Greetings. I am G.H. Park, head of Hana Financial Group, IR. I would like to express my sincere gratitude to all market participants for taking part in today's earnings presentation despite your busy schedules. We will now start the 2024 first half earnings presentation. I would first like to introduce the top management from our group and major subsidiaries who are here for the earnings presentation. Group CFO Jong-moo Park is here with us. Group CRO Jae-shin Kang is here with us. Group CSO Jae-hyuk Yang is in attendance. Next, Hana Bank CFO Young-il Kim is here with us. Hana Bank CRO Chang-wook Bae is also in attendance. Last but not least, Hana Securities CFO Jeong-ki Kim is also here with us. First, we will deliver our earnings presentation and then engage in a joint Q&A session.
Please take into account that the forward-looking outlook related to the business results that will be discussed today may differ significantly from the actual business results depending on macroeconomic and market situation changes. I would like to invite CFO Jong-moo Park to deliver Hana Financial Group 2024 First Half Earnings Presentation.
Good afternoon. This is Hana Financial Group CFO Jong-moo Park. I deeply appreciate your participation in today's earnings call despite your busy schedules. Now I would like to take you through the 2024 first half business results of Hana Financial Group. First, please turn to page 3, which starts with the financial highlights. Hana Financial Group's group level net income in first half of 2024 was KRW 268.7 billion, which is KRW 47.8 billion, or a 2.4% increase on a YOY basis. Second quarter net income was KRW 1,034.7 billion, similar Q1, and remaining slightly above KRW 1 trillion of net income for 2 consecutive quarters. The group's above-market consensus first half business result is mainly attributed to solid growth in fee income as well as healthy control of our credit costs.
First-half group fee income was KRW 1,032.8 billion, which is KRW 115.9 billion, or a 12.6% increase YOY. Increase in credit card fee income due to increased sales and better cost efficiency, increase in Hana Bank's IB fee income, and also the continued improvement of cumulative asset fees from products such as operating lease and retirement pensions have all helped deliver solid above-planned growth. Group's credit cost ratio was 0.24% YTD first half, which is the lowest since late 2022. Despite our conservative and preemptive provisioning of KRW 36.1 billion to reflect potential increase in credit costs and the additional KRW 40.8 billion in provisioning due to revised real estate project financing appraisal standards, thanks to the preemptive provisioning taken last year and also the write-backs in Hana Bank's provisioning, the group's credit cost remained stable.
Group's cost income ratio in first half was 38.7%, which is a 0.6 percentage point increase YOY. Recurring costs somewhat have increased due to inflation and our digital investments, but thanks to the preemptive execution of the special retirement expenses last year and the disciplined cost optimization efforts group wide, our group CI ratio was kept within our full year targets. If you look at the bottom left hand of the page, there is the 2024 first half group ROE and ROA, which was 10.36% and 0.69% respectively. Our ROE remained in double digits for two consecutive quarters, supported by net income levels that are consistent with our fundamental strengths of the group. Next, please turn to page 4. Second quarter group NIM was 1.69%, which is an 8 basis points decrease QOQ. Hana Bank's NIM was 1.46%, which is about a 9 basis points drop QOQ.
High interest rate time deposits reaching maturity did help improve funding costs, but decline in market rates and also the weakening of our KRW loan deposit pricing from our flexible loan pricing to capture high-quality loan assets were the main reason for the decline. The group's second quarter interest income was KRW 2,161 billion, which is a 2.7% QOQ decrease due to falling NIM. First half interest income fell by 0.6% on a YOY basis as shown in the graph. Given that the loan growth targets for our full year 2024 have been preemptively met during the first half of the year, we plan to focus on RWA control and profitability during the remaining second half.
Policy rates are expected to fall in the US and Korea during the second half, and this expectation has already been reflected in market rates, creating a not-so-friendly environment for interest income, but we plan to improve group interest income based on risk-adjusted return metrics such as RORWA. Next, group's non-interest income. Q2 non-interest income posted KRW 556.4 billion and went down around 22% QOQ. Group fee income, as I aforementioned, on the back of card fee and accumulative fee income-based growth, increased 1.4% QOQ and delivered solid performance. However, due to the underlying effect from the corporate IPO-related trading and valuation gains and the FX translational losses following the weak continued won, group's Q2 non-interest income decreased QOQ. First half non-interest income, as you can see on the right side of the page, posted KRW 1,269 billion.
