SFG's Record H1 Profit

Acquisition of Chohung Bank, LG Card boosts the group's performance

Shinhan Financial Group reported that its H1 net income amounted to 1.6 trillion won, up 56.3 percent from the same period last year. Shinhan Bank recorded net income of 1.54 trillion won, 62.1 percent increase YOY.
Accumulated net interest margin recorded 2.27 percent, similar to 2.28 percent during the Q1. The group's non-bank affiliates recorded net income of 562.3 billion won, a rise of 102.8 percent YOY.
LG Card recorded a net income of 280.7 billion won in the H1, while Shinhan Card posted 111.2 billion won in net income during the same period. GMSH Securities recorded a net income of 76.4 billion, Shinhan Life, 65.4 billion won and Shinhan Capital 22.2 billion won. Non-bank subsidiaries contributions to the group's total net income amounted to 26.7 percent, up 3.2 percent. Non-bank contributions will rise to 36.3 percent excluding the bank's one-off factors such as 370 billion won of LG Card related income, 217.7 billion won, resulting from disposal of SFG shares and etc.
SFG's total assets amounted to 259 trillion won as of the end of H1, up 19.8 percent or 42.7 trillion won from the end of last year. Total assets of bank sector reached 201 trillion won at the end of June, up 12.2 percent or 21.9 trillion won from the end of last year. A 9.9 percent increase came from the loans in Korean currency while loans in foreign currency decreased 0.6 percent or 39 billion won.
The bank's total loans outstanding including loans in foreign currencies, amounted to 105.3 trillion won up 9.2 percent or 8.8 trillion won. Retail loans recovered from sluggish growth in Q1 showing 3.2 percent or 1.5 trillion won increase during Q2. Corporate loans rose by 15.2 percent or 7.4 percent backed by increased demand for working capital reflecting favorable export growth and facilities investments following heightened expectations of economic recovery. Loans for SMEs jumped 21.7 percent or 7.5 trillion won year-to-date.
The group's NPL ratio rose up to 1.12 percent during Q1 due to the incorporation of LG Card into the group, yet recorded 1.98 percent as of end of Q2 a slight 0.04 percent decrease. The group's BIS ratio stood at 10.5 percent in H1. Shinhan Bank's BIS ratio reached 11.9 percent as of end H1.
Chairman Ra Eung-chan of the financial group, a veteran of 48 years in the financial business, is known for his special care for the people working for him and the group. He launched his banking career with the Agricultural Bank in 1959, following his graduation of a commercial high school. He didn't go to college. He worked for Daegu Ban before moving to Shinhan Bank which he helped set up. He became managing director of the new bank. In 2001, when Shinhan Financial Group started he took over the group as its chairman and he is still there as chairman serving for 17 years as CEOs of the bank and the group.
He told shareholders at the start of this year, that the group has opened a new chapter in Korean financial history with the birth of the new Shinhan Bank, the second largest bank in Korea. He said the event marked the culmination of a demanding integration process, a bold endeavor which involved upgrading to a completely new system. Equally important was the acquisition of LG Card into the Shinhan family representing a major step in achieving a balanced portfolio of banking and non-banking businesses, which is crucial in sustaining growth over the long run.
The new system and organizational culture of Shinhan Bank combined with LG Card's 10 million customers have given Shinhan Financial Group. The group has been growing rapidly and for the first time, its net profit is likely to reach over 2 trillion won and its assets 259 trillion won. During the rapid growth for the group, its CEO has become a myth in the financial community through his calculated gambling and building a "Shinhan Way."At he core of his mystic management is the people management. He has always given a crucial importance to employees. This has been the reason why the group has been managing so well despite a number of large mergers and acquisitions. The acquisition of Chohung Bank and LG Card have gone smoothly due largely to the chairman's cautious approach not to get people hurt. He desisted police from entering Chohung to quell labor union members on strike opposed to the merger. He let the negotiating officials to listen to what the union had to say and accepted a number of their key demands. He let Chohung operate alone without the interference from the group for two years and managed to smooth out the differences during the two years, paving the way for complete merger with Shinhan Bank, creating the second largest bank in the country with close to 20,000 employees. nw

President Lee In-ho of Shinhan Financial Group.