Hana Financial Group Inc. (A086790) Earnings Call Transcript & Summary

Good afternoon. I am Guenhoon, Head of IR at Hana Financial Group. I would like to express my sincere gratitude to all market participants who are taking time out of your busy schedules to attend our earnings presentation today. And I would now like to begin our Q3 2024 earnings call. First of all, let me start by introducing the executives from the group and the key subsidiaries who are here today for the earnings presentation. Jongmoo Park, the Group CFO is with us; the Group CRO, Jae-shin Kang is with us; the Group CSO, Jae-hyeok Yang; Hana Bank CFO, Byoung-ho Kim; last but not least, CFO of Hana Securities, Jeong Ki Kim is here with us. Today, the presentation on the business results for the third quarter of 2024 will be made first, followed by an explanation of Hana Financial Group's corporate value enhancement plan, which was disclosed today, and then we'll proceed to a Q&A session. Please note that any forward-looking statements regarding our performance discussed here and may differ materially from our actual results of operations due to changes in macroeconomic and market conditions. We now invite CFO, JongMoo Park, for the earnings presentation.

Good afternoon. I am JongMoo Park, CFO of the Hana Financial Group. I would like to thank all of our stakeholders, shareholders, investors, analysts and others who are taking time out of your busy schedules to attend today's earnings call. Before I describe the gross business results, I'd like to talk about the shareholder return policy approved by our Board of Directors today. Our BOD today approved KRW 150 billion of share buyback and cancellation. As such, together with the KRW 300 billion of share buyback and cancellation already executed in the first half of the year, we will be undertaking a total of KRW 450 billion of share buyback and cancellation for the year. In addition, a quarterly cash dividend of KRW 601 per share has been approved as well so that on a cumulative basis for the third quarter per share dividend of KRW 1,801 has been finalized. This is 53% of the total per share dividend of KRW 3,401 of 2023 and the year-end dividend will be determined flexibly by BOD, taking into account the full year performance and shareholder return rate in a comprehensive manner. As a result, our return to our shareholders this year is expected to be north of 30% range, a significant increase from last year. Today, our Board of Directors also approved a new corporate value enhancement plan. To briefly outline the highlights, we plan to gradually increase our shareholder return ratio to reach 50% by 2027. We also set a target range of CET1 ratio of 13% to 13.5% for the efficient capital deployment. And in order to achieve this, we plan to manage the RWA growth in line with the nominal GDP growth rate. In addition, we plan to maintain the group's ROE at 10% above to achieve sustainable valuation. The corporate value enhancement plan approved today is driven by the strong commitment of our Board of Directors and management to restore our undervalued stock price and maximize shareholder value. To ensure that our value up is not just a slogan or a goal setting, that is genuinely internalized, implemented and leads to an increase in corporate value. We will review and evaluate it annually and make the necessary improvements. I will provide more details on our enterprise value enhancement plan after I discuss our third quarter results. Now let me start with the highlights of our business results. You can find the relevant information on Page 3 of the presentation. Hana Financial Group's cumulative net income for the third quarter of 2024 was KRW 3,225.4 trillion, up KRW 247.4 billion, year-on-year and up 8.3% year-on-year, achieving the highest performance on a cumulative basis in the third quarter. In addition, the group's net income for the third quarter was KRW 1,156.6 trillion, up 20.9% year-on-year and 11.8% quarter-on-quarter, achieving the highest performance since the group's inception on a quarterly recurring basis. The strong growth in noninterest income, including fee income and gains on valuation and disposal and stable credit cost management were the main drivers of the group's results which exceeded market consensus. Turning first to the fee income. Group's cumulative fee income for the third quarter was KRW 1,547.5 trillion, up 11.9% Y-o-Y. Key drivers were the continued year-on-year expansion of cumulative fee items such as the credit card fees, which drove the improvement in group fee income in the first half of the year, fees from the bank's IB business and operating leases. Next, in the third quarter, cumulative group disposition and valuation gains totaled KRW 936.7 billion, up 18.9% Y-o-Y driven by improved trading performance of Hana Bank's AFS securities and declining foreign exchange losses. As a result, the group's cumulative noninterest income increased 6.4% Y-o-Y to post KRW 1,804.9 trillion, leading the group's performance improvement. Meanwhile, the group's cumulative credit cost ratio for the third quarter was managed at a stable 25 bps, well below our business plan of mid-30 basis points. While the overall delinquency and NPL ratios continued to rise, a high proportion of secured loans among the nonperforming assets and the impact of the large preemptive provisioning since the end of 2021 has kept credit cost at a stable level compared to expectations at the start of the year. Next, the group's CET1 ratio is expected to be up at 37 bps QTD to post 13.7% as of the end of the third quarter. The group's proactive management of RWA coupled with the impact of the decline in $1 exchange rate have resulted in a significant improvement in the group's CET1 ratio. Going forward, we plan to maintain a quarterly CET1 ratio of 13% or above based on our RORWA driven asset growth strategy to ensure that we have the capability for shareholder returns. If you look at the bottom left of the page, you'll see that our group ROE for Q3 was 10.62%, which has been consistently above 10% this year. Next, please turn to Page 4. The group NIM in Q3 was 1.63%, down 6 bps Q-o-Q, while Hana Bank's NIM was 1.41%, down 5 bps Q-o-Q. Despite efforts to improve loan-to-deposit pricing, the downward trend in market interest rates continue to exert downward pressure on the group's and the bank's NIM in Q3. However, starting from October, we expect NIMs