P3. Q3 2021 Business Highlights (1)

First is the Group's financial highlights. Please refer to Page 3.

The cumulative net income in Q3 of 2021, for Hana Financial Group is up 27.4% Y-o-Y to post KRW 2,681.5 billion, already surpassing total net income of 2020. The net income in Q3 stands at KRW928.7 billion up 1.3% Q-o-Q and is up 22.5% Y-o-Y. Following last quarter, the net income has exceeded the KRW900billion mark, once again demonstrating our ability to generate strong profit. Against the backdrop of improved core earnings, stable cost management at the bottom line, including decline in loan loss provisions was the key driver.

However, amidst rising oil and commodities prices and the supply chain disruptions that threatened the global economy, we are seeing in some parts the signs of slow-flation both at home and abroad. Also with the policy rate hike undertaken by the BOK in August, discussions on normalizing the monetary policies of major countries are gaining traction to ease the growing financial imbalance across the world that has emerged after the outbreak of the pandemic, leading to greater uncertainties in the global economic environment.

As such, Hana Financial Group will stay committed to further strengthening our fundamentals by conservatively managing our risk and employing a strategy focusing on high-quality assets to respond to changes in the domestic and external business environment. Based on a strong capital position, we will explore various means of improving shareholder value and we'll proactively take part in the government's policy to provide COVID-19 related assistance, to realize our commitment of making finance that means of going together and sharing happiness while also paying heed to issues of inequity as well as injustice.

Now let me give you some more details on the business result.

First, the Group's key fundamental, the core earnings continued its growth trend Y-o-Y. The NIM declined over the previous quarter, but due to the effect of the increase in the loan asset average balance, interest income was up 3.6% Q-o Q and on a cumulative basis, it is up 15.3% as well. In the case of the fee income, despite the fall in the merchant fee income on a Q-o-Q basis, IB and asset management fee was up Q-o-Q constraining the decline as us. On a cumulative basis, it is up 11.3% Y-o-Y to post KRW1,879.8 billion.

Next in Q3, the Group's cumulative SG&A posted KRW3,003.5 billion, and due to one-off factors such as the labor cost of the bank, that was occurred in the first half on a Y-o-Y basis, it is up 9.5% but against the annual business target, it is being maintained at an appropriate level. In particular, the SG&A in Q3 was down 0.6% Q-o-Q due to the absence of the one-off factors such as the bank labor cost and was stabilized at below KRW1 trillion for the quarter. Going forward, we will continue to improve cost efficiency through the group line cost savings and digital innovation.

Finally, the Group's Q3 cumulative credit cost ratio is 11 bps, so following up from the first half, a stable credit cost ratio is being maintained. And against the annual target, we are maintaining a sufficient level of buffer. As well as managing the delinquency rate and other asset quality measures at a healthy level internally, the deadline of COVID-19 loan assistance programs has been extended by the government till next year March. And maintaining such policy support has been a positive factor. However the increasing uncertainties surrounding the economy, both domestically and globally dictate that we continue to maintain robust asset quality by strengthening preemptive management such as risk management and selection of watchlist to respond against fluctuations in key macro indicators such as the commodity price and the foreign exchange rates. With regards to profitability measures, if you look at the bottom left of the page, on a cumulative basis for Q3, the Group's ROE and ROA stands at 11.23% and 0.76% showing a significant improvement Y-o-Y.

P4. Q3 2021 Business Highlights (2)

Next on Page 4. The Group's Q3 NIM including Hana Bank and Hana Card is down, 3 bps Q-o-Q to post 1.64%. The bank NIM which takes up a predominant share in the interest bearing assets of the Group and a fixed interest income is down 1 bps Q-o-Q to stand at 1.40%. And the main reason for this is that the share of the assets in foreign currency with relatively lower interest rates increased somewhat in the interest bearing asset segment. For the purpose of managing liquidity ratios such as the LCR, the funding side have grown temporarily which led to a lower LDR. And so the main causes are related to factors concerning portfolio changes. Such factors are deemed to be temporary in nature. And in August after the BOK rate hikes, in Q4 as well, the market expectations of another interest rate hike is positively reflected in the market rate. And thus, this is leading us to expect positive improvement in the NIM going forward.

