Our contacts with shareholders and analysts so as to ensure smooth and accurate communication going forward. We now begin the 2022 Q1 earnings presentation. For today's presentation, we have with us our CFO, Hoo-seung Lee, and also other members of the senior management. Today, we will first have the presentation of our business results, followed by a Q&A session via phone. Our CFO, Hoo-seung Lee, will now begin the presentation on the business results of 2022 Q1.
Good afternoon to all the capital market participants, research analysts, and financial news journalists. Thank you for your interest in our Hana Financial Group. As he himself has introduced, G.H. Park is the new head of Hana Financial Group's IR team.
His predecessor, Jay Lee, has over the course of the past 10 years, built a very close working relationship with shareholders, investors, as well as market experts. We also have very high hopes for G.H. Park as well. As you are well aware, G.H. Park has worked at the Hana Financial Group's IR team for a very long time, and previously had served as the General Manager of Hana Bank's Amsterdam office, making significant contributions to our global business. I'd like to take this opportunity as the CFO of our Group to ask our shareholders and market experts for your continued support and interest so that G.H. Park makes a smooth transition into his position. May is just around the corner, the season of new beginnings.
Last March, at the General Shareholders Meeting, Young-joo Ham took office as the new CEO of the Hana Financial Group. I am indeed pleased to be announcing healthy business results in keeping with this new and auspicious beginning. I truly hope that all of you will be able to enjoy the beautiful spring weather during the weekend. We'll now present the business results of the Hana Financial Group for Q1 of 2022. First is the business highlights of the Group. Please refer to page three. The net income of Hana Financial Group in Q1 of 2022 is up 8% YoY and up 6.8% QoQ to post KRW 902.2 billion.
Despite recognizing large one-off expense and preemptively setting aside additional positioning, the Group's top-line results have grown in a healthy manner, posting over KRW 900 billion for the quarter, and thus once again demonstrating strong fundamentals. However, the uncertainties surrounding the domestic and the global macro environment is intensifying along with the COVID-19 pandemic. Russia's invasion of Ukraine is aggravating the global supply chain disruptions. In response to surging inflation, central banks of major countries are seeking to tighten their monetary policies, resulting in flattening yield curves of the government bonds, which is a key signal of a looming economic recession. In response, the Hana Financial Group has continued to preemptively set aside loan loss provisions and has secured more than sufficient buffer to weather any potential risk factors.
Going forward, we will strengthen our management of marginal borrowers under different macroeconomic scenarios, and at the same time, we will continue to further shore up the company's fundamentals based on thorough risk management, including reviewing the Group's risk response system to ensure prompt countermeasures in a risky environment. Following the trade deficit, fiscal deficits are also being forecasted as twin deficit situation is increasingly becoming a source of concern, rising inflation, tightening monetary policies, FX volatility, and growing household and corporate debt. Even against the possibility of an economic slowdown, we will be thoroughly prepared. Hana Financial Group, with a vision of becoming Asia's top-tier financial Group, will take the year 2022, the year that CEO Young-joo Ham came on board, as the beginning of going beyond finance and moving beyond the boundaries of the financial sector.
We'll pursue and focus on our three key strategies, namely maximizing our strength and reorganizing the non-banking business and strengthen our position as a global leading financial Group in digital financial innovation as well. We'll also stand at the forefront of realizing the values of ESG under the motto of growing together and sharing happiness through finance. In addition, today, the BoD of the Hana Financial Group resolved to cancel, for the first time after our establishment as a financial holding Group, at least, KRW 150 billion of treasury stock. As our CEO, Young-joo Ham of the Group and the BoD places top priority enhancing shareholder value. Even when the COVID-19 pandemic was at its height, we have continued our 15-year tradition of interim dividend payout and continuing on with this legacy of shareholder return enhancement.
As part of our plans to further diversify shareholder return policy, we have decided to cancel our treasury shares. This is our way of showing our appreciation to our shareholders who have placed their trust in us, as well as being proof of our commitment going forward. We will continue to move forward with more diverse ways of enhancing shareholder value. Now let me go into greater details about the Group's business result.
