Shinhan Financial Group Reports Record First Half Net Profit of 2.7208 Trillion Won

[Asia Economy Reporter Yu Je-hoon] Shinhan Financial Group posted a record-high net profit of 2.7 trillion KRW in the first half of this year.

Shinhan Financial announced on the 22nd that its net profit for the first half of this year reached 2.7208 trillion KRW, an increase of 277 billion KRW (11.3%) compared to the same period last year. The net profit for the second quarter was 1.3204 trillion KRW, up 5.5%.

A Shinhan Financial official stated, "The profit and loss in the second quarter decreased compared to the previous quarter due to one-time expenses such as COVID-19 and economic response provisions, but excluding these, the recurring net profit maintained a favorable level despite some contraction in non-interest income." Regarding dividends, the official said, "We regularized quarterly dividends to increase predictability of shareholder return policies, such as paying a quarterly dividend of 400 KRW in the first quarter," and added, "The dividend for the second quarter will be decided at the board meeting next month."

Interest Income Increased 17% to 5 Trillion KRW in First Half... Non-Interest Income Weak

The growth in performance was driven by interest income. Shinhan Financial's interest income in the first half reached 5.1317 trillion KRW, a 17.3% increase compared to the same period last year. For the second quarter alone, it rose 6.3% to 2.6441 trillion KRW. The net interest margin (NIM) also improved by 9 basis points (bp) for the group to 1.98% and by 12 bp for the bank to 1.63% in the second quarter. Shinhan Financial explained, "This is due to increased loan demand from corporate clients following the rise in market interest rates and growth in loan assets centered on high-quality borrowers."

Non-interest income was sluggish. Non-interest income for the first half was 1.8415 trillion KRW, down 7.7%, and the second quarter non-interest income was 855.3 billion KRW, with a larger decline of 13.3%. Although fee income, a core profit source, increased, gains from securities decreased due to rising market interest rates.

Global profit and loss improved. The group's total global profit for the first half rose 44.3% to 283.2 billion KRW. The company explained this was due to balanced growth in interest income and fee income along with an increase in high-quality assets. In particular, Shinhan Vietnam Bank and SBJ Bank led the group's global performance by posting net profits of 86.6 billion KRW and 51.8 billion KRW, up 50.2% (29 billion KRW) and 32.5% (12.7 billion KRW) respectively compared to the same period last year.

Loan loss expenses expanded significantly. Shinhan Financial's loan loss expenses for the first half surged 67.6% to 601.8 billion KRW. This was due to conservative provisioning, including additional provisions related to COVID-19 and economic responses. Shinhan Financial stated, "The group's loan loss expense ratio increased by 11 bp to 0.31%, but excluding the effect of additional provisions, it remains low at 0.16%. Since 2020, additional provisions related to COVID-19 and economic responses total 881.3 billion KRW, maintaining a sufficient buffer against economic uncertainties."

Securities Sluggish but Bank Performed Well, Card and Others Held Up

By affiliate, the securities sector showed noticeable weakness. Shinhan Investment Corp.'s net profit for the first half was 189.1 billion KRW, down 41.4% year-on-year. Despite improvements in the IB division's performance, securities brokerage fees declined due to reduced trading volume amid a bearish stock market, and gains from securities decreased due to rising interest rates.

On the other hand, the banking sector performed well. Shinhan Bank's net profit for the first half reached 1.683 trillion KRW, up 22.8% compared to the same period last year, accounting for more than half of the group's total net profit. Interest income increased 22.9% (724 billion KRW) due to asset growth centered on corporate loans and NIM improvement, while non-interest income decreased 12.8% (48.5 billion KRW) due to a decline in securities-related gains despite an increase in fee income.

Shinhan Card also posted a net profit of 412.7 billion KRW, up 12.4%. Since this result includes proceeds from real estate sales, the actual performance was roughly flat. Shinhan Financial said, "Despite regulatory tightening, rising funding costs, and increased credit risk, the company performed well due to growth in operating assets and sales through business diversification."

Additionally, Shinhan Life's net profit decreased 10.2% to 277.5 billion KRW, while Shinhan Capital's net profit rose 55.1% to 203.6 billion KRW due to increased loan assets. Shinhan Financial stated, "In an environment of rising interest rates and inflation uncertainties, we will do our best to create a virtuous cycle in the financial environment by supporting small business owners and young people, contributing to the future growth of customers and society, and mitigating systemic risks in the mid to long term to enhance corporate value."

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