NH NongHyup Bank is pursuing a rights offering worth 500 billion won ($365 million). Through this capital expansion, the bank plans to increase corporate lending and grow to the scale of Korea's four major commercial banks.
According to financial industry sources on Wednesday, NH NongHyup Bank will hold a board meeting in May to approve the rights offering. A source familiar with the matter said, "Internal meetings for the rights offering have recently been held," adding that "a capital increase of 400 billion to 500 billion won, similar to last year, is under review."
NH NongHyup Bank previously carried out a 400 billion won rights offering in May last year. It came three years after the bank raised 1.2 trillion won through a shareholder-allocated rights offering in February 2022.
Once this latest offering, pursued about a year after the last one, is completed, NH NongHyup Bank's Common Equity Tier 1 (CET1) capital will increase, which is expected to help improve capital adequacy metrics. The CET1 ratio is a key indicator of a financial institution's ability to absorb losses. For banks to expand risk-weighted assets (RWA) such as corporate loans, CET1 must be sufficiently backed.
NH NongHyup Bank has managed its CET1 ratio in the 15 percent range. However, the ratio, which stood at 15.43% at the end of 2023, fell to 14.75% at the end of 2024. It briefly rebounded after the rights offering but declined again to 15.08% at the end of the first quarter this year. The move for additional capital expansion is interpreted as a response to growing concerns that the ratio could fall below 15% within the year.
"Typically, when a bank increases capital by 1 trillion won, it can take on up to 10 trillion won in additional RWA," a bank credit official said. "The rights offering appears to be an option to stably expand corporate-focused credit supply while maintaining capital adequacy."
Through this capital increase, NH NongHyup Bank is expected to accelerate asset growth centered on corporate loans. With growth centered on household loans facing limits, the bank's strategy is to expand productive finance that supports the real economy, including advanced industries, exporters, and mid-sized and small and medium-sized enterprises. NH NongHyup Financial Group has set a goal of investing 93 trillion won in productive finance over five years.
"This is a move to simultaneously expand the bank's scale and profit base by leading with productive finance," a financial industry official said.
The expansion of corporate credit is already reflected in the numbers. NH NongHyup Bank's outstanding corporate loan receivables grew from 136.12 trillion won at the end of 2023 to surpass 140 trillion won in 2024, and further increased to 148.92 trillion won at the end of last year. This year, driven by expanded productive finance supply, the figure reached 151.08 trillion won at the end of the first quarter, surpassing the 150 trillion won mark.
NH NongHyup Bank has managed stable earnings while growing corporate credit. First-quarter interest income was 2.0066 trillion won, up 1.3% from 1.9801 trillion won a year earlier. Net profit also edged up 0.6% to 557.7 billion won from 554.4 billion won.
Its size is already comparable to the four major commercial banks. Based on first-quarter net profit, it ranked fourth after Shinhan Bank (1.1571 trillion won), Hana Bank (1.1042 trillion won), and KB Kookmin Bank (1.1010 trillion won), pushing Woori Bank (522 billion won) down the list. Financial industry observers say that if this capital expansion leads to further asset growth, the gap with the top-tier banks could narrow even further.
