Shinhan Financial Group Posts 3Q Net Profit of 1.5946 Trillion KRW...Strong Contender to Reclaim Leading Bank Status

Cumulative Record High in Q3... Impact of Shinhan Investment Corp. Headquarters Sale Profit

Shinhan Financial Group Headquarters Building

[Asia Economy Reporter Yu Je-hoon] Shinhan Financial Group is highly likely to reclaim its position as the leading bank in the third quarter of this year as well. Despite a decrease in non-interest income due to the sharp interest rate hikes this year, Shinhan Financial posted the highest quarterly and cumulative third-quarter earnings in its history, driven by the sale of real estate (headquarters building), improvement in the bank's net interest margin (NIM), and steady growth in non-bank sectors such as cards and capital.

◆ Likely to reclaim 'leading bank' status in the third quarter following the second quarter = Shinhan Financial Group announced on the 25th that its net profit for the third quarter reached 1.5946 trillion KRW, a 42.9% increase compared to the same period last year. The cumulative net profit for the first to third quarters of this year also rose 21.2% year-on-year to 4.3154 trillion KRW. This marks the highest cumulative third-quarter earnings in Shinhan Financial's history.

As a result, Shinhan Financial is expected to reclaim the leading bank position in the third quarter following the second quarter. According to securities consensus, the earnings of major financial holding companies are expected to be ▲ KB Financial Group 1.2709 trillion KRW ▲ Hana Financial Group 978.7 billion KRW ▲ Woori Financial Group 871 billion KRW.

The strong performance is attributed to resilience in interest income. Shinhan Financial's interest income in the third quarter increased by 2.7% from the previous quarter to 2.716 trillion KRW. Although funding costs rose in the non-bank sector, improvements in the bank's NIM and growth in loan assets centered on corporate loans drove this increase. In fact, the group's and the bank's NIMs for the third quarter were 2.00% and 1.68%, respectively, up 2 basis points (1bp=0.01%) and 5 basis points from the previous quarter.

The sale of Shinhan Investment Corp.'s headquarters building also significantly contributed to the increase in net profit. Excluding the pre-tax proceeds of 443.8 billion KRW from the sale of the Shinhan Investment Corp. headquarters, Shinhan Financial's net profit was 1.2728 trillion KRW.

However, non-interest income remained at 609.2 billion KRW, down 28.8% from the previous quarter due to the impact of rapid interest rate hikes and stock market downturn. Fee income decreased by 16.1% quarter-on-quarter due to declines in credit card, securities custody, and investment banking fees, while gains and losses related to securities fell 22.9% quarter-on-quarter due to valuation losses caused by rapid interest rate increases despite active loss mitigation efforts.

A Shinhan Financial official explained, "Despite sluggish non-interest income due to the sharp rise in interest rates in the third quarter, earnings increased quarter-on-quarter thanks to preemptive loss absorption capacity and capital efficiency efforts through the sale of non-operating assets such as the securities headquarters. Excluding the headquarters sale, recurring net income remained at a similar level to the previous quarter."

◆ Bank 'holds up well,' non-bank affiliates 'underperform' = By subsidiary, Shinhan Bank recorded a net profit of 909.4 billion KRW, up 10.9% from the previous quarter. Although non-interest income declined significantly due to losses related to securities, overall growth continued thanks to asset growth centered on corporate loans and NIM improvement. As of the end of last month, the size of won-denominated loans was 278.5 trillion KRW, up 2.7% from the end of last year. Household loans decreased by 3.1% due to regulatory tightening, but corporate loans increased by 8.6%. The delinquency rate and non-performing loan ratio were low at 0.20% and 0.25%, respectively.

On the other hand, most non-bank affiliates struggled due to the impact of interest rate hikes. Among credit finance subsidiaries, Shinhan Card's net profit fell 26.1% to 175 billion KRW, and Shinhan Capital's net profit decreased 17.1% to 78.8 billion KRW. Shinhan Investment Corp. posted a net profit of 381.3 billion KRW, up 350.9% quarter-on-quarter, but excluding gains from the headquarters sale, it remained at 59.5 billion KRW, down 29.6%.

Meanwhile, Shinhan Financial held a board meeting on the 6th and resolved to pay a common stock dividend of 400 KRW for the third quarter and to repurchase and retire treasury shares worth 150 billion KRW. Earlier, Shinhan Financial decided to regularize quarterly dividends as part of its shareholder return policy following the second quarter. A Shinhan Financial representative stated, "In preparation for increased market volatility such as interest rates and exchange rates, we are continuously working to mitigate systemic risks by enhancing risk management systems for vulnerable borrowers and strengthening group-level support to ensure a soft landing for financially marginalized groups. Additionally, through this treasury share retirement, we will retire a cumulative 300 billion KRW worth of treasury shares this year, and despite uncertain internal and external management environments, we are implementing differentiated shareholder return policies based on excellent capital adequacy and stable profit generation capabilities."

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