However, due to the drop in Card NIM, this led to additional decline to Group's NIM and the main cause for this was the fall in and the card business earnings. And this was because of the reduction in the average balance of card loans undertaken for preemptive risk management.

Due to the COVID-19 pandemic, the risk faced by the self-employed has grown. And there are concerns of the default risk stemming from the increasing household debt. Thus we have preemptively strengthened management of high-risk multiple debtors as well as managing the card loan limits. Such a strategy of risk management will be maintained in Q4 as well and to ensure stable asset growth in return for reducing reliance on high risk loan assets and we will expand the customer base of customers with sound asset quality. And we will also respond preemptively towards normalizing to overseas segment, which has experienced reverse growth, thus diversifying our income base.

Next, if you look at the right-hand side of the screen, the Korean won loans of the bank has grown 2.2% Q-o-Q to post KRW254 trillion. Based on such healthy loan growth, the Group's interest income in Q3 was up 3.6% Q-o-Q and on a cumulative basis has grown 15.3% over the last year. In the case of the Q3 Group fee income as I have already noted card fee income has declined, also due to other one-off special factors. So it has come down from Q2. However, the IB fee income has increased even further and the asset management fee also has improved Q-o-Q to partially offset the decline the Group fee income. And in Q3 on a cumulative basis, the Group fee income has grown 11.3% Y-o-Y maintaining a solid trend against the business target.

P5. Q3 2021 Business Highlights (3)

Next is Page 5. As of the end of Q3 2021, the NPL ratio of the Group is 0.33%, down 3 bps Q-o-Q and the delinquency ratio is the same as last quarter to post 0.28% maintaining a stable trend. The Group's Q3 cumulative credit cost ratio is down 1bps over the first half and has posted 0.11%. The group wide efforts to manage risk has led to the downward stabilization of the key asset quality related indicators. However, due to the protracted global pandemic, we are seeing fatigue building up in the real economy and thus we will do our best to continue supporting a sound asset quality by being prepared preemptively.

Finally, as at the end of Q3, the Group's CET1 ratio is expected to be down 4 bps Q-o-Q to reach 14.06%. Despite the increase in the retained earnings due to improved earnings, the quarterly weakened KRW temporally increased RWA resulting in a slight decline of the CET1 ratio. But following on from Q2, the CET1 ratio is above 14%, and thus the CET1 ratio underpins the highest capital adequacy level among our peers.

P7. Group Consolidated Earnings

And now I'd like to go over the Group's business results by item. Please refer to Page 7 for the Group's consolidated income statement.

Of the general operating income in Q3 2021, Hana Financial Group's interest income grew 3.6% Q-o-Q to KRW1,740.2 billion, and on a cumulative basis, it grew 15.3% Y-o-Y. The fee income stood at KRW618.5 billion, down 3.9% Q-o-Q but on an accumulative basis grew 11.3% Y-o-Y. The Group's valuation gain on sales decreased 86.6% Q-o-Q to KRW31 billion. This was due to a significantly weak Korean won leading to a non-monetary translation loss of KRW81.9 billion, and also due to other factors such as slow performance on bond trading due to a market rate hike.

Let me say a few more words on the non-monetary translation loss. The FX rate changes affect the translation gain or loss in accounting numbers and to minimize its impact on the bank's net income. We reduced the foreign currency denominated open position related to overseas network this quarter, and we are considering further reduction.

Lastly, the Q3, SG&A decreased 0.6% Q-o-Q to KRW988.5 billion and loan loss provisioning also decreased 21.5% Q-o-Q to KRW83.8 billion, proving the Group's excellent cost control capabilities.

P8. Business Results of Subsidiaries

And now moving on to page 8, net income of subsidiaries. The Group's major subsidiary Hana Bank recorded a net income of KRW1,947 billion in Q3, up 17.7% Y-o-Y and maintaining a high growth rate. Despite the weak valuation gain that I mentioned earlier, the Q3 net income of Hana Bank increased slightly Q-o-Q and it was able to defend itself, thanks to the growth in interest income and the bottom line cost reduction in both SG&A and provisioning. Hana Financial Investment's net income for Q3 increased by 43% Y-o-Y to KRW409.5 billion. Overall profit fundamentals improved, for example, core earnings increase on the back of favorable results in asset management fees. Hana Card's net income in Q3 increased 73.9% Y-o-Y to reach KRW199 billion. And lastly Hana Capital also saw an increase in its net income by 51.9% Y-o-Y to KRW193.1 billion, thanks to an overall increase in general operating income. And please refer to the slide for the other subsidiaries results.

