Shinhan Financial Group(SHG)2023-07-29 13:23Financial Data and Key Metrics Changes - In Q2 2023, despite an increase in operating income, net income declined to KRW1.2383 trillion due to conservative provisioning [6] - Non-interest income recorded KRW1.33 trillion, showing a recovery after an increase in Q1, attributed to balance growth and fee income deposits despite a decline in securities-related income [7] - The Group's cost income ratio for the first half of the year was 38.3%, maintaining stability despite inflationary pressures [7] - The credit cost ratio increased by 22 bps year-over-year to 53 bps due to increased provisions [8] - Interest income stood at KRW2.69 trillion, a 4.7% increase quarter-over-quarter, driven by higher interest-bearing assets and improved bank margins [10] Business Line Data and Key Metrics Changes - Bank loans grew by 0.6% in Q2 after a 0.1% increase in Q1, with corporate lending up 2.8% year-to-date, while retail lending decreased by 1.8% year-to-date [11] - Non-interest income improved by 21.5% year-over-year, with a 3.4% increase quarter-over-quarter, despite a drop in securities-related income [13] - Fee income increased by 7.6% quarter-over-quarter, with credit card fees rising by 26.9% and brokerage fees by 17.9% [14] Market Data and Key Metrics Changes - The delinquency rate for Shinhan Bank remained flat quarter-over-quarter at 0.27%, while Shinhan Card's delinquency rate increased to 1.43% [18][19] - The Group's provisioning rate against total loans and total assets is 0.96% and 0.55% respectively, indicating a steady upward trend in loss absorption capacity [23] Company Strategy and Development Direction - The Group aims to implement a sustainable capital policy by securing sufficient capital capacity and has raised its CET 1 ratio target to 13% [26] - The Group is focusing on leveraging digital capabilities to enhance financial competitiveness and social value, with significant growth in digital platform users [27][34] - The strategy includes expanding into advanced and emerging markets, particularly in Vietnam, while maintaining a conservative approach to risk management [52] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the economic environment, indicating that credit costs may stabilize in the second half of the year [61] - The Group is preparing for potential economic uncertainties by maintaining conservative provisioning policies [61] - The outlook for NIM in the second half is expected to remain stable or slightly higher than Q2, with intense competition anticipated in the loan market [63] Other Important Information - The Group plans to execute an additional round of share buyback and cancellation amounting to KRW100 billion in Q3 [8] - The Group's digital initiatives have led to significant cost savings and increased operating profits from new digital businesses [38] Q&A Session Summary Question: OCI trajectory and securities book losses - Management acknowledged the volatility in the securities book due to interest rates and indicated that valuation losses should reduce in the second half [42][45] Question: CET 1 ratio and buyback plans - The Group confirmed that the CET 1 ratio target was raised to 13% and that buyback plans would be reviewed quarterly [47] Question: Credit card delinquency trends - Management noted that the delinquency rate has stabilized and is expected to return to manageable levels by year-end [44] Question: Global expansion strategy - The Group is exploring opportunities in both advanced and emerging markets, with a focus on supporting Korean companies abroad [52] Question: Household debt to GDP levels - Management indicated that high-quality portfolios would be maintained while cautiously managing household loan growth [56]