Group fee income improved 12.6% YOY, but due to the decreased valuation and other operating income, decreased 7.4% YOY. As you can see on the right side of the page, bank loans in won posted KRW 308 trillion, a 3.9% increase QOQ. In the case of corporate loans, through strengthening customer bases through cross-selling and centering on quality corporate loans and SME loans to secure preemptive interest income, with the upcoming full-fledged interest rate reduction cycle, it increased 4.4% QOQ. On the other hand, in the case of household loans, with signs of recovery of the domestic real estate market as well as home mortgage loans, real demand increased and went up 3.1% QOQ. Accordingly, first half bank loans in won went up 6.1% YTD and posted a growth trend that exceeded the domestic nominal GDP growth rate level that was mentioned in our annual guideline.
However, in the second half, we are expecting a very limited level of additional loan asset growth, and we plan to concentrate on portfolio rebalancing, considering risk and profitability, and focus on efficient management of loan assets that were preemptively secured in the first half of the year. Next, let's go to page five. 2024 first half and group's NPL ratio, due to non-bank subsidiaries' NPL loan increase following the revision of real estate PF business feasibility standards, posted 0.56%, a 3 BP increase QOQ. On the other hand, group delinquency ratio posted 0.49%, a 5 BP drop QOQ. With stable management of Hana Bank delinquency ratio, this was attributable mostly to the normalization or recovery of delinquent assets owned by non-banking subsidiaries.
Since I have already covered group credit cost ratio, I will now cover group's capital ratio and annual shareholder return, as you can see on the right side of the page. 2024 first half and group CET1 ratio is expected to record 12.79%, a 10 BP decline QOQ, and quarterly dividend was resolved at KRW 601 per share, the same as the previous period. With preemptive loan asset growth and the continued weakened won trend, group's CET1 ratio continuously declined. But as aforementioned, in the second half, we plan to focus on RWA and profitability management, and it is expected that the group CET1 ratio will recover to our target level. On the other hand, we are reviewing multifaceted ways to enhance our group's corporate value.
We have formed a Corporate Value-up Program and are verifying our profitability, capital efficiency, and shareholder return indicators, and through setting targets for key indicators, we will not only set predictable methods to enhance shareholder value, but also have a goal to establish a system to realistically implement the plans in question, including our asset growth strategies. Through this, we will set up value-up plans that will be appropriate not only for our asset structure and business portfolio, but also continuously enhance shareholder value. Regarding the plan, as soon as it is completed within the second half of the year, we will announce it as soon as it has BOD approval. Please refer to the materials for details regarding Section 2 profitability and other sections. With this, we will conclude Hana Financial Group 2024 first half earnings release. Thank you for listening. Thank you.
Now we will move on to the Q&A session. If you have questions, you can ask by pressing the hand button you would see in the bottom center of your screen. Questions can be asked in English, but please allow time for consecutive interpretation.
Now we will wait for questions. Our first question comes from NH Investment & Securities, Mr. Jeong Jun-seop. Please go ahead.
Yes. Good afternoon. This is Jeong Jun-seop of NH Investment & Securities. Thank you very much for this opportunity. I have a question about your capital ratio and shareholder return. During the presentation, you've mentioned the CET1 has dropped, but in the second half, you will focus on RWA and expect CET1 to recover your target. Is target 13%? Do I have that correct? And if at the end of the year, CET1 reaches 13%, based on a calendar year basis, can we look forward to some share buybacks and cancellations in Q4?
Well, thank you very much, Mr. Jeong, for that question. Please give us some time to prepare the answer.
Thank you very much, Mr. Jeong, for that wonderful question. That's a good question, and as the Group CFO will answer that question, our CET1 target, whether it's 13% for the second half, I think end of third quarter, we are planning to achieve 13%. That is our current goal, and I think if there are no unexpected factors, we will be able to reach 13% by end of Q3 and actually bring CET1 above last year's level by end of Q4 by focusing on RWA management. You've also asked about whether you can look forward to share buyback and cancellation additional in Q4. As you know, at the start of this year, we announced plans of KRW 300 billion of share buyback and cancellations. Cancellations will be completed in August.