to bottom out in the third quarter and rebound slightly in the fourth quarter, driven by a moderation in the decline in loan balance rates since October as well as an improvement in funding costs due to the maturity of high-interest term deposits. Next, if you look at the right side of the slide, Hana Bank's KRW loans decreased by 1% from the previous quarter to post KRW 305 trillion. As we have already exceeded our annual loan growth target in the first half of the year, in the third quarter, we rebalanced our assets in favor of quality assets and profitability in order to manage RWA. More specifically, corporate loans decreased by 2% Q-o-Q, while retail loans grew 0.4% led by mortgage loans. We plan to continue our loan growth strategy focused on profitability and asset quality in Q4. Next, please turn to Page 5. Q3 and group NPL ratio posted 0.62%, a 5 bp increase Q-o-Q. Delinquency ratio posted 0.55%, a 6 bp increase Q-o-Q. The main reason for this was expansion of defaults, particularly among real estate PF and financially vulnerable borrowers with low credit ratings. However, as aforementioned, the group Q3 cumulative credit cost ratio despite the increase of delinquent assets maintained a sound level following the previous quarter. Recently, there was a cut in the Korean base interest rate. But since there is continued uncertainty, including overall deterioration of corporate financial asset quality, following the prolonged high interest rate regime, as well as Korean PF loan restructuring, we will secure an appropriate level of loss absorption capability and do our best for preemptive risk management. Please refer to the material related to the group's capital ratio. With this, I will conclude the 2024 Q3 business results presentation and now walk you through the corporate value up plan that was disclosed today. Please refer to Page 2 of the corporate value plan that was distributed through our disclosure today. Hana Financial Group, right after the KRX guideline was announced, formed the task force team within the group and through in-depth discussions and collection of external feedback and opinions establish our corporate value plan. This plan, which was confirmed and finalized today through a resolution from our BOD, sets forth clear shareholder return targets enhancing predictability and established a new capital ratio management framework, focusing on resolving market concerns due to changes in the capital ratio. In addition, we aim to establish an RORWA focused sales culture, diversify our business portfolio to enhance in ROE and establish a sustainable corporate value generation basis. First, let me explain the reasons for selecting the key metrics and goals. Please refer to Page 15. According to the status analysis, it was analyzed that our corporate value was undervalued compared to local and global competitors due to the following reasons: first, our low shareholder return ratio compared to global financial stocks. Second, our conservative capital management policy. And third, our cost of equity referring to the low ROE relative to COE. To resolve these issues, we determined that we needed to increase shareholder return, improve capital management policy and enhance ROE. Accordingly, we selected shareholder return ratio, CET1 ratio and ROE as key metrics and established respective individual goals and action plans. I will now explain about the goals and action plans. Please refer to Page 17. The first goal of our corporate value up plan is to enhance shareholder return and increase predictability. By gradually increasing shareholder return ratio, we will achieve 50% shareholder return ratio that we previously set forth as our mid- to long-term goals by 2027. Please go to Page 18. A concrete action plan to increase shareholder return and improve predictability is to implement quarterly even dividend policy and increase the proportion of share buyback and cancellation. We will adopt quarterly even dividend policy to improve dividend consistently -- consistency and increase the proportion of share buyback and cancellation, so that we will improve major metrics, including not only dividend per share as well as EPS and BPS. We determined that share buyback and cancellation is more effective than cash dividends in the current valuation range, So we plan to gradually enhance shareholder return ratio focusing on share buyback and cancellation. Let's go to Page 19. The second goal is to improve our capital management ratio and stably manage our CET ratio between 13% to 13.5% range. By maintaining our CET1 ratio in this range, we will consistently be able to implement the shareholder return policy that we promised, regardless of Y-o-Y ratio increase or decrease to provide predictability to shareholders. Next, let's go to Page 20. The action plan to stably manage the CET ratio within the target range is to set forth a RWA growth rate target. We will manage the RWA growth rate target consistent with nominal GDP growth rate level to secure the consistency and stability of our capital policy. Next, let's go to Page 21. The third goal is to maintain our ROE to 10% or higher. ROE is a multiple of financial leverage and RORWA. Theoretically, ROE enhancement through RWA growth ratio management and shareholder return enhancement is possible. But in order for sustainable corporate value generation, ROE needs to be enhanced through RORWA improvement. Let's go to Page 22. The action plan to enhance ROE and maintain it at 10% or higher requires enhancing group RORWA through business portfolio improvement. In addition, we plan to implement value of internalization methods by reflecting value of plans to the key initiatives and detailed action plans and by expanding the weight of RORWA items in the KPIs for our management. Hana Financial Group apart from achieving the 3 financial goals that I have covered so far will enhance our company's trustworthiness by improving our corporate governance and through active communication by transparent information disclosure and active communication with shareholders and investors. In addition, the BOD fully recognizes the market expectations regarding corporate value of plans and will endeavor to establish plans so that it will be recognized as a role model in Korea. Even after the disclosure, we will have a BOD focused implementation assessment each year to strictly monitor the actual application status. Thank you for listening.

