管理層發言
Good afternoon, everyone. It's been a while since we last met. I am Cheol Woo Park from the IR team. I hope you're all looking forward to your summer vacation plans. So ahead of the summer vacation season, I'd like to thank you all for joining Shinhan Financial Group's 2026 Second Quarter Earnings Conference. Joining today's earnings conference are Jeong Hoon Jang, Group CFO; Go Suk-Hyun, Group CSO; Hyuck Jae Choi, Head of Group AX Digital; Hoon Ra, Group CRO; Kan Yeong Hong, CFO of Shinhan Bank; Jeong-bin Lee, CFO of Shinhan Card; Jaesung Lee, CFO of Shinhan Securities; and Sung-hwan Joo, CFO of Shinhan Life. We would appreciate your active interest and participation throughout today's event. Today's conference will begin with a presentation by our Group CFO on the group's financial results for the second quarter of 2026. Afterwards, it will be followed by a Q&A session with the participants. Now I'd like to invite Group CFO, Jeong Hoon Jang to begin this presentation on the group's financial performance.
Good afternoon, everyone. I am Jeong Hoon Jang, CFO of Shinhan Financial Group. First of all, I'd like to thank everyone for joining our 2026 second quarter earnings presentation. Now let me walk you through our business results for the second quarter of 2026. Please turn to Page 2, highlights of financial performance. As of the end of second quarter of 2026, the group's CET1 ratio was provisionally tallied at 13.43%, maintaining a stable level despite domestic and external uncertainties, including foreign exchange movements. Today, based on our solid capital position, the Board of Directors approved the repurchase of KRW 700 billion worth of treasury shares over the next approximately 3 months as well as a second quarter cash dividend of KRW 740 per share. As a result, the total amount of share buyback by October 2026 will reach KRW 1.4 trillion, and we plan to announce an additional share buyback amount during the fourth quarter after considering our expected annual earnings and capital adequacy. For your reference, the record date for this dividend is July 30, and we have completed both the share buyback and cancellation of the KRW 700 billion for the first half of this year that we have committed to. If the present level of quarterly cash dividend continues until the year-end, the annual DPS will come to KRW 2,951, up 14.3% Y-o-Y and share buyback simply calculating the amount committed until the end of October drives up the amount to 12.0% higher on a Y-o-Y basis. So going forward, we'll continue to implement a flexible and forward-looking shareholder return policy in line with our industry-leading corporate value enhancement plan. Net income for the second quarter of 2026 amounted to KRW 1,820.1 billion, up 12.2% from the previous quarter. Through our group-wide efforts to enhance profitability, ROE and ROTCE improved by approximately 1 percentage point Y-o-Y to 12.4% and 13.9%, respectively. The next page summarizes various indicators representing Shinhan's shareholder value for your reference in making investment decisions. Next, Page 4, capital. First, CET1 ratio as of the end of the first quarter has been revised upward by 11 basis points from the provisional figure to 13.30%. This revision reflects the approval of certain measures under the capital regulation rationalization initiative aimed at expanding productive finance, resulting in a reduction of the group's RWA by KRW 3.2 trillion. As of the end of second quarter of 2026, the CET1 ratio improved by a further 13 basis points from the revised level to 13.43%, supported by a solid net income despite the impact of rising exchange rate. Going forward, we'll continue to provide sufficient funding where needed while maintaining a stable capital ratio through internal efficiency improvement and strategic resource allocation. Please refer to Page 5 for details on assets and liabilities. Next, Page 6, the group's earnings. The group's operating profit before expense for the second quarter increased by 8.8% Q-o-Q, driven by solid net interest income and another strong expansion in net interest income. I will now explain each item in more detail, beginning with the following pages. Page 7, interest income. The group's interest income grew by 3.6% Q-o-Q, supported by improvement in the bank's NIM and growth in average loan balances. The bank's NIM increased by 1 basis point from the previous quarter as loan asset yield improved rapidly in line with rising market interest rates. The bank's KRW loans increased by 0.4% Q-o-Q, as we continue to provide balanced financing to both households and corporate sector. Please refer to Page 25 for further details. The next page covers noninterest income. The group's noninterest income increased by 22.0% Q-o-Q, led by fee income continuing the growth trend seen in the first quarter. Fee income increased across all business areas Q-o-Q. Securities custody fees rose 29.5% and wealth management product sales fees increased 60.8%, benefiting from a strong stock market, while investment banking-related fees rebounded from the previous quarter, improving by 151.3%, effecting a successful turnaround. Gains on securities increased by 30.9% from the previous quarter, as gains from other securities more than offset bond-related losses reflecting higher market interest rate. Insurance-related income declined by 44.6% Q-o-Q due to larger expected versus actual losses and the impact of changes in actuarial guidelines. Next, Page 9 is on SG&A and credit cost. The group's SG&A increased by 8.1% quarter-on-quarter, driven by seasonal tax and charges and recognition of Shinhan Securities performance fee. However, the cost-to-income ratio remained stable at 36.6%, almost unchanged Y-o-Y as operating profit expanded. Group's credit cost increased