PART I [ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](index=6&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) The report indicates this section is not applicable - The report states that this item is not applicable[22](index=22&type=chunk) [ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE](index=6&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) The report indicates this section is not applicable - The report states that this item is not applicable[23](index=23&type=chunk) [ITEM 3. KEY INFORMATION](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section outlines key investment risks, encompassing macroeconomic, competitive, regulatory, geopolitical, and ADS-specific factors [Risk Factors](index=6&type=section&id=ITEM%203.D.%20Risk%20Factors) The company faces diverse risks including macroeconomic volatility, intense competition, regulatory changes, geopolitical tensions, and operational challenges across its banking and credit card segments - The COVID-19 pandemic's impact on business operations and financial conditions remains highly uncertain. The company accumulated an additional **₩187.9 billion** in COVID-19-related provisions during 2021[40](index=40&type=chunk)[43](index=43&type=chunk) - Intense competition in the Korean financial industry, heightened by the entry of internet-only banks and fintech companies, may pressure net interest margins and profitability[50](index=50&type=chunk)[53](index=53&type=chunk)[61](index=61&type=chunk) - The company and its subsidiaries must maintain capital ratios above minimum levels required by Basel III regulations, and failure to do so could lead to operational suspensions[65](index=65&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk) - The company faces potential losses and reputational damage from financial products sold by its subsidiaries, such as those related to Lime Asset Management, which have led to regulatory investigations and compensation payments[126](index=126&type=chunk)[127](index=127&type=chunk)[130](index=130&type=chunk) - Tensions with North Korea, including its nuclear program and military actions, could have a material adverse effect on the company's business, financial condition, and the price of its securities[192](index=192&type=chunk)[195](index=195&type=chunk)[197](index=197&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=51&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of Shinhan Financial Group, covering its history, strategic direction, diverse business activities, organizational structure, and properties [History and Development of the Company](index=51&type=section&id=ITEM%204.A.%20History%20and%20Development%20of%20the%20Company) Shinhan Financial Group, established in 2001, has grown through strategic acquisitions and is guided by its 'F.R.E.S.H. 2020s' mid-term strategy for sustainable growth - The Group's mid-term strategy is **'F.R.E.S.H. 2020s'**, which stands for Fundamental, Resilience, Ecosystem, Sustainability, and Human-talent[216](index=216&type=chunk) - Seven detailed strategic directions for 2022 have been established, including conversion to innovative digital platforms, pursuit of efficient growth, global expansion, sustainable performance, proactive risk management, development of a dynamic organization, and convergent human resources management[217](index=217&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) Key Acquisitions and Formations | Date of Acquisition | Entity | Principal Activities | | :--- | :--- | :--- | | August 2003 | Chohung Bank | Commercial banking | | March 2007 | LG Card | Credit card services | | February 2019 | Orange Life Insurance | Life insurance services | | September 2020 | Shinhan Venture Investment | Venture capital | [Business Overview](index=56&type=section&id=ITEM%204.B.%20Business%20Overview) The company offers comprehensive financial services across banking, credit cards, securities, and insurance, detailing its diverse product offerings, risk management framework, and extensive regulatory oversight - The Group's principal activities are divided into commercial banking, credit card services, securities brokerage, life insurance, specialized credit services, and other services like asset management and savings banking[237](index=237&type=chunk)[238](index=238&type=chunk) Corporate Loan Portfolio by Type (as of Dec 31) | Loan Type | 2019 (₩ Billion) | 2020 (₩ Billion) | 2021 (₩ Billion) | | :--- | :--- | :--- | :--- | | Small- and medium-sized enterprises | 91,162 | 108,016 | 121,961 | | Large corporate loans | 34,466 | 35,289 | 40,368 | | **Total corporate loans** | **169,130** | **190,255** | **208,468** | Retail Loan Portfolio by Type (as of Dec 31) | Loan Type | 2019 (₩ Billion) | 2020 (₩ Billion) | 2021 (₩ Billion) | | :--- | :--- | :--- | :--- | | Mortgage and home-equity loans | 68,074 | 73,188 | 79,860 | | Other retail loans | 66,350 | 73,602 | 79,146 | | **Total Retail Loans** | **134,424** | **146,790** | **159,006** | - The risk management framework is hierarchical, covering credit, market, liquidity, and operational risks, with oversight from the Group Risk Management Committee at the holding company level[572](index=572&type=chunk)[576](index=576&type=chunk) - The company and its subsidiaries are subject to extensive regulation by Korean authorities (Financial Services Commission, Financial Supervisory Service) and U.S. authorities (Federal Reserve, FDIC, NYDFS) for its U.S. operations[761](index=761&type=chunk)[925](index=925&type=chunk)[926](index=926&type=chunk) [Organizational Structure](index=197&type=section&id=ITEM%204.C.%20Organizational%20Structure) Shinhan Financial Group comprises 17 direct and 34 indirect subsidiaries, including wholly-owned entities like Shinhan Bank and Shinhan Card, with a significant international presence across multiple continents - The Group comprises **17 direct and 34 indirect subsidiaries**[977](index=977&type=chunk) - Key wholly-owned subsidiaries include Shinhan Bank, Shinhan Card Co., Ltd., Shinhan Investment Corp., and Shinhan Life Insurance Co., Ltd[977](index=977&type=chunk) - The Group has a significant international presence with subsidiaries in the United States, Canada, China, Japan, Germany, Vietnam, Indonesia, and Mexico, among others[981](index=981&type=chunk) [Properties](index=201&type=section&id=ITEM%204.D.%20Properties) The company's properties, primarily in Korea, had a net book value of **₩2,930 billion** as of December 31, 2021, with most branch facilities being leased rather than owned - The net book value of all properties owned by the Group was **₩2,930 billion** as of December 31, 2021[985](index=985&type=chunk) - Approximately **25%** of Shinhan Bank's 784 branches are housed in buildings owned by the Group, with the remainder being leased properties[983](index=983&type=chunk) [ITEM 4A. UNRESOLVED STAFF COMMENTS](index=202&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved comments from the staff of the U.S. Securities and Exchange Commission regarding its periodic reports - The company has no unresolved staff comments from the SEC[986](index=986&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=202&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial performance, liquidity, and capital resources, discussing operating results, funding sources, and capital adequacy within the context of Korean and global economic trends [Operating Results](index=202&type=section&id=ITEM%205.A.%20Operating%20Results) In 2021, net income increased by **17.6%** to **₩4,113 billion**, driven by growth in net interest and fee income, against a backdrop of **4.0%** Korean GDP growth and proactive credit loss provisioning Operating Income Summary (2020 vs. 2021) | Component | 2020 (₩ Billion) | 2021 (₩ Billion) | % Change | | :--- | :--- | :--- | :--- | | Net interest income | 9,883 | 10,769 | 9.0% | | Net fees and commission income | 2,383 | 2,675 | 12.3% | | Net other operating income (expense) | (7,336) | (7,492) | 2.1% | | **Operating income** | **4,930** | **5,952** | **20.7%** | - Net income for 2021 increased by **17.6%** to **₩4,113 billion** from **₩3,498 billion** in 2020[1070](index=1070&type=chunk) - Provision for credit loss allowance decreased by **29.5%** to **₩975 billion** in 2021, following proactive provisioning in 2020 in response to COVID-19[1066](index=1066&type=chunk)[1068](index=1068&type=chunk) - The Korean economy grew by approximately **4.0%** in 2021, supported by robust exports and a recovery in private consumption, with moderate growth expected in 2022 despite inflation and monetary policy risks[1003](index=1003&type=chunk)[1004](index=1004&type=chunk) [Liquidity and Capital Resources](index=236&type=section&id=ITEM%205.B.%20Liquidity%20and%20Capital%20Resources) The company manages liquidity primarily through customer deposits, which constitute **72.0%** of total funding, while maintaining strong capital adequacy with a Group BIS ratio of **16.20%** and Common Equity Tier 1 ratio of **13.10%** as of year-end 2021 - The principal source of funding is customer deposits, accounting for **72.0%** of total funding as of December 31, 2021[1205](index=1205&type=chunk) Capital Adequacy Ratios (Basel III) | Ratio | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Group BIS ratio | 13.90% | 15.74% | 16.20% | | Tier I capital adequacy ratio | 12.34% | 14.37% | 14.94% | | Common equity capital adequacy ratio | 11.12% | 12.87% | 13.10% | - As of December 31, 2021, the company had contractual cash obligations totaling **₩496,475 billion**, primarily consisting of deposits, borrowings, and debt securities[1220](index=1220&type=chunk)[1222](index=1222&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=245&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, including board composition and senior management, compensation practices, board committees, employee numbers, union memberships, and share ownership disclosures [Directors and Senior Management](index=245&type=section&id=ITEM%206.A.%20Directors%20and%20Senior%20Management) The company is led by CEO Cho Yong-byoung, with a board comprising one executive, one non-executive, and twelve outside directors, all selected for diverse professional expertise - The Chief Executive Officer is **Cho Yong-byoung**, who has held the position since March 2017[1234](index=1234&type=chunk)[1235](index=1235&type=chunk) - The board consists of one executive director, one non-executive director, and twelve outside directors, selected for their expertise in areas like law, finance, economics, and management[1238](index=1238&type=chunk)[1239](index=1239&type=chunk) [Compensation](index=250&type=section&id=ITEM%206.B.