Shinhan joins '5 trillion won club' for first time
Shareholder returns set at record 3 trillion won
ROE target of 10% may be hit ahead of schedule
Shinhan Financial Group posted more than 5 trillion won ($3.78 billion) in net profit through the first three quarters of this year, surpassing its full-year earnings from last year and becoming the first Korean financial group to enter the so-called "5 trillion won club." The group also announced a record total shareholder return of about 3 trillion won for the year, and the likelihood of achieving its return on equity target of 10 percent — originally set for next year — by year-end has grown considerably.
Shinhan Financial said Tuesday its cumulative net profit for the period reached 5.03 trillion won, exceeding last year's full-year net profit of 4.97 trillion won in just three quarters. Net interest income rose 7.9 percent year-on-year to 9.35 trillion won, while non-interest income climbed 8.2 percent to 3.43 trillion won, driven by higher fee income including securities custody commissions.
On a standalone third-quarter basis, however, net profit fell 12.9 percent quarter-on-quarter to 1.58 trillion won. While interest income increased, non-interest income dropped 45.5 percent from the previous quarter. The group attributed the decline to lower custody fee income amid a slowdown in securities trading volume, reduced gains on securities holdings, and the impact of rising interest rates.
Capital adequacy indicators remained stable. As of the end of September, the group's preliminary BIS capital ratio stood at 15.99 percent and its common equity tier 1 ratio at 13.62 percent, both above regulatory guidance levels. Shinhan Financial noted that paying 693.3 billion won to acquire Lotte Non-Life Insurance is expected to lower its CET1 ratio by approximately 0.19 percentage points, but said it would maintain sufficient capital buffers to continue its shareholder return policy after the acquisition.
The group set its total shareholder return for this year at a record approximately 3 trillion won, up about 20 percent from 2.5 trillion won last year. The figure combines 1.6 trillion won in share buybacks and cancellations with an estimated 1.4 trillion won in annual cash dividends. As part of this plan, the group approved a cash dividend of 740 won per share for the third quarter and a total of 450 billion won in share buybacks. Of the buyback amount, 200 billion won will be executed in the fourth quarter of this year and the remaining 250 billion won in January next year, with each tranche counted toward the respective year's shareholder return.
The group's annualized return on equity rose 0.9 percentage points year-on-year to 11.9 percent, while its return on tangible common equity also gained 0.9 percentage points to reach 13.4 percent. With interest and non-interest income both growing steadily, Shinhan Financial said it is increasingly likely to achieve its ROE target of 10 percent or above by year-end, ahead of the original goal of next year.
Among key subsidiaries, Shinhan Bank posted cumulative net profit of 3.68 trillion won through the third quarter, up 9.8 percent year-on-year, supported by improved net interest margins and loan asset growth. On a standalone third-quarter basis, net profit fell 5.9 percent quarter-on-quarter to 1.23 trillion won, weighed down by lower non-interest income and higher loan-loss provisions.
Won-denominated loans at the end of September grew 3.3 percent from the end of last year. Corporate loans rose 4.7 percent, with large-company lending up 12.3 percent and loans to small and medium-sized enterprises up 2.4 percent. Household loans increased 1.5 percent overall, as mortgage lending rose 2.3 percent. Both the delinquency ratio and the substandard-and-below loan ratio stood at 0.29 percent as of end-September.
Shinhan Card's cumulative net profit through the third quarter rose 27.7 percent year-on-year to 485.8 billion won. Shinhan Securities saw its cumulative net profit surge 78.9 percent to 642.9 billion won, driven by higher fee income amid a more active capital market. On a standalone third-quarter basis, however, Shinhan Securities' net profit fell 77.4 percent quarter-on-quarter to 65.3 billion won, hurt by a slowdown in trading volume and lower product management returns amid rising interest rates. Shinhan Life's cumulative net profit declined 18.5 percent year-on-year to 419.4 billion won.
Meanwhile, Shinhan Financial's global operations — widely regarded as a key strength — continued to expand at core markets including Vietnam and Japan. Despite heightened interest rate and exchange rate volatility, the group's overseas net profit through the third quarter rose 7.4 percent year-on-year to 698.3 billion won, accounting for 13.9 percent of the group's total net profit.
"We will continue sustainable growth based on profitability-focused portfolio management and efficient capital allocation," said Jang Jeong-hun, Shinhan Financial's chief financial officer. "We will also strengthen the foundation for mid- to long-term improvement in group profitability through the acquisition of the non-life insurer and the normalization of our insurance business."
forest@heraldcorp.com
