[Click eStock] "1Q Smooth Sailing for Shinhan Financial Group... Strong Performance in Both Banking and Non-Banking"

1Q Jibae Net Profit 1.2 Trillion Won... 12% Above Expectations
Annual Net Profit Forecast 4 Trillion Won This Year... 17% Increase YoY

[Asia Economy Reporter Minwoo Lee] Shinhan Financial Group posted earnings in the first quarter of this year that exceeded market consensus. This is attributed to solid performance from both banking and non-banking sectors despite increased private equity-related expenses and selling, general and administrative expenses.

On the 26th, Korea Investment & Securities maintained a 'Buy' rating and a target price of 50,000 KRW for Shinhan Financial Group, citing these factors. The previous trading day's closing price was 37,450 KRW.

Shinhan Financial Group's first-quarter net income attributable to controlling interests was 1.1919 trillion KRW, surpassing consensus estimates by 12%. Both banking and non-banking divisions showed robust results. The bank's net interest margin (NIM) in Q1 rose by 5 basis points (bp; 1bp=0.01%) to 1.39% compared to the previous quarter. The bank's won-denominated net interest spread (NIS) increased by 8bp during the same period. Although loan yields fell by 3bp, deposit costs dropped by 10bp.

As core liquidity deposits increased by 6.5%, the proportion of low-cost deposits in Q1 improved by 1.4 percentage points (P) to 48.1% compared to the previous quarter. Despite the loan-to-deposit ratio falling by 1.4%P to 96.8%, the NIM rose by 5bp, which is considered encouraging.

Won-denominated bank loans increased by 2.5% quarter-on-quarter. Household loans grew by 1.9% during the same period, mainly driven by mortgage and jeonse (key money deposit) loans, while corporate loans increased by 3.1%, primarily in small and medium-sized enterprise lending.

The group's quarterly loan loss ratio was 0.22%, down 18bp from the previous quarter, indicating a healthy level. Even considering some increase in COVID-19 related provisions from Q2 onwards, the annual loan loss ratio is expected to be 0.29%, below last year's 0.41%.

Group non-interest income rose 55% quarter-on-quarter. Fee income increased by 9% during the same period, mainly from card services, securities custody, and leasing. Additionally, gains from securities and foreign exchange/derivatives increased by 270.3 billion KRW quarter-on-quarter due to a base effect from valuation losses in the previous quarter. By subsidiary, card, financial investment, life insurance, and capital businesses all posted net income increases ranging from 23% to 260% quarter-on-quarter, demonstrating solid performance. This year’s net income is projected at 4 trillion KRW, a 17% increase from last year.

Baek Doosan, a researcher at Korea Investment & Securities, stated, "The non-banking net income ratio in Q1 was 48%, up 14 percentage points year-on-year. With a well-established system including Global Investment Banking (GIB) and proprietary asset management (GMS), supported by favorable market conditions, annual net income is expected to reach 4 trillion KRW, a 17% increase from last year." He added, "Currently, there is room in the double leverage ratio, and considering last year’s capital policy stance, expectations remain valid for future mergers and acquisitions (M&A), expansion of non-banking earnings, and improvements in shareholder returns."

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