[Asia Economy Reporter Jo Gang-wook] Shinhan Financial Group recorded its highest-ever performance with a cumulative net profit of 2.9502 trillion KRW for the first three quarters. On a cumulative basis, this is the largest performance in the financial sector, surpassing KB Financial Group.
Shinhan Financial announced on the 27th that its cumulative net profit up to the third quarter this year was 2.9502 trillion KRW, a 1.9% increase compared to the same period last year (2.896 trillion KRW). In particular, the group's net profit for the third quarter alone reached 1.1447 trillion KRW, marking the first time since the establishment of the holding company that quarterly recurring income exceeded 1 trillion KRW, demonstrating the highest cumulative third-quarter performance in the financial sector, according to Shinhan Financial.
Thus, on a cumulative third-quarter basis, Shinhan Financial maintained its leading position in the financial sector, surpassing KB Financial. KB Financial's cumulative net profit for the third quarter was 2.8779 trillion KRW, which is 72.3 billion KRW less than Shinhan Financial's 2.9502 trillion KRW. However, since KB Financial's quarterly results for the second and third quarters were higher than Shinhan Financial's, the situation requires monitoring the fourth-quarter results.
A Shinhan Financial official said, "The main feature of this performance is that despite concerns about a decline in earnings due to the resurgence of COVID-19, efforts to turn the crisis into new opportunities based on the expansion of the capital market area and a diversified non-bank portfolio have translated into financial results."
In particular, Shinhan Financial's GIB, GMS, and Global divisions have carried out various investments accompanied by systematic risk management and profitability, with operating profits growing by 24%, 128%, and 7% respectively compared to the same period last year. This is said to play a foothold role for the group's sustainable growth.
In fact, despite a decrease in large deals due to increased market volatility, the GIB division demonstrated Shinhan's differentiated capabilities in investment banking by expanding joint underwriting of IB deals through collaboration among group companies, achieving an operating profit of 649.4 billion KRW, an increase of 127.3 billion KRW compared to 522 billion KRW in the same period last year.
The GMS division, which manages the proprietary assets of each group company including banking, securities, and life insurance, is actively responding to changes in the market environment and continues a remarkable growth trend each quarter. The GMS division recorded an operating profit of 472.5 billion KRW, an increase of 264.9 billion KRW compared to 207.6 billion KRW in the same period last year, driving the group's profitability improvement. Going forward, it plans to continue stable management centered on bonds while striving to create profit opportunities through diversification of investment assets, establishing itself as a core profit source for the group.
The group's core business area, the Global division, also maintained stable growth despite the COVID-19 crisis, with operating profit increasing by 53.4 billion KRW compared to the same period last year (7.916 trillion KRW cumulative operating profit for Q3 2020 / 7.382 trillion KRW for the same period last year) through growth strategies tailored to the characteristics of overseas branches focused on ROE and strengthening global non-bank sectors such as cards and securities.
Cost efficiency continues to improve through digital-based cost reduction and efforts to strengthen soundness for productivity enhancement.
As of the end of September, the group's selling and administrative expenses increased by 2.6% compared to the same period last year but are being stably managed at the level of the business plan established at the beginning of the year. Due to strategic cost reduction efforts at the enterprise level over the past few years, the recent increase rate of recurring selling and administrative expenses has gradually stabilized, and cost efficiency improvements continue steadily.
In particular, during the third quarter, strategic cost reduction efforts using digital technology (digital cost savings of 192.2 billion KRW) continued, maintaining the group's CIR at 42.5%, one of the highest efficiency levels in the financial sector. Going forward, the group plans to manage selling and administrative expenses at a stable level by streamlining the business portfolio from a profitability perspective and operating personnel by digital organization/channel focused on productivity.
The group's loan loss expense ratio for the third quarter improved by 8 basis points from the previous quarter to 42 basis points, and excluding the provision factors related to COVID-19 and private equity funds that were proactively reserved last quarter, it remains stable at 30 basis points within the annual business plan range. In the fourth quarter, the group plans to continue proactive risk management policies considering the spread of the COVID-19 crisis and the level of asset quality deterioration due to the slowdown in the real economy.
Shinhan Financial announced that the investment funds raised through a third-party paid-in capital increase last month will be used as growth resources for the group (organic/inorganic growth, digital transformation, etc.). Shinhan Financial explained that expanding the profit base through this will act as a catalyst for improving the group's ROE and ROA.
Shinhan Financial Group is strengthening its social responsibility role as a financial company by supporting 'innovative growth' to create a digital ECO ecosystem and supporting 'financial stability' to overcome the COVID-19 crisis.
As a result of practicing 'inclusive finance' to overcome the COVID-19 situation, bank loan assets grew by 11.4% year-on-year, centered on small and medium-sized enterprises and small business owners (non-audited SMEs 9.5% / SOHO 12.6%).
The innovative growth sector is also steadily pushing forward the 'Shinhan N.E.O Project,' recording approximately 22 trillion KRW (loans/investments) in fund supply as of the end of September, continuing efforts to discover new business opportunities.
A Shinhan Financial official emphasized, "In a situation where concerns such as economic slowdown forecasts are increasing, we are continuing efforts for proactive risk management," adding, "Capital management will also be operated and managed in a conservative manner without considering the temporary increase effect due to the early adoption of Basel III credit risk."
Regarding the performance of affiliates, the mainstay Shinhan Bank was somewhat sluggish, but Shinhan Card and Shinhan Life Insurance posted strong results. Shinhan Bank's cumulative net profit for the third quarter was 1.765 trillion KRW, down 10.7% from 1.9763 trillion KRW in the same period last year. For the second quarter, it was 624.4 billion KRW, a 10.1% decrease compared to the same period last year.
The non-bank affiliate Shinhan Card's cumulative net profit for the third quarter was 470.2 billion KRW, up 14.4% from 411.1 billion KRW in the same period last year. Shinhan Life Insurance (171.3 billion KRW) and Orange Life (213.3 billion KRW) saw net profits increase by 56% and 0.8%, respectively, compared to the same period last year. Shinhan Investment Corp. recorded 184.6 billion KRW, down 8.7% from the same period last year.
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