Hana Financial Group posted net profit of slightly over 228.1 billion won in the third quarter, down around 8 percent year-on-year due to the loss (expenses) in connection with the merger of the Korea Exchange Bank with Hana Bank, which officially started its operation on Sept. 1, the group announced on Oct. 23.
The group said its operating profit amounted to 241 billion won in the quarter with net profit at 253.4 billion won, thus its net profit this year up to the Q3 coming to 1.23 trillion won, up 13.1 percent year-on-year. KEB Hana Bank, a major affiliate of the group, recorded 228.1 billion won in net profit in Q3, down 18 percent year-on-year due mainly to rises in the marketing expenses and losses in foreign exchange transactions.
The group incurred an expense of 1.921 trillion won mainly in connection with the merger of Hana Bank with Korea Exchange Bank and the loss in foreign exchange transactions amounting to 112.8 billion won, with the Korean currency losing its value against the U.S. dollar.
On July 24, Hana Financial Group announced that it had achieved a net income of 374.9 billion won during the first six months.
The net income for the first half of the year increased by 22.7 percent, or 138.4 billion won, YoY thanks to an increase in commission income and gains on disposition and valuation.
Commission income rose by 12.6 percent, or 108.5 billion won, to 971.6 billion won due to an increase in trust fees, commissions from securities custody, and commissions from M&A advisory, and gains on disposition and valuation increased by 104 percent, or 300.8 billion won, YoY to 588.9 billion won. Furthermore, loan loss reserves climbed by 56 billion won, or 10 percent, YoY due to a loan workout with Posco Plantec.
The Group’s net interest margin declined by 0.03 percent to 1.80 percent over that of the previous quarter, due to the drop of the base interest rate, and ROE and ROA, thanks to the increased general operating income, rose by 0.96 percent and 0.06 percent YoY to 7.02 percent and 0.48 percent, respectively. Also, the cost income ratio, a measure of cost in relation to income, improved to 56.2 percent, down 2.2 percent, while the credit cost ratio rose 0.04 percent YoY to 0.53 percent.
Total assets increased by 12.4 trillion won, or 3.1 percent, to 408.4 trillion won from the previous quarter. Loans to large corporations decreased, while loans to SMEs increased due to a realignment of the portfolio with a focus on profitability. Low-interest core deposit rose to 37 trillion won up 2.6 trillion won, or 7.6 percent, from the previous quarter.
Hana Bank’s performance in first half of 2015
During the first half of 2015, the net income of Hana Bank on a consolidated basis rose by 4.1 billion won, or 0.7 percent, to 560.6 billion won, which, excluding the one-off profits of 113 billion won from the integration of its Indonesian subsidiaries in 2014, amounts to a rise of 86 billion won, or 18 percent, YoY.
Specifically, the reduction of the base interest rate by the Bank of Korea led interest income to decrease by 39.6 billion won YoY, but commission income and gains on disposition and valuation soared by 21.3 billion won and 178.2 billion won, respectively, thanks to the active trading of securities in response to the anticipated interest rate reduction.
The net interest margin declined by 0.02 percent to 1.37 percent quarter-on-quarter due to the continued low-interest rate trend, while ROE and ROA dropped to 9.02 percent and 0.66 percent, down by 1.06 percent and 0.05 percent, respectively, YoY. The cost income ratio improved to 46.2 percent, down 2.30 percent YoY, and the credit cost ratio rose to 0.33 percent, up 0.01 percent YoY.
Korea Exchange Bank’s performance in first half of 2015
During the first half of 2015, Korea Exchange Bank earned a net income of 231.3 billion won on a consolidated basis, down 88.2 billion won, or 27.6 percent, YoY. This is attributed to a decrease in interest income of 34.4 billion won due to the declining net interest margin and 34.1 billion won increase in the loan loss reserve caused by the sluggish economy.
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