We are identifying opportunities in a timely manner through diversified portfolios in line with market flows and quality-driven investment strategies, thereby proactively responding to risks and continuing solid growth.
INVESTMENT BANKING
Hana Financial Group focused on income source diversification and market leadership refortification in the face of base rate hikes and other daunting challenges. As a result, Hana Bank’s IB product performances improved across the board. In M&A financing, where the Bank has been a market leader, it arranged a total funding of KRW 2,749.9 billion through PEFs and partnership-based big deals. For Netmarble’s acquisition of global game company SPIN X, the Bank made a preemptive finance offer totaling USD 1.1 billion put together in a close collaboration between the branch in charge of the Netmarble account and IB Division. In addition to arrangement fees, it substantially increased interest incomes through securing the profitable foreign currency asset.
The majority of IB revenues is recognized through fee income. Hana Bank in 2021 posted KRW 178.3 billion in non-interest income, including fee, from its IB operations – a YoY increase of KRW 44.3 billion or 33%. The solid growth of non-interest income is more significant in that it highlights the Bank’s successful diversification of its income portfolio through inclusion of finance arrangement for M&A, real estate development, new & renewable energy power generation projects, asset-backed commercial paper (ABCP) credit facility, and marketable securities investment. In addition, equity investment-related non-interest incomes soared 182% YoY to KRW 36.1 billion, thus establishing a solid non-interest income base from a mid- to long-term perspective.
Hana Financial Investment (HFI) quickly pivoted to its domestic operations, preoccupying market advantages and focusing resources on diversifying income sources through investing in real estate and green infrastructure projects and corporate equities. As a result, IB operating income increased KRW 130.1 billion YoY to KRW 594.0 billion. Investments in companies with high growth potential also increased, contributing a great deal to the record-high performance. It also took an active part in IPOs, funding customers’ growth, offering advisory services on M&A, and corporate finance.
Hana Bank will work toward closing the loan inventory it secured in 2021, while continuing to discover new IB deals. To this end, it will increase equity investments. Rather than pursuing dividend incomes or capital gains, it will seek to make equity investments in deals in the initial phase of business and thus secure arrangement rights, which will lead to opportunities to generate income through loan and equity. Furthermore, in line with the spread of ESG trends, the Bank plans to increase investments in relevant industries. In particular, it will continually invest in new and renewable energy-related infrastructures, including photovoltaic, offshore wind power, and hydrogen energy, as a way to build an ESG-related process throughout all value chains. The Bank will make all-out efforts to enhance competitiveness in the global market. Overseas IB assets grew some 30% in 2021 compared with the year before. Taking advantage of opportunities presented by the substantial growth, it will also strive to strengthen the ability to arrange funding in the global market.
Diversifying its growth engines, HFI will continue its strong performance of focusing on domestic and overseas quality real asset investments. It will form a strategic investment alliance with outside parties and practice ESG management worthy of mega-scale IB. HFI will increase selective overseas alternative investments, and strengthen conventional IB, such as IPO and M&A, to fortify the foundation it has laid for stable income growth.
BROKERAGE
HFI posted an operating income of KRW 460.2 billion from its WM business in 2021 – KRW 130.1 billion increased from the previous year. The growth is mainly attributable to increased commissions from a strong stock market recovery and the robust growth of beneficiary certificate sales, wrap fees, and trust fees. Customer assets grew KRW 10.6 trillion over the year to KRW 76.7 trillion. The 13.8% rise stems from the robust growth of both deposit assets and product sales fueled by increased stock prices. The greatest achievement in 2021 is an income increase consisted of financial product custody fees and interest incomes. Custody fee income rose 74% YoY to KRW 31.7 billion, while interest income grew 65% to KRW 120.4 billion on the back of 2021 loan growth.
The stock market is expected to experience increased volatility in 2022 due to the spread of the Omicron variant, Russia’s invasion of Ukraine, and other factors that dampen investor sentiments. In response, HFI will increase cash assets, and enhance competitiveness by upgrading trading systems for overseas markets. It will also enhance product competitiveness by supplying flagship products, such as bestowal wrap, and further increase customer satisfaction by advancing digital platforms and contents.
SALES & TRADING
In sales & trading (S&T), HFI recorded an operating income of KRW 217.9 billion, a YoY increase of KRW 79.3 billion, in 2021. The robust increase is mainly attributable to the base effect of pandemic-induced trading losses in 2020 and an expansion of global investment assets, as the development as well as sales of new low-risk products.
ELS/ELB and DLS/DLB issued in 2021 amounted to around KRW 8.3 trillion. Although market difficulties ensued with the ramp-up of the Financial Consumer Protection Act and regulations on complex financial investment products, HFI proactively responded to market changes, increasing products with enhanced stability and customizable structured products. It launched a Wave ELS with improved customer investment stability, and other innovative products, and generated KRW 340.0 billion by selling new products. It also made considerable growth in creating markets and ETN, CFD, and other platform business. In particular, as Korea’s first market maker for carbon credit trading, HFI generated KRW 11.4 billion in income by trading domestic and Europe/North America carbon credits.
In addition, by commencing development of carbon offset credits, both mandatory and voluntary, HFI positioned itself in the forefront of emissions rights trading platform business. In PI investment, the company carried out 14 cases totaling KRW 19.5 billion and an annual KRW 163.7 billion, including overseas investments, surpassing its income target by 55%.
In 2022, HFI will focus on risk management in the S&T business. It will strengthen platform-based OTC derivatives sales, and expand our trading operations to include alternative assets, carbon credits and other non-mainstream assets.