First of all, the core earnings of the Group, which form the core part of our fundamentals, is up 12.9% YoY and up 1.9% QoQ to post KRW 2,473.7 billion in this quarter, continuing the growth trend for five consecutive quarters. Key drivers included the rise in NIM and increase in the loan asset following the BOK rate hike, thus resulting in growth in the interest income of Hana Bank. Also, despite the credit card merchant fee rate cut and deteriorating brokerage fee income, the Group's fee income improved QoQ on the back of increasing IB and FX-related fees, resulting in record high core earnings for the Group. Next, the Group's 2022 Q1 SG&A posted KRW 1,251.8 billion.
The main reason for this was the one-off cost incurred due to the ERP program undertaken by Hana Bank and Hana Card. As such, the C/I ratio increased somewhat YoY and YTD. However, when such one-off cost factors are excluded, the C/I ratio in Q1 posted 42% level. Going forward, while we undertake investments to improve profit and operational efficiency, including digital capacity enhancement, we'll also continue to make efforts to reduce recurring costs. Finally, the Group's Q1 new credit cost ratio posted 0.19%, and compared to the yearly target, a fair level of buffer has been secured. This is due to the fact that in order to cope with any economic uncertainties, we have engaged in preemptive risk management efforts, continuing to set aside loan loss provisioning and maintaining a strategy of asset growth based on asset quality.
Because of the continuing rise of the prices of key commodities, it is expected that the present high rate of inflation will continue for the time being. Last week, on April 14th, the Bank of Korea undertook additional rate hikes to respond to high inflation and unstable foreign exchange rates. This was ahead of the timing that had been predicted by the market. Concerns are growing over the so-called three highs, rising prices, interest rates, and the foreign exchange rate. We're fully aware of the market's concerns over the deteriorating asset quality of borrowers who are vulnerable to such changes in the economic environment. We will be fully participating in the government support policy for vulnerable Groups, such as the small business owners, while also strengthening our risk management system to maintain sound asset quality.
More specifically, we have already set up and is implementing a management plan for high-risk borrowers to effectively manage credit risk. For corporate loans, we have selected borrowers to be monitored through our priority watchlist and have reduced the unused credit line for borrowers with low credit worthiness. In the case of SOHO and household loans, we are focused on managing our exposure to low credit quality and multiple loan borrowers. If you look at the lower left-hand side of the slide, in Q1 of 2022, the Group's ROE and ROA is 10.69% and 0.72% respectively. Next, please, refer to page four. Hana Bank and Hana Card included, the Group's 2022 Q1 NIM posted 1.71%, similar to last quarter.
Hana Card's NIM has continued to fall over the previous quarter, leading to a significant fall in profitability due to merchant fee rate cuts, reduction in card loan, and other loan assets due to preemptive risk management. However, the bank's NIM, which has a substantial impact on the interest income and takes up a lion's share of the Group's interest-bearing asset, posted 1.50%, up 3 basis points QoQ, and continues the improvement trend. Last January, the BOK's rate was raised, and the U.S. Fed shift to a more hawkish stance has led to rising market rates, which is improving loan asset pricing. Also the efforts to shift the portfolio to focus more on portfolio is starting to pay off. In addition, on the back of the BOK rate hike in April, we expect additional improvements in NIM.
Next, if you look at the right-hand side, the bank's Korean won loans grew 1.2% QoQ to post KRW 260 trillion. Sound loan growth, based on real demand and improving bank NIM, has led the Group's interest income to grow 17.3% YoY, and on a QoQ basis as well is up 0.8%, overcoming the two business day effect, which makes it appear as if the interest income is declining from a time series perspective. The fee income is up 7.6% QoQ and is rebounding from the downward trend of the second half of last year. However, the credit card fees and brokerage fee is down 3.3% YoY. Next is page five.
As of the end of Q1 of 2022, the Group's NPL ratio posted 0.36%, down 4 basis points YoY, and the total delinquency ratio is down 1 basis point YoY to post 0.29%, maintaining a stable trend overall. Next, the Group's Q1 credit cost ratio posted 0.19%.
