Business Context and Reporting Period
This Form 6-K summarizes the FY 2009 Business Report of Shinhan Financial Group Co., Ltd. (SFG), filed with the Financial Supervisory Service of Korea on March 31, 2010. The financial data is prepared in accordance with Korean GAAP. The reporting period covers the fiscal year ended December 31, 2009.
Key Financial Metrics
| Metric | 2009 | 2008 | Unit |
|---|---|---|---|
| Operating Income | 2,097.9 | 3,039.3 | KRW Billion |
| Consolidated Net Income | 1,328.2 | 2,025.7 | KRW Billion |
| Net Income (Majority Interest) | 1,305.3 | 2,018.7 | KRW Billion |
| Group BIS Ratio | 12.60% | 10.19% | Percentage |
| Won Liquidity Ratio | 125.03% | 133.35% | Percentage |
| Liabilities to Equity Ratio | 30.84% | 47.19% | Percentage |
| Total Dividends Paid | 427,860 | N/A | KRW Million |
Capital Adequacy (Subsidiaries): Shinhan Bank maintained a BIS Capital Adequacy Ratio of 15.13% (2009) vs. 13.44% (2008). Shinhan Card's Adjusted Equity Capital Ratio was 26.73% (2009) vs. 20.32% (2008).
Material Changes vs. Prior Period
- Profitability Decline: Consolidated net income decreased by approximately 34.4% year-over-year, dropping from KRW 2,025.7 billion in 2008 to KRW 1,328.2 billion in 2009. Operating income fell by 31.0%.
- Capital Strength Improvement: Despite lower earnings, the Group BIS Ratio improved significantly from 10.19% to 12.60%, driven by an increase in Aggregate Equity Capital from KRW 18.7 trillion to KRW 22.6 trillion.
- Leverage Reduction: The Liabilities to Equity ratio improved (decreased) from 47.19% to 30.84%, indicating a stronger equity base relative to liabilities.
- Asset Quality: Non-performing loans (NPL) for Shinhan Bank decreased to 0.77% of total loans (from 0.85% in 2008). However, NPLs for Shinhan Investment rose sharply to 19.45% (from 12.14% in March 2009).
- Share Capital: Common shares increased by 78 million in March 2009 via a rights offering, raising proceeds of KRW 1,310.4 billion.
Outlook, Risks, and Management Commentary
- Management Changes: On March 24, 2010, Mr. Eung Chan Ra was appointed Chairman of the Group, and Ms. Sung Bin Chun was appointed Chairman of the Board of Directors.
- Dividend Policy: Total dividends for FY 2009 were declared at KRW 427.86 billion (KRW 189.68 billion for common stock and KRW 238.18 billion for preferred stock).
- Asset Quality Risks: The top twenty non-performing loans totaled KRW 289.3 billion as of December 31, 2009, with significant exposure in Real Estate, Leasing, and Service sectors. Shinhan Investment's NPL ratio of 19.45% warrants attention.
- Concentration Risk: The twenty largest borrower exposures totaled KRW 39,786.6 billion. Major debtor groups include Hyundai Heavy Industries (KRW 3,954.2 billion exposure) and Samsung (KRW 3,679.5 billion exposure).
- Related Party Transactions: Significant inter-company lending exists, with total loans to subsidiaries ending at KRW 1,575 billion as of the reporting date.
Investor Verification Checklist
- Verify the impact of the 34% drop in net income on future dividend sustainability.
- Review the specific drivers behind the 19.45% NPL ratio at Shinhan Investment and the adequacy of loan loss allowances.
- Assess the concentration risk associated with the top 20 borrowers, particularly in the shipbuilding and heavy industry sectors.
- Confirm the integration progress of new subsidiaries acquired or formed in 2009 (e.g., Shinhan Vietnam Bank, Shinhan BNP Paribas Asset Management).
- Monitor the Won Liquidity Ratio, which declined to 125.03% (noting the 2009 figure is based on assets/liabilities due within 1 month).