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Hana Securities Additional Discussion Report: SSC Credit-Risk Monitoring Discussion

Issuer: Hana Securities | Document: Additional Discussion | Date: 2026-09-17 | Event: Ssc Discussion

1. Purpose and Treatment

This supplementary report preserves the analytical questions and answers raised in a project-specified SSC external discussion. It is not a verification of new facts and does not amend the existing issuer summary, issuer flash, issuer notes, knowledge snapshot or source registry.

The discussion combines information described as web-checked in the external material with analytical sensitivities and monitoring hypotheses. Figures, management statements and rating-agency interpretations below should therefore be read in three categories: (i) context already confirmed in the existing reports, (ii) claims or source readings made in the SSC discussion, and (iii) matters that remain unconfirmed pending primary-source review. In particular, the numerical warning ranges are analytical monitoring lines, not published rating triggers.

2. Discussion Takeaway

The SSC discussion supports a conditional rather than binary credit read-through. The strong 1H26 earnings recovery described in the existing issuer flash improves Hana Securities' initial capacity to absorb provisions and valuation losses, but does not establish that the recovery is through-cycle or that PF, bridge-loan, guarantee, proprietary-investment and wholesale-funding risks have diminished. The key downside is correlation: a simultaneous deterioration in asset quality, fair-value marks, collateral conditions and refinancing access could consume earnings, weaken capital flexibility and make the expected HFG support component more consequential.

The discussion treats several ratios as useful signals but not stand-alone conclusions. These include the reported 2.22% NPL ratio, the adjusted three-month liquidity ratio cited at 100.1% for March 2026, and the adjusted operating net capital ratio cited at 183.6% for March 2026. The more informative question is whether these measures weaken together with observable evidence that normal market refinancing, internal capital generation or group support can no longer restore flexibility.

3. Q&A Discussion Notes

3.1 PF, guarantees and fair-value losses: when does an earnings issue become rating risk?

Question intent. The first exchange asked when real-estate/PF deterioration and market-value losses would exceed the benefit of the 1H26 earnings recovery, and which indicators would distinguish a downgrade-risk event from ordinary volatility. The follow-up narrowed the issue to exposure migration: guarantee crystallisation, failed bridge-to-main-PF refinancing, impaired overseas real estate and declining provision coverage.

Answer and follow-up. The SSC discussion did not identify a verified numerical downgrade trigger. It stated that 1H26 pre-provision profit of KRW 399.4bn, net income of KRW 273.1bn, provisions of KRW 54.1bn and negative disposition/valuation income of KRW 104.1bn show that earnings initially absorbed concurrent credit and valuation pressure. It also cited approximately KRW 6tn of equity, S&P's reported June 2026 NCR of about 1,551%, and historical end-2024 real-estate exposure of about KRW 4.7tn as context only; the historical exposure is not a verified 1H26 exposure measure.

The discussion's sensitivity analysis treated combined losses of roughly KRW 300bn-500bn as potentially an earnings event if funding and capital remain stable, while sustained cumulative losses approaching KRW 0.7tn-1.0tn or more could become capital-relevant. These ranges are hypotheses rather than rating-agency criteria. The follow-up emphasised that the most consequential migration would be a combination of guarantee conversion into funded problem assets, bridge refinancing failures, deteriorating overseas real-estate marks and provisions that fail to keep pace.

Credit implication. A higher NPL ratio alone is not sufficient to establish downgrade risk. The practical escalation pattern would be repeated PF/Stage 3 migration, weak provision coverage, credit costs plus valuation losses consuming most pre-provision earnings, NCR declining for loss-related reasons, and a concurrent deterioration in market funding. The discussion also cautioned that guarantees and fair-valued alternative investments may deteriorate economically before appearing fully in the NPL ratio.

Doubts and unconfirmed items. The June 2026 composition, seniority, collateral, LTV, bridge-loan migration, guarantee utilisation, provisioning coverage and FVTPL sensitivity were not verified in the existing reports or the SSC material. The relationship between accounting losses and incremental regulatory risk requirements also remains unconfirmed.

3.2 Wholesale funding: the boundary between manageable dependence and liquidity stress

Question intent. The second exchange asked which combination of repo haircuts, CP and short-term-bond rollover disruption, collateral-value decline and foreign-currency funding pressure would create a genuine liquidity concern. The follow-up asked which development is decisive when the adjusted liquidity ratio is near 100% and contingent liabilities nearly match the liquidity gap.

