汇丰银行-韩国银行业-korea banks：2q17 trends，sharply lower credit cost lift earnings-20170721-hsbc

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1、21July2017KoreaBanksEQUITIESFIG2Q17trends:SharplylowercreditcostliftearningsKoreaSharplylowercreditcostslift2QearningsatHanaFGandIBKSinyoungPark*Analyst,KoreaFinancialsHanacontinuestorunatightship;well-rounded2Q17resultsTheHongkongandShanghaiBankingCorporationLimited,Seoul

2、SecuritiesBranchsinyoungpark@kr.hsbc.comIBK’s2Q17wasbetter-than-expectedbutstilllackingpotential+82237068770tonarrowtheprofitabilitygapvs.largecommercialbanks*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisnotregistered/qualifiedpursuanttoFINRAregulationsHanaFG(Buy):16

3、%beatduetostrongerNIMandsharplylowercreditcostHanaFGreported2Q17netprofitofKRW539bn,16%aboveconsensusestimatesdespitenetone-offlossofKRW107bn.YetanotherearningsbeatwasdrivenbystrongerNIM(+6bpsq-o-q)andsharplylowercreditcost(14bps).Despitesizablebonuspayment(KRW48bn),SG&Aexpenses

4、declinedby6.3%y-o-ywithcostsavingsfrompre-emptiveemployeerestructuringin2016.Ofnote,themanagementcommentedthatjustwithnaturalretirements,HFGwillsee700leaversforthenextfewyearsandthiswillhelpcostmanagement.Adjustingforspecialitems,recurringearningscameinatKRW620bn,up51%y-o-y.Inte

5、rimDPSofKRW300announced,up20%YoYandequivalentto9%of1H17earnings.✔VoteinAsiamoneyBrokersPoll2017Votingstarts6thJulyIBK(Hold):17%beatduetolower-than-expectedcreditcostIfyouvalueourserviceandinsight,voteforHSBCIBKreported2Q17netprofitofKRW357bn,17%aboveconsensusestimatemainlyClickh

6、eretovoteduetocreditcostimprovement(down16bpsq-o-qto60bps)andbetter-than-expectedNIM(+2bpsq-o-q).Still,welackconvictioninfurtherassetqualityGlobalResearchimprovementssinceIBKdidnotgothroughaggressiveassetclean-upprocessandGettheAppbecauseitslendingisheavilymanufacturing-focused.

7、AlsoonNIM,themagnitudeofFindHSBCGlobalResearchonexpectedNIMexpansionwilllikelybesmallervs.peersgivenhigherdependencyonAppStoreandGooglePlaydebenturefundingandweakercoredepositinflowduetolittleretailpresence.WecontinuetobelievethatitwillbechallengingforIBKtonarrowtheprofitability

8、gapvs.largecommercialbanksgivenfundingcostpress