Shinhan Financial Group Co., Ltd. (SHG) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. While there are positive aspects like an increase in interest income and shareholder return plans, there are also significant concerns such as declining non-interest income, increased competition, and unclear management responses in the Q&A. The optimistic guidance on credit costs and share buyback plans are offset by declining NIM and asset quality vigilance. These mixed signals suggest a neutral market reaction, with neither strong positive nor negative sentiment expected.
Key Financial Performance
Net Income KRW1 trillion 238.6 billion, down 10.1% QoQ due to large losses in non-interest income segment.
Interest Income Increased by 1.2% QoQ, driven by growth in the bank's loan book.
Non-Interest Income KRW827.8 billion, down 25.6% QoQ due to losses on securities and derivatives.
SG&A Expenses Increased by 1.2% QoQ, managed fairly despite depreciation impact.
Cumulative CIR Improved by 1.2 percentage points YoY to 37.9% due to higher operating profit before expenses.
Cumulative Credit Cost Ratio 44 BPS, decreased by 4 basis points compared to the first half of the year.
CET1 Ratio Estimated at 13.13%, improved by 7 basis points QoQ despite an increase in risk-weighted assets.
Dividend per Share KRW541 per share approved for Q3.
Share Buyback and Cancellation Totaling KRW400 billion, including KRW250 billion in Q4 2024.
Bank Won Loans Total of KRW2 trillion 855 billion, up 1.2% QoQ.
Household Loans Increased by 6.3% Q-on-Q, driven by real estate purchasing demand.
Corporate Loans Increased by 1.4% in Q3.
NIM 1.56%, down 4 basis points QoQ.
RWA KRW337 trillion, increased by KRW4.1 trillion.
Credit Cost Ratio 44 BPS, with ordinary CCR at 32 BPS.
Provisioning Expected to be smaller than the first half of the year, with no large-scale provisioning anticipated.
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Operating Highlights
Share Buyback and Cancellation: The Board of Directors approved a third quarter dividend of KRW541 per share and resolved to undertake share buyback and cancellation totaling KRW400 billion, which includes the amount for 2025. A buyback of KRW250 billion is planned for the fourth quarter 2024.
CET1 Ratio: The CET1 ratio at the end of September 2024 is estimated to be 13.13%, an improvement of 7 basis points Q-on-Q.
Loan Growth: For next year, the target loan growth is about 5%, with a focus on RWA-based ROE-driven growth.
Non-Interest Income: Non-interest income recorded KRW827.8 billion, down 25.6% QoQ due to poor earnings from securities and derivatives.
Value Up Program: The Group is committed to enhancing shareholder returns and improving ROE through qualitative growth and better resource allocation.
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Risk or Challenges
Derivatives Trading Losses: Shinhan Securities incurred significant losses of KRW135.7 billion due to derivative trading, impacting the Group's CET 1 ratio by minus 6 basis points. This incident raised concerns about internal controls and regulatory compliance.
Regulatory Investigation: Shinhan Securities is cooperating with regulators regarding the derivative trading losses, indicating potential regulatory scrutiny and the need for improved internal controls.
Non-Interest Income Decline: Non-interest income decreased by 25.6% QoQ, primarily due to losses in securities and derivatives, which could affect overall profitability and investor confidence.
Economic Environment: The company faces challenges from declining market interest rates, which are expected to continue impacting net interest margin (NIM) negatively.
Provisioning and Asset Quality: The company anticipates ongoing provisioning needs related to real estate project financing (PF) and asset trust exposure, despite a stable trend in asset quality.
Funding Market Competition: Increased competition in the funding market is expected in the fourth quarter, which may pressure funding costs and margins.
Loan Growth Management: The company plans to minimize loan growth in the fourth quarter to enhance profitability and asset soundness, indicating a cautious approach to lending amid economic uncertainties.
Shareholder Return Policy: While the company has committed to a shareholder return policy, the ability to meet targets may be influenced by CET1 growth and earnings performance.
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Guidance & Outlook
Shareholder Return Policy: The Board of Directors approved a third quarter dividend of KRW541 per share and resolved to undertake share buyback and cancellation totaling KRW400 billion, including KRW250 billion in Q4 2024 and KRW150 billion in early 2025.
Value Up Program: The Group is committed to enhancing enterprise value and will continue to monitor the implementation of the Value Up plan, with a review of execution results planned for the full year performance announcement next year.
Loan Growth Strategy: For 2025, the Group plans to minimize loan growth relative to RWA budget, focusing on enhancing profitability and asset soundness.
Asset Quality Management: The Group intends to maintain well-calibrated management of asset quality and enforce tight management of recurring credit costs.
CET1 Ratio: The CET1 ratio is estimated to be 13.13% at the end of September 2024, with a target to maintain it above 13% going forward.
Loan Growth Target: The Group targets a loan growth of about 5% for next year, focusing on RWA-based ROE-driven growth.
NIM Outlook: The NIM is expected to decline due to market conditions and interest rate cuts, with a projected NIM of 1.56% in Q4.
