Good afternoon, investors, research analysts, capital market participants and journalists.
Thank you all for your interest in Hana Financial Group. Nice to meet you all, I'm Lee Hooseung, the CFO of Hana Financial Group.

On every street we find, spring in full bloom with May, the queen of all-season, is just around the corner, we are indeed pleased to be able to present to you business update or in keeping with lovely spring weather. And now, let me start walking you through the business highlights of Hana Financial Group in Q1 of 2021.

P3. 1Q 2021 Business Highlights (1)

First, the group’s key business highlights. Please refer to Page 3.
Hana Financial Group in Q1 of 2021 posted a net income of KRW834.4 billion, up 27% on a YoY basis. And the situation was a sufficient buffer had been set aside last year to absorb potential losses in the form of counter-cyclical provisioning and reserves for private equity funds. The group posted healthy growth and the top line. As such, our earnings have improved significantly and we take into accounts the various one-off factors and exceptional impact from lower credit cost arising from the pre-emptive recognition of provisions through 2020. The ordinarily recorded income of the group comes to around KRW800 billion, demonstrating very sound fundamentals.

Recently, a number of new COVID-19 cases globally had hit record highs, and also there are concerns within Korea of a fourth wave of the pandemic spread. We believe business impact both at home and abroad will continue to a certain extent in 2021. For potential external shocks, Hana Financial Group has secured ability to respond to risks at several levels, including provisioning. And we will continue to pre-emptively manage the real economic situation and the financial market, both in Korea and globally. As part of this effort, in consideration of the recent regulation by the financial authorities to protect the financial consumers of PEF, we needed additional provisions to the reserves related to PEF that we had already recognized last year. In addition, despite the uncertainties surrounding our business environment, diversification of business portfolio, further cost savings and the strategy of strengthening synergies between subsidiaries will continue to be implemented so that the group's profitability will continue to grow.

Next, the group's business highlights in more detail.
In the first quarter of 2021, the group core earnings grew 6.9% QoQ and 12.1% YoY to KRW 2,191.7 billion. We had net interest income and a fee income posting healthy growth, but it's not only the bank's other subsidiaries on the back of our strategy to strengthen the non-bank global businesses witnessed growth in their performance, thus leading the group to achieve its largest core earnings in history.

As seen in greater detail, our business study increases our loan assets and a strong rebound of the NIM which had continued to fall for the past two years starting from the early 2019. The group's interest income has grown at 6.1% QoQ. In a case of the fee income, Hana financial investments’ IB related other commissions and brokerage commissions have improved significantly. And in addition, the bank's loan related fee items have showed a strong recovery, by driving up the fee income 8.8% QoQ.

Next, the group's Q1 credit cost ratio fell deeply from the previous quarter to 0.12%. The reason for the low ratio is that in consideration of the uncertainties both at home and abroad, efforts to strengthen the group's buffer related to capabilities completed. For our strategy to asset quality, the recurring loan loss provisions are being maintained at a sound level. Improving loan asset portfolio and some one-off write-backs sales are due to the impact of having preemptively recognized counter-cyclical provisioning of KRW 340 billion in 2020. That has led to the exceptionally low levels of bank's provisioning that are set aside. As such, the group's credit cost ratio YoY is also down slightly.

This April, the number of new COVID-19 cases is again on the rise and it appears it will take some time for the domestic economy to completely turn around to recovery. As such, Hana Financial Group intends to provide active support to the borrowers vulnerable to the pandemic situation. And at the same time, it's going to exert effort on an enterprise wide level to control risks. Overall credit risk screening of the loans that benefit from the financial assistance program and the early credit assessment to potentially defaulting companies will be undertaken to engage in proactive measures to thoroughly manage our asset quality.

Meanwhile, the group's SG&A in Q1 of 2021 posted KRW1,020.4 billion, the absence of the basis effect of ERP and declining goods and services expense led to a decline of 13.2% over the previous quarter. On a YoY basis, the SG&A of Hana Insurance was added, and a large sum of one-off cost had been incurred as bonus payment for Hana Bank policies that linked to an increase of 10% YoY. However, excluding the one-off factors, the current SG&A stands at KRW900 billion. It is within the popular scheme and the business plan and such things stably in managed.

