Shinhan Financial Group(SHG) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Indicators Changes - In Q3 2022, the Group's cumulative net income reached KRW 4,315.4 billion, with Q3 alone contributing KRW 1,594.6 billion, indicating solid results despite external challenges [8][9] - The cost income ratio (CIR) for Q3 was 40.1%, reflecting stable management of SG&A expenses despite increased digital-related costs [10][19] - Interest income for Q3 was KRW 2,716 billion, up 2.7% QoQ, driven by improved bank NIM [12] - The CET1 ratio remained stable at 12.7% as of the end of September [22] Business Line Data and Key Indicators Changes - The Group's non-interest income decreased by 28.8% QoQ, primarily due to declining fee income and market volatility [16] - Corporate loans grew by 2.5% QoQ, while retail loans declined by 1.3% QoQ, reflecting a shift in demand due to regulatory changes and interest rate hikes [15] - Shinhan Card's recurring net income decreased despite growth in credit purchases, attributed to rising funding costs and merchant fee cuts [23] Market Data and Key Indicators Changes - The delinquency rate for the Bank remained stable at 0.20%, while the Card business saw a slight increase to 0.86% [20] - In overseas markets, the Group's exposure to real estate is about KRW 3.5 trillion, with no visible risks currently identified [124] Company Strategy and Development Direction - The Group aims to enhance shareholder value through a gradual improvement of the shareholder return ratio, including a per-share dividend of KRW 400 [11] - A conservative provisioning policy will be maintained to address potential credit risks amid economic uncertainties [20] - The digital strategy focuses on expanding customer engagement through multiple applications, enhancing user experience and financial contributions [38][80] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increasing uncertainties in domestic and foreign financial markets due to tightening monetary policies and economic conditions [28] - The Group is preparing for potential asset quality deterioration due to rising interest rates and is implementing preemptive risk management measures [30][34] - Future NIM growth is anticipated despite current funding rate increases, with expectations of stabilization in Q1 2023 [76] Other Important Information - The Group's digital platform MAU surpassed 21 million, indicating strong user engagement and growth in digital services [38] - The Group is actively involved in ESG efforts, with a focus on reducing carbon emissions and integrating sustainability into its operations [56][59] Q&A Session Summary Question: Concerns about real estate PF status and future strategies - The Group's real estate PF constitutes about 2% of total loans, with a manageable NPL of KRW 20 billion, indicating effective risk management [53][54] Question: Outlook for Card business fee income and asset quality - Card fee income was softer in Q3 due to seasonal factors, but is expected to normalize in Q4, with asset quality remaining stable [64][66] Question: Impact of liquidity risk on funding costs - The Group has sufficient liquidity and is not significantly affected by market liquidity risks, although funding costs are rising [68] Question: Strategies for managing overseas real estate exposure - The Group's overseas real estate exposure is KRW 3.5 trillion, with no current visible risks, and a sophisticated monitoring system is in place [124] Question: Dividend expectations and shareholder return ratio - The Group plans to maintain a solid increase in cash dividends, supported by a high CET1 ratio and effective stress testing [99][100]