[Operator Instructions]. This is the first question. The first question is from NH Securities, Jun-Sup Jung.

I'm Jun-Sup Jung from NH Securities. I have 2 questions. First question is just now, you talked about your corporate value enhancement plan. It was very well explained. This recently announced plan compared to the plans that have been announced by your peers. What do you think differentiates your plan from that of your peers? That's my first question. And my second question is the target CET1 ratio range has been set at 13% to 13.5%. If it exceeds a 13.5% -- you said that the amount that exceeds 13.5% can be invested into sustainable gross investment or it can be returned to the shareholders, which carries more weight. And if you set the growth of RWA to limit that growth to dominate our GDP growth rate. And I don't think you need to actually worry about which of the two you should be focused on. So thank you very much for the question. We will prepare the answer. Thank you.

I'm the group CFO. Thank you very much for that excellent question. So our value program compared to our peers, how it is differentiated. I think that was your question. So in 2023 February, the capital management policy and the shareholder written policy was announced. And the shareholders and investors' feedback. There were some common feedbacks. The first of that was that 50% with the mid- to long-term target. And what was the exact target date? That was the first question. And then secondly, the target of the CET1 ratio was rather high. In the case of Hana Financial Group, there's a high fluctuation of the CET1 ratio. And can this be a stumbling block to the shareholder returns? That was a question that was also put forward. So we consider this comprehensively and although we have made the necessary preparations this time, up until 2027, reaching 50%, I think that target is similar to our peers, but we're going to move in steps. We're going to gradually achieve that target. I think that is a key differentiating point. And secondly, it is related to the CET1 ratio. Because of the CET1 ratio fluctuating, the visibility of shareholder returns or stability of the shareholder returns. This is a source of concern. Reflecting that, we have set a range of 13% to 13.5%. So if the CET1 ratio falls within that range, the shareholder returns can be undertaken in a very stable manner. And I think that is another key differentiating point and certainly, the value program realistically -- to ensure that it is implemented realistically, we need to internalize that within our organization. And so to do that, RORWA related KPIs, so way is going to be enhanced or increase of our executives of subsidiaries. So I think this is another differentiating point. And with regards to your second question, 13.5% if CET1 ratio exceeds that more, which of the two we will be focusing more on. Well, that's not at a point that we have actually arrived at yet, and so we need more time to think about it. However, basically speaking, the weight itself, whether we're going to use it for a shareholder return or for additional growth, the excess amount. So RORWA, where the RORWA is higher for which investments, I think we need to think about that. I'll search for the excess that exceeds 13.5%, through discussion and deliberation of the BOD going forward, more specific plans will be formulated. Thank you very much.

