How Hana will be affected by KRW128b provisioning for STX Pan Ocean

Are credit costs out of control?

According to Nomura, they expect HFG to miss 2Q13F consensus earnings due to additional provisioning of KRW128bn for STX Pan Ocean and credit risk assessment for large corporations.

However, with the stock currently trading at 0.47x 12m forward P/B (ABVPS: KRW71,273), Nomura thinks market concerns on earnings due to STX Group exposure are largely priced into the shares.

Here's more from Nomura:

We think, excluding STX Group, credit costs seem to be under control. That said, we expect HFG’s earnings should normalise in 2H13F.

We reaffirm our Buy rating on Hana Financial Group (HFG) as our top pick among Korean banks. Market concerns about execution risk post the recent KEB acquisition, likely 2Q13F earnings miss, and a potential capital shortfall have pushed the stock to below 0.5x forward 2013F P/B.

However, we believe the market’s concerns are overdone and the current valuation is attractive.

Potential synergy gains with KEB have not been priced in at all In our view, potential synergy gains with KEB have not been priced in at all at current valuations; hence, any developments suggesting such synergies could act as a positive catalyst.