%20Compensation) Aggregate compensation for directors and executive officers in 2021 was **₩4.9 billion**, with the company utilizing a performance share plan for long-term incentives instead of stock options - Aggregate remuneration for directors and executive officers in 2021 was **₩4.9 billion**, comprising **₩4.0 billion** in salaries and **₩0.9 billion** in bonuses[1274](index=1274&type=chunk) - The company uses a performance share plan for long-term incentive compensation, which is tied to the company's business performance and share price movements over a four-year period[1278](index=1278&type=chunk)[1282](index=1282&type=chunk) - In 2021, CEO Cho Yong-byoung's compensation included **₩839 million** in salary and a grant of **30,000 performance shares**[1281](index=1281&type=chunk) [Board Practices](index=251&type=section&id=ITEM%206.C.%20Board%20Practices) The 14-member Board of Directors, with 12 outside directors, oversees company affairs through seven committees, including the Audit Committee, which is entirely composed of independent outside directors - The Board of Directors consists of **14 members**: one executive director, one non-executive director, and twelve outside directors[1283](index=1283&type=chunk) - The board has seven key committees to oversee specific areas: Risk Management, Audit, Remuneration, CEO Candidate Recommendation, Independent Director Recommendation, ESG Strategy, and Subsidiary Management[1287](index=1287&type=chunk)[1293](index=1293&type=chunk) - The Audit Committee is composed entirely of four outside directors, overseeing financial reporting and the independent auditors[1290](index=1290&type=chunk) [Employees](index=253&type=section&id=ITEM%206.D.%20Employees) As of December 31, 2021, the Group employed **21,530 regular** and **1,947 non-regular employees**, with a significant portion of subsidiary employees belonging to various labor unions - As of December 31, 2021, the Group employed **21,530 regular** and **1,947 non-regular employees**[1297](index=1297&type=chunk) - Employees at major subsidiaries are members of various unions, including the Korean Financial Industry Union and the Korean Federation of Clerical and Financial Labor Union[1298](index=1298&type=chunk) [Share Ownership](index=254&type=section&id=ITEM%206.E.%20Share%20Ownership) As of April 6, 2022, directors and executive officers collectively held **0.02%** of common stock, while the employee stock ownership association held **4.93%** as of December 31, 2021 - As of April 6, 2022, directors and executive officers as a group held **127,036 common shares**, representing approximately **0.02%** of outstanding shares[1302](index=1302&type=chunk) - The employee stock ownership association held **25,464,625 common shares**, or **4.93%** of the total, as of December 31, 2021[1303](index=1303&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=255&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section identifies major shareholders, including the National Pension Service and BlackRock, and details related party transactions, such as the strategic alliance with BNP Paribas and loans to directors [Major Shareholders](index=255&type=section&id=ITEM%207.A.%20Major%20Shareholders) As of December 31, 2021, the National Pension Service of Korea was the largest shareholder with an **8.78%** stake, followed by BlackRock Fund Advisors at **5.45%** Major Shareholders as of December 31, 2021 | Name of Shareholder | Number of Common Shares | Beneficial Ownership (%) | | :--- | :--- | :--- | | National Pension Service | 45,340,437 | 8.78% | | BlackRock Fund Advisors | 28,133,027 | 5.45% | | Shinhan Financial Group Employee Stock Ownership Association | 25,464,625 | 4.93% | | BNP Paribas SA | 18,690,310 | 3.62% | [Related Party Transactions](index=256&type=section&id=ITEM%207.B.%20Related%20Party%20Transactions) The company maintains an alliance with BNP Paribas, a **3.62%** shareholder with board nomination rights, and had **₩6.1 billion** in outstanding loans to directors and affiliates as of December 31, 2021 - The company maintains an alliance agreement with BNP Paribas, which holds **3.62%** of common stock and has the right to nominate one board member[1316](index=1316&type=chunk) - As of December 31, 2021, loans outstanding to directors, executive officers, and their affiliates totaled **₩6.1 billion**, all made in the ordinary course of business[1317](index=1317&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=256&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section references consolidated financial statements and details legal proceedings, including **₩404 billion** in aggregate claims and ongoing matters related to Lime Asset funds and the CEO's hiring practices [Consolidated Statements and Other Financial Information](index=256&type=section&id=ITEM%208.A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) As of December 31, 2021, the company faced **₩404 billion** in pending lawsuits with a **₩10 billion** provision, alongside ongoing regulatory and legal issues concerning Lime Asset funds and the CEO's hiring practices - As of December 31, 2021, the company faced pending lawsuits with an aggregate claim amount of **₩404 billion** and had recorded a provision of **₩10 billion**[1320](index=1320&type=chunk)[1321](index=1321&type=chunk) - The company is dealing with the fallout from the Lime Asset incident, including regulatory sanctions, fines, and compensation payments to affected investors[1324](index=1324&type=chunk)[1326](index=1326&type=chunk)[1327](index=1327&type=chunk) - The CEO was acquitted by the Seoul High Court on charges of illegal hiring activities, but the case is currently pending in the Supreme Court[1323](index=1323&type=chunk) [ITEM 9. THE OFFER AND LISTING](index=260&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details the trading markets for the company's common shares on the KRX KOSPI Market and its American Depositary Shares (ADSs) on the NYSE, including historical price data and market regulations [Offer and Listing Details](index=260&type=section&id=ITEM%209.A.%20Offer%20and%20Listing%20Details) The company's common stock trades on the KRX KOSPI Market, while its ADSs are listed on the NYSE under 'SHG', with historical price and volume data provided for both securities - The company's common shares are listed on the Korea Exchange, and its ADSs are listed on the NYSE under the symbol **'SHG'**[1336](index=1336&type=chunk) 2021 Stock and ADS Price Range | Security | High Price | Low Price | | :--- | :--- | :--- | | Common Stock (KRW) | 43,000 | 30,650 | | ADS (USD) | 39.07 | 27.67 | [Markets](index=261&type=section&id=ITEM%209.C.%20Markets) This subsection describes the Korea Exchange (KRX), the primary market for common stock, detailing its structure, regulatory oversight, trading rules including a **30%** daily price limit, and reporting requirements for substantial shareholders - The Korea Exchange (KRX) is the principal market for the common stock and operates four market divisions: KOSPI, KOSDAQ, Futures, and KONEX[1340](index=1340&type=chunk)[1343](index=1343&type=chunk) - Share price movements on the KRX are limited to **30%** upward or downward from the previous day's closing price[1352](index=1352&type=chunk) - Under Korean law, any person whose beneficial ownership of Equity Securities reaches **5%** or more must report the holding status and purpose to the Financial Services Commission and the Korea Exchange within five business days[1366](index=1366&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=269&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides supplementary information on the company's share capital, Articles of Incorporation, exchange controls, and taxation, outlining shareholder rights, dividend policies, and tax implications for non-resident investors [Memorandum and Articles of Incorporation](index=269&type=section&id=ITEM%2010.B.%20Memorandum%20and%20Articles%20of%20Incorporation) This subsection details the company's share capital, authorized at **1 billion shares**, and outlines shareholder rights, dividend policies, preemptive rights, and procedures for general meetings as per its Articles of Incorporation - The company's authorized share capital is **1,000,000,000 shares**, with **516,599,554 common shares** issued and outstanding as of December 31, 2021[1386](index=1386&type=chunk) - Dividends are declared annually at the general shareholders' meeting and can be paid in cash or shares. The company may also pay quarterly cash dividends by a resolution of the board of directors[1390](index=1390&type=chunk)[1391](index=1391&type=chunk) - Shareholders have preemptive rights to subscribe to new shares in proportion to their existing holdings, though the board can issue new shares to third parties under specific circumstances, such as a public offering or strategic alliance[1396](index=1396&type=chunk) [Exchange Controls](index=277&type=section&id=ITEM%2010.D.%20Exchange%20Controls) Korean Foreign Exchange Transaction Laws regulate non-resident investment, requiring foreign investors to designate a foreign exchange bank, with the government reserving the right to impose temporary restrictions during emergencies - The Foreign Exchange Transaction Act of Korea regulates investment in Korean securities by non-residents[1426](index=1426&type=chunk) - Foreign investors must register with the Financial Supervisory Service and designate a foreign exchange bank to open accounts for stock investments[1428](index=1428&type=chunk) - The Korean government may temporarily suspend foreign exchange transactions or impose other restrictions in the event of a national emergency or severe economic crisis[1427](index=1427&type=chunk) [Taxation](index=278&type=section&id=ITEM%2010.E.%20Taxation) This subsection summarizes Korean and U.S. federal income tax implications for non-resident holders, detailing dividend withholding tax (**22%**), capital gains tax, foreign tax credits, and the company's PFIC status assessment - Korean withholding tax on dividends paid to non-residents is **22%** (including local surtax), which may be reduced under an applicable tax treaty[1433](index=1433&type=chunk) - Capital gains for non-residents are generally taxed at the lower of **11%** of gross proceeds or **22%** of net gain, unless an exemption applies. Transfers of ADSs outside Korea are generally exempt from this tax under the Special Tax Treatment Control Law[1434](index=1434&type=chunk)[1437](index=1437&type=chunk) - For U.S. holders, dividends are generally taxable as ordinary income. Qualified dividends may be subject to reduced tax rates. Korean withholding taxes may be eligible for a foreign tax credit, subject to limitations[1458](index=1458&type=chunk)[1459](index=1459&type=chunk)[1463](index=1463&type=chunk) - The company does not believe it was a Passive Foreign Investment Company (PFIC) for 2021 and does not expect to become one, but notes that PFIC status is an annual determination that could result in adverse U.S. tax consequences if it were to change[1469](index=1469&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=287&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section refers to Item 4.B for comprehensive quantitative and qualitative disclosures regarding market risk management - Quantitative and qualitative disclosures about market risk are provided in **'Item 4.B. Business Overview — Risk Management'**[1490](index=1490&type=chunk) [ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](index=287&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section details fees and charges for American Depositary Shares (ADSs) and discloses payments received from the depositary, while other security types are noted as not applicable [American Depositary Shares](index=288&type=section&id=ITEM%2012.D.