이 기사는 2019년 10월 31일 08시00분 thebell에 표출된 기사입니다

South Korea's Hana Financial Group expects the decrease in net interest margin (NIM) to continue in the near term.

According to Lee Seung-Iyul, Chief Financial Officer (CFO) of Hana Financial Group, said on the third quarter earnings conference call on October 25, the group posted positive earnings thanks to KEB Hana Bank's interest income on the back of sound loan asset growth, despite a drop in NIM. The year-to-date net income of Hana Financial Group recorded 2.04 trillion won, a 7.8 percent increase year-on-year.

Although the group has grown sizably, its NIM witnessed sharper decline compared to its peers in the same industry. Accordingly questions were mainly about its NIM on the conference call. Hana Financial Group's NIM declined by nine basis points.

"The group's NIM was 1.72 percent, a 0.09 percent points drop compared to the previous quarter. Seven basis points went down from the KEB Hana bank, and two basis points went down from the Hana card. For the bank's NIM decline, we had six basis points going down from loan-to-deposit pricing. The card's NIM declined two basis points with the fee refund to new small and medium merchants," Lee explained.

In the middle of September, the money market deposit account (MMDA) balance decreased 9.3 percent quarter-on-quarter due to huge amounts of withdrawals by some large corporations and public agencies. The low-cost core deposits increased 7.7 percent year-to-date, and time deposits increased 8 percent year-to-date, continuing with a stable funding structure.

"On the back of sound loan asset growth, the interest income drove the net earnings growth. However, next year's interest income will be quite hard to grow compared to the third quarter. We want to put efforts to enhance non-interest income, including investment banking (IB) fees and the retirement pension fees," said Lee.

"Korean benchmark interest rate has reached a record low level, and the global Central Bank's monetary easing policy is expected to continue. Accordingly, we expect more downward pressure on NIM. Hana Financial will selectively grow the high-quality assets and actively improve our portfolio so that it is more focused on profitability," said Lee.

As of September, the group's BIS capital adequacy ratio] and common equity tier 1 (CET 1) ratio are estimated at 14.17 percent and 12.25 percent, down 52 basis points and 37 basis points, respectively.

The group's major subsidiary, KEB Hana Bank, recorded a cumulative net income of around 1.79 trillion won in the third quarter. The bank's loans in Korean won were 214.6 trillion won, up 5.9 percent year-to-date. Large corporation loans recorded a small decrease, but small and medium-sized enterprise loans grew by 8.3 percent and household loans increased five percent, respectively, year-to-date. The loan-deposit ratio was 97.6 percent in the third quarter.

(By reporter Jin Hyun-woo)