Shinhan Financial Group(SHG)2024-10-25 15:00Financial Data and Key Metrics Changes - In Q3 2024, the company reported a net income of KRW1 trillion and 238.6 billion, a decrease of 10.1% quarter-on-quarter (QoQ) [5] - Interest income increased by 1.2% QoQ, driven by growth in the bank's loan book [5] - Non-interest income decreased by 25.6% QoQ due to significant losses in securities derivative transactions and conservative valuation impairments in overseas alternative investments [5][10] - The CET1 ratio at the end of September 2024 is estimated at 13.13%, a decrease of 6 basis points due to operational risk RWA impacts [3][12] Business Line Data and Key Metrics Changes - Bank won loans increased by 3.5% during the quarter, with household loans rising by 6.3% QoQ driven by real estate purchasing demand [8] - Corporate loans increased by 1.4% in Q3, focusing on Blue Chip corporate borrowers [8] - Non-interest income from securities and derivatives fell by 47.1% QoQ, primarily due to a KRW135.7 billion loss in derivative trading [10] Market Data and Key Metrics Changes - The cumulative credit cost ratio for Q3 decreased by 4 basis points compared to the first half of the year, posting 44 basis points [6][11] - The Group's CIR improved by 1.2 percentage points year-on-year to 37.9%, driven by higher operating profit before expenses [5][11] Company Strategy and Development Direction - The company is committed to enhancing shareholder returns through a share buyback and cancellation program totaling KRW400 billion, including KRW250 billion in Q4 2024 [6][7] - The focus is shifting towards qualitative growth and capital efficiency, with a target ROC of about 13% [21][22] - The company plans to minimize loan growth in Q4 relative to its RWA budget, emphasizing profitability and asset soundness [8][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by recent losses in derivatives trading and emphasized the importance of strengthening internal controls [3][4] - The outlook for NIM is expected to decline due to anticipated cuts in benchmark interest rates, with a proactive approach to managing funding rates [18] - The company expects gradual improvement in asset quality and provisioning, with no large-scale provisioning anticipated for the remainder of the year [32] Other Important Information - The company is actively cooperating with regulators regarding the investigation into the derivative trading losses and is reviewing its internal control systems [4] - The Group's total PF loan exposure is KRW9.4 trillion, representing about 2.2% of the total loan book, with significant provisioning already set aside [30][31] Q&A Session Summary Question: Shareholder return rate and triggers for increasing TSR - Management confirmed a commitment to gradually increase the TSR rate and emphasized the importance of CET1 growth and earnings growth as triggers for this increase [16][17] Question: NIM outlook - Management indicated that NIM is expected to decline further due to market conditions and interest rate cuts, with ongoing management of funding rates to mitigate impacts [18] Question: Loan growth targets for next year - The company targets a loan growth of about 5% for next year, focusing on qualitative growth and capital efficiency [21][22] Question: Continuation of share buyback program - Management expressed a commitment to maintaining the share buyback program, prioritizing share cancellation to achieve the targeted reduction by 2027 [25] Question: Provisioning outlook - The company anticipates a credit cost ratio of around 45 basis points by year-end, with no large-scale provisioning expected [26] Question: PF exposure and provisioning - Management provided insights into the current status of PF exposure, indicating a cautious approach to provisioning and restructuring plans [30][31] Question: RWA data disclosure - Management acknowledged the need for more segmented data on RWA and committed to enhancing RWA management going forward [34][36]