by 14.7% Q-o-Q due to the base effect from our conservative provisioning policy. Credit cost ratio was 42 basis points, improved by 8 bp Y-o-Y. Although credit costs are managed within the range planned at the start of the year, given macro uncertainties such as policy rate hikes, sustained high FX and ongoing geopolitical risks, we will continue to manage them from a conservative standpoint. Turning to Page 10, asset quality indicators. The group's NPL coverage ratio improved by 2 percentage points Q-o-Q, reflecting reductions in nonperforming assets through proactive group-wide asset quality management and conservative provisioning. For the bank, delinquency ratio rose slightly versus Q1, but it was the lowest net new delinquency in the industry. For the card business, it fell by 9 basis points Q-o-Q relative to year-end levels, supported by volume growth and continued risk management efforts. The sluggish recovery in domestic demand has increased corporate credit risk and vulnerable customer segments remain under stress, which require continued asset quality management into the future. Please refer to the next page for more detailed information on group's loss absorption capacity and write-off and sale activities. Page 12 is on subsidiary earnings. Shinhan Bank achieved Q-on-Q earnings growth of 12.5%, thanks to top line growth and write-back of fines and lower credit costs, despite higher SG&A from taxes and public charges. Shinhan Investment Corporation, along with Shinhan Asset Management that showed strong core earnings, delivered earnings growth of 92.5%, benefiting from expanded SAL ETF AUM and proprietary asset returns. For Shinhan Card, in a difficult funding environment, it achieved a Q-o-Q growth of 19.5%, following the lapse of the one-off impact of voluntary retirement and decrease in credit cost. For Shinhan Capital, its earnings fell 28.9% Q-o-Q despite the large improvement in credit costs due to the reduced valuation gain on marketable securities recognized in the first quarter. Shinhan Life also achieved Q-on-Q earnings growth of 81.8%, led by the significant improvement in insurance and financial gains despite the wider expected versus actual loss and actuarial assumption adjustments. Banking ROCE remains stable and on the path of improvement. Capital market subsidiaries, ROCE improved materially Y-o-Y, driven mainly by fee income. Specialized finance subsidiaries continued profitability enhancement efforts, including cost efficiency and reducing RWA in low ROCE areas. Page 13, on overseas business earnings, where Shinhan continues to deliver differentiated performance. The group's overseas earnings rose 13% Q-o-Q, supported by growth at major country operations such as Japan and Vietnam. SBJ is seeing expanded interest income amid a robust real estate market and higher policy rates and the bank MMC is demonstrating resilient core earnings. Meanwhile, we are also streamlining global operations to enhance profitability, including the withdrawal of securities subsidiary in New York. Pages 14 to 16 cover our digital and sustainability initiatives. Page 17 onward provides further details on subsidiary financials, earnings, asset operations and funding. This concludes the presentation. Thank you very much for your attention. And going forward, in the second half, while we have focused on the growth in size for productive finance in the first half, we're going to focus more on profitability going into the second half, and we will be focusing on high credit assets. So with regards to NIM, let me add two things. As has been noted just now by banks, I think there can be some variance by bank because if you look at it on a monthly basis compared to April, as we move toward June, we have seen the NIM rising more. The reason why there was no inflection point was that maybe during the quarter, the NIM could have fallen. As has been noted, because we're seeing a long-term trend in increasing NIM, we do believe that going into the second half, aligned with the rise in interest rate, we have a more positive picture for the NIM for the second half. And for your second question, so yes, the guidance that we provided earlier in the year: if the foreign exchange rate rises and it becomes KRW 1,600, then our RWA will increase by 8%. Would that mean that the interest rate will go to 20%? No, that's not the case because using only that as a factor would involve too many one-off factors to consider. When we talk about nominal GDP growth rate, the reason why we noted capital or RWA is because stably we do believe that the capital will maintain a stable growth of 4% to 5% because nowadays in the banking sector, the financial holding companies' earnings do not have that much volatility. So we believe even if 50% or 60% goes to shareholder returns, if you look at the current capital size, 4% to 5% is going to be the normal. But if you look at the RWA from a more balanced perspective, we're not saying that everything should be excluded as non-ordinary. We're going to leave out some of the influence of the foreign exchange rate when we decide on the shareholder return policy. If you look at our Value-up 2.0 plan, we have noted clearly capital or RWA, and we have set that up as a buffer. Some analysts actually asked back then when we gave this guideline in the early part of the year: we wanted to say that this is a guideline that will remain unshaken, and that was the communication that we had with the market. If that has to change, if that standard has to change, then we will, of course, communicate that this will be changed. So that was our policy. As you have noted, currently the foreign exchange rate has changed. But as we presented in the Value-up 2.0 plan, in that guideline we will not be deviating from our set trajectory.