%20American%20Depositary%20Shares) This subsection outlines fees payable by ADS holders for issuance, cancellation, and annual services, and reports that the company received **US$57,122.07** from the depositary in 2021 for proxy process expenses - ADS holders may be required to pay fees to the depositary for services such as issuance (up to **US$5.00 per 100 ADSs**), cancellation (up to **US$5.00 per 100 ADSs**), and an annual depositary services fee (up to **US$2.00 per 100 ADSs**)[1494](index=1494&type=chunk) - In 2021, the company received **US$57,122.07** from the depositary, Citibank, N.A., primarily for reimbursement of proxy process expenses[1498](index=1498&type=chunk) PART II [ITEM 15. CONTROLS AND PROCEDURES](index=290&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management confirmed the effectiveness of disclosure controls and internal control over financial reporting as of December 31, 2021, with an unqualified audit opinion from Samil PricewaterhouseCoopers - Management evaluated and concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[1501](index=1501&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO 2013 framework[1502](index=1502&type=chunk)[1504](index=1504&type=chunk) - The independent registered public accounting firm, Samil PricewaterhouseCoopers, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[1505](index=1505&type=chunk) [ITEM 16G. CORPORATE GOVERNANCE](index=293&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) This section details the company's corporate governance, noting compliance with Korean practices as a foreign private issuer while meeting key NYSE standards for board independence and audit committee composition - As a foreign private issuer listed on the NYSE, the company is permitted to follow home country (Korean) corporate governance practices in lieu of certain NYSE standards[1521](index=1521&type=chunk) - The board of directors consists of a majority of independent directors (**12 out of 14**), which complies with the NYSE standard for U.S. companies[1522](index=1522&type=chunk) - The Audit Committee is composed of four outside directors, all of whom meet the independence requirements of the NYSE and Rule 10A-3 under the Exchange Act[1524](index=1524&type=chunk) - The company has adopted a code of ethics for its principal officers and a supplemental code of behavior for all employees, in compliance with the Sarbanes-Oxley Act[1532](index=1532&type=chunk) PART III [ITEM 18. FINANCIAL STATEMENTS](index=298&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section directs the reader to Item 19(a) for a comprehensive list of all financial statements included in the annual report - This item references Item 19(a) for a list of all financial statements filed with the annual report[1548](index=1548&type=chunk) [ITEM 19. EXHIBITS](index=298&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including the Articles of Incorporation, CEO/CFO certifications, and a detailed index to the financial statements - A list of exhibits filed with the annual report is provided, including the Articles of Incorporation, CEO/CFO certifications, and a list of subsidiaries[1553](index=1553&type=chunk) - The financial statements filed as part of the report are listed in the Index to Financial Statements on page F-1[1549](index=1549&type=chunk)

[Independent Auditors' Report](index=5&type=section&id=Independent%20Auditors'%20Report) This report presents the independent auditors' opinion on the consolidated financial statements and highlights key audit matters and significant economic impacts [Opinion and Basis for Opinion](index=5&type=section&id=Opinion%20and%20Basis%20for%20Opinion) The auditors issued an unqualified opinion, confirming the financial statements are fairly presented in all material respects in accordance with Korean IFRS - The auditors issued an unqualified opinion, confirming the financial statements are fairly presented in accordance with Korean IFRS[7](index=7&type=chunk) - The audit was conducted following Korean Standards on Auditing, and the auditors confirmed their independence from the Group[8](index=8&type=chunk) [Emphasis of Matter and Key Audit Matters](index=5&type=section&id=Emphasis%20of%20Matter%20and%20Key%20Audit%20Matters) The report emphasizes COVID-19's economic impact and identifies key audit matters regarding expected credit losses and Level 3 OTC derivative valuation - Emphasis of Matter: The auditors highlighted the negative impact of the COVID-19 pandemic on the global economy, which could increase the Group's expected credit losses and impair assets[9](index=9&type=chunk) - Key Audit Matter 1: Expected Credit Losses on Loans. This was significant due to the high level of management judgment and complex models required by IFRS 1109, especially in using forward-looking information. As of Dec 31, 2021, loans measured at amortized cost were **W 392.3 trillion** with allowances of **W 3.17 trillion**[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) - Key Audit Matter 2: Valuation of Level 3 OTC Derivatives. This was a key matter due to the complexity and judgment involved in using internally developed valuation models. These derivatives amounted to **W 8.38 trillion** as of Dec 31, 2021[20](index=20&type=chunk) [Consolidated Statements of Financial Position](index=10&type=section&id=Consolidated%20Statements%20of%20Financial%20Position) The Group's financial position shows significant growth in total assets and liabilities, primarily driven by increased loans and customer deposits Consolidated Statements of Financial Position (Amounts in KRW billions) | Account | 2021 | 2020 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **648,152.185** | **605,234.104** | **+7.1%** | | Loans at amortized cost | 389,137.156 | 356,221.519 | +9.2% | | Total Securities | 114,768.399 | 105,598.735 | +8.7% | | **Total Liabilities** | **598,613.763** | **558,877.246** | **+7.1%** | | Deposits | 364,896.675 | 326,416.868 | +11.8% | | Debt securities issued | 80,149.363 | 75,134.394 | +6.7% | | **Total Equity** | **49,538.422** | **46,356.858** | **+6.9%** | - Total assets grew by 7.1% YoY to **W 648.2 trillion**, primarily driven by a 9.2% increase in Loans at amortized cost[34](index=34&type=chunk) - Total liabilities increased by 7.1% YoY to **W 598.6 trillion**, mainly due to an 11.8% rise in customer deposits[36](index=36&type=chunk) - Total equity rose by 6.9% YoY to **W 49.5 trillion**, supported by retained earnings growth, despite an increase in accumulated other comprehensive loss[36](index=36&type=chunk) [Consolidated Statements of Comprehensive Income](index=12&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Group reported strong profit growth for the year, driven by increased net interest and fee income, alongside reduced credit loss provisions Consolidated Statements of Comprehensive Income (Amounts in KRW billions) | Account | 2021 | 2020 | YoY Change | | :--- | :--- | :--- | :--- | | **Net Interest Income** | **10,769.325** | **9,882.700** | **+9.0%** | | Net fees and commission income | 2,674.997 | 2,382.933 | +12.3% | | **Operating Income** | **5,952.096** | **4,929.736** | **+20.7%** | | **Profit for the year** | **4,112.628** | **3,498.076** | **+17.6%** | | Profit attributable to equity holders | 4,019.254 | 3,414.595 | +17.7% | | Total comprehensive income for the year | 3,494.839 | 3,324.232 | +5.1% | | **Basic and diluted EPS (in won)** | **7,308** | **6,654** | **+9.8%** | - Profit for the year increased by 17.6% YoY to **W 4.11 trillion**, driven by a 9.0% growth in Net Interest Income and a 20.7% rise in Operating Income[39](index=39&type=chunk) - The provision for allowance for credit loss decreased to **W 974.7 billion** in 2021 from **W 1.38 trillion** in 2020, contributing to higher profitability[39](index=39&type=chunk) - Total other comprehensive income was a loss of **W 617.8 billion**, a significant increase from the loss of **W 173.8 billion** in 2020, primarily due to losses on securities at fair value through other comprehensive income[40](index=40&type=chunk) [Consolidated Statements of Changes in Equity](index=14&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity increased, primarily driven by annual profit and hybrid bond issuance, partially offset by dividends and other comprehensive losses Changes in Total Equity (Amounts in KRW billions) | Account | 2021 | 2020 | | :--- | :--- | :--- | | **Balance at beginning of year** | **46,356.858** | **41,930.381** | | Profit for the year | 4,112.628 | 3,498.076 | | Other comprehensive income (loss) | (617.789) | (173.844) | | Dividends paid | (1,102.920) | (883.929) | | Issuance of hybrid bonds | 1,154.597 | 448.699 | | Other changes | (364.952) | 1,537.475 | | **Balance at end of year** | **49,538.422** | **46,356.858** | - Total equity increased from **W 46.4 trillion** to **W 49.5 trillion** in 2021. The growth was primarily driven by the profit for the year (**W 4.11 trillion**) and the issuance of hybrid bonds (**W 1.15 trillion**), partially offset by dividends paid (**W 1.1 trillion**) and other comprehensive losses[45](index=45&type=chunk) - In 2020, total equity increased from **W 41.9 trillion** to **W 46.4 trillion**, supported by profit for the year (**W 3.5 trillion**) and a paid-in capital increase of **W 1.4 trillion**[43](index=43&type=chunk) [Consolidated Statements of Cash Flows](index=16&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Group experienced a significant turnaround in operating cash flow, offset by increased investing outflows, leading to overall cash and equivalents growth Consolidated Statements of Cash Flows (Amounts in KRW billions) | Account | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash inflow (outflow) from operating activities** | **11,080.115** | **(4,409.317)** | | **Net cash outflow from investing activities** | **(12,030.510)** | **(3,025.926)** | | **Net cash inflow from financing activities** | **4,961.745** | **7,880.569** | | Effect of exchange rate changes | 109.553 | (61.518) | | **Increase in cash and cash equivalents** | **4,120.903** | **383.808** | | Cash and cash equivalents at beginning of year | 8,962.982 | 8,579.174 | | **Cash and cash equivalents at end of year** | **13,083.885** | **8,962.982** | - The Group generated a strong net cash inflow from operating activities of **W 11.1 trillion** in 2021, a significant turnaround from a **W 4.4 trillion** outflow in 2020. This was mainly due to a large increase in deposits[46](index=46&type=chunk)[48](index=48&type=chunk) - Net cash outflow from investing activities increased to **W 12.0 trillion** in 2021 from **W 3.0 trillion** in 2020, primarily due to a net increase in the acquisition of securities[48](index=48&type=chunk) - Net cash inflow from financing activities decreased to **W 5.0 trillion** in 2021 from **W 7.9 trillion** in 2020. While proceeds from debt securities issued increased, this was offset by lower net increases in borrowings compared to the prior year[50](index=50&type=chunk) [Notes to the Consolidated Financial Statements](index=19&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on the Group's reporting entity, accounting policies, financial risk management, and significant business combinations - The Group's risk management is overseen by the Group Risk Management Committee, which establishes basic policies and risk limits for the Group and its subsidiaries[269](index=269&type=chunk)[270](index=270&type=chunk) [1. Reporting entity](index=19&type=section&id=1.