The next question is from HSBC, Jaewoong Won.

Thank you for the good performance despite the challenging environment. I have 2 questions related to your value program. First of all, by 2027, you said gradually, you're going to lift it up to 50%. And I calculated some numbers, and it seems that for this year, it's probably about 38%, although it might not be accurate. So by 2027, it means that you need to have 4 percentage increase in total 12 percentage point increase by 2027. So do you think that there will be this type of gradual lift if there are no outliers? And on Page 18, you mentioned that you're going to increase the proportion of share buyback and it seems share buyback and cancellation. So it seems that here, we can see that the cash dividend proportion seems a little bit at a standstill. So do you think that will be probably the picture going forward as well?

Thank you very much for your questions, and please hold and we will soon answer your question.

I am the Group CFO. Thank you very much for your questions. And I will answer both of them. Well, it seems that for this year, well 2024 shareholder return ratio, you mentioned that you believe that it will be probably 38%, but it will depend on Q4 net income and year-end cash dividend payout. And then I think we will have finalized shareholder return ratio. And maybe the latter 30% level is a guide that maybe you would have actually taken into consideration and we had KRW 150 billion of share buyback and a cash dividend of 2023 level and Q4 net income, if we make the projections, it would be probably around 38% as I do believe. So from 2025 for 3 years, it will be in stages or in gradual steps. So that will mean the figures that you had set forth because it is for each year. And regarding the interest or profits for each year and others, we will need to take those into consideration. But I think you had made the correct projections according to our guidelines. And regarding the cash dividend, the gradual cash dividend and expansion of share buyback and cancellation that you mentioned, I believe that we are thinking of PBR and regarding the appropriate PBR. Well, if we think that it is one, then regarding what goes beyond one then for share buyback and cancellation, we can decrease it a little and have other measures such as cash dividends that we could utilize the excess for. But for now, it's about 0.8. And I think when it goes to 0.8, then we can think about the breakdown between dividend and share buyback and cancellation come out with more concrete measures and talk to the BOD when it reaches that level.

The next question comes from SK Securities, Yong Jin Seol.

So I also have 2 questions. First of all, in the case of our treasury shares, going forward, what will be the cycle intervals in what you will be making the announcements for share buyback? And secondly, I think there was some write-back of credit cost. And going forward, do you foresee additional write-backs of the credit cost?

Thank you very much for those questions. While we are preparing the answers, please hold for a few seconds. Thank you.

Yes, this is the CFO, Jongmoo Park. Let me take your questions with regards to the cycle of share buyback and cancellation. Basically, at the start of the year, the cash dividend size, the equal quarterly cash dividend plans will be announced at the start of the year. And so I think that will be the timing in which this announcement will be made basically. And then whether it will be in the first quarter or whether it will be in the third quarter like this time, I think it's really flexible. And what's most important is that as the regulators have provided guidance, the CET1 ratio must be stably maintained at above a certain level. And the loss absorption capability that has been sufficiently maintained. So all these situations will be comprehensively considered in order to ascertain the exact timing.

Let me also add to this -- I'm the CRO. With regards to the credit cost provisioning, up until now, we had some write-back. And so our credit cost is really low. However, going into the second half, there is no special issues that calls for any special write-backs. And if we remove the write-back asset, then the credit cost is around 0.32% at present. And the mid-0.30 percentage range was our business plan. And in the second half without any special write-back we think that it will be slightly above the recurring level at the year-end.

The next question is from Korea Investment and Securities, Doosan Baek.

Yes. I'm Doosan Baek from Korea Investment and Securities. I have a question related to nonbank. Regarding capital, you had very robust earnings, but it seems that for this quarter, it is not as robust. So can you maybe tell us why. And looking at other companies' trust, we are seeing a lot of the issues related to complete guarantees or different lawsuits related to those losses. So compared to your peers, do you have similar loss possibilities in these types of real estate trust that have completion guarantees or similar cases?

Thank you very much for your question. Please hold and we will soon answer your question.