Answer and follow-up. The SSC material cited KIS data of KRW 32.99tn of three-month liquidity assets, KRW 28.83tn of liabilities, a KRW 4.16tn gap, KRW 4.13tn of contingent liabilities and a 100.1% adjusted liquidity ratio at March 2026. The discussion correctly treated this as a narrow cushion rather than a hard rating boundary. A temporary sub-100% result repaired through ordinary repo, CP or bond funding would remain different from a prolonged deficit that cannot be repaired without asset monetisation or sustained group liquidity.

The answer ranked persistent CP/repo tenor shortening, weaker rollover, higher haircuts and reduced collateral flexibility as leading signals. PF guarantee crystallisation was described as a stress multiplier because it creates cash needs while refinancing flexibility may be weakening. Forced asset sales caused by refinancing failure were treated as the clearest realised evidence that the funding model has become structurally weaker.

Credit implication. The working downgrade-risk configuration is not the liquidity ratio alone, but persistent adjusted liquidity below 100% plus demonstrably weaker normal wholesale refinancing and material reliance on asset sales or group liquidity. A timely, temporary HFG or Hana Bank facility draw would be consistent with the current support assumption; persistent facility use because external market access does not recover would weaken the standalone liquidity profile. Delayed or inadequate support in a clear stress would additionally call the support assumption into question.

Doubts and unconfirmed items. June 2026 adjusted liquidity on the same methodology, repo haircuts and maturities, CP rollover rates, unencumbered collateral, foreign-currency funding terms, facility commitments and usage, and the reason for any asset sales remain unconfirmed. No source in the discussion established a mechanical rating trigger tied to a specific liquidity ratio or facility-use level.

3.3 Short-term financing business: franchise benefit versus capital and liquidity transformation

Question intent. The third exchange tested whether the post-licence short-term financing business can improve franchise earnings without increasing leverage, maturity transformation and contingent-risk capacity faster than loss absorption. The follow-up focused on evidence that management would actually restrain growth before capital measures become stressed.

Answer and follow-up. The SSC discussion described management as targeting KRW 2tn of financing-note funding in 2026 and as stating that part of proceeds would remain in liquid government bonds, CDs and repos, supported by maturity management and HFG liquidity channels. It also cited a stated practice of retaining roughly 30% of proceeds in readily monetisable assets. These are management statements reported in the discussion, not independently reconfirmed findings of this report.

The external material contrasted that strategy with cited KIS trends: adjusted leverage rising from 11.0x at end-2024 to 12.5x at end-2025; non-matched borrowing/equity increasing to about 168.5% by March 2026; the short-term share rising; and adjusted operating net capital declining to 183.6%. It noted KIS's cited persistent sub-150% adjusted operating net capital downside factor, while distinguishing that published factor from the discussion's 160%-170% analytical warning area.

Credit implication. The relevant test is asset deployment and growth discipline, not issuance volume in isolation. Financing-note growth could be constructive if it diversifies funding, sustains genuinely liquid reserves and supports diversified corporate-finance assets. It would be adverse if short-term liabilities increasingly fund illiquid, subordinated, valuation-sensitive or property-related assets while non-matched borrowings and capital consumption outpace retained earnings. The strongest evidence of discipline would be voluntary slower issuance, reduced illiquid commitments, higher liquidity allocation or pre-emptive capital action before published regulatory or rating thresholds are approached.

Doubts and unconfirmed items. No verified public ceiling for leverage, non-matched borrowing, short-term funding share, illiquid-asset deployment, internal adjusted-capital floor or stop-growth trigger was identified. It is also unconfirmed whether HFG support lines are committed, how they enter internal liquidity limits, and whether HFG has committed capital for growth-related pressure.

3.4 HFG support and core-subsidiary status: the behavioural test

Question intent. The fourth exchange asked what could reduce Hana Securities' strategic centrality to HFG beyond an outright capital shortfall, and which parent actions in a future stress would validate or weaken the core-subsidiary assumption.

Answer and follow-up. The SSC material cited S&P's reported view that Hana Securities is an HFG core subsidiary, with support expected in foreseeable circumstances, while substantial NCR erosion without timely support could weaken group status and lead to a materially lower issuer rating. The discussion consistently distinguished this support expectation from an explicit guarantee for a specific obligation.

It identified persistent weak returns, repeated remediation needs, reduced contribution to HFG's non-bank strategy, capital-allocation changes, ownership or governance shifts, and withdrawal of strategic growth capital as possible early signals. The practical test was not strategic language alone but behaviour when Hana Securities has a material capital or liquidity need: timely pre-emptive liquidity or capital, tolerance for temporary earnings dilution, and retention of strategically relevant businesses would support the current assumption. Delayed, inadequate or conditional assistance that forces asset sales, involuntary deleveraging or permanent franchise contraction would be more concerning.