%20Reporting%20entity) Shinhan Financial Group, incorporated in 2001, is a financial holding company managing subsidiaries in banking, credit cards, securities, and insurance - Shinhan Financial Group Co., Ltd. is the controlling company, incorporated on September 1, 2001, to manage its financial subsidiaries[52](index=52&type=chunk) Ownership of Major Consolidated Subsidiaries (as of Dec 31, 2021) | Investee | Ownership (%) | | :--- | :--- | | Shinhan Bank | 100.0 | | Shinhan Card Co., Ltd. | 100.0 | | Shinhan Investment Corp. | 100.0 | | Shinhan Life Insurance Co., Ltd. | 100.0 | | Shinhan Capital Co., Ltd. | 100.0 | - On July 1, 2021, Shinhan Life Insurance Co., Ltd. and Orange Life Insurance Co., Ltd. merged, with the surviving entity named Shinhan Life Insurance Co., Ltd[54](index=54&type=chunk) [2. Basis of preparation](index=22&type=section&id=2.%20Basis%20of%20preparation) The consolidated financial statements adhere to Korean IFRS, requiring management estimates, with a key accounting policy change related to LIBOR reform - The financial statements are prepared in accordance with Korean IFRS on a historical cost basis, with certain exceptions like derivatives measured at fair value[59](index=59&type=chunk)[61](index=61&type=chunk)[66](index=66&type=chunk) - The Group adopted amendments related to the interest rate benchmark reform (LIBOR suspension) from January 1, 2021. The report details the carrying values and notional amounts of financial instruments still linked to LIBOR[68](index=68&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) - The Group applied a practical expedient for COVID-19 related rent concessions, recognizing **W 47.59 billion** in profit or loss for the year ended December 31, 2021, to reflect changes in lease payments[74](index=74&type=chunk)[75](index=75&type=chunk) [3. Significant accounting policies](index=25&type=section&id=3.%20Significant%20accounting%20policies) This section details the Group's accounting policies for operating segments, consolidation, financial instruments, ECL, leases, and insurance contracts, consistent with prior year except as noted - The Group's accounting policies are based on K-IFRS and are consistent with the prior year, except for the changes detailed in Note 2[77](index=77&type=chunk) - Financial assets are classified and measured based on the business model and contractual cash flow characteristics as either at amortized cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL)[97](index=97&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - The Group uses a three-stage expected credit loss (ECL) model for impairment of financial assets, recognizing 12-month ECL for Stage 1 assets and lifetime ECL for Stage 2 (significant increase in credit risk) and Stage 3 (impaired) assets[124](index=124&type=chunk)[125](index=125&type=chunk) - The Group is preparing for the adoption of K-IFRS No. 1117 'Insurance Contracts' effective January 1, 2023, which is expected to have a significant impact on the valuation of insurance liabilities and revenue recognition[250](index=250&type=chunk)[251](index=251&type=chunk)[265](index=265&type=chunk) [4. Financial risk management](index=51&type=section&id=4.%20Financial%20risk%20management) The Group manages credit, market, interest rate, and liquidity risks through a structured framework, including limits, monitoring, and stress testing, while maintaining Basel III capital adequacy [Credit Risk](index=54&type=section&id=4.b%20Credit%20risk) Credit risk, the Group's largest risk, is managed through comprehensive evaluation, monitoring, and limit systems, using a three-stage ECL model with forward-looking scenarios - Credit risk is managed via credit evaluation systems (e.g., ASS, BSS for cards), credit monitoring, and a limit management system to control portfolio risk[283](index=283&type=chunk)[284](index=284&type=chunk)[288](index=288&type=chunk) - To measure ECL, the Group uses forward-looking information based on three macroeconomic scenarios (Upside, Central, Downside) reflecting the impact of COVID-19[303](index=303&type=chunk)[305](index=305&type=chunk)[317](index=317&type=chunk) Maximum Exposure to Credit Risk (Amounts in KRW billions) | Category | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Due from banks and loans | 415,086.775 | 389,906.694 | | Securities | 171,847.833 | 159,967.087 | | Derivative assets | 3,799.189 | 5,633.915 | | Guarantees & Loan commitments | 199,253.152 | 191,549.327 | | **Total** | **813,425.881** | **767,398.214** | [Market Risk](index=73&type=section&id=4.c%20Market%20risk) Market risk from trading positions is managed using VaR, investment limits, and stress tests, with interest rate risk assessed via EaR and EVE under Basel III Group's Market Risk Capital Requirement (Standard Method, Amounts in KRW billions) | Risk Type | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Interest rate risk | 576.515 | 592.668 | | Stock price risk | 219.900 | 222.544 | | Foreign exchange risk | 299.909 | 113.497 | | **Total** | **1,123.399** | **941.482** | - Interest rate risk for non-trading positions is measured using the Basel III IRRBB method, assessing changes in Economic Value of Equity (△EVE) and Net Interest Income (△NII)[370](index=370&type=chunk)[374](index=374&type=chunk) - The Group's net foreign currency exposure was **W 7.37 trillion** as of Dec 31, 2021, up from **W 4.32 trillion** in 2020[379](index=379&type=chunk)[382](index=382&type=chunk) [Liquidity Risk](index=82&type=section&id=4.d%20Liquidity%20risk) Liquidity risk is managed by maintaining adequate liquidity through systematic monitoring, early detection, and stress testing, with short-term liabilities being a key focus - The Group manages liquidity risk by comparing liquidity requirements under normal and stress situations (internal, external, and combined crises) and monitoring various liquidity indices[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk) Maturity of Non-Derivative Financial Liabilities (Dec 31, 2021, Amounts in KRW billions) | Maturity | Amount | | :--- | :--- | | Less than 1 month | 258,829.710 | | 1~3 months | 47,580.176 | | 3~6 months | 52,503.110 | | 6 months ~ 1 year | 83,879.492 | | 1~5 years | 77,760.091 | | More than 5 years | 13,079.460 | | **Total** | **533,632.039** | [Fair Value Measurement](index=85&type=section&id=4.e%20Measurement%20of%20fair%20value) Fair value measurements are categorized into a three-level hierarchy based on input observability, with a significant portion of financial instruments measured at Level 3 - Fair value is determined using a three-level hierarchy: Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[394](index=394&type=chunk) Fair Value Hierarchy of Financial Instruments (Dec 31, 2021, Amounts in KRW billions) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **Financial Assets at Fair Value** | 33,497.763 | 83,457.029 | 14,086.479 | 131,041.271 | | **Financial Liabilities at Fair Value** | 1,560.286 | 3,460.166 | 7,959.207 | 12,979.659 | [Capital Risk Management](index=112&type=section&id=4.i%20Capital%20risk%20management) The Group manages capital to comply with Basel III requirements, maintaining capital ratios well above regulatory minimums as of December 31, 2021 - The Group is required to maintain minimum capital ratios under Basel III: Total Capital Ratio (**8.0%**), Tier I (**6.0%**), and Common Equity Tier I (**4.5%**), plus additional buffers[453](index=453&type=chunk) Capital Adequacy Ratios (Basel III) | Ratio | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total capital ratio | 16.20% | 15.74% | | Tier I capital ratio | 14.94% | 14.37% | | Common stock ratio (CET1) | 13.10% | 12.87% | [47. Business combination](index=271&type=section&id=47.%20Business%20combination) The Group completed several business combinations in 2020 and 2021, including the acquisition of Neoplux and Leaders Financial Sales departments, and the merger of Shinhan Life and Orange Life - The Group acquired Neoplux Co., Ltd. (now Shinhan Venture Investment) in 2020, recognizing **W 14.0 billion** in goodwill[855](index=855&type=chunk)[859](index=859&type=chunk) - On July 1, 2021, Shinhan Life Insurance Co., Ltd. and Orange Life Insurance Co., Ltd. completed their merger[861](index=861&type=chunk) - The Group acquired business departments from Leaders Financial Sales Co., Ltd. in 2021, recognizing **W 13.9 billion** in goodwill[860](index=860&type=chunk) [49. Uncertainty due to changes in domestic and global economic conditions](index=274&type=section&id=49.%20Uncertainty%20due%20to%20changes%20in%20domestic%20and%20global%20economic%20conditions) The report addresses ongoing economic uncertainty from the COVID-19 pandemic, detailing its impact on expected credit losses and the Group's exposure to affected industries and moratorium loans - The rapid spread of COVID-19 continues to create economic uncertainty, which may increase expected credit losses and negatively impact the Group's ability to generate revenue[865](index=865&type=chunk) Shinhan Bank Exposure to COVID-19 Affected Industries (Dec 31, 2021, Amounts in KRW billions) | Industry | Total Exposure | | :--- | :--- | | Lodging | 3,656.464 | | Oil/petroleum refinery | 3,881.950 | | Clothing manufacturing | 3,075.249 | | Airlift passenger | 643.413 | | Travel | 132.830 | Loans under Moratorium (Dec 31, 2021, Amounts in KRW billions) | Bank | Moratorium of interest payments | Moratorium of repayment in installments | Total | | :--- | :--- | :--- | :--- | | Shinhan Bank | 224.449 | 1,342.366 | 1,632.588 | | Jeju Bank | 0.348 | 276.193 | 276.541 |

Shinhan Financial Group Co., Ltd. (NYSE:SHG) Q4 2021 Earnings Conference Call February 9, 2022 1:00 AM ET Company Participants Heo Young-Taeg - Group CMO Bang Dong-Kwon - Group CRO Kim Myoung-hee - Group CDO Conference Call Participants Kim Jin-Sang - Hyundai Automobile Securities Lee Byung Gun - DB Securities Josie Hung - JPMorgan Yafei Tian - Citi Securities Mike Makdad - Morningstar Sin-Young Park - Goldman Sachs Unidentified Company Representative [Foreign Language] Recording in progress Group CSSO; Cor ...

