Shinhan Financial Group Posts 4.46 Trillion Won Net Profit Through Q3...On Track for 5 Trillion Won Annually

Shinhan Financial Group achieved a record-breaking performance, posting a net profit of 4.4609 trillion won for the first three quarters of this year. Despite a deteriorating business environment due to falling interest rates and tightened household loan regulations, the group managed to defend its interest income as loan assets increased. With the stock market boom, fee income from securities custody and other services also expanded, putting the group on the verge of joining the “5 trillion won club” in annual net profit for the first time in its history.

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On October 28, Shinhan Financial Group announced through a regulatory filing that its cumulative net profit for the third quarter of this year reached 4.4609 trillion won, up 10.3% from the same period last year. This marks the highest cumulative net profit ever recorded for the group up to the third quarter.

Chun Sangyoung, Vice President of Finance at Shinhan Financial Group, explained, “Despite a challenging external business environment, we maintained stable profit generation through balanced growth, expansion of fee income, and cost management.” However, he added, “In the fourth quarter, the expansion of interest income is expected to be limited due to margin pressure and a slowdown in household loan growth.”

Cumulative interest income for the third quarter was 8.6664 trillion won, a 2.0% increase from the same period last year. Although the group’s net interest margin (NIM) fell from 1.95% in the third quarter of last year to 1.90% this year due to lower interest rates, the increase in cumulative loan assets led to higher interest income. Non-interest income, driven by higher fee income and gains related to securities, reached 3.1692 trillion won on a cumulative basis, up 4.9%. Non-operating income for the third quarter totaled 115.2 billion won. This figure represents an increase of 478.6 billion won compared to the same period last year, as one-off expenses such as provisions for losses related to Hong Kong H-index equity-linked securities (ELS) in the first quarter of last year and equity method losses in the third quarter have now expired.

Net profit for the third quarter alone was 1.4235 trillion won, up 9.8% year-on-year but down 8.1% from the previous quarter’s record high of 1.5491 trillion won. Interest income was 2.9476 trillion won, a 2.9% increase from the previous quarter. Vice President Chun attributed this to “margin defense through efficient asset-liability management (ALM).” The group’s NIM rose from 1.89% in the second quarter to 1.90% in the third quarter. In addition, interest-bearing assets increased by 3.2% from the previous quarter, further boosting interest income. Non-interest income was 964.9 billion won, down 23.7% from the previous quarter. While fee income from capital market activities such as securities custody and investment banking offset the decline in credit card fee income, overall non-interest income decreased due to lower gains related to securities. Provisions for loan losses in the third quarter amounted to 439.6 billion won, a 30.1% decrease from the previous quarter.

Global profit for the third quarter was 218.8 billion won, a 0.5% decrease from the previous quarter. On a cumulative basis, global profit reached 650.3 billion won, up 12.4% from the same period last year. By country, cumulative profits were 205.4 billion won in Vietnam, 137 billion won in Japan, and 67.8 billion won in Kazakhstan.

By subsidiary, Shinhan Bank posted a cumulative net profit of 3.3561 trillion won for the first three quarters, up 8.2% year-on-year. For the third quarter alone, net profit was 1.0892 trillion won, down 4.3% from the previous quarter but still the highest ever for a third quarter. Interest income remained robust, and fee income from investment banking, fund sales, and bancassurance increased, although gains related to securities decreased. As of the end of September this year, won-denominated loans increased by 3.5% compared to the end of last year. Corporate loans grew by 2.3%, with both large corporations and small and medium-sized enterprises seeing balanced increases. Household loans rose by 5.1%, mainly driven by policy loans (28.5%). The bank’s own loans increased by 1.6%. Despite the falling interest rate environment, NIM rose from 1.55% in the second quarter to 1.56% in the third quarter.

Shinhan Card’s cumulative net profit for the third quarter was 380.4 billion won, a 31.2% decrease year-on-year, due to lower merchant fees, increased funding and credit loss costs, and expenses related to voluntary retirement. For the third quarter alone, net profit was 133.8 billion won, up 20.6% from the previous quarter thanks to improved asset quality. Shinhan Investment Corp. recorded a third-quarter net profit of 100.5 billion won, down 33.5% from the previous quarter, but cumulative net profit was 359.4 billion won, up 44.4% year-on-year. Shinhan Life posted a third-quarter net profit of 170.2 billion won, down 5.0% from the previous quarter, with cumulative net profit at 514.5 billion won. In contrast, Shinhan Capital’s cumulative net profit for the third quarter was 92 billion won, down 39.7% year-on-year, as interest income and securities-related income declined due to a decrease in interest-bearing assets.

As of the end of September, Shinhan Financial Group’s Common Equity Tier 1 (CET1) ratio stood at 13.56%, and its BIS capital adequacy ratio was 16.10%. On this day, Shinhan Financial Group’s board of directors announced a dividend of 570 won per share and a plan to retire 200 billion won worth of treasury shares.

Shinhan Financial Group stated that, although a challenging business environment is expected in the fourth quarter, it will continue to faithfully provide funding to productive sectors and pursue balanced profit growth through the expansion of non-banking and non-interest businesses. Vice President Chun emphasized, “Currently, the Korean financial industry is heavily weighted toward collateral, real estate, and household loans, so a structural transformation of finance is needed for Korea’s economic resurgence and sustainable growth of the real economy. We will continue to expand resource allocation focused on corporate finance, and by providing funding where it is most needed and strengthening efficient risk management capabilities, we will proactively fulfill the essential role of finance in driving industrial transformation.”

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