[Click eStock] "Shinhan Financial Group Expected to Miss Q4 Earnings Estimates... Target Price Down"

Target Price Downgraded from 76,000 Won to 73,000 Won

NH Investment & Securities lowered the target price for Shinhan Financial Group from 76,000 KRW to 73,000 KRW on the 10th, anticipating that the company's Q4 earnings last year would fall short of market expectations. The investment rating was maintained at 'Buy.'

Jung Joon-seop, a researcher at NH Investment & Securities, explained, "The target price was lowered due to adjustments in profit estimates considering a conservative economic outlook."

Q4 earnings are expected to fall below the consensus (average forecast by securities firms). Researcher Jung said, "Shinhan Financial Group's Q4 net income attributable to controlling interests is expected to increase by 9.4% year-on-year to 601.3 billion KRW, but still fall short of consensus," adding, "Seasonal factors, losses on valuation of non-marketable securities (decrease in non-interest income), and increased costs from voluntary retirement (increase in selling and administrative expenses) are expected." He further noted, "Net interest margin (NIM) is expected to decline by 4 basis points (1bp=0.01 percentage point) compared to the previous quarter, loan growth rate is projected at 0.4%, and loan loss cost ratio at 55 basis points."

Although Q4 earnings are expected to underperform consensus, it is unlikely to affect shareholder returns. Researcher Jung stated, "Through active risk-weighted assets (RWA) management, the common equity tier 1 (CET1) ratio for Q4 is expected to slightly decrease from 13.1% in the previous quarter," adding, "While Q4 earnings are expected to fall short of consensus, shareholder returns are more influenced by capital ratios than quarterly earnings, so there is no need to link this to concerns over shareholder returns."

The trend of expanding shareholder returns is expected to continue. Researcher Jung said, "Based on a solid capital ratio, this year’s dividend per share (DPS) is projected at 2,220 KRW (555 KRW quarterly), and share buybacks and cancellations totaling 1 trillion KRW (250 billion KRW quarterly, based on announcements) are expected," explaining, "These figures represent increases of 60 KRW and 150 billion KRW respectively compared to last year, and the total shareholder return ratio is also expected to expand to 44.5%, indicating a continued trend of shareholder return expansion centered on share buybacks. Currently, 200,000 shares are being repurchased daily, contributing to stock price stability."