"No Cap on Shareholder Returns, Linked to ROE and Growth Rate"... Shinhan Financial Unveils Value-Up 2.0

Early Achievement of Previous Targets, Including 50% Shareholder Return Rate

New Standards Linked to ROE and Growth Rate Introduced

Three Years of Tax-Exempt Dividends Starting This Year... DPS to Increase Over 10% Annually

Shinhan Financial Group has introduced new value-up standards linked to profitability indicators such as ROE (Return on Equity) and growth rate, following the early achievement of its previous value-up goals, including a 50% shareholder return rate. The group also announced plans to implement tax-free dividends for three years starting from this year’s settlement and to increase the dividend per share (DPS) by more than 10% annually.

On April 23, Shinhan Financial unveiled its new corporate value enhancement initiative, dubbed ‘Shinhan Value-Up 2.0’.

This announcement comes as the company has achieved its previously set corporate value enhancement goal of a 50% shareholder return rate ahead of schedule and has rapidly executed its share buyback and cancellation plan. As a result, the price-to-book ratio (PBR) has normalized, leading to a growing need to present new shareholder return standards.

The new plan, which will apply for three years from 2024 to 2028, marks a shift from the previous approach of setting individual numerical targets. Instead, it introduces a formula for shareholder return rate based on managing an appropriate Common Equity Tier 1 (CET1) ratio, which is linked to ROE and growth rate. This is designed to establish a predictive and sustainable system in which shareholder returns increase in tandem with the group’s growth.

Specifically, the value-up target has been updated from the previous “50% shareholder return rate” to a new standard of “unlimited shareholder return rate linked to ROE and growth rate.” The shareholder return rate will be determined by connecting the elevated target of “ROE of 10% or higher” with the growth rate. The growth rate will take into account the increase in recurring capital and risk-weighted assets (RWA), and the board of directors will determine the appropriate balance between market capital supply and shareholder returns. For example, if the target ROE is 10% and the growth rate is 4–5%, the shareholder return rate is expected to be 50–60%. To ensure the stability of shareholder returns, the board will review the appropriateness each year.

Additionally, to gradually strengthen the competitiveness of non-banking group subsidiaries based on the bank’s stable profit foundation, Shinhan Financial will reallocate capital to each subsidiary based on Return on Capital (ROC). This will be linked with group-wide performance measurement, evaluation, and compensation systems, ultimately aiming to improve ROE.

The tax-free dividend policy will also begin this year. It will be maintained for three years from this year’s settlement, with remaining funds used to carry out the existing plan to repurchase and cancel more than 50 million treasury shares. While maintaining a quarterly equal dividend policy, the group will expand the scale of dividend per share by more than 10% annually.

Jang Junghoon, Executive Vice President of Finance at Shinhan Financial Group, said, “This plan is meaningful not only for setting a shareholder return rate target but also for establishing a sustainable virtuous cycle where the group’s growth and shareholder returns reinforce each other. Going forward, we will continue to enhance shareholder value based on predictable shareholder return systems and intrinsic corporate value growth through improved ROE.”

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