Seoul Office And Atlanta Branch Will Drive Future Stability

Key Takeaways

• Geographic and strategic expansion into Korean and U.S. markets, alongside SBA loan growth, aims to bolster revenue and diversify income streams.
  
• Enhancing deposit growth, particularly noninterest-bearing, to improve net interest margins and provide a low-cost funding advantage.
  
• Economic uncertainty, tariff impacts, and elevated interest rates may constrain loan demand and growth, potentially impacting Hanmi Financial's revenue and earnings stability.

Catalysts

Operates as the holding company for Hanmi Bank that provides business banking products and services in the United States.

• The expansion into the Korean market with the establishment of a representative office in Seoul has increased visibility and customer interest, particularly among midsized companies. This expansion is likely to drive future revenue growth as Hanmi expands its customer base among Korean firms looking to operate in the U.S.
  
• Hanmi's focus on strong deposit growth, especially in noninterest-bearing demand deposits, is expected to enhance net interest margins in the future. With a significant increase in deposits from U.S. Korean Corporates, this could improve earnings by providing a low-cost funding base.
  
• The strategic hiring of additional banking talent to expand the C&I (Commercial and Industrial) business and target verticals suggests Hanmi is positioning for increased loan production and revenue growth by diversifying and expanding its loan portfolio away from CRE (Commercial Real Estate).
  
• Hanmi's continued success and focus on SBA (Small Business Administration) loan growth and sales are expected to diversify revenue streams, offering higher margins and fee income, contributing to future earnings stability and growth.
  
• Geographic expansion, such as opening a new branch in the Atlanta market where there is a large Korean-American community, is anticipated to boost loan and deposit growth, enhancing revenue prospects in a region with significant potential for Korean manufacturing investments, particularly in industries like automotive and clean energy.

Hanmi Financial Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Hanmi Financial's revenue will grow by 13.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 27.7% today to 30.0% in 3 years time.
• Analysts expect earnings to reach $100.5 million (and earnings per share of $3.33) by about May 2028, up from $64.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.5x on those 2028 earnings, down from 10.8x today. This future PE is lower than the current PE for the US Banks industry at 11.0x.
• Analysts expect the number of shares outstanding to decline by 0.72% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Hanmi Financial Future Earnings Per Share Growth

Risks

• The uncertainty in the macroeconomic environment, including potential tariff impacts, could soften loan demand in the latter half of the year, potentially impacting revenue and overall earnings.
  
• There is concern over a commercial real estate loan that has been downgraded to nonperforming status, which could indicate risk in the portfolio and impact net margins.
  
• The continued elevated interest rate environment may impact refinancing activities and potentially constrain loan growth, affecting overall revenue and earnings.
  
• While Hanmi is focused on expanding its Corporate Korea deposit base, heightened levels of economic uncertainty and tariff issues could hamper growth in this area, potentially impacting revenue from deposits.
  
• The bank's exposure to office property loans in its syndicated loan book, amid ongoing challenges in the office sector, could pose a risk to the portfolio quality and future earnings stability.

Valuation

• The analysts have a consensus price target of $27.5 for Hanmi Financial based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $335.1 million, earnings will come to $100.5 million, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 6.2%.
• Given the current share price of $23.14, the analyst price target of $27.5 is 15.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.