Thank you very much for your questions. I am the CFO. Thank you very much for your insightful questions. For nonbank, for this year, for Hana Securities compared to the previous year, well, last year, we had turned around, and it seems that it has been doing well. And compared to Q3 of the previous year, we are seeing very robust performance. However, for capital, there have been some one-off vulnerabilities and for the delinquencies related to real estate PF loans, it had heightened. So because of the provisioning burden, it seems that the performance actually was depressed a bit. However, on the whole, compared to the previous year, of course, we had seen the securities uplift, which -- and capitals downlift. But in card, we also had some earnings that had provided an offset. So we are expecting the nonbank actually to have better results compared to the previous year.

Let me answer the question along with the CFO, I'm the CRO. And related to the lower performance of capital for some discount loans we had some losses. So that is why we had 100% provisioning for those cases. So that is why in Q3, we had some depressed performance for capital. And for asset trust, as you had asked, for our peers, we are seeing a lot of lawsuits related to these types of trust. But for Hana real estate trust, we have 30 of the completed guarantee sites but we don't have any of them that are leading to lawsuits yet. According to the real estate economic situation, there could be some possibilities going forward of some difficulties, but we have been doing our best for the sales and other site management. So it seems that compared to our peers, we are superior in our management of these sites. So I believe that we have a limited possibility of insolvencies related to our asset trust.

The next question is from Hanwha Securities. Do Ha Kim.

So I do have 2 questions. So one is that you announced your share buyback plan. I'm sure there are diverse opinions. But I myself believe that you should have implemented the share buyback related commitments. In the first half, the CET1 ratio was below 13%. However, you're now above the 13% level because of several factors. But of course, there has been KRW 150 billion share buyback and there has been the KRW 50 billion that is lacking. But what is your outlook for fourth quarter? And what is your outlook for the year-end? And also for the excess that goes over the 13 points, are you going to be very tight in using that for the shareholder returns? Is that your plan? Second is with regard to value of program, can you talk about any downward pressures in the case of EPS, no matter what the situation is, it will be above the last year's level or also for the total dividend amount, it will be at a minimal above the last year's level. Do you have any guidance on those issues?

So thank you very much for those questions. While we are preparing the answers, please hold for a few seconds.

Yes, this is a CFO. Thank you for your questions. So in the case of CET1 ratio, yes, we did have some fluctuations. And there were some concerns. Thank you very much for those concerns. So KRW 150 billion of share buyback and cancellation whether it is really necessary? Well, basically, the value program, we need to actually see the big picture together with the value of program. Because gradually we need to reach 50% target. That is our road map. And on that -- based on that road map on an annual basis, a significant -- we can't really significantly increase the share buyback and cancellation every year. And what's most important actually is that the shareholders, what they request, the market expectations actually have been reflected. And in connection with that, in the fourth quarter, the CET1 ratio, what is our outlook for the CET1 ratio for the fourth quarter? Well, in the first half, 13% in a situation where it was under 13% at the year-end, we said that we will maintain it at the previous year's level. That was the commitment that we had made. And so in that process, in the third quarter, there was 18 bps, impact of the exchange rate drop. And aside from them, 22 -- 19 bps was related to RWA management and due to increase of the capital. That is the reason why we have been able to achieve 13.1% of CET1 ratio. As I have noted during my presentation, for the fourth quarter, with regards to asset growth, we will be maintaining a conservative stance. That is our plan going forward. And the target that we are expecting is 13.20% and higher, that is our target at this point. Of course, in the case of the exchange rate, because of the impact of the U.S Presidential election, there is a lot of fluctuations. But as the time passage, we do believe that it will become more stabilized. That is our expectation. And next, the value of the minimum line. So when announcing the value program, we have not made assumptions about when it would not be possible to keep our commitments. But basically speaking, we will be maintaining last year's level. That will be our most basic guideline that we will keep to. In the case of DPS, especially, if you look at our past history, you can tell that any decline in net income did not deter us from maintaining the previous year's level. So I think that is our shareholder return policy up until now.

We will take the next question. The next question is from Citi Securities. Miseon Lee.

