[Newsmaker] Hana eyes stronger earnings, shareholder value under new leadership

South Korea’s Hana Financial Group announced a record annual net income of 3.5 trillion won ($2.9 billion) for 2021 last week, citing successful portfolio diversification as a driving force behind the banking group’s robust profit.

Exceeding market expectations, Hana’s annual net income gained 33.7 percent on-year, driven by a noteworthy increase in earnings of its nonbanking businesses, a regulatory filing showed Thursday.

Brokerage arm Hana Financial Investment’s net profit for 2021 gained 23.3 percent on-year to 506.6 billion won, while its consumer finance affiliate Hana Capital’s net income jumped 53.5 percent on-year to 272 billion won in the cited period. Credit card unit Hana Card saw its net income jump 62.2 percent to 250.5 billion won in the same period.

The combined net income from nonbanking businesses accounted for 35.7 percent of the total 3.5 trillion won raked in by the banking group last year. The figure has significantly jumped from the corresponding 24 percent in 2019, reflecting the fast growth in its nonbanking units.

The record-breaking performance came two days after the firm nominated Senior Vice Chairman Ham Young-joo as the next chairman. The vice chief’s three-year term as chairman will start upon confirmation at a shareholders meeting next month.

Under the new leadership, the financial giant aims to post more upbeat earnings and boost shareholder value.

Hana’s board approved the group’s plan on a year-end dividend payout of 2,400 won per share, on top of an interim dividend payment of 700 won. This puts the total payout at 3,100 won per share and the dividend payout ratio back at the pre-pandemic level of 26 percent. Hana said its goal is to raise the ratio to 30 percent.

Hana Financial Group’s share price came to 51,200 won on Friday, some 5 percent higher than the previous trading session. But Meritz Securities, a local brokerage, set its target price at 63,000 won, explaining that it is still being undervalued than its peers -- KB, Shinhan and Woori -- and therefore, has more room to grow.

“Despite the leverage effect from recent interest rate hikes and a relatively high dividend of around 7 percent alongside other positive traits including its strong fiscal soundness management, Hana Financial Group’s stocks are undervalued among its peers,” Meritz Securities analyst Eun Kyung-wan said in a Friday note.

“The undervaluation stems from uncertainties surrounding the firm’s ownership and governance structure, which is forecast to be relieved with the nomination of the next chairman,” he added.

Eun noted Hana’s flexible stance toward shareholder value, citing its interim dividend payout amid the COVID-19 pandemic. Its willingness to uphold shareholder return is higher than other banking groups, he explained.

The banking group’s nonperforming coverage ratio, which reflects a bank’s ability to absorb future losses, gained 33.5 percentage points on-year to 177.3 percent in 2021. Return-on-equity, which is the measure of a company’s net income divided by its shareholders’ equity and a gauge of a business’ profitability, came to 10.89 percent in the same period.

“On Tuesday, Hana has recommended Vice Chairman Ham Young-joo, who has successfully led the transition process following the merger between Hana Bank and Korea Exchange Bank in 2015 as the lender’s CEO, as sole candidate for chairman,” the firm said in a statement.

“The latest record performance is a result of Ham’s long-standing partnership with current Chairman Kim Jung-tai and effective management of the group as vice chairman.”

By Jung Min-kyung (mkjung@heraldcorp.com)