Hanwha Investment & Securities is set to become a securities firm with over 3 trillion won in equity through a capital increase of up to 900 billion won. While this move is expected to significantly improve its financial stability and strengthen its foundation for entering the comprehensive financial investment business, analysts indicate that it will take time before the firm meets the requirements for such designation.
According to NICE Credit Rating on October 1, if Hanwha Investment & Securities completes its planned 500 billion won capital increase and issues up to 400 billion won in new capital securities, its equity is projected to exceed 3 trillion won by the end of the year.
On September 30, Hanwha Investment & Securities decided to proceed with a 500 billion won third-party allocation capital increase. The largest shareholder, Hanwha Asset Management, will acquire 250 billion won worth of common stock, while Hanwha Life Insurance will purchase 250 billion won worth of convertible preferred stock. The new share issuance price is set at 5,000 won per share, with the payment date scheduled for October 8.
The firm is also planning to issue up to 400 billion won in new capital securities by the end of the year. If the capital increase and the issuance of new capital securities are reflected, the separate equity is expected to rise from 2.2674 trillion won at the end of June to 3.1674 trillion won.
However, even after the capital increase, the firm will not immediately meet the requirements for designation as a comprehensive financial investment business. This is because new capital securities are excluded from the calculation of equity for such designation. To be designated, the firm must maintain equity of over 3 trillion won for two consecutive fiscal years based on the most recent financial statements.
NICE Credit Rating stated, "Since the amount of new capital securities is excluded from the equity calculation for comprehensive financial investment businesses, additional profit accumulation or capital increases will be necessary to meet the related requirements," adding that it is expected to take some time before the firm can enter this sector.
The capital adequacy is expected to improve significantly. If both the 500 billion won capital increase and the 400 billion won in new capital securities are fully reflected, the net capital ratio is projected to rise from 835.2% at the end of June to 1502.3%, while the adjusted net capital ratio is expected to increase from 237.7% to 333.5%.
NICE Credit Rating anticipates that this capital increase will enhance Hanwha Investment & Securities' operational capacity and strengthen its foundation for entering the comprehensive financial investment business, positively impacting its competitiveness and revenue base.
However, there remains volatility in terms of profitability. The firm's net operating revenue for the first half of this year was 305.8 billion won, an increase from 225.5 billion won in the same period last year, but its net profit fell to 55.7 billion won from 61.7 billion won. The proprietary trading profit also turned from a gain of 37.9 billion won in the previous year to a loss of 31.3 billion won in the first half of this year.
NICE Credit Rating noted, "While profitability has shown signs of recovery since 2025, the high volatility in the proprietary trading sector and the unfavorable business environment in the investment banking sector, particularly in real estate finance, remain burdensome factors," adding that it will monitor the level of profitability from the expanded capital and the firm's entry into the comprehensive financial investment business.
* This article has been translated by AI.
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