[Edaily Marketin Reporter KIM YEON-SEO ] Hana Securities (AA0) is set to issue up to 500 billion won in public corporate bonds this September. While the company is receiving positive evaluations for improved profitability and strong capital adequacy due to the strong stock market, its substantial domestic and international real estate investments are cited as a potential risk factor.

According to the investment banking (IB) industry on the 13th, Hana Securities plans to raise a total of 300 billion won through 2-year and 3-year bonds. Depending on the results of the bookbuilding process, the company plans to increase the offering size to a maximum of 500 billion won.

The target yield band for both the 2-year and 3-year bonds is -30 basis points (bps; 1 bp = 0.01 percentage point) to +30 bps relative to the respective market average yields. The company plans to conduct the bookbuilding on the 2nd of next month and issue the bonds on the 9th.

Korea Ratings, Korea Credit Rating, and NICE Credit Rating have assigned Hana Securities a credit rating of “AA0” with a “Stable” outlook.

The credit rating industry forecasts that Hana Securities will maintain its current level of profitability for the time being. Although the company posted a loss in 2023 due to factors such as losses from alternative investments and the accrual of provisions, analysts note a marked improvement, including a return to profitability in 2024.

Last year, buoyed by a strong stock market, profits from brokerage and asset management increased, resulting in a return on assets (ROA) of 0.4%. In the first quarter of this year, profits in these sectors continued to rise, pushing ROA up to 0.6% from 0.5% in the same period last year. ROA is a key profitability metric that shows how much net income a company generates using its total assets (the sum of equity and liabilities).

Capital adequacy was also assessed as excellent. Since 2018, Hana Securities has raised approximately 3 trillion won in capital through rights offerings and the issuance of hybrid capital securities. As of the end of March this year, the adjusted net capital ratio stood at 179.5%. Generally, a company is considered to have sound capital adequacy if it maintains an adjusted net capital ratio of 150% or higher.

However, the soundness of its real estate investment assets remains an area to monitor. As of the end of March this year, Hana Securities’ domestic and overseas real estate exposure stood at approximately 5.2 trillion won, accounting for 84.6% of its equity capital. This is higher than the average of 57.5% for comprehensive financial investment firms. Real estate exposure refers to the total risk exposure borne by a financial institution due to real estate-related loans, debt guarantees, and land-secured loans.

Overseas assets account for approximately 48% of total real estate exposure. The ratio of overseas real estate exposure to equity capital also stood at 40.5%, significantly exceeding the average of 15.8% for comprehensive financial investment firms.

Jeong Won-ha, a senior researcher at NICE Credit Rating, stated, “We plan to continuously monitor Hana Securities’ profitability and asset quality in light of fluctuations in domestic and international real estate markets.”