SFG's Business Results for 1Q 2026 (Including Script)

Hello, this is Jung Hoon Jang, CFO of Shinhan Financial Group.

First of all, thank you everyone for joining us today for Shinhan Financial Group’s earnings presentation for the first quarter of 2026.

On pages 2 and 3 of the presentation materials, I will first walk you through Shinhan Financial Group’s new Value-Up plan,

which we disclosed today.

Through the corporate value enhancement plan announced in July 2024, we presented three key targets under our “10/50/50” framework, 

and since then, we have been executing the relevant initiatives with consistency and speed.

As a result, we have already achieved our 50% shareholder return target ahead of schedule,

while also delivering a meaningful improvement in PBR.

We believe this demonstrates both the sound direction of the plan and the Company’s solid execution capabilities.

In addition, with dividend-related tax rules having been revised and government efforts to revitalize the capital market continuing, 

we believe the time has come to undertake a comprehensive review of the existing plan.

Accordingly, led by the Board of Directors, we have upgraded our previous Value-Up plan under the new name, “Shinhan Value-Up Triple Plus,” and established a plan that reflects the current market environment and our strategic direction.

Previously announced value-up plans by financial holding companies were largely focused on increasing shareholder returns,

either by setting absolute targets for a given point in time or by returning all capital above a certain threshold,

in order to address undervaluation stemming from low shareholder return ratios.

However, we now believe that the market needs a new value enhancement framework that incorporates not only a predictable

shareholder return policy, but also a sustainable growth story.

Rather than simply returning excess capital or pursuing shareholder returns based on fixed numerical targets, as in the past,

our objective is to establish a sustainable value-up plan in which shareholder returns and corporate growth work

organically together on the basis of a solid capital ratio.

Against this backdrop, we have newly established three key objectives.

First, ROE of 10% plus.

We are focused on improving ROE at a faster pace, with the goal of exceeding our cost of equity, and given Shinhan Financial Group’s current business portfolio, we believe this improvement can be delivered at a meaningful speed.

Building on the Bank’s solid recurring earnings base, we will strengthen our non-bank competitiveness in phases, first in capital markets through 2026, and then in the specialized finance businesses from 2027 onward.

Through this approach, we aim to manage ROE within the 10% to 12% range through 2028.

In particular, based on Shinhan’s proprietary PBR-ROC Logic Tree, as set out in detail in the value-up materials,

we will pursue both capital ratio management and improvements in profitability across our subsidiaries through a granular action plan.

Second, a shareholder return ratio of 50% plus.

We have removed the cap on the shareholder return ratio and introduced an intuitive formula based on our capital allocation principles linked to required returns, taking into account both the Company’s ROE and growth rate.

Through this framework, we believe investors will be able to more easily anticipate both the direction and the level of our shareholder return policy in line with the Company’s growth.

That said, in periods like the current one, when ROE remains below COE,

we have set a principle of gradually increasing the shareholder return ratio versus the previous year.

We have also rebalanced the mix of shareholder returns by fully reflecting both the revised dividend tax framework and investor preferences.

While maintaining our current policy of equal quarterly dividends, along with a gradual increase in DPS and the total  dividend amount,

we plan to make priority use of the tax-exempt dividend resources secured through approval at the regular shareholders’ meeting in March, beginning with the 2026 year-end dividend and continuing for three years, in order to maximize shareholder returns.

For reference, we plan to increase DPS by around 10% annually over the next three years.

The allocation between dividends and share buybacks will be determined in accordance with a rational framework based on required returns,

and we will continue to communicate with the market on our progress toward the previously announced target of reducing 50 million shares.

Third, a CET1 ratio of 13% plus.

Taking macro volatility into account, we will maintain a sufficient capital buffer so that we can preserve a stable capital ratio under any environment.

In addition, any excess capital generated through improved capital efficiency, including RWA optimization, will in principle be returned to shareholders.

We will also continue to communicate actively with the market by reviewing the gap versus our objectives each year at the Board level and updating our three-year guidance on a rolling basis.

Let me now move on to our first quarter 2026 earnings results.

Page 4 presents the highlights of our quarterly performance.

As of the end of the first quarter of 2026, the Group’s CET1 ratio was provisionally recorded at 13.19%,

remaining at a stable level despite domestic and external uncertainties.

Based on our solid capital position, the Board of Directors resolved today to approve a cash dividend of KRW 740 per share for the first quarter of 2026. For reference, the record date for this cash dividend is April 30, which means shares must be purchased by April 28 in order to qualify, and the dividend is scheduled to be paid on May 29.

Of the KRW 700 billion in treasury shares scheduled to be acquired by July 2026, we have already completed the acquisition of KRW 404.3 billion, and the remaining shares will be cancelled immediately upon completion of the purchase.

Net income for the first quarter of 2026 came in at KRW 1,622.6 billion, up 9.0% year-on-year,

supported by top-line growth led by non-interest income.

On the back of the Group’s solid financial fundamentals and disciplined capital management, ROE and ROTCE improved by 50 basis points year-on-year to 11.9% and 13.4%, respectively.

The next page provides various indicators that illustrate Shinhan’s shareholder value, which we hope will be helpful for your investment analysis.

Turning to page 6, on capital.

The Group’s CET1 ratio declined by a total of 68 basis points due to RWA growth and shareholder returns, 

but remained well managed, down only 16 basis points from year-end, supported by stable earnings generation.