To prepare for the risk of an economic downturn due to the protracted COVID situation and also due to credibility to provide financing necessary to overcome the crisis, starting from last year we have been maintaining a conservative control over our labor cost. Last year, Hana Bank achieved sound growth unlike the initial market concerns. And in Q1, the labor costs grew to a certain extent. But including that labor cost, the group C/I ratio posted 46.5%, showing that the cost efficiencies are still quite sound. Including the labor cost in 2021, as well in consideration of various factors in the business environment and the overall profitability of the group, and to further increase the shareholder value, we will continue to appropriately manage SG&A.

On the lower left-hand side of the page, the group's ROE and ROA in the first quarter 2021 was 10.94% and 0.74% respectively, showing that the profitability indicators have improved significantly over the previous year.

P4. 1Q 2021 Business Highlights (2)

Hana Bank and Hana Card recorded a growth of '21, Q1 NIM posted 1.61%, up 6bp over the previous quarter. Hana Card's NIM fell slightly over the previous quarter and Hana Bank's NIM is up 8bp over the previous quarter to post 1.36%. As the asset repricing that is inferred due to the renewal of time deposit, funding cost has gone down significantly and this was one of the main causes. Aside from that, the improvement of the portfolios from the increase of core low cost deposit also had impact. In addition, there has been a slight change in the calculation formula of the card NIM, and starting from the second quarter of 2018 the quarterly NIM of the group has been upward just above approximately 1bp.

Next, if you see the data on the right hand side, the bank segment's KRW loans is up 2.1% over the end of last quarter to post KRW244 trillion. The group's interest income on the back of a sound growth at the loan asset and also the rebound in the bank's NIM grew 6.2% over the previous quarter. On a YoY basis, the business unit in China and Hana Capital from such equivalent non-standing businesses to the contribution expanded leading to an increase of 10.3%.
The quarterly fee income is up 8.9% over the previous quarter, led by IB, brokerage and loans related fees of Hana Financial Investment and Hana Bank. On a YoY basis, led by the credit card and securities brokerage, the non-banking segment's fee base has been strengthened, leading to the increase of fee income by 15%. Thus, the core income, core earnings related to group had all achieved healthy growth.

P5. 1Q 2021 Business Highlights (3)

Next Page 5. As at the end of Q1 of 2021, the group's NPL ratio was 0.40%, down 7bp YoY and the delinquency ratio is down to 1bp YoY to post 0.30%, maintaining a stable level.
Next, Q1 credit cost ratio is down 1bp YoY and down 15bp over the previous quarter to post 0.12%.
As I have already mentioned in the background of the preemptive risk management efforts, on such a result, it is mainly due to the fact the loan loss provision cost of Hana Bank has temporarily declined, and thus from the next quarter we expect it to recover from the current levels.
In 2021 as well, to prepare for any potential deterioration of the macro-environment, Hana Financial Group will continue to manage loan loss provisioning as conservatively as possible. Currently in the CET1 ratio of the group is up 2 percentage points over the end of last quarter and expected to post 14.07%. The introduction of Basel III credit RWA standard has been completed and on the back of strong quarterly income posted, the group's capital ratio has been improved considerably.

And now, I'd like to go over the group's business results by items. Please refer to Page 7 for the group's consolidated earnings. Out of Hana Financial Group, general operating income in Q1 2021, the group's interest income is KRW1,574.1 billion, up 6.1% QoQ and up by 10.2% YoY. The fee income grew 8.8% QoQ and 17.3% YoY to reach KRW617.6 billion. The group's disposition valuation gain increased to KRW103.8 billion, it was a decrease QoQ.

This is due to the base effect of the non-monetary translation gain amounting to KRW149 billion at the end of 2020 and also due to the FX valuation loss of KRW82 billion in Q1, due to the exchange rate increase.
On a YoY basis, the valuation gain increased by about 40% in the back of stronger S&T performance by Hana Financial Investment. The group's SG&A in Q1 increased 10% YoY with Hana Bank keeping away performance compensation for the loss factor, SG&A was maintained at the lower end of KRW900 billion, showing the cost effectively under control. Even with the performance pay included, nominally speaking, the group's SG&A slightly hovered over KRW1 trillion, the cost fee being managed within the range of the annual target.