Credit implication. A single capital injection or temporary liquidity line is not inherently negative; it may validate expected support. Support dependence becomes a credit concern if it is repeatedly required to maintain an unchanged risk profile, replaces normal market funding over time, or is not mobilised promptly despite apparent group capacity. The most severe configuration would pair standalone pressure with evidence that HFG is reducing commitment or cannot provide timely support.

Doubts and unconfirmed items. The scale, legal form and immediacy of any available group facilities, HFG's internal capital-allocation priorities, and the operational response to a future stress remain unconfirmed. No specific parent action was identified as a published automatic group-status trigger.

3.5 Earnings resilience: when cyclical weakness becomes a capital-management issue

Question intent. The fifth exchange asked how a capital-markets slowdown could reduce pre-provision earnings while PF provisions and valuation losses remain elevated. The follow-up asked what response would preserve the credit trajectory if operating net revenue/SG&A coverage enters the 120%-140% range.

Answer and follow-up. The SSC discussion treated business-volume measures as earlier signals than net income: Korean equity turnover, brokerage fees, ECM/M&A completions, structured-product issuance and corporate-finance activity. It cited historical operating net revenue/SG&A coverage of 47.9% in 2023, 148.4% in 2024 and about 159% in 2025, alongside the 1H26 earnings recovery. The discussion's 120%-140% and 100%-120% coverage ranges are portfolio-monitoring markers, not published agency thresholds.

The answer argued that cost reduction alone would be insufficient. A credible response would combine slower financing-note and balance-sheet growth, reduced new illiquid or high-risk deployment, stronger liquidity allocation, earnings retention or reduced distributions, targeted cost controls, and HFG capital support only if those actions cannot preserve adequate capital. It described continued risk-asset expansion while coverage approaches 100%-120% as the key behavioural failure.

Credit implication. A cyclical profit correction remains more manageable if management slows capital consumption and retains earnings early. The risk becomes medium-term rating relevant when low coverage, persistent PF/valuation losses, falling adjusted capital and continued growth in non-matched funding or illiquid assets reinforce each other. The discussion's strongest warning configuration is coverage near 100%, ongoing risk-asset growth, distributions to the parent and delayed recapitalisation.

Doubts and unconfirmed items. No explicit management cost trigger, earnings-coverage target, risk-asset-growth ceiling, stress dividend policy or capital-injection commitment was verified. The degree to which SG&A can be adjusted within one or two quarters is also unconfirmed.

4. Monitoring / Next Check

The next review should use primary disclosures and original rating-agency materials to test the discussion's warning lines rather than treat them as established facts. The highest-value checks are the following:

Candidate Items For issuer_notes.md

The following are candidates for later consideration only; issuer_notes.md has not been changed.

Candidate item Ongoing check and credit relevance Originating Q&A
Correlated PF and alternative-investment migration Monitor whether PF, bridge, guarantee and overseas-real-estate exposures migrate together and whether provisioning keeps pace. Correlation could turn an earnings issue into capital and funding pressure. Q&A 3.1
Wholesale-funding restoration capacity Monitor whether short-term funding growth weakens adjusted liquidity and increases reliance on group liquidity or asset monetisation. Persistent reliance could impair standalone liquidity flexibility. Q&A 3.2
Growth restraint in short-term financing Confirm whether management slows financing-note and risk-asset expansion when capital or liquidity buffers weaken. This is the principal behavioural test of risk appetite. Q&A 3.3
Timeliness and scale of HFG support Monitor actual support under stress and evidence of HFG's continued strategic commitment. Delayed or inadequate support would affect both liquidity and the group-status component of credit quality. Q&A 3.4
Earnings protection before capital pressure Monitor whether weaker recurring earnings lead to timely cost, risk-growth and capital-retention measures before loss absorption deteriorates. Q&A 3.5

5. Unverified / Pending Items

The external discussion supplied potentially useful data points and source readings, but this report does not independently verify them. The most material pending issue is exposure content: detailed PF, bridge-loan, guarantee, proprietary-investment and FVTPL positions, their seniority and collateral, their loss classification, and their linkage to regulatory risk requirements remain to be confirmed from primary Hana Securities disclosures.

Liquidity conclusions also remain provisional. The discussion cited a narrow March 2026 adjusted liquidity cushion, but did not establish the corresponding June position, actual funding tenor, haircut trends, collateral encumbrance, rollover performance or whether group facilities are committed and used only as ordinary treasury tools. The presence of HFG support expectations should not be read as a contractual guarantee for Hana Securities debt.

Finally, the proposed loss, capital and coverage warning zones are analytical constructs from the SSC discussion. Original rating-agency reports should be obtained before assigning them any formal rating significance.

6. Reference Context