Financial Data and Key Metrics Changes - The company achieved a record high half-year net income of KRW2.4438 trillion, surpassing the recurring income fundamentals of KRW1 trillion per quarter [15][16] - Bank net income rose 20% year-over-year (Y-O-Y), while non-banking recorded a record high half-year net income, improving 68% Y-O-Y [7][8] - Return on Equity (ROE) reached 11.5%, marking a significant improvement in capital profitability [13] Business Line Data and Key Metrics Changes - Non-banking income increased significantly, with capital market subsidiaries contributing KRW507.4 billion, representing 43% of the group non-banking income [8][20] - The digital channels operating income before expenses recorded KRW824 billion in the first half, up 52% Y-O-Y [26] - The credit cost ratio was managed stably at 20 basis points, with the bank's credit cost ratio at a record low of 8 basis points [22] Market Data and Key Metrics Changes - The company reported a 4.2% year-to-date (YTD) increase in loans in won, with SME loans increasing by 7.6% YTD [16][17] - The delinquency rates for Shinhan Bank and card fell Y-O-Y, indicating no signs of asset quality deterioration due to the pandemic [22] Company Strategy and Development Direction - The company aims to balance earnings improvements through efficient capital allocation and synergy expansion between subsidiaries [9] - There is a focus on digital transformation, with plans to launch non-face-to-face collateralized loans in August [58] - The company is committed to ESG activities and is actively expanding strategic digital investments [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining asset quality despite potential risks from the resurgence of COVID-19 [36] - The company anticipates a favorable flow in the second half of the year, with plans to enhance net interest margin (NIM) through improved loan yield [19][66] - The management is closely monitoring the market situation and will execute shareholder return policies accordingly [14][64] Other Important Information - The company is reviewing dividend plans and considering quarterly payouts based on previous year's EPS [14] - The integration of life insurance companies is expected to yield positive results, with a net income goal of KRW400 billion [38][40] Q&A Session Summary Question: Outlook on SOHO loans and COVID-19 impact - Management acknowledged potential risks but noted improvements in asset quality and delinquency rates for SOHO loans [35][36] Question: Integration of life insurance and IFRS 17 impact - The company expects net income to rise with IFRS 17 adoption, enhancing transparency and market differentiation [38][41] Question: Performance of Shinhan Card and income trends - Management confirmed that cost control measures led to improved results and a steady income increase is expected [49][50] Question: Digital loan offerings in response to competition - The company plans to launch non-face-to-face collateralized loans and aims for a fully digital retail loan process [58][66] Question: Shareholder return policy and CET1 ratio - The company is reviewing its total shareholder return ratio and aims to maintain a CET1 ratio of 12% in the mid to long term [76][77] Question: Competition from KakaoBank and fintechs - Management is developing alternative credit rating models to compete effectively in the mid-interest rate market [83]

PART I [IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](index=6&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) This section is not applicable as per the report - The report states that this item is not applicable[25](index=25&type=chunk) [OFFER STATISTICS AND EXPECTED TIMETABLE](index=6&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) This section is not applicable as per the report - The report states that this item is not applicable[26](index=26&type=chunk) [KEY INFORMATION](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents key financial data, risk factors, and exchange rate information for Shinhan Financial Group, covering selected consolidated financial statements, profitability, asset quality, capital ratios, and business risks [Selected Financial Data](index=6&type=section&id=ITEM%203.A.%20Selected%20Financial%20Data) This subsection presents selected consolidated financial data for **2016** through **2020**, covering income, balance sheet, profitability, asset quality, and capital ratios under IFRS Consolidated Income Statement Data (2016-2020) | Indicator | 2018 (W billion) | 2019 (W billion) | 2020 (W billion) | | :--- | :--- | :--- | :--- | | **Net Interest Income** | 8,580 | 9,738 | 9,883 | | **Operating Income** | 4,499 | 5,046 | 4,930 | | **Profit for the year** | 3,198 | 3,642 | 3,498 | | **Profit attributable to Equity holders** | 3,156 | 3,403 | 3,415 | | **Basic earnings per share (Won)** | 6,579 | 7,000 | 6,654 | Consolidated Balance Sheet Data (2018-2020) | Indicator | As of Dec 31, 2018 (W billion) | As of Dec 31, 2019 (W billion) | As of Dec 31, 2020 (W billion) | | :--- | :--- | :--- | :--- | | **Total Assets** | 459,601 | 552,420 | 605,234 | | **Total Liabilities** | 422,949 | 510,489 | 558,877 | | **Total Equity** | 36,652 | 41,931 | 46,357 | Profitability Ratios (2018-2020) | Ratio | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | **Return on Average Assets (ROA)** | 0.72% | 0.69% | 0.60% | | **Return on Average Equity (ROE)** | 9.23% | 9.02% | 7.95% | | **Dividend Payout Ratio** | 24.81% | 25.97% | 25.42% | | **Net Interest Margin** | 2.14% | 2.07% | 1.92% | Asset Quality Ratios (2018-2020) | Ratio | As of Dec 31, 2018 | As of Dec 31, 2019 | As of Dec 31, 2020 | | :--- | :--- | :--- | :--- | | **Impaired Loans as % of Total Loans** | 0.56% | 0.57% | 0.56% | | **Non-Performing Loans as % of Total Loans** | 0.36% | 0.40% | 0.47% | Capital Ratios (2018-2020) | Ratio | As of Dec 31, 2018 | As of Dec 31, 2019 | As of Dec 31, 2020 | | :--- | :--- | :--- | :--- | | **Group BIS Ratio** | 14.87% | 13.90% | 15.74% | | **Tier I Capital Adequacy Ratio** | 13.42% | 12.34% | 14.37% | | **Common Equity Tier I Ratio** | 12.55% | 11.12% | 12.87% | [Risk Factors](index=14&type=section&id=ITEM%203.D.%20Risk%20Factors) This subsection details various risks, including those related to business operations, specific financial products, regulatory changes, and the Korean economy, that could materially affect the company's financial condition - The COVID-19 pandemic presents significant uncertainty, potentially impacting business, operations, and financial conditions through increased loan defaults, interest rate decreases, and operational disruptions. The company accumulated an additional **W394.4 billion** in COVID-19-related provisions during **2020**[63](index=63&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - The company's business is heavily dependent on the Korean economy, which is susceptible to global economic turbulence, trade disputes (e.g., U.S.-China), and domestic issues like rising household debt and real estate market volatility[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - Intense competition exists in the Korean financial services industry from domestic banks, foreign institutions, and new entrants like internet-only banks and fintech companies. This competition pressures net interest margins and may increase marketing expenses[75](index=75&type=chunk)[76](index=76&type=chunk)[87](index=87&type=chunk) - The company and its subsidiaries must maintain capital ratios above regulatory minimums (e.g., Basel III requirements). Failure to do so could result in operational suspensions. The implementation of stricter standards like Basel III may require raising additional capital[92](index=92&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk) - The company has significant exposure to small- and medium-sized enterprises (SMEs), which are more vulnerable to economic downturns. As of December **31**, **2020**, loans to SMEs represented **29.9%** of the total loan portfolio[114](index=114&type=chunk)[115](index=115&type=chunk)[118](index=118&type=chunk) - The credit card business faces risks from market saturation, stricter regulations on merchant fees, and competition from new payment methods. Government regulations have put downward pressure on merchant fees, impacting revenues[131](index=131&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - The company may suffer losses from financial products sold by its subsidiaries, such as those related to Lime Asset Management. The Financial Supervisory Service has investigated and recommended sanctions against Shinhan Bank and Shinhan Investment for improper sales[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - Tensions with North Korea, including its nuclear program and military actions, could escalate and have a material adverse effect on the company's business, the Korean economy, and the price of its securities[215](index=215&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) [INFORMATION ON THE COMPANY](index=57&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of Shinhan Financial Group, detailing its history, strategic direction, principal business activities, structure, key subsidiaries, and regulatory environment [History and Development of the Company](index=57&type=section&id=ITEM%204.A.%20History%20and%20Development%20of%20the%20Company) Established on **September 1**, **2001**, as Korea's first privately-held financial holding company, Shinhan Financial Group has grown through strategic acquisitions and implements a 'F.R.E.S.H. **2020s**' mid-term strategy for sustainable growth - Shinhan Financial Group was established on **September 1**, **2001**, as the first privately-held financial holding company in Korea[235](index=235&type=chunk)[250](index=250&type=chunk) - The company has grown substantially through key acquisitions, including Chohung Bank in **2003**, LG Card in **2007**, and Orange Life Insurance in **2019**, making it a leading financial services provider in Korea[237](index=237&type=chunk)[251](index=251&type=chunk) - The Group's new mid-term strategy is 'F.R.E.S.H. **2020s**', which stands for Fundamental, Resilience, Ecosystem, Sustainability, and Human-talent. This initiative aims to drive distinguished and sustainable growth[240](index=240&type=chunk) - As of December **31**, **2020**, the Group has **18** direct and **30** indirect subsidiaries, serving approximately **19 million** active customers through a network of **1,383** branches[238](index=238&type=chunk) [Business Overview](index=62&type=section&id=ITEM%204.B.