Shinhan Financial Group(SHG)2024-07-27 01:00Financial Data and Key Metrics - Interest income grew 0.2% QoQ to KRW 2,821.8 billion despite declining market interest rates [57] - Corporate loans grew 6.0% during the quarter, driven by demand from large companies [38] - Non-interest income increased 10.9% QoQ to KRW 1,112.1 billion, driven by favorable market conditions [55][71] - SG&A expenses increased 7.2% QoQ due to higher advertising and service expenses [58] - CET1 ratio was 13.05% as of June 2024, down 6 bps QoQ due to RWA growth [48][56] - Credit cost ratio for Q2 was 48 bps, down 5 bps YoY, with recurring credit cost ratio at 31 bps [61][45] Business Line Performance - Bank NIM declined 4 bps QoQ to 1.60%, with interest-bearing assets growing 2.9% QoQ [41][42] - Fee income increased 1.8% QoQ, led by gains in credit cards and IB business [43] - Household loans grew 0.1%, driven by home mortgages, but growth slowed in Q2 [64] - Card delinquency ratio improved 12 bps QoQ, recovering to levels seen at the end of 2023 [59] Market and Regional Performance - Real estate PF exposure increased due to specific sites (Doan and Seoripul), adding KRW 1 trillion [90] - Provisioning rate for real estate PF was 12% for securities and 7% for Shinhan Capital, with group-level provisioning at 4.2% [90] - Delinquency ratios for SOHO loans and card business stabilized, with proactive credit management [59] Strategic Direction and Industry Competition - The company aims to achieve an ROE of 10% and ROTCE of 11.5% by 2027, with a CET1 ratio above 13% [50] - Shareholder return rate will be increased to 50% by 2027, with plans to reduce the number of shares to below 450 million [14][7] - The company will focus on improving ROA, leverage, and RWA management to enhance profitability [8][52] - Digital and ESG initiatives are being prioritized, with detailed updates provided in the presentation [49] Management Commentary on Operating Environment and Future Outlook - The company expects to maintain a CET1 ratio above 13% while increasing shareholder returns [27] - NIM is expected to decline slightly in H2 2024 due to lower policy rates and LCR regulations, but funding costs will be managed [92] - The company has set aside KRW 182.7 billion in additional provisions for real estate PF in Q2, with total exposure at KRW 269.6 billion [22][29] - Annual credit cost guidance is expected to be around 45 bps, with recurring provisions dominating in H2 [80][87] Other Important Information - The company resolved to distribute a per-share dividend of KRW 541 for Q2 2024 [56] - A KRW 300 billion share buyback is underway, with shares to be canceled upon completion [40] - The company plans to retire shares to below 500 million by 2024 and 450 million by 2027 [14][7] Q&A Session Summary Question: Shareholder Return and ROE Targets - The company aims to increase shareholder return to 50% by 2027, with a phased approach to TSR growth [19][20] - CET1 ratio will be maintained above 13%, allowing for higher shareholder returns without further growth [27] Question: Real Estate PF Provisions - Additional provisions of KRW 182.7 billion were set aside in Q2 for real estate PF, with total exposure at KRW 269.6 billion [22][29] - Provisioning rates for real estate PF are 12% for securities and 7% for Shinhan Capital [90] Question: NIM and Asset Growth Guidance - NIM is expected to decline slightly in H2 2024 due to lower policy rates, but funding costs will be managed [92] - Loan growth in H2 will focus on prime assets, with home mortgages and corporate loans driving growth [76] Question: Share Buyback and Dividend Policy - The company plans to retire shares to below 450 million by 2027, with flexibility in DPS and total dividend amounts [14][85] - If PBR falls below 1, the company will prioritize share cancellation over dividends [75] Question: Credit Cost Guidance - Nominal credit cost ratio for Q2 was 48 bps, with recurring credit cost ratio at 31 bps [61][45] - Annual credit cost guidance is expected to be around 45 bps, with recurring provisions dominating in H2 [80][87]