Thank you very much. I hope that has answered your question. We will take the next question from JPMorgan.
分析師問答
I have three. First, I see that the financial performance was much stronger than expected for the first and the second quarters with the very strong fee earnings. But then because the capital market is very much volatile, what is the expectation of the fee income in the second half? And also because the earnings are really spiking up, then now for this year and also for the next three years, what is the company's expectation of the ROE. So I would like to ask for the guidance. And then the second question is how about the share buyback, the company is increasing the size and also the ROE continues to climb up. So the stock price appears as if it is likely to recover. So then going into the third quarter and the fourth quarter, it was mentioned that in the latter half there's also going to be additional share buyback. Now then for the year-end dividend, not just the equal dividend, but if the earnings are better than expected for this year and the next, then the cash dividend as well, of course considering TSR and others. So I wonder whether the company is also willing to be flexible about the year-end dividend payout as well. And the last question is about this quarter: I wonder whether there have been any one-off costs because the improvement was not as high as expected. So I wonder whether there were any other one-off expenses.
Thank you very much for the questions. Please hold for a minute as we prepare the responses.
First of all, about the fee: I would say that it is Shinhan Securities that is seeing the biggest impact. So we will first hear from the Shinhan Securities CFO, and then I will come up with additional follow-up.
Good afternoon. This is Jaesung Lee, the CFO of Shinhan Investment Securities. Yes, the equity trading volume has continued to grow in Korea, but toward the end of June, for Hynix and Samsung Electronics, we saw some corrections. Compared to the first quarter, the equity trading volume has gone down. Having said that, in the second half of the year in terms of brokerage fee growth, it is not going to be as high as in the first half, but we are expecting that it will be maintained at the second quarter level. For brokerage fee, there have also been some financial products fees. We are focusing on selling financial products and ELS sales have also gone up considerably. So in the second half, we do expect the performance to continue, perhaps a bit less than the first half.
Yes. And about fee income in the second half: along with securities, asset management is also showing good performance. Year-on-year, we see over 100% growth in some areas. As the fee goes up, ROE also improves. We have been reiterating since the beginning of the year that by 2027 the target ROE is 10%. But we also want to accelerate the process. We did mention that it is an accelerated process of ROE improvement. We are still cautious, but internally we hope there will be more visible outcomes within 2026. In the Value-up 2.0, similar to overseas cases, the ROE management range is set between 10% to 12%. The reason we said it like this is because there will be volatility in returns. Despite that, we intend to maintain ROE at a minimum of 10% and shift toward 12%. There could be volatility along the way, which is why we offered the 10% to 12% management range. Second, about additional shareholder return: as of October, based on expected performance, we will make decisions about shareholder return. There are timing considerations: the decision in October may close at the end of December, so for year-end dividends we need to adjust. Equal dividend payments will be maintained, and if additional dividend payout is warranted, there could be extra dividend added. We will be open to such variability. About one-off costs: as mentioned during the presentation, there was the write-back of the ELS penalty amounting to about KRW 83.7 billion. That is a one-off item. We have talked about credit cost, but we don't believe that is one-off. From the beginning of this year, the Group CEO mentioned we will have solid BIS and a conservative financial policy. For real estate PF and business feasibility studies, we've been building a conservative analysis process. As a result, we saw a reversal of about KRW 30 billion from a business feasibility analysis. As we maintain our conservative approach, this is some of the variability we are seeing.
I hope that provided a sufficient answer to your question. We'll receive the next question. The next question comes from White Oak Capital.