We do not limit buyback and cancellations to one time a year, and so we will look at share prices, financial market situation, our own business performance, and the fact that our CET1 currently is below 13%. We'll consider all of that to flexibly manage our share buyback and cancellation. And if I may add, in that context, the Hana Financial Group does we know that our share buyback and cancellations is smaller in scale versus other financial groups, but then when you take into account the current valuation, the effectiveness of our share buyback and cancellation is that much larger because we will buyback cancel that would help distribution dividends per share or even EPS improvement. We do know that share buyback and cancellation at this point is the most effective way of improving these key metrics.
We have also been listening to shareholders, and 30% of our shareholders want more dividends, but then 70% of the shareholders we've been talking to want to keep the DPS at current levels and actually gradually increase our share buyback and cancellation. So there are mixed views within our shareholder group. So we do need to discuss further with our BOD about possible increase of our share buyback and cancellation within the TSR, but of course, we have in a direction strategy-wise to overall increase our TSR. So last in 2022, it was 27%. We brought it up to above 30% last year. We've already completed KRW 300 billion of share buyback and cancellation, and so this year, we expect our TSR to be even higher than last year, and we will continue to try to gradually increase that going forward.
Thank you for your answer. We have the next question from HSBC Securities. Jung-won, please, you're on the line.
Thank you for the opportunity in a challenging environment. Thank you very much for your good performance. I also have another question about shareholder return, and I want to ask you about your credit cost as well. Last year, looking at the TSR, I think it was around 33%, and there was KRW 150 billion of share buyback, and you have already had twice that of share buyback and cancellation of KRW 300 billion this year, and I think it may differ a bit, but according to my estimation, on a calendar basis, you're already doing it on a calendar basis, and I think it is almost 36% if cash dividends maintain at a similar level to the previous year. So in this situation, will there be more room for share buyback and cancellation?
I would think maybe not. You mentioned that you're thinking of different ways going forward, and regarding cash dividends, well, does that mean you're not going to have a forward movement on that and change some portion of your treasury shares? Was that the intention behind that, or did you mean that you're going to increase your cash dividends and control your treasury shares? That's my first question. The second question is about risk management. I think your credit cost is at a very low level with good risk management.
However, I think in the second half of the year, your net income will be very important as you manage your RWA, and in the top line, you mentioned you're going to manage your loans, and NIM has fallen, so I think in the top line, it's not going to be easy to boost it up, and I think your credit cost is already quite low. So for SG&A and for credit cost, are you going to have downward pressure, or do you think for the subsidiaries, if income improves, do you think there will be upward momentum? Thank you.
Thank you very much for your questions. Please hold, and we will soon ask your questions. Thank you very much for your questions. For shareholder return, I will explain that, and our group CRO will additionally give an answer related to credit cost.
Regarding the question that you asked, I think some answers were already given previously with the first question, and regarding whether we're going to have DPS increase and whether we're thinking of future share buyback or cancellation, well, I think we will need to actually review these with caution and with deliberation because share buyback and cancellation, and for DPS, it's always good to have more, but we need to think about the even distribution of dividends that another financial group is undertaking. So regarding the DPS, well, rather than not having DPS as a standard, there could be a way to look at the total dividend payout, have a total payout amount, and if there is even distribution of these share buyback and cancellation and the dividends, well, it may be another way for us.
So we are actually reviewing many different measures, and we hope you can give us feedback, and we will review these feedback with a lot of positive reviews and try to find the best way to go forward. I am Jessie Kang, the CRO of the group. I would like to answer your question related to credit cost. There was 0.24% credit cost, which is quite low for this quarter, and there are several reasons behind that, but there was a large amount of reversal or write-back, and there were some delinquencies, but we had some provisioning that was quite low because of securitized provisioning and other factors. But in the second half of the year, we have some valuation or standards for real estate that haven't been actually completed yet, and regarding the non-viabilities of overseas projects, we need to review it.
So by the end of the year, we believe that the credit cost will go up to about 30 BP level, so we will set up business plans, taking those projections into consideration as well as capital plans so that we will have a 30 BP credit cost in mind as we try to prepare for the future.
Thank you. Thank you for that answer.
Now we will move on to the next question. Next question will come from Korea Investment & Securities, Mr. Baek Doo-san. Please go ahead.