I have a question related to ROE. I actually have three questions related to ROE. The first question is looking at your past earnings fundamentals compared to your peers, your ROE was higher, and it seems that for sustainable ROE target, I think maybe you could have set the target at a higher range. And secondly, it's a related question and for the bank's net income contribution, you are considering actually taming down the proportion. And because the bank's proportion is high, ROE could actually increase, but you have to increase your ROE and also have good management of RORWA. So which subsidiary or which type of assets are you going to concentrate on to reach this goal? My last question is related to the bank contribution, if you wanted to go down then RORWA growth rate. Well, can it actually go below the loan growth rate level? If that is correct in my understanding.

Thank you very much for your questions. And we will soon answer your questions. Please hold.

Thank you very much for your questions related to ROE. Well, compared to peers, you mentioned that our ROE was actually better relatively. So maybe we could have set a higher ROE target. Well, it would have been good to do that. But related to our basic fundamentals and our recurring fundamentals, well, we believe that we are at a level where we could, of course, exceed 10% sufficiently. Of course, we would need to look at some one-offs in the earnings that you probably can consider. However, related to whether it's a sustainable ROE, we believe that will be more important. Regarding the second question, regarding the bank's contribution. Well, having more of non-bank contribution would be better. But that doesn't mean that the absolute bank contribution should go down. We think that it should go up. However, strategically, we want to actually groom some other aspects. And regarding the capital allocation that we mentioned related to this guide. Well, RORWA is our guide and the bank RORWA has been the highest so far. So that is why for the nonbanking strengthening needs, of course, it exists. But because of the bank RORWA is the highest we need to have the capital allocation to those resources. And then gradually, step by step, we will actually grow our nonbanking contribution, so that we can have higher uplift of RORWA. Third, related to the nonbanking RORWA, Well, they will be higher than loans in won growth. I think that was your question. So let me just answer maybe from a fundamental aspect. Related to the RWA growth rate, we want to have a consistent with the nominal GDP growth rate, which means that related to -- well, RORWA, there are loans in won, equities, investment and other types of accounts. And from a bigger picture related to how -- this is, I think, related to the allocation of RORWA. So I don't think that we can actually give you information about which will be growing higher than which other category.

The next question comes from Samsung Securities, Jaewoo Kim.

I'm Jaewoo Kim from Samsung Securities. I have 2 questions. Yes, it is related to ROE, as you have mentioned, how to increase the ROE. Well, on that topic, as you have said, the bank subsidiary needs to improve further. But what I'd really like to know is that in the past, securities had done really well in the past. But the performance had improved compared to last year for the securities. However, I don't think it's yet up to the level that we would like to come to. So the real estate finance, I think, was the strength that your Hana securities had, but RORWA will be the focus. What kind of business model do you need to have for the securities business? Can you share your plans about the business model going forward for the securities business? That's my first question. And the second question is this focus on RORWA, of course, individual subsidiary-related strategy is important. But from the point of view of the financial group, how to integrate all of this to create synergy. I think this was a homework that you need to address. And recently, Hana The Next for the senior citizens, centering around the banks. I think this was a plan intended to create synergies throughout the group. So do you believe that you are giving a lot of thought to this kind of approach? So how do you intend to go about increasing the profitability within the group itself? If you have any plans, please share it with us.

Thank you very much for those questions. While we are preparing the answers, please hold for a few seconds. So with regards to this question, our CFO from Hana Securities will answer the first question, and the second question will be taken up by our CSO.

Thank you very much for your question. Starting from last year, we have been undergoing a challenging time. This year, we do believe that we will be achieving a turnaround. In the past, as we have noted, IB-led growth had been achieved. However, because of the profitability that have been very much biased toward the IB business. Last year, we had undergone hardship. And so up until now, IB sales and trading was the focus of our business model. But going forward, for more balanced profitability, we need to have more suitable business model for that. So compared to other companies, we do have weaker competitiveness in the retail segment. For the retail business, customers who can serve as sales basis or increasing our assets will be undertaken in order to create a more balanced growth model. I think that will prevent us from going through the same difficulties that we had last year. And in the past, Sales and Trading and IB had been the focus. But if we shift towards a newer profitability model, we will be able to achieve higher ROE going forward.

