Shinhan Financial Group Reports 4.6 Trillion KRW Net Profit Last Year... Surpasses KB to Become Leading Bank

Net Income Increased by 15.5% Year-on-Year
Profit Growth Trend Maintained Based on Corporate Loans

[Asia Economy Reporter Sim Nayoung] Shinhan Bank recorded an annual net profit of 4.6423 trillion KRW last year, surpassing KB Kookmin Bank (4.4133 trillion KRW) to become the leading bank. Shinhan Bank announced on the 8th through its earnings report that last year's net profit increased by 15.5% compared to the same period last year. Excluding the gain from the sale of Shinhan Investment Corp. building (pre-tax 443.8 billion KRW), it increased by 7.5%.

Shinhan Bank stated, "Despite uncertain domestic and international economic conditions, corporate funding support and the global sector grew," and added, "Although household loans and non-interest income decreased, net profit growth was maintained based on corporate loans and growth in the global sector."

Last year, the total shareholder return ratio reached 30.0%. A dividend of 865 KRW (annualized 2,065 KRW including quarterly dividends) is scheduled as the 2022 year-end dividend. The annual common stock dividend payout ratio is 22.8% (a decrease of 2.4 percentage points from the previous year; 23.5% including preferred stock). This year, the scale of treasury stock acquisition and cancellation is 150 billion KRW.

The net profit for the fourth quarter was 326.9 billion KRW, a 28.9% decrease compared to the same period last year. Net profit declined due to increased one-time expenses such as customer compensation costs related to investment products and proactive reserve accumulation. Accounting treatment changes for principal preservation trust (146.4 billion KRW), customer investment product losses (180.2 billion KRW), alternative investment valuation losses (104.1 billion KRW), voluntary retirement (145 billion KRW), and additional reserves for economic response (197 billion KRW) were recorded as expenses.

Last year's annual interest income (10.6757 trillion KRW) increased by 17.9% compared to the previous year due to asset growth and base interest rate hikes. The group's and bank's NIM (net interest margin) improved by 0.15 and 0.22 percentage points to 1.96% and 1.63%, respectively. In the fourth quarter, due to a sharp rise in funding costs in the banking and card sectors, the group's and bank's NIM slightly decreased to 1.98% and 1.67% compared to the previous quarter. A Shinhan Bank official stated, "Fourth-quarter group interest income increased by 4.1% compared to the previous quarter due to corporate loan growth driven by increased corporate funding demand and a decrease in foreign currency-denominated insurance contract interest burden caused by the appreciation of the Korean won."

Last year's annual non-interest income was 2.5315 trillion KRW, down 30.4% from the previous year. Both fee income and securities-related income decreased, resulting in a 30.4% decline compared to the previous year. Fee income was significantly reduced due to a contraction in securities custody fees caused by a downturn in the stock market. Securities-related income decreased by 43.4% (629.4 billion KRW) compared to the end of the previous year due to valuation losses caused by a sharp rise in interest rates.

Last year's ROE (return on equity) was 10.3%, and the common equity tier 1 ratio was 12.7%. Shinhan Bank stated, "Through efficient capital management efforts, ROE increased by 1.1 percentage points from the previous year to 10.3%," adding, "Although the common equity tier 1 ratio slightly decreased compared to the end of the previous year due to a decrease in household loans and a reduction in other comprehensive income caused by rising interest rates, it maintained a stable level."