I wanted to get an overview from you on whether the tailwind the Korean economy is experiencing can be an opportunity for you. We saw, for example, a $26 billion bonus package approved for Samsung's employees. Now does this throw up any opportunity for you to grow, let's say, as that money comes into the economy mortgage book or as it is reinvested, can this be a loan growth opportunity for you? Or can this be maybe a wealth management opportunity for you? How are you thinking about the tailwind that the economy is as a business opportunity for the next one to two years?
While we prepare the answer, please hold for a few seconds.
The government as well as the financial institutions are looking forward to this. In the past, individual retail funds and gains from equity investment mostly flowed into real estate. There were concerns this time around as well. However, if vendor companies and others see this money flow into the consumer economy, then although exports are growing, we hope this money can lead to an uptick in domestic consumption. We still have concerns about a K-shaped phenomenon and polarization, income disparity issues. Whether this flows down to the middle class and working class remains to be seen. For wealth management, we have a positive outlook and, along with peer securities companies, we are seeing greater inflows into financial products.
Thank you very much. I hope that has answered your question. Now I see that there are no further questions. We will pause briefly to see if there are any additional questions. Yes, there is another question. Shane Mathews, please go ahead.
Two questions from my end. One, given the news flows of acquisitions, how would that really return to your shareholder return policy program? How should we think about what impact that can have because certain assets might need more capital than just initial capital. So can you guide us on how you think about shareholder return plan in conjunction with M&A opportunities you see? And second, just on costs, do you have any long-term cost-to-income ratio plans? Any benefits you're seeing from AI? Can you talk more about long-term cost outlook going forward?
Please give us a moment to prepare the question.
First, about shareholder return and M&A: consider this framework. If CET1 moves from 13.0% to 14.0%—that is the management's range—going beyond that we could consider additional growth or M&A. If we gain additional strength in CET1, we could utilize that for M&A, probably not very large deals, but we are considering some M&A. For the short term, such M&A will not affect shareholder return for that particular year; I can say that with certainty. For any M&A, we consider ROI, ROE, and EPS perspective and the required return on capital. For example, if PBR is 0.8 and COE is 10%, the required return might be 15.2%; any M&A will have to meet required returns. So there won't be short-term impact from M&A on shareholder returns. Second, about SG&A: our continuous guidance is that expenses will grow in line with nominal GDP growth or inflation, about 4% to 5%. However, top-line growth and performance pay, and government regulations—education tax or securities transaction tax—have increased Y-o-Y, which are reflected in SG&A. These expenses are related to top-line growth, so the cost-to-income ratio is not expected to worsen quickly. What we are thinking is whether a low-40% CIR is an appropriate level; compared to overseas peers it is still low. We're not saying we will dramatically increase expenses. For the three-year projection, there will be little change; CIR will be managed within guidance.
I hope that provides a sufficient answer to your question. There's one more question from Hana Securities. From Kim Do Ha, please go ahead.
I have two questions. First is related to the share buyback. I think the cycle has been reduced to two or three months. So going forward, can we expect that the share buyback will take place on a quarterly basis? And the second question has to do with the non-life insurance acquisition that has been reported in the media: including capital increase, what kind of plans do you have going forward about this matter?
Please hold for a few seconds while we prepare to answer your question.
You asked two questions on treasury stock policy. Normally we carried out share buyback on a six-month basis. This year, interest rate, foreign exchange rate, and stock prices have been quite volatile, and predicting earnings six months ahead was not easy. To refine ratios up until October, we shortened the cycle to three months. At present it's KRW 700 billion and at the end of October, when we announce earnings, we'll consider various factors to determine the share buyback value. That does not mean we'll do it every three months as a fixed rule. Next year, if we can stably predict earnings in the first half, it may go back to a six-month cycle. Until then we will consider shorter intervals. Regarding possible acquisition of a non-life insurer: many media reports have circulated, but nothing has been finalized. Regarding M&A options, we are looking at various options, including non-life insurance, to see what will be helpful and contribute to our bottom line. We are reviewing several options, but nothing is finalized. M&A processes always involve counterparties and require balanced compromise, which can prolong the process. From our company's standpoint, as announced in April with the Corporate Enhancement Plan 2.0, we will pursue M&As in accordance with that plan while managing a stable CET1 ratio. Within that range, if EPS or ROE improvement is significant, we will pursue those M&A options. If Shinhan Group engages in M&A, you can expect improved performance. If there are concrete developments, we will communicate promptly to investors and the market.