%20Business%20Overview) This subsection details the Group's principal activities across banking, credit cards, securities, and insurance, covering its network, IT, competitive landscape, assets, liabilities, risk management, and regulatory environment - The Group's principal activities are commercial banking, credit card services, securities brokerage, life insurance, asset management, and other services like leasing and savings banking[260](index=260&type=chunk) Loan Portfolio by Type (As of Dec 31) | Loan Type | 2018 (W billion) | 2019 (W billion) | 2020 (W billion) | | :--- | :--- | :--- | :--- | | **Total Corporate Loans** | 159,790 | 169,130 | 190,255 | | **Total Retail Loans** | 120,832 | 134,424 | 146,790 | | **Credit Cards** | 22,448 | 24,024 | 23,759 | | **Total Gross Loans** | **303,070** | **327,578** | **360,804** | - As of December **31**, **2020**, total exposure to the **10** largest main debtor groups (chaebols) was **W26,011.5 billion**[429](index=429&type=chunk)[430](index=430&type=chunk) - The Group's risk management framework is hierarchical, overseen by the Group Risk Management Committee, and covers credit, market, interest rate, liquidity, and operational risks. It utilizes tools like Value-at-Risk (VaR) and stress testing[590](index=590&type=chunk)[594](index=594&type=chunk)[595](index=595&type=chunk) - The Group and its subsidiaries are heavily regulated by Korean authorities like the Financial Services Commission (FSC) and are subject to various laws including the Financial Holding Companies Act, the Banking Act, and capital adequacy standards based on Basel III[786](index=786&type=chunk)[837](index=837&type=chunk)[851](index=851&type=chunk) [Organizational Structure](index=204&type=section&id=ITEM%204.C.%20Organizational%20Structure) This subsection illustrates Shinhan Financial Group's organizational structure, listing its direct and indirect subsidiaries and highlighting its extensive domestic and international network - As of the report date, Shinhan Financial Group has **18** direct and **30** indirect subsidiaries[1002](index=1002&type=chunk) - Key subsidiaries include Shinhan Bank, Shinhan Card, Shinhan Investment Corp., Shinhan Life Insurance, and Orange Life Insurance, all of which are **100%** owned (except for Jeju Bank at **75.3%** and Asia Trust Co. at **60.0%**)[1002](index=1002&type=chunk)[1670](index=1670&type=chunk) - The Group has a significant number of overseas subsidiaries, including banking operations in the USA, Canada, China, Japan, Vietnam, and Indonesia, reflecting its global presence[1003](index=1003&type=chunk)[1007](index=1007&type=chunk) [Properties](index=205&type=section&id=ITEM%204.D.%20Properties) This subsection details the Group's principal owned and leased properties, including locations and sizes, with a net book value of **W3,030 billion** as of December **31**, **2020** - The net book value of all properties owned by the Group was **W3,030 billion** as of December **31**, **2020**[1011](index=1011&type=chunk) - Shinhan Bank owned approximately **21.9%** of its **859** branch facilities, with the remainder being leased. Other subsidiaries like Shinhan Card and Shinhan Investment also primarily lease their branch locations[1009](index=1009&type=chunk)[1010](index=1010&type=chunk) [UNRESOLVED STAFF COMMENTS](index=206&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) This section is not applicable as the company reports no unresolved comments from the staff of the U.S. Securities and Exchange Commission - The company reports no unresolved staff comments from the SEC regarding its periodic reports[1012](index=1012&type=chunk) [OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=206&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of the Group's financial condition and operating results, including performance comparisons, analysis of financial items, liquidity, capital resources, and critical accounting policies [Operating Results](index=206&type=section&id=ITEM%205.A.%20Operating%20Results) This subsection analyzes the Group's operating results, comparing performance across years, detailing income trends, segment performance, and critical accounting policies Operating Income Comparison (2019 vs 2020) | Component | 2019 (W billion) | 2020 (W billion) | % Change | | :--- | :--- | :--- | :--- | | **Net Interest Income** | 9,738 | 9,883 | 1.5% | | **Net Fees & Commission Income** | 2,141 | 2,383 | 11.3% | | **Net Other Operating Expense** | (6,833) | (7,336) | 7.4% | | **Operating Income** | **5,046** | **4,930** | **(2.3)%** | - In **2020**, net income decreased by **4.0%** to **W3,498 billion** from **W3,642 billion** in **2019**. This was primarily due to a significant increase in provision for credit loss allowance (up **40.9%** to **W1,382 billion**), largely driven by proactive provisioning for corporate loans in response to the COVID-19 pandemic[1154](index=1154&type=chunk)[1158](index=1158&type=chunk)[1160](index=1160&type=chunk) - Net interest margin decreased by **15 basis points** from **2.07%** in **2019** to **1.92%** in **2020**, mainly due to decreases in the base interest rate by the Bank of Korea[1144](index=1144&type=chunk) - In **2019**, net income increased by **13.9%** to **W3,642 billion** from **W3,198 billion** in **2018**. The growth was driven by a **13.5%** increase in net interest income and a **10.4%** increase in net fees and commission income, partly due to the acquisition of Orange Life Insurance[1164](index=1164&type=chunk)[1190](index=1190&type=chunk) - The adoption of IFRS **9**, **15**, and **16** in recent years affects the direct comparability of financial data. IFRS **9**, adopted in **2018**, replaced the 'incurred loss' model with a forward-looking 'expected credit loss' model for impairment, leading to earlier recognition of losses[1053](index=1053&type=chunk)[1061](index=1061&type=chunk)[1086](index=1086&type=chunk) [Liquidity and Capital Resources](index=251&type=section&id=ITEM%205.B.%20Liquidity%20and%20Capital%20Resources) This subsection details the Group's liquidity and capital management, highlighting customer deposits as the primary funding source and outlining capital adequacy ratios and funding strategies - The principal source of funding is customer deposits, accounting for **70.9%** of total funding as of December **31**, **2020**[1274](index=1274&type=chunk) Contractual Cash Obligations as of Dec 31, 2020 | Obligation Type | Total (W billion) | | :--- | :--- | | Deposits | 329,350 | | Borrowings | 41,922 | | Debt securities issued | 78,799 | | Lease liability | 593 | | **Total** | **450,664** | Capital Adequacy Ratios (Basel III) as of Dec 31, 2020 | Ratio | 2020 | | :--- | :--- | | **Total Capital Adequacy Ratio** | 15.74% | | **Tier I Capital Adequacy Ratio** | 14.37% | | **Common Equity Capital Adequacy Ratio** | 12.87% | - In **September 2020**, the Group issued **39.13 million** new common shares to **two** private equity funds, raising approximately **W1,158 billion** to increase loss absorption capacity in response to the COVID-19 pandemic[1282](index=1282&type=chunk) [DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=257&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section provides information on the company's directors, senior management, and employees, covering their backgrounds, compensation, board practices, and workforce details [Directors and Senior Management](index=257&type=section&id=ITEM%206.A.%20Directors%20and%20Senior%20Management) This subsection lists the executive, non-executive, and outside directors, including CEO Cho Yong-byoung, and provides their professional backgrounds - The board of directors consists of **one** executive director, **one** non-executive director, and **twelve** outside directors[1345](index=1345&type=chunk) - Cho Yong-byoung serves as the Chief Executive Officer and executive director, with his term ending in **March 2023**[1297](index=1297&type=chunk)[1298](index=1298&type=chunk) [Compensation](index=261&type=section&id=ITEM%206.B.%20Compensation) This subsection details director and executive officer compensation, noting **W4.0 billion** aggregate remuneration in **2020** and the use of performance-based incentives - The aggregate remuneration paid to the chairman, executive directors, non-executive directors, and executive officers for the year ended December **31**, **2020**, was **W4.0 billion**[1334](index=1334&type=chunk) - CEO Cho Yong-byoung received **W1,251 million** in **2020**, consisting of **W800 million** in salary and **W450 million** in incentive compensation[1342](index=1342&type=chunk) - The company has ceased granting stock options since **April 1**, **2010**, and now uses performance-based cash compensation like 'performance shares' for high-ranking officers[1337](index=1337&type=chunk)[1339](index=1339&type=chunk) [Board Practices](index=263&type=section&id=ITEM%206.C.%20Board%20Practices) This subsection describes the board of directors' structure and practices, including its composition with a majority of outside directors and its **seven** key committees - The Board of Directors has ultimate responsibility for management and currently consists of **one** executive director, **one** non-executive director, and **12** outside directors[1345](index=1345&type=chunk) - The Board has **seven** key management committees: Risk Management, Audit, Remuneration, Committee for Recommending Candidates for Independent Directors and Members of Audit Committee, Committee for Recommending Candidates for CEO, ESG Strategy Committee, and Committee for Managing Subsidiary's Business[1349](index=1349&type=chunk)[1350](index=1350&type=chunk)[1356](index=1356&type=chunk) [Employees](index=265&type=section&id=ITEM%206.D.%20Employees) This subsection details the Group's workforce, comprising **21,652** regular and **1,439** non-regular employees across the holding company and subsidiaries as of December **31**, **2020**, with many employees belonging to labor unions - As of December **31**, **2020**, the Group employed **21,652** regular employees and **1,439** non-regular employees at the holding company and subsidiary levels[1360](index=1360&type=chunk) - A large number of employees are members of various labor unions, including the Korean Financial Industry Union and the Korean Federation of Clerical and Financial Labor Union. Employee relations are considered good[1361](index=1361&type=chunk)[1362](index=1362&type=chunk) [Share Ownership](index=266&type=section&id=ITEM%206.E.%20Share%20Ownership) This subsection details share ownership by directors, executive officers, and the employee stock ownership association, noting their respective holdings as of **April 1**, **2021**, and year-end **2020** - As of **April 1**, **2021**, directors and executive officers as a group beneficially held **1,383,133** common shares, representing approximately **0.27%** of outstanding stock[1364](index=1364&type=chunk) - The employee stock ownership association owned **24,788,139** shares of common stock, or **4.80%**, as of December **31**, **2020**[1365](index=1365&type=chunk) [MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=267&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section identifies the company's major shareholders and describes significant related party transactions, including the strategic alliance with BNP Paribas and loans to directors and officers [Major Shareholders](index=267&type=section&id=ITEM%207.A.