Business Context and Reporting Period
This Form 6-K summarizes the FY2021 Business Report of Shinhan Financial Group Co., Ltd. (SFG), filed with the Financial Services Commission of Korea and the Korea Exchange on March 16, 2022. The financial information is prepared in accordance with Korean International Financial Reporting Standards (K-IFRS). The reporting period covers the fiscal year ended December 31, 2021.
Key Financial Metrics
Profitability and Revenue
- Consolidated Net Profit: KRW 4,113 billion (FY2021) vs. KRW 3,498 billion (FY2020).
- Net Profit Attributable to Equity Holders: KRW 4,019 billion.
- Earnings Per Share (Consolidated): KRW 7,308.
- Net Interest Income: KRW 10,769 billion.
- Net Fees and Commission Income: KRW 2,675 billion.
- Net Operating Income: KRW 5,952 billion.
Balance Sheet and Liquidity
- Total Assets: KRW 627,364 billion.
- Total Liabilities: KRW 579,260 billion.
- Total Stockholder's Equity: KRW 48,104 billion.
- Debt to Equity Ratio (Separate Basis): 39.43% (Dec 31, 2021).
- Capital Adequacy (BIS Ratio): 16.20% (Consolidated), exceeding the 8% minimum requirement.
- Liquidity Coverage Ratio (Shinhan Bank): 87.9% (Dec 31, 2021).
Dividends
- Total Cash Dividends: KRW 1,046,787 million.
- Cash Dividend Per Share: KRW 1,960.
- Dividend Payout Ratio: 26.04% (Consolidated).
Material Changes vs. Prior Period
- Profit Growth: Consolidated net profit increased by approximately 17.6% year-over-year, driven by higher net interest income and improved net operating income.
- Asset Quality Improvement: The Non-Performing Loan (NPL) ratio decreased to 0.35% from 0.39% in FY2020. The Substandard & Below ratio also improved to 0.44% from 0.53%.
- Capital Strength: The Consolidated BIS Ratio increased to 16.20% from 15.74% in the prior year.
- Interest Rates: The average interest rate on deposits decreased to 0.63% from 0.91%, while the average interest rate on loans decreased to 3.18% from 3.43%.
Outlook, Risks, and Unusual Items
Corporate Actions and Mergers
- Post-Reporting Period Merger: Shinhan Alternative Investment Management Inc., Ltd. was dissolved via merger with Shinhan Asset Management Co., Ltd. effective January 1, 2022. The surviving entity is Shinhan Asset Management.
- Subsidiary Integration: In July 2021, Shinhan Life Insurance and Orange Life Insurance merged to form Shinhan Life Insurance Co., Ltd.
Risk Exposure
- Top Exposures: The largest single borrower exposure is the Ministry of Economy & Finance (KRW 29,130 billion). The top ten debtor groups (including Hyundai Motor, Samsung, and LG) account for KRW 29,121 billion in total exposure.
- Credit Ratings: SFG maintains high credit ratings, including AAA for debentures from Korea Rating, KIS Rating, and NICE Investors Service, and Baa3 from Moody's for Write-down Contingent Capital Securities.
Investor Verification Checklist
- Verify the impact of the January 2022 merger between Shinhan Asset Management and Shinhan Alternative Investment Management on future consolidated reporting.
- Review the concentration of credit exposure to the top ten debtor groups, which represents a significant portion of total assets.
- Monitor the trend in the Liquidity Coverage Ratio (LCR) for Shinhan Bank, which was 87.9% at year-end, noting the temporary regulatory easing due to the pandemic ended in September 2021.
- Confirm the sustainability of the dividend payout ratio of 26.04% given the competitive interest rate environment.
- Assess the quality of the loan portfolio, specifically the coverage ratio for substandard loans which stands at 182.50%.