President Lee Jin-kook of Hana Financial Investment Co.

Hana Financial Investment Co. (HFI), an affiliate of Hana Financial Group, plans to boost its capital to around 4 trillion won and become a large investment banking firm. Its closest rival, Shinhan Financial Investment, has put off its plan to increase its capital.

Industrial sources speculated on June 2 that the financial holding company has been studying the right time to launch the issues of new shares to boost its capital as a way to increase the capital of its affiliate, although the affiliate increased its capital twice already, once in March, 2017, followed by another capital increase in December of the same year. Its capital amounted to 3.201,7 trillion won as of the end of March, this year, rising from 1.966,7 trillion won in 2017.

The move is in line with similar moves among rivals to bulk up amid a government scheme to nurture domestic brokerages into mega-sized investment banks. Under current capital market law, a brokerage with equity of 3 trillion won or more is categorized as a comprehensive finance and investment business entity, allowing it to provide corporate lending services and act as a prime broker in large trading services.

The capital increase is expected to help Hana Financial Investment’s competitiveness and significantly strengthen its balance sheet through improved IB services and trading operations. It would also help ease its reliance on banking, contributing to the group-wide goal to bolster its non-banking sector to 30 percent by 2025.

Hana Financial wanted to take time and go slowly to boost its affiliate’s capital. But the group had to speed up the move with KB Securities getting a license to handle short-term financing thru the issuance of notes, a key part of the large IB firm’s operation and HFI boosting its annual income to the largest among its rival firms, amounting to 62.3 billion won in the first quarter this year, up 48.9 percent YoY.

Shinhan Financial Investment postponed its plan to boost its affiliate’s capital to around 4 trillion won this week and the sources speculated that Hana Financial has speeded up its move to help boost Hana Financial Investment Co.’ capital to earlier than its rival Shinhan Financial.

Shinhan Financial was said to have to slow down its move to boost the capital of its affiliate due mainly to its operational results. Its first quarter this ended in a deficit this year. South Korea’s major financial group, Hana Financial Group Inc., reported best-ever earnings last year, owing to its flagship KEB Hana Bank that earned a highest-ever income from interest and commission fees.

Hana Financial Group in a regulatory filing on said its net profit on a consolidated basis reached 2.24 trillion won ($2.02 billion) last year, up 10 percent from the previous year and the highest-ever figure since its establishment in 2005. Operating profit jumped 16.3 percent on year to 3.16 trillion won, with revenue dropping 17 percent to 32.5 trillion won in the same period.

The best-ever annual result comes despite a fall in profit in the final quarter of 2018 ended December due to the erased one-off gains that lifted profit in 2017. It raked in 348.1 billion won in net profit in the fourth quarter, down 29.8 percent from a year ago. Operating profit and revenue also declined 27.0 percent and 39.3 percent to 523.4 billion won and 7.3 trillion won, respectively, over the same period.

A view of the building in Yeouido, Seoul, where HFIC has offices. (Photos: HFIC)