Thank you very much. I hope that has answered your question. We will take the next question from HSBC, Mr. Won Jaewoong.
Thank you very much, and thank you very much for the good performance and the sizable share buyback announcement. My questions are about nonbank subsidiaries. For example, KB Securities has secured KRW 1 trillion of capital, increasing their capital to about KRW 8 trillion and is about to get certification from IME, which allows short-term note issuance business and so forth. Does the company have any plan to expand into such areas? And regarding capital injection, could it be placed in the back corner? Also about the shareholder return formula announced earlier: if share buyback is to be announced again in October, how should we apply that formula to predict the October share buyback? Could you give us some criteria?
Please give us a moment to prepare the answers.
I'll take the question on capital injection. Regarding Shinhan Securities and resource allocation: compared to peers, our position is different. For short-term note issuance, we just got approval last year, and in terms of leverage line we still have room. Peers may be increasing capital to expand IME business, but in our case it's more about risk limits than RWA limits. For example, within our capital there are credit or brokerage risk limits where we may need to increase capacity. If outcomes materialize, resource allocation will be possible. Compared to peers, immediate capital injection is not warranted. Regarding connection with a non-life insurer, it can be undertaken in parallel. Insurance leads to immediate capital deduction and affect CET1 right away. Capital injection into securities does not immediately increase RWA; business performance may lead to RWA increase over time. As mentioned earlier, we will avoid subordinary capital positions. If ROE is high enough, we believe capital injection and allocation can proceed as needed. About the shareholder return formula: when we announced it earlier this year, we hinted at an October decision. The denominator we use is ordinary nominal growth—about 4% to 5%—and the numerator target ROE is 10%. Excluding exchange rate influence, RWA growth is below 2%. We provided hints for Value-up 2.0; the maximum shareholder return level would be around the low 50% range (e.g., up to approximately 53%), and the decision will be made in October after considering size, politics and other factors. So far, KRW 1.4 trillion of shareholder return including quarterly dividends and reversals of P&L suggests we are cautiously optimistic that there could be some additional shareholder return in October.
I hope that provides a sufficient answer to your question. The next question will come from Hana Securities.
I have two questions. First, on margin: you are the very first financial group to do an earnings presentation, but we don't have data on other banks. It seems that margins have gone up by 1 bp in the banking business. But if you look at the market rate and the timing, the rise in margin does not seem to live up to expectations. It seems that loans to large companies have increased, and there's a lot of M&A influence. What do you think internally are the factors behind this result? And up until this month, what was the result, and going forward for the third quarter and fourth quarter, what is your estimation or prediction for margins? Another question: regarding the shareholder return formula presented last quarter and guidance for this year in the early 50% range—just now you said excluding foreign exchange, RWA growth was around 2%. On a YTD basis, RWA increased 4% over the past six months. When we look forward to shareholder return, do we have to look at RWA growth excluding abnormal factors and foreign exchange? That makes visibility less clear. I cannot assess the tone of your comments to exclude these issues when predicting going forward.
Thank you very much for that question. We'll take a few seconds to prepare the answer.
So with regards to the first question about the margin, the cause for the current results and what we predict going forward: that question will be answered by our CFO, and the second question will be taken up by myself.
With regards to your question: as of the second quarter, the bank's NIM is 1.61%, up 5 bps Y-o-Y and up 1 bp Q-o-Q. In the first half, the rise of market rates should have been reflected, but why only 1 bp Q-o-Q is a reasonable concern. If you look at the market, it has risen to some extent in the first half. From the funding perspective, because of a strong stock market, there has been a decline in retail deposits and corporate deposits, especially large company deposits, have increased significantly. This has had an impact. Starting earlier in the year, we have been aggressive in pursuing productive finance. Although Q-o-Q the NIM rose only 1 bp, compared to prior quarters it has risen in a time series: 1.55, 1.56, 1.58 and now 1.61—so it is continuously moving up and you should look at the longer trend. For the second half, in July the Monetary Commission decided to increase the benchmark rate by 25 bps and we do believe there is expectation of additional rate hikes. Internally, we believe there will be at least one more rate hike in the second half. If that happens, there can be an additional 3 to 4 bps improvement in NIM. We have increased retail time deposit rates and expect more inflow of deposits; from the corporate sector as well we expect greater deposit inflows. This will lead to an improvement in the funding structure.