Yes, thank you for this opportunity. I have a question about your non-banking business, about the Hana Asset Trust. Compared to other companies, its performance this year and last year was fairly good, and there was the Guaranteed Completion Trust. How are you responding to that risk? And in the second half, are there any losses that you're watching out for?
Second question is about Hana Securities. Hana Securities last year, the year before, had some challenges, but I think eventually, if we assume that it will turn around either this year or at any time if it completes turnaround, what kind of net income or ROE do you expect from Hana Securities?
Well, thank you very much, Mr. Beak, for your question. Please allow us some time to prepare our responses.
Yes, this is the group CRO. I'll answer your question about Hana Asset Trust. Hana Asset Trust currently has some risk regarding the Guaranteed Completion Trust, as does other asset trust companies, but I think compared to other asset trust companies, it's doing a good job in maintaining managing that risk.
We have 31 land trusts that are on completion guarantee basis, and we have around KRW 2.3 trillion of PF exposure, and this is around 4 times its capital, but then other asset trusts are exposed to up to 8 times its capital in terms of these land trusts with completion guarantees. So it has done a good job in managing that risk. That said, we do see that there is a risk of this risk realizing. Regarding this completion guarantee, there's also the borrowing type, but we have around KRW 380 billion of related losses. None of that has gone into a legal litigation phase, but depending on the project site, there are some sites that are having some construction delays. And so we do think that there is a potential of litigation in some of these projects.
Actually, Hana Asset Trust has created a task force to control and manage this situation. Now, going forward, if there are any legal disputes or when there are construction delays, they will be classified into substandard. It will be provisioned immediately in order for us to conservatively respond to them.
And this is Kim Jeong-ki, the CFO of Hana Securities. You have asked about the ROE and net income assuming securities is eventually able to turn around. And as you know, last year, this year, in terms of provisioning or overseas issues, it's been a challenging year period for all securities firms, including Hana Securities.
That said, we are working very hard to turn around this year, and so if we look at 2025 or 2026, once we have completed turnaround, we think that we will be able to have around additional or KRW 100 billion of net income or around 8%-9% of ROE, which is sort of the average of the previous three-year period. That will be sort of the normalized target for us.
Thank you very much for your answers. We will take the next question. From Samsung Securities, we have Kim Jae-woo. You're on the line. Please ask your question.
Thank you for the opportunity and congratulations on your good earnings. I have two questions. My first question is related to several of your competitors. We see that they're strengthening their non-banking or they're saying that they want to have more synergy.
For Hana Financial Group, I think you have mentioned from the past regarding some M&A potential in the future. Do you have any changes strategically in mind of M&As for the future? Do you have any strategies you have in mind to actually have better performance? Second question is related to real estate PF or overseas real estate CRE. You mentioned there might be some more potential losses in the second half and for other banks. For some of your competitors that have released their earnings, they have mentioned that they will not be overburdened by these project financing cases in the second half. Can you give us more color on what did you mean by that?
There were some sizable, I think, write-backs of a large amount of loans, and if you're going to have some, there's going to be some cycle turnaround in the second half of the year. Well, I think for that period, maybe we could have some offsetting with some reversals that have happened in the second quarter that can also take place in the future.
Thank you very much for your questions. We will soon answer your questions. Thank you.
Thank you very much. I am the CFO of the group. And regarding the M&A and synergy strategies, you have asked a question about whether our strategies have changed. And to sum up, we haven't had any changes. So compared to other financial groups or looking at our own portfolio, it is true that we need to strengthen our non-banking.
Firstly, in regards to our strategy, we want to strengthen competitiveness, in particular for insurance and for securities. We believe that it is needed to also strengthen our major business. We went through some trials and errors and felt that. We want to come up with our own methods to enhance competitiveness in these other areas. With this, we have non-banking subsidiaries such as securities that we believe can add to our synergy. We are developing a system to do this. In some cases, there are some internal limits. We do know that we may need some M&As or investment alliances going forward. But as we have mentioned previously, we want to develop internal synergy, and we want to strengthen our main business, and we want to have capital efficiency. So we will try to come up with opportunities that can also strengthen these areas. Thank you.
