SFG's Business Results for 2025 2Q (Including Script)

[Opening Remarks]

Good morning.

Thank you for joining us for Shinhan Financial Group’s 2025 second-quarter earnings presentation.

Let me begin with the highlights on page 2 of the presentation.

As of the end of June 2025, the Group’s CET1 ratio stood at 13.59%, up 32 basis points QoQ on a preliminary basis.  This was driven by solid earnings across the Group, along with a decline in FX rates and continued efforts to manage RWA efficiently.

Today, based on our stable capital position, the Board of Directors resolved to pay a quarterly cash dividend of KRW 570 per share and to repurchase KRW 800 billion in treasury shares.

Of this, KRW 600 billion will be executed in the second half of this year, and the remaining KRW 200 billion will be repurchased in January next year, allowing us to continue our uninterrupted buyback policy for two consecutive years. Including the KRW 650 billion of shares repurchased and cancelled in the first half and the planned KRW 600 billion in the second half, the total buyback amount for 2025 will reach KRW 1.25 trillion.

Group net income for Q2 2025 came in at KRW 1.5491 trillion, up 4.1% QoQ, supported by stronger non-interest income despite an increase in credit cost. The Group’s cost-to-income ratio remained stable, while the credit cost ratio edged up due to a delay in economic recovery.

[Page 3 – Capital]

As mentioned, the Group’s CET1 ratio improved 32bps QoQ, even after factoring in the expanded buyback program, supported by FX movements and solid profitability.

Group RWA declined by KRW 4 trillion QoQ, as foreign currency RWA decreased in line with FX trends, and domestic lending grew at a moderate pace with continued portfolio optimization focused on profitability.

Going forward, we will continue to allocate resources strategically and enhance internal efficiency to maintain a stable capital position while ensuring sufficient support to the real economy.

[Page 4 – Balance Sheet]

Please refer to the materials for details on the Group’s balance sheet and funding profile.

[Page 5 – Profitability]

The Group posted net income of KRW 1.5491 trillion in Q2, up 4.1% QoQ. This was achieved despite a rise in credit costs, thanks to meaningful improvement in non-interest income across a diversified portfolio.

As a result, key metrics under our Value-Up Plan—ROE and ROTCE—rose 0.7 percentage points YoY to 11.4% and 12.9%, respectively. Let me now walk you through each component in more detail.

[Page 6 – Net Interest Income]

Despite a decline in market interest rates, net interest income remained flat QoQ, supported by profitability-focused growth. Loan growth in domestic banking remained stable. While we pursued portfolio efficiency through rebalancing, household loans were managed in line with market demand.

Please refer to page 27 for more detailed breakdowns.

Bank NIM declined 16bps QoQ due to lower yields on interest-earning assets reflecting market rate trends. However, overall NIM was stable, thanks to moderate asset growth and disciplined ALM execution.

[Page 7 – Non-Interest Income]

Non-interest income increased 34.7% QoQ, with improvement across all segments.

In particular, securities and FX/derivatives-related gains drove the overall growth, reflecting a favorable market environment.

Looking more closely at fee income:

·        Card fees improved QoQ due to lower marketing costs, although they remain soft YoY.

·        Brokerage commissions surged QoQ as equity market turnover increased.

·        IB fees continued to grow, led by quality deal execution, especially at the bank.

·        Fund and bancassurance fees grew both QoQ and YoY amid strong market conditions.

Insurance income declined YoY due to a high base from short-term policy sales last year but remained at a solid level.

[Page 8 – SG&A and Credit Cost]

SG&A expenses were stable YoY, with no significant anomalies, and the Group’s cost-to-income ratio for the first half stood at 36.6%. The QoQ rise in credit costs reflects a more conservative approach to loan provisioning amid delayed economic recovery.

While real estate PF-related provisions—mostly from non-bank subsidiaries—are rising in line with the government-led restructuring plan, they remain within expected levels.

Given rising credit risk for corporates and increasing pressure on financially vulnerable retail segments, we now expect credit costs to exceed our initial projections both in terms of magnitude and recovery timeline.

[Pages 9–10 – Asset Quality and Loss Absorption]

Please refer to the attached data for detailed asset quality indicators and capital buffer analysis.

[Page 11 – Subsidiary and Overseas Performance]

At the subsidiary level:

·        Shinhan Bank delivered stable results, with flat net interest income and a significant improvement in non-interest income led by securities and IB-related fees, despite higher credit costs.

·        Shinhan Securities is steadily recovering its normalized earnings power by strengthening its core businesses such as brokerage and proprietary trading, following last year’s weak performance.

·        Shinhan Card and Capital continue to face pressure from funding and credit cost trends, but are working on fundamental improvements through portfolio rebalancing and other self-help measures. Profitability is expected to recover gradually.

·        Global operations remained resilient in Q2, despite continued macro and geopolitical uncertainties.

[Pages 12–13 – Digital & Sustainability]

Please refer to these pages for updates on our digital transformation and ESG management performance.

[Page 14 – Inclusive Finance]

We are also driving inclusive finance initiatives at the Group level.

These include refinancing Shinhan Savings Bank loans through Shinhan Bank to improve customer credit, identifying hidden asset value, and lowering household lending rates above 10% to below 10%.

These actions are aimed at supporting economic self-reliance and helping customers lead financially sustainable lives through institutional support.

Going forward, we will continue to play our role as a productive financial intermediary while offering programs that promote mutual growth with our customers and society, as part of our vision to be a truly sustainable financial group.

[Pages 15–18 – Value-Up Plan Execution]

From pages 15 through 18, you’ll find a summary of our progress on the Group’s Value-Up Plan.

Compared to the implementation goals announced last year and this year, we are on track and demonstrating strong execution across key initiatives.

Please refer to the slides for further detail.

[Pages 19 onward – Subsidiary Financials and ALM]

From page 19, you’ll find financial data by subsidiary, including detailed income statements, funding structure, and asset management breakdowns.

Lastly, we are preparing a separate briefing session for retail investors to share more on our 1H performance and shareholder return policy. We encourage individual investors to participate and engage with us.

Thank you.