[Click eStock] "Shinhan Financial Group, Expected to Escape Relative Stock Price Slump"

Meritz Securities Report

[Asia Economy Reporter Minji Lee] Meritz Securities maintained a buy rating and a target price of 51,000 KRW for Shinhan Financial Group on the 25th, expecting that any further stock price decline would be limited.

In the first quarter, Shinhan Financial Group's controlling shareholder net profit reached 1.4 trillion KRW, surpassing market estimates by 13.7%. Margins improved by 6 basis points, with corporate-centered loan growth of over 0.5% quarter-on-quarter and a low loan loss cost ratio (0.26%), leading to a significant improvement in the bank's profits. Non-bank subsidiaries also performed better than expected. Eun Kyung-wan, a researcher at Meritz Securities, explained, "Losses related to securities and insurance were inevitable due to unfavorable external conditions, but Cart and Capital made strong advances, largely offsetting the burden."

This year, the company's controlling shareholder net profit and ROE are estimated to increase by 18.5% and 0.9 percentage points respectively from the same period last year, reaching 4.76 trillion KRW and 9.7%. Unlike the past two years, there is little uncertainty about future performance due to factors such as a big bath of about 300 billion KRW related to financial product sales in Q4 last year and an additional 74.5 billion KRW provision for COVID-19 in Q1. The researcher added, "If the ongoing successful sale of Shinhan Financial Investment's Yeouido building is completed, there is potential for an additional upward revision of over 200 billion KRW."

Since the COVID-19 pandemic, Shinhan Financial Group has shown the weakest stock price performance among major banks due to various adverse factors. However, considering the normalization of profits centered on banking and securities, quarterly dividends (400 KRW), share buyback and cancellation (150 billion KRW), and valuations approximately 15% lower than competing banks, further stock price declines are expected to be limited.

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