[Click eStock] "Shinhan Financial Group Strengthens Non-Banking Sector... Target Price Up 6%"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] Shinhan Financial Group maintained a buy rating on IBK Investment & Securities on the 11th and raised the target price by 5.9% to 55,000 KRW.

In the second quarter, Shinhan Financial Group's consolidated net profit was 1.25 trillion KRW, a 5% increase compared to the first quarter. The cumulative consolidated net profit for the first half of the year reached a record high of 2.44 trillion KRW, up 35% compared to the first half of last year. While the disappearance of additional COVID-19 related provisions from last year had an effect, the increase in interest income and non-interest income was also analyzed to have had a positive impact. Interest income and non-interest income increased by 8.3% and 13.1%, respectively, compared to one year ago.

Kim Eun-gap, a researcher at IBK Investment & Securities, said, “Not only the topline profit growth but also the decline in the CIR ratio through cost management and the downward stabilization of credit loss costs are positively influencing performance improvement,” adding, “The CIR has been gradually decreasing every year, showing the low 40% range, and the credit loss cost ratio recorded 0.2%, lower than 0.29% last year excluding COVID-19 provisions.”

The net profit of the non-bank sector in the first half reached a record high of 1.22 trillion KRW, a 68% increase compared to the same period last year, with significant performance improvements from Shinhan Investment Corp., Shinhan Card, and Orange Life. Researcher Kim Eun-gap stated, “The profit ratio of the non-bank sector is 47%, showing a balanced figure,” and added, “With the improvement in the non-bank sector’s performance, the group’s non-interest income also increased by 13% cumulatively in the first half.”

The consolidated net profit forecast for this year was revised upward by 6.5%, from 4.1 trillion KRW to 4.34 trillion KRW. Researcher Kim Eun-gap said, “The ROE forecast is 9.3%, and the PBR of 0.43 times is an attractive level relative to profitability,” and added, “The announcement regarding the dividend as of the end of June is expected to be released this week, and it seems likely that an appropriate level of dividend will be implemented to establish quarterly dividends rather than a temporarily attractive level.”

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