During the quarter, setting aside additional provisioning for COVID-19-related loans for which repayment has been pushed back and conservative application of individual assessment has resulted in preemptive setting aside of KRW 60.3 billion of additional provisioning. Even so, however, compared to the yearly target, the credit cost ratio is maintained at a stable level. Finally, the Group CET1 ratio is 13.55%, maintaining a healthy level compared to the regulatory ratio. However, the decline in the ratio over the previous quarter is due to the increase in the RWA on the back of rising exchange rate and asset growth. Going forward, when the exchange rate stabilizes, we expect the Group's CET1 ratio to improve, reflecting the stable profit structure of the Group. That is our cautious prediction going forward.
We will continue to secure a sufficient buffer and strategic investment capability while maintaining the highest capital ratio in the industry through proactive RO-RWA management and reduction of unused credit lines. Now let me walk you through the Group's business results by item. Please refer to the Group's consolidated earnings on page seven. Of the Group's general operating income for Q1, quarterly interest income posted KRW 2,020.3 billion, up 17.3% YoY and up 0.8% QoQ. Due to a decline in asset management-related fees, including security brokerage fees and credit card fees, Q1 fee income fell 3.3% YoY. On a QoQ basis, it was up by 7.6% to reach KRW 453.5 billion. The Group's Q1 disposition valuation gain recorded KRW 203.1 billion.
The bank recognized non-monetary translation loss of KRW 31.5 billion due to weak performance of securities, especially bonds, amidst the rapid market rate increase and due to FX rate rise during the quarter. On the other hand, FX disposition gain and derivative-related gain increased, and the large-scale non-monetary translation loss recorded in Q1 last year acted as a positive base effect. Non-bank subsidiaries improved their investment performance, such as from the valuation gain of beneficiary securities, and the Group's disposition valuation gain increased both YoY and QoQ. Lastly, SG&A in Q1 increased 22.7% YoY and 19.6% QoQ due to the ERP I had mentioned earlier. Moving on to page eight, business results for our subsidiaries.
Hana Bank's net income for Q1 2022 went up 15.9% YoY and up 7% QoQ to KRW 667.1 billion. The highest core earnings in history was achieved on the back of balanced top-line growth, enabling a robust growth despite the sizable ERP. Hana Financial Investment's net income in Q1 was KRW 119.3 billion. Although IB-related M&A and advisory fees increased YoY, the contracted transaction on the stock market affected the securities brokerage fees, overall weakening the asset management fee income. Recognition of bonus payment increased the SG&A, bringing down the net income 12.8% YoY, but increased by 23.5% QoQ. Hana Capital's net income for Q1 was KRW 91.3 billion, thanks to improvement in general operating income, including interest income and disposition valuation gain.
The net income was up 48.1% YoY and up 15.8% QoQ, continuing the upward trend. Hana Card's net income for the quarter was up 6.1% QoQ to KRW 54.6 billion. Due to the lowered merchant fees applied since February and reduction of high-risk loan assets in line with risk management and higher SG&A due to ERP, the net income fell by 24.7% YoY. Please refer to the table for the other subsidiaries' performance. Also please refer to pages nine through 11 for details about NIM, non-interest income, and SG&A explained earlier. Page 13 discusses the Group's total assets, liabilities, and equity. Now moving on to page 14, Hana Bank's loan and deposit in Korean won.
The bank's loan in won as of quarter end was KRW 260 trillion, up 1.2% QoQ. The asset growth can be broken down as follows. Corporate loans stood at KRW 129 trillion, growing 2.3% QoQ. Large corporate loan increased 1.4% QoQ, and SME loans also grew 3.0% QoQ, driven by continued funding support extended to the internally audited SMEs and SOHO borrowers. Household loans grew slightly QoQ to KRW 130 trillion. Credit loans balance decreased and demand-driven loans centering around Jeonse loans increased. As of quarter end, the deposit in won stood at KRW 278 trillion, up 3.6% QoQ.