Credit Cost Ratio: The credit cost ratio is expected to be around 45 basis points by year-end, with normalized provisioning anticipated.
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Shareholder Return Plan
Third Quarter Dividend: The Board of Directors approved a third quarter dividend of KRW541 per share.
Share Buyback and Cancellation: The company resolved to undertake share buyback and cancellation totaling KRW400 billion, which includes KRW250 billion in the fourth quarter of 2024 and an additional KRW150 billion in early 2025.
Shareholder Return Policy: The company aims for a 50% Total Shareholder Return (TSR) by 2027, with a gradual increase in share buyback and cancellation efforts.
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Key Q&A
Q:What kind of trigger do you need to raise the TSR rate from 2% to 4% going forward?
A:We have just started and what we can say at this point is that, confidently including shareholder - share buyback and cancellation. The shareholder return related very specific targets were announced and the action plans for that has been announced as well.
Q:What is your outlook for NIM?
A:The NIM decline trend will continue and new profitability based that growth of assets and also where funding rate continues to be managed in order to defend the NIM.
Q:What is your target in terms of loan growth and RWA growth for next year?
A:Our target loan growth is about 5%. In terms of RWA, our target ROC would be about 13%.
Q:Can we expect the size of the share buyback and cancellation to continue every quarter?
A:The targeted level is by 2027 KRW450 million is the target. The number of share reduction that, a specific target has been given, by 2027, the number of shares, the cancellation of shares, we would like to accelerate that first.
Q:What is the outlook for provisioning?
A:By the year end, the credit cost ratio is about around 45 BPS at the year end.
Q:What is the current status of your PF exposure and provisioning?
A:We have KRW9.4 trillion in overall PF loan exposure, which is about 2.2% of our total loan book. We think any risk of the stress is very limited.
Q:Can you disclose more segmented data about RWA going forward?
A:Going forward, we feel first to RWA, very specific targets will be provided and penalties for exceeding that our target will be considered.
Q:What are your plans to enhance profitability and ROE?
A:We need to have this awareness shared throughout the Group. And also qualitative growth, we need to set targets for this and also evaluation and the resource allocation, it should all be aligned.
Q:Can you share the FX rate sensitivity with us for your CET1?
A:For CET1, FX sensitivity, it's 0.8 BP for KRW10.
Q:Review of Unclear Management Responses
A:Management's responses lacked clarity on the specific triggers needed to raise the TSR rate from 2% to 4%, and the details on segmented data about RWA were vague, with no specific figures provided.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BPS
Bank asset
CRO
Directors
FX
ROC
ROE
SGA
Sang Yung
Shinhan Securities
Value program
Yung Chun
affiliate
answer question
asset trust
assumption
banking account
basis point
burden
control system
disclosure
exposure
household loan
implementation
incident
kind
presentation
priority
promise
regard
resource allocation
restructuring
review
share cancellation
situation
target
term asset
SHG Transcript
Shinhan Financial Group Co., Ltd. (SHG) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call summary presents mixed signals: stable NIM and credit costs are positive, but noninterest income and insurance profits declined. The Q&A reveals cautious optimism with plans for loan growth and shareholder returns, but uncertainties persist in asset quality and dividend policy. The lack of decisive guidance and management's vague responses contribute to a neutral sentiment, suggesting limited stock movement.
Shinhan Financial Group Co., Ltd. (SHG) Q2 2025 Earnings Call Transcript
Unknown7-25
The earnings call summary indicates mixed results: strong brokerage commissions and trust fee income but sluggish credit card fee income and increased credit costs. The Q&A reflects cautious optimism with some uncertainties, particularly in regulatory impacts and stablecoin plans. Shareholder returns and capital management remain stable, and there's a proactive approach to loan growth. However, management's vague responses on certain issues suggest underlying uncertainties. Given these factors, a neutral sentiment is appropriate, as positive and negative elements are fairly balanced.
Shinhan Financial Group Co., Ltd. (SHG) Q3 2024 Earnings Call Transcript
Unknown10-25
The earnings call presents a mixed picture. While there are positive aspects like an increase in interest income and shareholder return plans, there are also significant concerns such as declining non-interest income, increased competition, and unclear management responses in the Q&A. The optimistic guidance on credit costs and share buyback plans are offset by declining NIM and asset quality vigilance. These mixed signals suggest a neutral market reaction, with neither strong positive nor negative sentiment expected.
Shinhan Financial Group Co., Ltd. (SHG) Q1 2024 Earnings Call Transcript
Unknown4-26
The earnings call summary shows mixed financial performance with positive growth in interest and noninterest income, but challenges in securities income and NIM stability. The Q&A highlights management's cautious approach, with uncertainties in real estate exposure and shareholder return timelines. Despite positive global business growth, the lack of clear guidance on margins and shareholder returns tempers optimism. Overall, the mixed results and management's cautious stance suggest a neutral stock price reaction over the next two weeks.
SHG Report
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