Shinhan posts record quarterly profit, eyes 'W5tr club'

Shinhan Financial Group posted a record quarterly net profit in the second quarter of this year. Non-interest income surged on the back of a buoyant stock market, driving earnings growth despite domestic and external uncertainties including household lending regulations and instability in the Middle East. The strong first-half performance has fueled expectations that the group will join the "5 trillion won club" for the first time in its history.

Shinhan Financial said Thursday that its second-quarter net profit reached 1.82 trillion won ($1.23 billion), up 12.2% quarter-on-quarter and 17.5% from the same period last year — the highest quarterly result in the group's history. Cumulative net profit for the first half came to 3.44 trillion won, a 13.3% increase from a year earlier. The strong first-half showing has raised the likelihood that the group will surpass last year's full-year earnings of 4.97 trillion won and break into the 5 trillion won club.

The primary driver of the record result was stock market growth. A rally in equities lifted Shinhan Investment's earnings and produced a sharp improvement in non-interest and non-banking income. Second-quarter non-interest income jumped 22% quarter-on-quarter to 1.45 trillion won, and rose 14.6% from the same period a year earlier. Higher brokerage fee income and gains on securities holdings were the main contributors.

The non-banking segment's share of group earnings also hit an all-time high. Non-banking operations accounted for 35% of first-half net profit, up 5.3 percentage points from a year earlier. Non-interest income made up 30% of total income over the same period, an increase of 2.2 percentage points.

Second-quarter interest income rose 9.4% year-on-year to 3.13 trillion won, maintaining steady momentum. The net interest margin, a key measure of lending profitability, improved from 1.89% to 1.93% during the period. Capital adequacy indicators remained stable. Shinhan Financial's common equity tier 1 ratio stood at 13.43%, above the financial regulator's recommended level, while the group's preliminary BIS capital adequacy ratio was 15.74%.

Shinhan Bank, the group's core subsidiary, continued its steady growth. The bank's second-quarter net profit rose 12.5% quarter-on-quarter to 1.3 trillion won, while first-half cumulative net profit climbed 8.5% year-on-year to 2.46 trillion won. Interest income grew on the back of an improved net interest margin and asset expansion led by corporate lending, while selling and administrative expenses and loan-loss provisions were kept under control.

Among subsidiaries, Shinhan Investment was the biggest beneficiary of the capital market boom. Its first-half net profit surged 123.1% year-on-year to 577.7 billion won, driven by higher brokerage commissions on increased equity trading volumes and improved gains from product operations. Second-quarter net profit edged up 0.3% quarter-on-quarter to 289.3 billion won, sustaining its solid trajectory.

The buoyant capital market environment also benefited other financial investment subsidiaries. Shinhan Asset Management posted first-half net profit of 53.6 billion won, up 135.1% year-on-year, driven by growth in assets under management centered on exchange-traded funds. Shinhan Capital's first-half net profit rose 48.1% to 94.7 billion won, supported by more efficient funding costs and stabilized credit costs.

Results were mixed among major non-banking affiliates, however. Shinhan Card posted first-half net profit of 253.4 billion won, up 2.8% year-on-year, as higher card spending and lower credit costs supported a recovery. Shinhan Life recorded second-quarter net profit of 187.5 billion won, an 81.8% jump quarter-on-quarter, aided by valuation gains on securities holdings.

Meanwhile, Shinhan Financial's board resolved Thursday to pay a second-quarter dividend of 740 won per common share. The group also decided to acquire and cancel a total of 700 billion won worth of its own shares by October. As a result, cumulative share buybacks and cancellations this year will reach 1.4 trillion won, surpassing last year's full-year total of 1.25 trillion won.

Building on its "Shinhan Value-up 2.0" strategy, Shinhan Financial plans to improve return on equity and capital efficiency while strengthening its role in channeling funds to the real economy, underpinned by solid loss-absorption capacity and asset quality. The group also intends to enhance the consistency and predictability of its capital policy as it continues to pursue shareholder return initiatives.