Reflective of the abundant liquidity in the market, low-cost deposit and MMDA balance each grew 4% and 7.2% respectively, and time deposit increased 1% from the previous quarter. As a result, the LCR weight in Q1 increased 0.9 percentage point over the quarter. For your reference, the graph on the bottom right shows the LDR at the end of the quarter to be 98.1%. Please refer to page 15 for Hana Bank's loan composition. Page 17, Group's asset quality. As of Q1 end 2022, the Group's total credit grew to KRW 355 trillion, up 2.8% from the previous quarter. Loans from the overseas entities that were delinquent in Q4 last year was reclassified as NPL.
Due to other one-offs, NPL increased 13.9% QoQ to KRW 1,267.6 billion. The top right shows the new NPL formation in Q1 was KRW 295.9 billion, somewhat higher than the previous quarter. However, the Group's NPL ratio is 0.36%, maintaining a lower level on a YoY basis. NPL coverage ratio as of quarter end recorded 160.4%, maintaining a sound level YoY, with the asset quality indicators being fairly managed. There will be strengthened risk monitoring for the overseas entities and branches, as well as improvement in new and existing management of overseas alternative investment, reinforcing overseas exposure risk management. Let me elaborate on the bank's asset quality on page 18. Yes, page 18.
Hana Bank's total credit in Q1 has grown 1.9% QoQ to KRW 301 trillion, and NPL decreased by 5.5% to KRW 715.1 billion. NPL ratio fell by two basis points QoQ to 0.24%, and the NPL coverage ratio as of quarter end is 179.2%. Hana Bank's delinquency ratio at the end of Q1 was 16 basis points, maintaining a similar level as the previous quarter. Please refer to the Group's and bank's provision on pages 19 and 20. Lastly, capital adequacy on page 21. We expect the Group's BIS ratio and Tier 1 ratio to be 16.06% and 14.99% respectively, and CET1 ratio is expected to be 13.55% at the end of the quarter.
As I mentioned earlier, due to weaker Korean won and increased RWA, the overall capital ratio fell QoQ slightly. Going forward, we will continue to enhance capital efficiency and shareholder value based on stable business results. With this, I'd like to conclude the earnings presentation for Hana Financial Group Q1 2022. Thank you.
Thank you very much. We will proceed with Q&A. Let me briefly explain how this works. In order to participate in the conference call, you needed to have called in through the number that we have notified or log into the website to listen to the webcast. For the online participants, if you want to pose a question, you have to call again using your phone. We will take the first question. Yes, we will receive the first question. The first question is from HSBC Securities, Mr. Jae-woong Won. Mr. Won, you are online?
Thank you for such a strong result. I have two questions. The first question. It's concerning your subsidiaries, the Hana Financial Investment. Despite the uncertainties in the capital market, the results were quite sound. Were there any special factors in the IB segment perhaps? Were there any M&A related brokerage fees or were there any one-off, you know, sales effect? Second question, because of the volatility in the exchange rate, so ultimately with regards to the volatility of the foreign exchange rate, how are you intending to cope with such volatility?
Thank you very much for those questions. Please wait for a few seconds while we prepare the answers.
Mr. Won, good afternoon. Thank you very much for those good questions. The Hana Financial Investment, the improvement in the business results has to do with the rise in the interest rate.
Because of the Russian invasion of Ukraine, the investor sentiment has been, you know, hit very heavily. However, because of various reasons, these effects have been able to be offset through various factors for the Hana Financial Investment. We will go into more details about that later on. Yes, we are exposed to the fluctuations in the FX rate, and we are aware of the situation, and we are making efforts to hedge such effects. With regards to those specific efforts, Mr. Kim Young-ho from the Hana Bank will actually answer your question.
Good afternoon. I'm Park Sung-ho from the Hana Financial Investment. Let me take the question about the financial investment first. You asked about whether there were any special one-off factors.
Yes, there were some one-off gains. At the year-end of last year, the beneficiary certificate, because of some stock price increases, there have been some write-backs. However, on a consolidated basis, through adjustments, they were all offset. That's not one of the key factors, actually. WM's poor performance, as our CSO has noted, this has been offset by the IB sector's increasing fees. Compared to our peers, you know, these are strong fee income allowed us to defend our performance.