I am Kang Jae-shin, the CRO of the group. You asked questions about real estate PF and for overseas real estate. Regarding domestic PF, in the first half, through the business feasibility study, we have had about KRW 40 billion of extra provisioning, and it might have been a little bit smaller than expected, and we're going to have some more accumulation in the second half of the year. And we believe that it will be around KRW 40 billion, so it is not a burdensome amount for us. It's because the banks' real estate PF are almost all senior, so we do not have a higher burden for us.
For alternative investment in overseas real estate and CRE, well, we are not expecting losses, but there will be some maturity coming in. We are taking into account the opinion of overseas creditor groups. We will wait and see if there are changes in the valuation of these overseas real estate cases. That is why we have put in those estimates in our provisional planning for the second half of the year. We have not made any definitive comments or numbers regarding confirmed losses. Regarding Hanwha Ocean and Taeyoung E&C, we have had some reversals in the first half. We don't think we will have more reversals in the second half of the year. We believe that a normalized version of write-back will exist, and it will go on a trend, as I aforementioned.
Thank you very much for your answers. We will take the next question. The next question comes from Citigroup Global Markets Korea Securities, Lee Mi-seon. Please go ahead.
Yes, thank you very much for your performance. I have three questions. First question is about your credit cost. If you look at first half, it was 28 BP. Your guidance said, I think, was you're expecting around mid-30 BP. So there's 3 BP increase in the second half. Is that coming from the project finance-related losses? Is that going to be the main of that 3 BP in your credit cost, or is there any other source where you're expecting the credit cost increase? My second question is about the value-up plan. You're saying that you'll announce your plan in the second half. Some companies have already done so.
Even though it may be difficult for you to disclose now, can you give us any additional color to your value-up program as a preview? Can you also give us some guidance of your loan growth you're expecting in the second half?
Thank you very much for those questions. Please give us some time to prepare the answers. Yes, about our credit cost ratio, I will answer that question. We've already discussed various issues, for example, of the large loans, the real estate project financing. These were sort of unique and special factors. Those were the first half issues. In the second half, we're looking towards the household and SOHO loans. Those are the main basis of our second half credit cost forecasts. So it's the SOHO and household where delinquencies have been going up.
We do expect, therefore, this will cause an increase in credit costs in the second half. There are business outlook, economic outlook for the second half. So given those forecasts and business outlook, we think that those will be the main causes or grounds for our mid-30 basis points credit cost in the second half, to give you a bit more color. And then your second question was about the value-up program, and also you've asked for some guidance on loan growth. I'll take those two questions. During the presentation, I did mention that we are preparing our value-up plan, and I gave you some direction as to what we have. In terms of ROE, the specific metrics, you will understand that in most cases, these key metrics will be included in the plan that we will announce in the second half.
What we're currently focusing on is the cost equity, adopting the COE concept, and using that in terms of investments made by related companies. How to apply that, how far to apply that, these are the areas that we're trying to figure out. I think the most important topic in our value-up program is that it has to be something we can implement. So we need to back our value-up plan with the actual systems that would enable us to execute our plan. And so we have to have onboarding of not only the management team, but all members of the Hana Financial Group. That's also a major focus when we are preparing our value-up plan. Once we have more details, we will definitely communicate that to the market. Your third question was about guidance on loan growth.
In the case of NIM Q1, Q2, there was a decline quarter-over-quarter in our NIM, and this has caused our interest income overall to also decrease QOQ. In second half, well, we think that May and June was sort of the period when we bottomed out in terms of interest income and NIM. We are working on portfolio rebalancing and focusing on RWA management so that we are able to have a balanced management of our CET1. And so to give you guidance on NIM, we think that 1.95% plus minus would be sort of 1.95% NIM plus minus would be the guidance. And then about the loan growth, we've already grown our loans by the nominal GDP rate in the first half, which was nominal GDP growth being our full-year target.
So we will keep that in mind as we manage our loan growth in the second half.
Thank you for the answers. We don't have any questions on the line currently. Please press the raise-your-hand button if you have any questions. We will hold. We have no questions in the queue. So I think we have had a very fruitful Q&A session. With this, we will conclude Hana Financial Group's 2024 first-half earnings release presentation. If you would like to visit our earnings release, or if you did not get a chance to see it in real time, we will upload it this evening on our website, Korea time. Please do not hesitate to contact our IR team if you have any further inquiries. Thank you very much.