Shinhan Financial Group Achieves 3.4 Trillion KRW Net Profit Last Year... Dividend Level to Be Decided Later (Comprehensive)

Last Year's Net Profit Increased by 0.3%... Achieving '3 Trillion Club' for 3 Consecutive Years
Reflecting Lime Investment Losses and COVID-19 Risks
Interest Income Based on Net Interest Margin Increased by 1.9% Year-on-Year

[Asia Economy Reporter Kwangho Lee] Shinhan Financial Group achieved a net profit of 3.4146 trillion KRW last year, marking its third consecutive year in the '3 trillion club.' This was the result of diversifying its global and non-bank profit bases, continuing a seven-year streak of net profit growth. Meanwhile, the recently controversial dividend level will be decided after further consideration.

Shinhan Financial Group announced on the 5th that the group's net profit for 2020 was 3.4146 trillion KRW, with a fourth-quarter net profit of 464.4 billion KRW. This represents a 0.3% increase compared to the previous year (3.4035 trillion KRW). Although it decreased by 59.4% compared to the previous quarter (1.1447 trillion KRW), considering the non-recurring expenses incurred in the fourth quarter, the group maintained solid performance for four consecutive quarters.

Interest income rose 1.9% year-on-year to 8.1551 trillion KRW, and non-interest income increased 7.9% to 3.3778 trillion KRW. Despite the low interest rate environment, robust asset growth continued, with growth in investment banking (IB), global proprietary asset management (GMS) non-interest sectors, and non-bank sectors such as card and capital businesses cited as key factors for the strong performance.

Large-scale provisions remain a regrettable aspect. In the fourth quarter alone, Shinhan Financial set aside 267.5 billion KRW related to Lime and 187.3 billion KRW due to COVID-19. As a result, fourth-quarter net profit was 464.4 billion KRW, down 8.5% year-on-year. The annual loan loss provision amounted to 439.8 billion KRW, a 46.3% increase from the previous year.

One of the main drivers of Shinhan Financial's strong performance last year was loan growth. Won-denominated loans showed balanced growth in both household and corporate loan sectors, achieving an annual growth rate of 10.6%. By sector, household loans grew 9.0%, and corporate loans grew 12.3%. In particular, loans to small and medium-sized enterprises increased by 14.1% annually, leading overall asset growth. This is interpreted as a result of increased funding demand from small and medium-sized businesses due to the spread of COVID-19, combined with the active implementation of financial support programs.

In the fourth quarter, the bank's net interest margin (NIM) recorded 1.34%, down 2 basis points (1bp=0.01%) from the previous quarter. However, due to stable funding operations based on profitability, the bank sector's interest income reached 7.843 trillion KRW, a 1.9% increase year-on-year.

The group's core business area, the global sector, saw a 14% decrease in net profit year-on-year due to provisions related to COVID-19 that were proactively set aside in the second quarter. However, as a result of focusing on strengthening profitability in the key market of Vietnam, the global sector's operating profit increased by 95.4 billion KRW year-on-year to 1.0124 trillion KRW. The capital markets divisions, GIB and GMS, grew by 33% and 125%, respectively.

In the fourth quarter, provisions related to Lime and COVID-19 were made mainly in the banking and card sectors. As a result, the group's loan loss cost ratio at the end of December was 39 basis points, up 12 basis points year-on-year. Excluding one-time non-recurring factors, it remained at 29 basis points, maintaining the previous year's level.

In 2020, the group's selling and administrative expenses slightly increased by 1.5% year-on-year due to higher employee-related costs. This included one-time factors from increased voluntary retirement costs at Shinhan Bank and Shinhan Investment Corp. in the fourth quarter. Excluding these, the expenses are still considered at an appropriate level. The operating expense ratios for the group and Shinhan Bank were 45.2% and 47.1%, respectively, among the highest in the financial sector.

By affiliate, Shinhan Bank and Shinhan Investment Corp. saw net profit declines due to loan loss provisions. Shinhan Bank's net profit last year was 2.0778 trillion KRW, down 10.8% year-on-year. During the same period, Shinhan Investment Corp. posted 154.8 billion KRW, a 29.9% decrease. Shinhan Card recorded 606.5 billion KRW, a 19.2% increase year-on-year. Insurance affiliates Shinhan Life (177.8 billion KRW) and Orange Life (297.3 billion KRW) increased by 43.6% and 118.7%, respectively.

A Shinhan Financial Group official emphasized, "The key feature of this performance is the continued stable generation of recurring income based on consistent execution of mid- to long-term strategies," adding, "In 2021, we plan to make it a year of achieving even more visible results based on this foundation."

This content was produced with the assistance of AI translation services.