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Hana Financial vows to boost dividends as capital buffer grows

Hana FinancialGroup Inc. pledged to return more of its profit to investors individends after a reduction in risk-weighted assets freed up capital, eventhough second-quarter earnings slumped.

The company's BIS capital ratio rose to 14.54% as of June 30from 13.43% three months earlier and from 12.52% a year earlier, the financialconglomerate saidJuly 22 as it reported a 6.1% decline in second-quarter net profit. Its commonequity Tier 1 capital ratio climbed to 11.44% from 10.38% at the end of thefirst quarter and from 9.44% as of June 30, 2015.

Hana Financial built up its capital buffer by trimmingrisk-weighted assets by 8.9% in the six months to June 30. During the period,its KEB Hana Bankunit reduced loans to large companies carrying higher risk weightings. Inaddition, South Korea's financial regulators in June approved Hana Financial'srequest to use an internal ratings-based approach to assessing assets,resulting in the group assigning lower risks to credit card loans.

Additional capital is allowing Hana Financial to boost itspayout ratio, which has been lower than its rivals'. Hana Financial raised itsinterim dividend to 9.57% of net profit for the six months through June from5.96% for the prior-year period.

In 2015, Hana Financial's dividend payout ratio was 21.74%,compared to Shinhan FinancialGroup Co. Ltd.'s 25.06% and KB Financial Group Inc.'s 22.39%, according to SNLFinancial data.

"With the confidence, we will try to increase ourdividend payout ratio to a similar level to those of our peers in order to givemore of our profit back to our shareholders," Hana Financial CFO KwarkCheol-seung said during an earnings conference call.

To make up for reduced lending to big corporate borrowers,Hana Financial is turning to smaller businesses to meet its 1% loan growthtarget for 2016. Its loan book shrank 3% from six months earlier, Kwark said.

As of July 21, US$1was equivalent to 1,138.16 won.