[Click eStock] "Shinhan Financial Group Decides to Cancel Treasury Shares Worth 150 Billion KRW... Positive Signal for Shareholder Returns"

[Asia Economy Reporter Lee Myunghwan] Hanwha Investment & Securities analyzed on the 7th that Shinhan Financial Group's decision to retire treasury shares worth about 150 billion KRW is a positive signal for its shareholder return policy. It also stated that it maintains the investment opinion of 'Buy' and the target price of 54,000 KRW for Shinhan Financial Group.

Shinhan Financial Group announced the day before that it decided to repurchase and retire treasury shares worth 150 billion KRW on the market. This corresponds to 4.3 million shares based on the previous day's closing price, accounting for 0.8% of the issued shares. The treasury share repurchase period is from the 7th to January 6, 2023, and it also announced that all repurchased shares will be retired after completion. Shinhan Financial Group also disclosed its quarterly dividend, deciding on a dividend of 400 KRW per share, the same as in the first and second quarters. Currently, Shinhan Financial Group's distributable profit limit is 4.8 trillion KRW, but Hanwha Investment & Securities expects that after reflecting the treasury share repurchase and the third quarter dividend amount, the distributable profit limit will be 4.4 trillion KRW.

Hanwha Investment & Securities evaluated that Shinhan Financial Group's decision to retire treasury shares this time is positive as it signals a shareholder return policy. However, it diagnosed that the change in per-share indicators due to the treasury share retirement is not significant. Hanwha Investment & Securities explained that Shinhan Financial Group's treasury share repurchase had been anticipated since the time when the sale of the Shinhan Investment Corp. building, an affiliate, was announced, but expectations had diminished as the financial authorities' mention of establishing a special loan loss reserve was regarded as a recommendation to retain capital.

Hanwha Investment & Securities pointed out that major bank holding companies' shareholder return policies are developing, including gradual expansion of dividend payout ratios, increased dividend payment frequency, and treasury share repurchases and retirements. In particular, it forecasted that if Shinhan Financial Group, which actively utilizes treasury share policies the most, regularizes this, further evolution of shareholder returns will be possible.

Kim Doha, a researcher at Hanwha Investment & Securities, said, "Despite increases in recurring earnings, active shareholder return policies, and EPS growth superiority within the industry, Shinhan Financial Group's 12-month forward price-to-book ratio (PBR) is 0.35 times, which is historically low except for the COVID-19 crash period," and added, "We maintain Shinhan Financial Group as our top pick within the industry."