P8. Business Results of Subsidiaries

Page 8, net income of subsidiaries. The group's major subsidiaries, Hana Bank, recorded a net income of KRW575.5 billion in Q1, up by 3.8% YoY. Despite the additional provisioning for the PEF-related reserves I mentioned earlier, and despite the increase in SG&A, the net income was sound, thanks to a robust growth in core earnings.
Hana Financial Investment's net income for the quarter increased by nearly 200% YoY to KRW136.8 billion. Putting aside the increase in the daily trading volume on the Korean Stock Exchange, Hana Securities arm exerted efforts to expand its own internal competency to dramatically increase the brokerage fees, and with the YoY increase in interest income its overall profit generating capacity was greatly enhanced.
Continuing from last year, Hana Card was able to improve its fundamentals through digital innovation and it reported a net income of KRW72.5 billion, up by 140% YoY. Hana Capital's net income for the quarter stood at KRW60.9 billion, up 37.8% YoY, showing an improvement in the general operating income category, including interest income and disposition valuation gain. Please refer to the slide for other subsidiaries results.

P9. NIM, P10. Non-Int. Income, P11. SG&A Expenses

And also, please refer to pages 9 through 11 for the NIM, non-interest income and SG&A details.

P13. Group Total Assets / Total Liabilities & Equity

Also, please refer to page 13 for the group's total assets, liabilities and equity.

P14. Hana Bank KRW Loan / Deposit, P15. Hana Bank KRW Loan Composition

Now, let us move on to Page 14, Hana Bank's loans and deposits in won. As of Q1 quarter ended 2021, Hana Bank's loans in won is KRW244 trillion, up 2.1% QoQ. Breaking down the loan growth by items, corporate loans increased 2.4% QoQ to KRW117 trillion. Of these, the large corporate loans increased by 2.3% QoQ. SME loans posted a growth of 2.5% QoQ with the continued supply of funds going into non-independently audited and SOHO borrowers. Household loans stood at KRW128 trillion, or 1.8% increase QoQ, Jeonse loan being the growth driver.

Deposits in won in Q1 2021 rose 4.5% QoQ to KRW256 trillion. Reflective of the ample market liquidity, low-cost core deposits and MMDA increased by 8.6% and 16.9% QoQ, and time deposit maintained a similar level over the quarter. This resulted in a 2.6 percentage points increase QoQ in the proportion of LCF in the portfolio. As can be seen from the graph on the bottom right, the LDR in Q1 2021 is 98.8%.
Please refer to Page 15 for Hana Bank's loan breakdown.

And now, moving on to group's asset quality on Page 17. The group's total credit grew 2.5% QoQ to KRW322 trillion and the amount of NPL increased 1.4% QoQ to KRW 1,279.4 billion. The group's NPL ratio is 0.4%, similar to the previous quarter.

On the top right, you will see the group's new NPL formation in Q1 was KRW228.3 billion. Bank's asset quality in greater detail on the following page, Page 18.

P18. Hana Bank Asset Quality

The bank's total credit rose 2.2% QoQ to KRW277 trillion, and NPL recorded KRW931.6 billion. The NPL ratio stood at 0.34%, similar to the previous quarter, and the NPL coverage ratio as of quarter end was 125%. The bank's delinquency ratio as of quarter end was 0.24%, up 5bp QoQ. Household loan delinquency ratio has continued its downward trend, whereas that of corporate loan increased, as some overseas loans were delinquent, but this is quite benign looking at the whole loan portfolio.

Provisions have been already set aside for the possible losses and speedy normalization and/or recovery measures will be implemented, such as debt restructuring and exercise of security right. Aside from these, the overall delinquency ratio is being managed at a stable level.

P19, P20. Provision Analysis

Pages 19 and 20 talk about the group and the bank's provisions. Please refer to the pages for a more information.

P21. Capital Adequacy

Lastly, moving on to capital adequacy on page 21. The group's BIS ratio and Tier 1 ratio are estimated at 16.36% and 15.16% respectively. As for CET1 ratio, we expect it to be around 14.07%. Capital adequacy has been significantly improved thanks to the robust results, higher capital ratios due to stable RWA management and the effect of early introduction of Basel III. We will continue to do our best to increase business results and shareholder value, armed with the industry-leading capital strength.
This brings me to the end of Hana Financial Group's earnings presentation for Q1 2021. Thank you.