%20Major%20Shareholders) This subsection lists Shinhan Financial Group's major shareholders, with the National Pension Service and BlackRock Fund Advisors as the largest holders as of December **31**, **2020** Major Shareholders as of December 31, 2020 | Name of Shareholder | Beneficial Ownership (%) | | :--- | :--- | | National Pension Service | 9.81% | | BlackRock Fund Advisors | 5.62% | | Shinhan Financial Group Employee Stock Ownership Association | 4.80% | | Centennial Investment Limited | 3.96% | | BNP Paribas SA | 3.62% | [Related Party Transactions](index=268&type=section&id=ITEM%207.B.%20Related%20Party%20Transactions) This subsection discloses related party transactions, including the alliance with BNP Paribas and loans to directors and executive officers made on normal commercial terms - The company maintains an alliance agreement with BNP Paribas, which held **3.62%** of common stock as of December **31**, **2020**, and has the right to nominate **one** director to the board[1378](index=1378&type=chunk) - As of December **31**, **2020**, the principal amount of loans outstanding to directors, executive officers, and their affiliates was **W5.1 billion**. These loans were made in the ordinary course of business on normal commercial terms[1379](index=1379&type=chunk) [FINANCIAL INFORMATION](index=268&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section provides consolidated financial statements and other financial information, detailing significant legal and regulatory proceedings, including investigations into Lime Asset funds and German Heritage DLS Products [Consolidated Statements and Other Financial Information](index=268&type=section&id=ITEM%208.A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) This subsection refers to the full consolidated financial statements and details ongoing legal and regulatory proceedings, including investigations into Lime Asset funds and German Heritage DLS Products - As of December **31**, **2020**, the Group was a defendant in pending lawsuits with an aggregate claim amount of **W320 billion**, for which a provision of **W15 billion** was recorded[1382](index=1382&type=chunk) - The Financial Supervisory Service is investigating the sale of Lime Asset funds by Shinhan Bank and Shinhan Investment. This has led to sanctions, including a partial business suspension for Shinhan Investment, and recommendations for fines and business suspension for Shinhan Bank[1386](index=1386&type=chunk)[1388](index=1388&type=chunk) - Shinhan Investment and Shinhan Bank have resolved to compensate investors for losses on certain Lime Asset products. Shinhan Investment has also made prepayments to investors in German Heritage DLS Products and recognized **W138.2 billion** in provisions for potential future compensation in **2020**[1389](index=1389&type=chunk)[1390](index=1390&type=chunk) [THE OFFER AND LISTING](index=272&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details the trading markets for the company's common stock and American Depositary Shares (ADSs), including historical market price data, Korea Exchange regulations, and foreign investor restrictions [Offer and Listing Details](index=272&type=section&id=ITEM%209.A.%20Offer%20and%20Listing%20Details) This subsection provides market price information for the company's common stock on the Korea Exchange (KRX) and ADSs on the New York Stock Exchange (NYSE), including historical high, low, and trading volumes Market Price Summary (2020) | Security | Exchange | High Price | Low Price | | :--- | :--- | :--- | :--- | | **Common Stock** | Korea Exchange | W42,750 | W22,200 | | **ADS** | NYSE | $37.45 | $17.37 | [Markets](index=272&type=section&id=ITEM%209.C.%20Markets) This subsection describes the Korea Exchange (KRX), the principal market for common stock, detailing its structure, regulations, trading rules, and reporting requirements for foreign investors - The principal trading market for the common shares is the KRX KOSPI Market Division of the Korea Exchange[1397](index=1397&type=chunk) - The Korea Exchange has a daily price fluctuation limit of **30%** of the previous day's closing price for any listed stock[1412](index=1412&type=chunk) - Under Korean law, any person acquiring **5%** or more of a company's voting shares must report the holding status and purpose to the Financial Services Commission and the Korea Exchange within **five** business days[1425](index=1425&type=chunk) [ADDITIONAL INFORMATION](index=280&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides additional details on the company's corporate structure and governance, including share capital, articles of incorporation, exchange controls, and Korean and U.S. taxation for shareholders [Memorandum and Articles of Incorporation](index=280&type=section&id=ITEM%2010.B.%20Memorandum%20and%20Articles%20of%20Incorporation) This subsection summarizes key provisions of the company's Articles of Incorporation and Korean laws, covering share capital, dividend policy, preemptive rights, and shareholder procedures - As of December **31**, **2020**, the authorized share capital is **1,000,000,000** shares, with **516,599,554** common shares issued and outstanding[1445](index=1445&type=chunk)[1446](index=1446&type=chunk) - Dividends are declared annually at the general shareholders' meeting and paid to shareholders of record as of December **31** of the preceding year. The company may also pay quarterly dividends upon a resolution by the board of directors[1449](index=1449&type=chunk)[1450](index=1450&type=chunk) - Existing shareholders have preemptive rights to subscribe to new shares in proportion to their holdings, with certain exceptions for public offerings, issuances for depositary receipts, and strategic alliances, which can be approved by the board of directors[1454](index=1454&type=chunk) [Exchange Controls](index=287&type=section&id=ITEM%2010.D.%20Exchange%20Controls) This subsection outlines Korean exchange control regulations affecting foreign investors, detailing procedural requirements for securities investment and remittance of funds - The Foreign Exchange Transaction Laws regulate investment in Korean securities by non-residents. The Ministry of Strategy and Finance may temporarily suspend transactions or impose deposit obligations in emergency situations[1483](index=1483&type=chunk)[1485](index=1485&type=chunk) - Foreign investors must designate a foreign exchange bank and open foreign currency and Won accounts for stock investments. Remittance of funds into Korea for investment does not require approval, and funds in the foreign currency account can be remitted abroad without approval[1486](index=1486&type=chunk) [Taxation](index=289&type=section&id=ITEM%2010.E.%20Taxation) This subsection summarizes Korean and U.S. federal income tax consequences for non-resident investors holding common shares or ADSs, covering dividends, capital gains, and PFIC status - Dividends paid to non-resident holders are subject to a Korean withholding tax of **22%** (including local surtax), which may be reduced under an applicable tax treaty[1491](index=1491&type=chunk) - Capital gains from the transfer of shares or ADSs by non-residents are generally subject to Korean withholding tax at the lower of **11%** of gross proceeds or **22%** of net gain, unless exempt under a tax treaty or specific domestic law provisions[1492](index=1492&type=chunk) - For U.S. holders, dividends are generally taxable as ordinary income. Qualified dividends may be subject to reduced tax rates, provided the company is a 'qualified foreign corporation' and holding period requirements are met[1517](index=1517&type=chunk)[1518](index=1518&type=chunk) - The company does not believe it was a Passive Foreign Investment Company (PFIC) for **2020** and does not expect to become one, but notes that PFIC status is an annual factual determination[1529](index=1529&type=chunk) [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=298&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section refers to Item **4.B.** for quantitative and qualitative disclosures about market risk - Quantitative and qualitative disclosures about market risk are provided in 'Item **4.B.** Business Overview — Risk Management'[1552](index=1552&type=chunk) [DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](index=298&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section addresses securities other than equity, including debt securities, warrants, and rights, all stated as not applicable, and details fees and payments related to the American Depositary Shares (ADSs) program administered by Citibank, N.A., in **2020** [American Depositary Shares](index=298&type=section&id=ITEM%2012.D.%20American%20Depositary%20Shares) This subsection details fees and charges for ADS holders payable to Citibank, N.A., and discloses payments received by Shinhan Financial Group from the depositary in **2020** - Holders of American Depositary Shares (ADSs) may be required to pay fees to the depositary, Citibank, N.A., for services such as issuance (up to **$5.00** per **100** ADSs) and cash distributions (up to **$2.00** per **100** ADSs)[1556](index=1556&type=chunk)[1557](index=1557&type=chunk) - In **2020**, Shinhan Financial Group received payments totaling **US$305,928.28** from the depositary, primarily for reimbursement of proxy process expenses and contributions to investor relations efforts[1561](index=1561&type=chunk) PART II [CONTROLS AND PROCEDURES](index=300&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting as of December **31**, **2020**, as concluded by management and audited by Samil PricewaterhouseCoopers - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December **31**, **2020**[1565](index=1565&type=chunk) - Management assessed the internal control over financial reporting based on the COSO **2013** framework and concluded it was effective as of December **31**, **2020**[1566](index=1566&type=chunk)[1567](index=1567&type=chunk) - The independent registered public accounting firm, Samil PricewaterhouseCoopers, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December **31**, **2020**[1568](index=1568&type=chunk) [AUDIT COMMITTEE FINANCIAL EXPERT](index=302&type=section&id=ITEM%2016A.%20AUDIT%20COMMITTEE%20FINANCIAL%20EXPERT) This section identifies Yoon Jaewon, chair of the Audit Committee, as an audit committee financial expert, noting all **four** committee members are independent - The Board of Directors has determined that Yoon Jaewon, the chair of the Audit Committee, is an 'audit committee financial expert'[1570](index=1570&type=chunk) [CODE OF ETHICS](index=302&type=section&id=ITEM%2016B.