KEB Hana Ban’s problem loans rising, but profitability stable

Net interest margin will decline whilst credit costs will rise.

KEB Hana Bank will face more problem loans, but profitability should remain stable over the next 12-18 months.

The South Korean bank’s problem loans ratio— measured as a stage 3 loans to gross loans— will rise from the 0.43% reported on 31 March 2025, said Moody’s Ratings in its latest ratings report on the bank.

Weak consumption, a sluggish construction sector, and slower exports growth will weigh on KEB Hana Bank.

Net interest margin will decline ‘modestly,’ because the market rate has declined since January 2024.

Credit costs— measured as loan loss provisions to average gross loans— will increase to 20 basis points (bp) level from 9bp in 2024.

The bank should maintain its solid capitalization, however, with its tagine common equity (TCE) to risk-weighted assets (RWA) at 16% level over the next 12-18 months.

The funding profile should be largely stable.

“We expect the bank to maintain its liquid banking assets to tangible banking assets at around 20%. In the first quarter of 2025, the bank's liquidity coverage ratio (LCR) was 105.9%,” Moody’s said.