[Click eStock] Shinhan Financial Group: Accelerated Profit Recovery at Securities Subsidiary... Target Price Raised

Target Price Raised by 6.1% from Previous Level

On April 2, KB Securities raised its target price for Shinhan Financial Group from 115,000 won to 122,000 won, citing the accelerated profit recovery of its securities subsidiary. The investment rating was maintained at 'Buy'.

Kang Seunggeon, a researcher at KB Securities, stated, "With rising market interest rates and growth centered on corporate loans, the net interest margin (NIM) in 2026 is expected to improve by 5 basis points year-on-year (1bp = 0.01 percentage point), continuing the margin improvement cycle. The increase in stock market trading volume is also expected to accelerate the profit recovery of the securities subsidiary. Although there are concerns of higher delinquency rates in the second half due to inflationary pressure caused by a surge in oil prices, this is expected to be offset by increased net interest income. We are raising our consolidated net profit forecast for this year by 1.6% to 5.65 trillion won," he explained.

The growth in net interest income from the banking subsidiary and the normalization of the securities subsidiary's performance are expected to be the main drivers of profit growth this year. Kang noted, "The securities subsidiary's contract market share reached 9.0% in the first quarter, and considering an average commission rate of 3.2 basis points, first-quarter brokerage commission income is projected to reach 241.8 billion won, a 100.6% increase from last year's quarterly average of 120.6 billion won." He maintained Shinhan Financial Group as his top pick among financial holding companies and banks.

Shinhan Financial Group's first-quarter results are expected to meet market forecasts. Kang said, "First-quarter consolidated net profit attributable to controlling shareholders is expected to be 1.53 trillion won, in line with the consensus (the securities firms' average forecast). This would represent an increase of 2.8% year-on-year, with the expected return on equity (ROE) at 10.5%," he said.

First-quarter won-denominated loans are forecast to grow 1.4% quarter-on-quarter, led by large corporations, and the bank’s NIM is expected to rise by 1 basis point, resulting in a 0.8% increase in group net interest income compared to the previous quarter. Kang analyzed, "Although bond valuation gains are likely to remain weak due to the impact of rising market interest rates, group non-interest income is projected to increase by 71.9% thanks to higher commission income from the securities subsidiary. The group’s cost of credit ratio (CCR) is expected to be 40 basis points, similar to the first quarter of last year, while the group’s common equity tier 1 (CET1) ratio is forecast to fall to 13.1% from the previous quarter. This is due to the increase in risk-weighted assets (RW) for equities resulting from a rise in the exchange rate and the application of Basel III transitional rules," he said.

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