lending yields uplift sooner than funding costs, aided by preemptive corporate funding secured earlier. CRO Jae-Shin Kang noted that while NPL increases were contained, subdued selloff markets delayed improvements. He projects that sufficient asset selloffs in Q4 will push the coverage ratio into triple digits, with credit costs managed around the 30-35 basis point range.

Q: UBS questioned why the CET1 improvement was smaller than expected despite strong net income and asked for Q4 guidance.

A: Group CFO Jong-Moo Park explained that while net income (+40 bps) and FX/easing regulations (+15 bps) boosted capital, dividends/buybacks (-20 bps) and a significant OCI decrease (-48 bps) offset these gains. He clarified that FX drops don't proportionally reduce RWA, limiting CET1 gains. For Q4, the group aims to maintain ~13% CET1, relying on buffer absorption for FX changes without major new investments, expecting stability similar to Q3 barring FX volatility.

Q: HSBC asked for details on the large OCI decrease, its impact on capital volatility, and how Hana Life's variable insurance accounting affects future profitability metrics.

A: Jong-Moo Park attributed the OCI drop to treasury/government bond valuations amidst rising yields, noting the duration is sufficient for needs. Regarding Hana Life, he explained a trade-off: high profitability boosts disposition gains but lowers interest income costs, creating distortions. He indicated that revised accounting standards will likely bring more transparency to these variable insurance effects, reducing such volatility in future reporting.

Q: iM Securities asked about Hana Securities' commercial paper margins amid competition and requested a breakdown of NIM factors, including statutory fee exclusions.

A: Hana Securities CFO Dong-Sik Kim reported fierce pricing competition among nine licensed issuers but confirmed margins remain positive (~100 bps), avoiding negative margin risks. Hana Bank CFO Young-Seok Jeong detailed that Q3 NIM fell 4 bps: funding costs rose 7.5 bps due to time deposit reliance replacing low-cost deposits, while loan pricing rose only 5.2 bps. He noted statutory fees excluded from loan pricing reduced NIM by 0.7 bps in Q3, with a larger 1.5-2 bps impact expected in H2.