P9. NIM, P 10. Non-Int. Income, P 11. SG&A Expenses

Pages 9, through 11 discuss the NIM non-interest income and SG&A details that I mentioned earlier.

P13. Group Total Assets / Total Liabilities & Equity

And please look at Page 13 for the Group's total assets, liabilities and equity.

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

And now I'd like to direct your attention to Page 14, Hana Bank's loans and deposits in Won.

As of Q3 2021 Hana Bank's loan in won is KRW254 trillion up 2.2% Q-o-Q. Breaking down the loan growth by each item, corporate loans increased to KRW122 trillion up 2.8% Q-o-Q as funding support continued for SME and SOHO borrowers. SME loans posted a sound growth of 2.7% Q-o-Q and with the fund demand growing for some corporations, large corp loans increased nearly making up for last quarter's decrease.

In the household loans, Jeonse loan and prime credit loan drove the growth, recording KRW132 trillion, up 1.7% Q-o-Q

Deposits in Won in Q3 rose 1.6% Q-o-Q to KRW263 trillion. Low-cost core deposits increased 2.4% Q-o-Q reconfirming the abundant liquidity in the market. Time deposits also increased 2.3% Q-o-Q continuing with a stable funding structure. However, the MMDA balance decreased slightly Q-o-Q due to fund withdrawals by household and some large corporations. Due to the FX rate increase at the end of the quarter, there was a temporary increase in demand for foreign currency deposits and therefore, share of low cost deposits was lowered slightly from the previous quarter. As can be seen from the graph on the bottom right, the LDR in Q3 is 98.6%.

Please refer to Page 15 for Hana Bank's loan breakdown.

P17 Group Asset Quality, P18. Hana Bank Asset Quality

And now moving on to Page 17, Group's asset quality. The Group's total credit grew 2.5% Q-o-Q to KRW342 trillion and the amount of NPL fell 4.9% Q-o-Q to KRW1,142.6 billion. This brought down the Group's NPL ratio to 0.33%, down by 3bps Q-o-Q. On the top right, you will see the group's new NPL formation in Q3 was KRW141.2 billion. Although there was a slight increase in some NPL of household and some corporations overseas operations, a similar level to the previous quarter's NPL was maintained, thanks to an overall decrease in corporate NPL with reduction in new defaults.

Bank's asset quality on the following page, Page 18. The Bank's total credit rose 2.6% Q-o-Q to KRW290 trillion and NPL was KRW781.1 billion. As was the case with the Group, this lowered the Bank's NPL ratio to 0.27%, a 3 bps decrease Q-o-Q and the NPL coverage ratio at the end of Q3 is 142.5%. The Bank's delinquency ratio as of quarter end was 0.19%, down 1 basis point Q-o-Q. Despite the increase in the corporate loans, the delinquent amount decreased bringing down the total delinquency ratio slightly.

P19, P20. Provision Analysis, P21. Capital Adequacy

Pages 19 and 20 talk about the Group's and the Bank's provisions. Please refer to them later.

And lastly, moving on to Page 21 about capital adequacy. The Group's BIS ratio and Tier 1 ratio are estimated at 16.58% and 15.37% respectively. As for CET1 ratio, we expect it to be around 14.06%. With robust earnings continuing from the previous quarter, we are able to maintain a high level of CET1 ratio once again posting of the industry's highest level of capital adequacy.

At today's BoD meeting, it was resolved that an interim dividend of KRW700 per share, up KRW200 YoY will be paid out. Despite the worsened conditions such as the emergence of virus variants, sluggish economic recovery despite vaccination, we were still able to normalize shareholder return policy while considering both the shareholders' interest and regulatory environment, and we will further strengthen shareholder return policy in an orderly phased manner.

This brings me to the end of Hana Financial Group's earnings presentation for Q3 2021.

Thank you.