My name is Kim Young-ho. I'm from the Hana Bank. With regards to our response to the volatility in the FX. We have about KRW 1.12 billion exposed to FX. Through the issue with the hybrid bonds, there's a reduction of KRW 600 million. This year as well, KRW 140 billion has been further reduced. Our target is to go under KRW 1 billion. In the first half because of the tightening of the liquidity situation of the capital market because of the Russian invasion, there is a situation. However, by further issuance of hybrid bonds in the second half we will try to meet the target of being under KRW 1 billion.
Thank you for the answers. We'll take the next question. It's from Shinhan Investment & Securities. Kim Soo-hyun, you're online, please.
Hello, I am Kim Soo-hyun with Shinhan Investment & Securities . Can you all hear me?
Yes, we can hear you fine.
You talked about the cancellation of treasury shares. As the company stabilizes, you will probably have plans for quarterly dividends, maybe starting in Q3. You could implement quarterly dividends. What is your plan for that? For the non-bank, you are having great performances. In order to grow the size of the non-bank side, maybe you probably have M&A business plans. The M&A market is a bit overpriced, but what are the areas of interest? Lastly, compared to Q1, I think the Q2 performance will far exceed, because in Q1 you had some one-offs.
I think it will be around KRW 1 trillion. What's your forecast for Q2?
Thank you for the questions. Please hold as we get the answers ready.
Thank you for the questions. Let me first address the shareholder return policy. As was mentioned earlier, the BoD meeting today announced that KRW 150 billion of treasury shares will be canceled. In the beginning of the year, there was the promise with the shareholders to look at cancellation in a positive light, and we lived up to that promise, and we will be faithful to shareholder return. The decision made at BoD meeting was not an easy decision because compared to the other peers in the insurance sector, we want to have M&As to size up our business. Canceling our shares was a tough decision.
The new CEO, Mr. Ham, the BoD believes that maximizing shareholder value is the best. Treasury buyback and additional cancellation may be an option at the back of our mind to have better returns for the shareholders, and we will be looking at the loss absorption capabilities, and we'll be communicating with the market, and we will be reviewing the right size and the right timing. As for the interim dividend, Shinhan and KB they are known to implement quarterly dividend, and that is also catering to the demands of the market, and we welcome that movement. Since the foundation for the past 15 years, as the only financial holding Group, Hana has been implementing interim dividend, and we were quite alone.
There were external and internal uncertainties due to COVID-19, but we were faithful to the promise that we made with our shareholders, and we continued with the interim dividend. We're not alone in the market anymore. We will be changing the articles of incorporation next year to enable quarterly dividend. But as for whether quarterly dividend will guarantee shareholder value, we will be reviewing that. We will continue to put shareholder value as our utmost priority. The newly appointed CEO, Mr. Ham, and the BoD will implement various shareholder return policies with their interest in mind. Dividend payout ratio of 30% is our target, so we will move in an orderly and systematic manner. We will be communicating with the financial authorities for treasury buyback and cancellation.
If they help, including quarterly dividends, we will implement that. We will be taking multifaceted approaches, and within the near future, you'll be able to see how that manifests in the market. As for the non-bank growth strategy, this is related to the comments I mentioned earlier. In 2022, we are faced with many risks. The big techs and the fintechs are here, and the competition in the financial market is getting fiercer. Hana Financial Group is trying to enhance capabilities in different areas, including digital, and we're looking at M&A investments and venturing into new businesses as new business opportunities. If there are companies and candidates that help the financial company in the long term, we will be looking at those companies with great interest.
Pension, payments, guarantee, non-bank sector will be reinforced, and we will be looking at the M&A market with that in mind. As for the Q2 forecast, we believe that Q2 will be much better than what we delivered in Q1. That's all for my comments. Thank you.
I think that was a very good answer provided by our CFO. We'll receive the next question. The next question is from Goldman Sachs , Mr. Sinyoung Park. Mr. Park, you're online.