Thank you very much for the question. I'm the CSO of the group, Jae-hyeok Yang. As you have mentioned, in order to enhance the group's enterprise value, a business portfolio needs to be enhanced, as you have mentioned. With regard to senior citizens, a new business model has been presented Hana the Next. Starting from last week, it has been launched into the market. And nonbanking subsidiaries to strengthen those businesses, we need to focus on 3 pillars. First is the internal competitiveness of each subsidiary. And then the inorganic growth through M&A. Another pillar will be the individual capabilities need to be leveraged. And one of that attempt is Hana the Next. So it is targeting senior citizens. However, basically, it is about enhancing our asset management capabilities of the bank, securities and insurance and card. It will all be pulled together to create products and services that is very much customer centered. I think that is the meaning and significance of this recent approach. So the demographic changes that we are undergoing. From that perspective, we are looking for new opportunities. And if you walk down this path, I think going forward organic and inorganic growth, both will be possible going forward. Thank you very much.

The next question is from JPMorgan, Jihyun Cho.

I also have 2 questions. The first question is related to the second share buyback and cancellation that you have announced within the year? And is it going to be this type of cycle going forward for semi year? Is this going to be official? So I'm curious about what is going to happen going forward. And if it's going to happen semiannually, if you're going to have share buyback and cancellation, then it probably means that you're going to have the first half and second half in order to cut down on the concentration in a particular time. And if that is your attention, then regarding the KRW 150 billion of share buyback and cancellation plans then it says that you're going to complete it by May of next year. But if this actually happens earlier than scheduled, then do you have plans to actually announce another round of share buyback and cancellation in the first part of next year. Can you give us some color on that? And second question is related to the market situation related to PF loans and related to your bank and nonbanking subsidiaries. And in Q3 of this year for the bank, there was about KRW 68 billion of reversal related to real estate. And by the end of this year related to the restructuring of the real estate PF loan market, I know that you will have more burden because of the provisioning. So I think maybe for nonbanking it will be different for the bank, maybe less of a burden. And because of your conservative stance on provisioning compared to other peers, maybe you are at a different stance compared to your peers. So can you give us more color on the market environment at the end of the year as you envision? And how much of risk can you manage? And when do you think this issue will finally be resolved. So can you give us some information on the market situation and your outlook for bank and nonbank.

Thank you very much for your questions. Please hold and we will soon answer your questions.

Thank you very much for your insightful questions. I think I elaborated on this previously a bit. And related to the semiannual announcement. Well, of course, we're going to have dispersion of the announcements because we do want to avoid any concentration at a particular period of time. And basically, at the early part of the year, we want to have announcement of quarterly even dividend policy and have the announcement of share buyback and cancellation at the same time. So as you had asked in the early part of the year, well, according to the current status, well, regarding shareholder return ratio or the gradual increase of shareholder return ratio uplift. And going forward, having more proportion, no weight on share buyback and cancellation is what we've said. And I think we will give you more details in the early part of next year. And regarding the timing, we're going to actually think a little more so that we will not have concentration in a particular moment in time.

I am the CRO, and I would like to ask your question related to real estate PF loans. About half of our real estate PF loans are regarding the bank and banks through the different supervisory activities had some reversals, as you had seen. And for securities, capital and savings loan, regarding those real estate PF loans, well, according to our business plans, we are trying to actually recognize additional losses. But regarding the different sites for feasibility studies and regarding the results, there have been some decisions or some conclusions that have not been made because of some conflicts yet. So we believe that there will be about KRW 100 billion of additional provisioning. And it will probably be at a level that will be reflected in the Q4 net income. And if this actually drags on into next year, then it will probably be less than KRW 100 billion of additional provisioning that will be reflected. And regarding the restructuring speed of the industry and the governmental financial authorities, I think the speed will be a little bit different. And I think I left out something. Because the KRW 150 billion of share buyback and cancellation that we announced this year -- this meeting. Well, we will do it as soon as possible within this year. And I think, regarding the share buyback and cancellation -- well, regarding at least the share buyback, it will be as soon as possible, and we will make it within this year. That is what we plan.

It is now already 50 minutes past since we have begun today's earnings presentation. There is no more questions in the queue. I think this has been a sufficient Q&A session. With this, I would like to conclude the earnings presentation of Hana Financial Group for Q3 2024. And for those of you who have not been able to view today's earnings presentation or those who need to watch it again, this evening we will be uploading the recorded video to our website. If you have any additional questions, please contact our IR team, and we will answer to the best of our ability. Thank you very much for staying with us till the very end. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]