%20CODE%20OF%20ETHICS) This section confirms the adoption of a code of ethics for principal officers and all employees, with no waivers granted during the most recent fiscal year - The company has adopted a code of ethics applicable to its principal executive officer, principal financial officer, and other senior financial officers, as well as all employees of the Group[1571](index=1571&type=chunk) [PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=302&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section details fees paid to the principal auditors, Samil PricewaterhouseCoopers, for **2018** through **2020**, and outlines the Audit Committee's pre-approval policies for services Principal Accountant Fees (2018-2020) | Type of Services | 2018 (W million) | 2019 (W million) | 2020 (W million) | | :--- | :--- | :--- | :--- | | **Audit fees** | 8,009 | 10,659 | 11,751 | | **Audit related fees** | 40 | 30 | 244 | | **Tax fees** | 209 | 35 | 152 | | **All other fees** | — | 284 | — | | **Total** | **8,258** | **11,008** | **12,147** | - The Audit Committee pre-approves all audit and non-audit services provided by the principal accountants, with delegated authority to its chair for certain approvals between meetings[1574](index=1574&type=chunk) [PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS](index=303&type=section&id=ITEM%2016E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) This section discloses the company's purchase of **5,035,658** common shares between **April** and **May 2020**, which were subsequently retired on **June 1**, **2020** - From **April 29**, **2020**, to **May 28**, **2020**, the company purchased **5,035,658** of its own common shares[1578](index=1578&type=chunk)[1579](index=1579&type=chunk) - All **5,035,658** treasury shares purchased in **2020** were retired on **June 1**, **2020**[1579](index=1579&type=chunk) [CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT](index=304&type=section&id=ITEM%2016F.%20CHANGE%20IN%20REGISTRANT%27S%20CERTIFYING%20ACCOUNTANT) This section explains the change in independent auditor from KPMG Samjong to Samil PricewaterhouseCoopers (PwC) for fiscal years **2020**-**2022** due to mandatory Korean auditor rotation regulations - Due to Korean regulations on mandatory auditor rotation, the Securities and Futures Commission designated Samil PricewaterhouseCoopers (PwC) as the independent auditor for fiscal years **2020**, **2021**, and **2022**[1581](index=1581&type=chunk)[1582](index=1582&type=chunk) - PwC replaced KPMG Samjong Accounting Corp., whose engagement expired upon completion of the **2019** audit[1582](index=1582&type=chunk) - There were no disagreements with the former auditor, KPMG Samjong, on any matter of accounting principles, practices, or financial statement disclosure during the **two** most recent fiscal years[1583](index=1583&type=chunk) [CORPORATE GOVERNANCE](index=305&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) This section details the company's corporate governance practices, highlighting compliance with key NYSE standards as a foreign private issuer while noting differences from U.S. company requirements - As a foreign private issuer listed on the NYSE, the company is permitted to follow home country (Korean) corporate governance practices in lieu of certain NYSE standards[1590](index=1590&type=chunk) - The company is in compliance with the NYSE requirement for a majority-independent board, with **12** of its **14** directors being independent[1591](index=1591&type=chunk) - The Audit Committee is composed of **four** outside directors, all of whom meet NYSE and SEC independence requirements[1594](index=1594&type=chunk) - Unlike NYSE rules for U.S. companies, Korean law does not require nomination or compensation committees to be composed entirely of independent directors, though the company's Remuneration Committee is fully comprised of outside directors[1595](index=1595&type=chunk)[1601](index=1601&type=chunk) PART III [FINANCIAL STATEMENTS](index=309&type=section&id=ITEM%2017.%20FINANCIAL%20STATEMENTS) The company has elected to respond to Item **18**, which requires the provision of audited financial statements, in lieu of this item - The registrant has responded to Item **18** in lieu of responding to this item[1615](index=1615&type=chunk) [FINANCIAL STATEMENTS](index=309&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section refers to the full audited consolidated financial statements and related independent auditor reports, included in the report starting from page F-**1** - This item refers to the full financial statements filed as part of the annual report, which can be found starting on page F-**1**[1616](index=1616&type=chunk)[1626](index=1626&type=chunk) [EXHIBITS](index=309&type=section&id=ITEM%2019.%20EXHIBITS) This section lists the exhibits filed as part of the annual report, including Articles of Incorporation, CEO/CFO certifications, and the former independent auditor's letter - This section provides an index of all exhibits filed with the annual report, such as the Articles of Incorporation (Exhibit **1.1**), CEO/CFO certifications (Exhibits **12.1**, **12.2**, **13.1**, **13.2**), and a list of subsidiaries (Exhibit **8.1**)[1617](index=1617&type=chunk)[1620](index=1620&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2021, nominal net income reached KRW 1,191.9 billion, with recurring income at approximately KRW 1,230 billion, marking the highest level since establishment [5] - Noninterest income increased by 40% year-over-year and 55% quarter-over-quarter, while nonbank net income rose by 84% year-over-year, also a record high [5] - Interest income grew by 5.7% year-over-year, with a rebound in net interest margin (NIM) after a decline due to low interest rates [6][12] Business Line Data and Key Metrics Changes - The group's noninterest income for Q1 2021 was KRW 1,030.8 billion, reflecting a 40.4% year-over-year growth, with significant contributions from card and capital sectors [13] - The card business showed strong performance, with credit card sales increasing significantly, positioning Shinhan Card as the market leader [28] - Operating income from matrix organizations showed growth: GIB at 19.6%, GMS at 61.2%, WM at 8.7%, and global business at 6.8% year-over-year [18] Market Data and Key Metrics Changes - Bank loans in won grew by 2.5% year-to-date, maintaining a solid growth rate centered on SMEs [12] - Demand deposits increased by 16.6% year-to-date, contributing to the improvement in NIM [12] Company Strategy and Development Direction - The company aims for efficient growth, global connection, digital transformation, and sustainable management through its FRESH 2020s strategic direction [10] - The financial target includes achieving over 10% ROE and expanding shareholder return policies [10] - A strategic investment fund of KRW 300 billion for digital business has been established, focusing on AI, blockchain, and healthcare startups [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing recovery from COVID-19 and the effectiveness of proactive asset quality management [15] - The company anticipates continued improvements in NIM and credit cost management, with a focus on monitoring credit risks [11][15] - There is a commitment to maintaining a solid capital ratio and implementing diverse shareholder return policies, including quarterly dividends [9][42] Other Important Information - The CET1 ratio as of March 2021 was 13.0%, reflecting a conservative management approach [16][17] - The company is adapting to the Financial Consumer Protection Act, focusing on careful product selection and customer communication [46][48] Q&A Session Summary Question: Inquiry about G&A expenses and labor costs - The CFO confirmed an increase in labor costs due to performance-linked pay and stock-related expenses, projecting a slight rise in G&A expenses for the year [25][26] Question: Performance of the card business and merchant fees - The CMO noted strong credit card sales and indicated that any adjustments to merchant fees would be analyzed and implemented next year without impacting current earnings [28][29] Question: Net interest margin outlook - The CFO indicated that while Q1 saw significant improvement in NIM, future increases may be more modest, but continued improvements are expected [31][32] Question: LIME Asset Management-related provisioning - The CFO confirmed that LIME-related financial impacts have been fully provisioned, with no further costs anticipated [33][34] Question: Dividend plans and external factors - The CFO reiterated plans for quarterly dividends, acknowledging external factors but expressing confidence in executing the dividend strategy [42][43] Question: Strategy for M&A and growth - The company is focused on M&A opportunities that align with its strategic goals, particularly in fintech and Southeast Asia, while maintaining a balanced approach [54][56]

SHG NYSE Business Results FY 2020 R.E.S.H Shinhan Financial Group Disclaimer The financial information contained herein has neither been reviewed nor audited by independent auditors. Therefore, no assurance is given that the financial information contained herein is accurate or complete, and such financial information may differ from the financial information to be contained in our financial statements audited by independent auditors. The information contained herein is subject to change without further not ...

Shinhan Financial Group Co, Ltd. (NYSE:SHG) Q4 2020 Results Conference Call February 5, 2021 2:00 AM ET Company Participants Park Cheol Woo - Head of IR Roh Yong-hoon - Deputy President & CFO Park Sung-hyun - MD and Chief Strategy & Sustainability Officer Park Cheol Woo Good afternoon. I am IR, Park Cheol Woo, Head of IR. I would like to thank all of you for taking part in today's event, and we'll now commence the 2020 Q4 earnings presentation. We ask for your understanding that only oral presentation is ...

Shinhan Financial Group Co Ltd (NYSE:SHG) Q3 2020 Earnings Conference Call October 27, 2020 3:00 AM ET Company Participants Park Cheol Woo - Deputy Head of IR Roh Yong-hoon - Deputy President & CFO Park Sung-hyun - MD and Chief Strategy & Sustainability Officer Kim Tae Youn - General Manager, Finance Management Team Bang Dong-kwon - MD & Chief Risk Officer Conference Call Participants Kim Jin-Sang - Hyundai Motor Securities Seo Young-Soo - Kiwoom Securities Kim Han Lee - KTB Investment & Securities Park Che ...

ଥିଲାତ NYSE Shinhan Business Results 3Q 2020 T.O.P f lez er F.R.E.S.H Shinhan Financial Group Disclaimer The financial information contained herein has neither been reviewed nor audited by independent auditors. Therefore, no assurance is given that the financial information contained herein is accurate or complete, and such financial information may differ from the financial information to be contained in our financial statements audited by independent auditors. The information contained herein is subject to ...