Compared with year-end, Group RWA increased by KRW 7.3 trillion from asset growth and by KRW 3.1 trillion from FX movements

and other factors, but overall remained within our budget plan.

Going forward, we will continue to provide funding where it is needed most,

while maintaining a stable capital ratio through internal efficiency improvements and disciplined resource allocation.

Please refer to page 7 for details on assets and liabilities.

Turning to page 8, on the Group’s earnings.

Group operating profit before general and administrative expenses for the first quarter increased by 11.0% year-on-year,

as non-interest income posted strong growth on top of solid net interest income.

I will now go through each line item in more detail from the following pages.

Turning to page 9, on net interest income.

Group net interest income increased by 5.9% year-on-year,

driven by an improvement in NIM and higher interest income from bond-related assets.

The Bank’s NIM improved by 2 basis points quarter-on-quarter,

as loan asset yields improved in line with higher market rates, while funding costs were also well managed.

KRW-denominated loans at the Bank increased by 1.4% from year-end.

While household loans declined due to regulatory factors, we strengthened our role in supplying productive funding to corporates,

which supported overall loan growth.

Please refer to page 26 for further details.

Turning to the next page, on non-interest income.

Group non-interest income increased by 26.5% year-on-year,

supported by strong fee income growth and broad-based improvement across other areas as well.

With the exception of investment banking fees, which were affected by the base effect from the previous year,

fee income showed solid performance across the board.

In particular, securities custody fees surged by 215.2% year-on-year on the back of strong stock market conditions, 

leading the overall growth trend.

In addition, fund and bancassurance fees related to the government’s capital market revitalization policy increased by 54.7% year-on-year, continuing their strong improvement.

As for securities-related gains, bond-related profits declined due to the recent sharp rise in market rates,

but this was offset by increased gains from other securities assets.

Insurance-related profit also increased by 8.7% year-on-year,

and we expect to continue generating stable earnings supported by disciplined management of our expanded CSM base.

Turning to page 11, on SG&A and credit cost.

Group SG&A increased by 10.4% year-on-year, mainly due to the impact of the higher education tax,

although efforts to improve cost efficiency continued across the Group.

Even so, the cost-to-income ratio came in at 36.7%, down slightly from the same period last year thanks to higher operating profit,

and remained at a stable level.

Credit cost for the first quarter increased by 17.5% year-on-year, reflecting a larger volume of write-offs and sales at the Bank,

as well as the emergence of a few stressed borrowers in the corporate loan portfolio.

That said, it is somewhat encouraging that one-off costs have shown a stable trend, as credit costs related to real estate PF,

which had previously been recognized conservatively and proactively, have declined.

Amid ongoing macro uncertainty, including high interest rates, a weak KRW, and continued geopolitical risks,

the credit cost ratio rose by 5 basis points year-on-year to 46 basis points.

Even so, we will continue to manage credit quality closely, with the aim of keeping the full-year credit cost ratio in the low-to-mid 40 basis point range, as previously planned.

Turning to page 12, on asset quality indicators.

The Group’s NPL coverage ratio declined by 12.4 percentage points from year-end,

despite our continued conservative provisioning and active write-off and sale policy across the Group.

However, this was mainly due to an increase in Group NPL assets resulting from principal and interest payments

related to trust projects that had passed their completion-guarantee period,

and the related credit costs had already been reflected in the prior year.

While delinquency ratios at both the Bank and the Card business had been gradually improving, they rose slightly during the first quarter.

In the case of the Bank, however, net new delinquencies were the lowest in the industry,

while for the Card business, the slight increase was largely due to a reduction in total assets under loan growth regulation,

and we believe both remain at manageable levels.

That said, given the continued rise in corporate credit risk amid delayed economic recovery, as well as the persistent difficulties faced by more vulnerable customer segments, we believe conservative asset quality management will remain necessary going forward.

Please refer to the next page for more detailed information on the Group’s loss absorption capacity and write-off and sale activities.

Turning to page 14, on subsidiary earnings.

Shinhan Securities recorded a 167.4% year-on-year increase in earnings, supported by higher brokerage fees due to increased equity trading volume in buoyant capital markets, as well as improved proprietary trading gains.

Shinhan Bank delivered 2.6% year-on-year earnings growth, led by net interest income, despite lower securities-related gains resulting from higher market rates, increased credit cost, and the impact of the higher education tax.

Shinhan Card saw improvement in operating revenue and credit cost, but earnings declined by 14.9% year-on-year due to costs recognized in connection with voluntary retirement.

Shinhan Capital posted a significant improvement year-on-year, supported by stronger securities-related gains, including dividend income, amid favorable stock market conditions.

Shinhan Life was weaker year-on-year, mainly due to expanded actual-versus-expected losses stemming from a higher loss ratio and lower financial gains caused by rising market rates.

Starting from this quarter’s earnings presentation, we have also included quarterly net income, RWA, and ROC by business segment, so that investors can track the Group’s performance in greater detail.

Please also refer to page 15 for more detailed information on our overseas business earnings,

where Shinhan continues to deliver differentiated performance.

Pages 16 and 17 cover our digital and sustainability initiatives, while page 19 onward provides further details on subsidiary f

inancials, earnings, asset operations, and funding.

This concludes my presentation.

Thank you for your attention.