Hello. I'm Sinyoung Park from Goldman Sachs Securities. I haven't been able to participate in the first half of this Q&A session, so maybe my question can overlap. My first question has to do with SG&A. During the last quarter, starting from this year, you're going to have this investment for digitalization and also additional expenses will be incurred because there's subsidiaries, and so the base itself will rise. You also said that you weren't going to, you know, apply the same standards to SG&A as you did in the previous years. What kind of standards can we expect for the SG&A going forward? That is my first question. Second question is with regards to the internet banks or the fintechs.
What kind of countermeasures do you have about these kind of new developments? Numerically speaking, in 2017, internet banks have emerged. Relatively speaking, Hana Bank's share in the loan market has dropped. As these internet banks move more aggressively into the market, what kind of plans do you have to cope with these kind of developments?
Thank you very much for those questions. While we prepare for the answers, please wait a few seconds.
Good afternoon. Long time no see. Thank you very much for those good questions. With regards to the SG&A, this is something that we're always giving a lot of thought to as well. As you have noted, even if the ERP expense is considered, the SG&A has increased.
Let me give you an outlook for this year. Our IR team is continuing to communicate with the market about this. This year, in order to secure our future growth engines, digitalization, new business and ESG business, in these areas, about KRW 35 billion across the Group will be invested in ERP. KRW 176 billion in ERP for the bank and card company, as reflected. The recurring increase is about KRW 20 billion level, and the actual increase rate is about 2% increase for the SG&A. As you have noted, the digital finance. In order to strengthen this area, the corporate digital channel opening and untapped banking advancement and also my data business is an area that we are engaged in preemptive investment continuously.
In the post-COVID-19 era, for the lifting of social distancing measures, the face-to-face sales and marketing activities will be resumed, and so marketing expense will also go up slightly. That is our expectation. Our Group, in the past we have been managing SG&A on a total volume basis. But now we're going to continue to engage in reducing the recurring costs. The increased incremental amount, we will be tolerating those incremental increases. The ERP and the total amount of SG&A can increase compared to previous years, but the C/I ratio will be maintained at the 40% level in the early range of 40% level. We will be putting our best foot forward. With regards to internet bank, so Mr. Kim Young-ho from Hana Bank will take your question.
I'm from Hana Bank. With regards to our response for the emergence of internet banks, in the case of the conventional banks, so when it comes to Toss Bank, K Bank and KakaoBank, they're engaged in unsecured loans and mortgage loans and several loans. Last year, these assets have been controlled under the total volume regulations, but their assets are now increasing, and so competition is intensifying. In order to survive in the competition against these banks, we are trying to strengthen the competitiveness of our products. Our new business model is being strategically overhauled. All of our process will be digitalized, and the branch offices will be focusing on consultations with our customers.
Also in internet banks weakness, which also is a strength of our conventional banks. These areas are FX business as well as PB areas. We're going to continue to nurture these areas. Then we'll also try to increase our collaborative synergy with Toss Bank, in which we have equity shares. Through this, we're going to enhance our competitiveness in this area.
We are waiting for questions to come in. Let's wait. I'll take the next question. It's from Hanwha Investment & Securities, research analyst Kim Do-ha. You're online.
Hello. I would like to ask a detailed question since no one else seems to have questions. You talked about the SG&A without the labor cost for digital and ESG. I guess the investment will take place regularly. Looking at SG&A minus labor cost, it was about KRW 300 billion, and it is now KRW 350 billion. Will that be in that range, or was this a one-off in just Q1?
Thank you for the question. Please hold as we get the answer ready.
Hello, I'm [Young-yu]. Thank you for the question. Last year it was about KRW 300 billion, and it was KRW 330 billion in Q1. When we made up the business plan last year, for digital and for digital-related marketing, we had allocated additional budget, and we want to enhance our competitiveness in the digital area.
As for Hana Bank in Q1, the non-labor cost in Hana Bank was about KRW 15 billion. Without that, it's in the range of KRW 310 billion-KRW 320 billion, and we believe that will be the range going forward. Thank you.
I hope that answers your question. We don't have any more questions in queue. With this, we would like to conclude Q1 2022 Hana Financial Group's earnings presentation. You may listen to the webcast again on our website, and the IR data book will be uploaded. If there are any additional questions, please contact the IR team and we will answer them to the best of our abilities. Thank you for your participation.