Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Similar to KB Financial and BNK, Hana Financial catches the eye in terms of value-quality trends and fundamental momentum. South Korea commands some top quartile opportunities within our global universe of bank stocks.A PH Score™ of 8.1 reflects an enhancement in Profitability, in headline Efficiency, in headline Asset Quality, and in Provisioning. While Common Equity/Assets (a PH Score™ variable) showed discrete erosion, other Capitalisation ratios showed marked progression, indicating that the underlying Score may understate Hana’s progression. Having said that, the positive improvement in the headline CIR may paint a slightly flattering view of Efficiency enhancement which was on an underlying basis little changed YoY while headline NPL amelioration may also embellish the Asset Quality picture somewhat though we are relatively comfortable with delinquency levels. Liquidity was impacted by double-digit credit growth.If there is an issue that concerns us, it is relatively subpar Earnings Quality, not picked up by the PH Score™ gauge. Bank Earnings here are highly dependent on trading gains and “other Noninterest Income”. This can flatter headline ratios. Debt/Equity remains high too.<div class="content-highlight">A FV of 6% a PBV of 0.47x are not unattractive given the respective thresholds of 10% and 1.0x. An Earnings Yield of 19.6% and a Total Return Ratio of 2.7x add to the attraction of the proposition. The Dividend Yield of 3.9% is a bonus. The bank commands well above-average fundamental momentum as testified by a robust PH Score™ while the VFM rankings reside in the top quartile globally.</div>Hana balances corporate credit (52.6% of Loan book) with consumer segments (44.5%0, backed mainly by Time Deposits and some transaction account funding.

Similar to KB Financial and BNK, Hana Financial catches the eye in terms of value-quality trends and fundamental momentum. South Korea commands some top quartile opportunities within our global universe of bank stocks.A PH Score™ of 8.1 reflects an enhancement in Profitability, in headline Efficiency, in headline Asset Quality, and in Provisioning. While Common Equity/Assets (a PH Score™ variable) showed discrete erosion, other Capitalisation ratios showed marked progression, indicating that the underlying Score may understate Hana’s progression. Having said that, the positive improvement in the headline CIR may paint a slightly flattering view of Efficiency enhancement which was on an underlying basis little changed YoY while headline NPL amelioration may also embellish the Asset Quality picture somewhat though we are relatively comfortable with delinquency levels. Liquidity was impacted by double-digit credit growth.If there is an issue that concerns us, it is relatively subpar Earnings Quality, not picked up by the PH Score™ gauge. Bank Earnings here are highly dependent on trading gains and “other Noninterest Income”. This can flatter headline ratios. Debt/Equity remains high too.A FV of 6% a PBV of 0.47x are not unattractive given the respective thresholds of 10% and 1.0x. An Earnings Yield of 19.6% and a Total Return Ratio of 2.7x add to the attraction of the proposition. The Dividend Yield of 3.9% is a bonus. The bank commands well above-average fundamental momentum as testified by a robust PH Score™ while the VFM rankings reside in the top quartile globally.Hana balances corporate credit (52.6% of Loan book) with consumer segments (44.5%0, backed mainly by Time Deposits and some transaction account funding.

Hana: Performing Well Despite the Caveats