Shinhan Financial Group(SHG) - 2021 Q1 - Earnings Call Transcript

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]