Ties with BNP Paribas
Two financial companies become partners in asset management co.
Shinhan Financial Group said it will merge two asset management units next year to create more close cooperative relations with BNP Paribas SA and become the nation's third largest fund manager.
The second largest financial group in the country will hold 65 percent of the merged asset manager and the French partner will share the remaining 35 percent stake in the new entity born of the merger of Shinhan BNP Paribas Investment Trust Management Co. and SHC Management Co.
The merged fund management company will have a total asset of 30 trillion won, which will be used to share a bigger pie in Korea's $316 billion asset management market.
Shinhan Financial Group reported its second quarter net income amounted to 791.2 billion won, up 27.6 percent from the previous quarter and up 15.3 percent YoY.
The Q2 earnings brought the group's first half total earnings to 1.411,6 trillion won, up 22 percent from the same period last year, if 336.9 billion won of one-time earning made last year at former LG Card is excluded. SFG took over the credit card company in 2007 and renamed it Shinhan Card.
The group's non-banking sector earnings amounted to 835 billion won up a whopping 48.5 percent YoY, boosting the sector's contribution to the group's earnings to 49 percent at the end of the H1 from 34 percent in the same period last year, the group said. The group's strategy to expand the non-banking sector's earnings has been showing a good result, the group said.
They said the performance record shows that the group's operation is going better than those of its rivals and they are confident that the non-banking sector would continue to perform well as the group's balanced operational structure has been working as projected with each individual non-banking affiliates such as the credit card business will continue to grow rapidly in the days ahead.
Good Morning-Shinhan Securities expanded its H1 earning to 111.7 billion won, up 46 percent YoY, Shinhan Life's H1 earnings came to 77.8 billion won, up 19 percent YoY, and Shinhan Capital's earnings increased to 40.8 billion won, up a whopping 84 percent YoY, which played a big role in boosting the non-banking sector's earning share this year.
SFG said the non-banking sector's earnings boost has been of a great help to its H1 earnings this year especially as the banking sector has been suffering from the reduction in net interest margins(NIM) in the H1, unlike the non-banking sector's credit card, life insurance and capital lease businesses, which were able to expand their profit to a great extent in the H1.
SFG officials said the group's strategy to diversify its income sources, which took place from the Q1 has continued into the Q2 well, which will further segregate the group's value from its rivals.
Another factor that played a big role in boosting the non-banking sector's het income has been a success in holding down costs and stable loan loss provisions. The operational expenses for banks rose only 5.5 percent and that for the group 5.1 percent, while the ratio of the non-performing loans came to be 0.98 percent sustaining a stable level, raising the overall expense control effectiveness for the group.
The effective expense control for the group is owed to the group's IT infrastructure built with the take over of Chohung Bank in 2006 and manpower restructuring, the officials said.
The indicator for the group's operation continue to show stability despite the uncertainty in the financial market both at home and abroad amid the concern for economic stagnation.
To review the performance by each affiliate, Shinhan Bank chalked up 493.9 billion won in net income in the Q2, up 29.4 percent from the previous quarter. The interest income contracted a little due to cuts in interest rates on CDs, loans and the rise in costs for mid-to long-term funds. Hikes in profits from selling funds and bancassurance offset the reductions in interest income.
The bank's NIM amounted to 3.57 percent if that of Shinhan Card was included, but it came to 2.1 percent if that for the card affiliate is excluded. The key factor in the non-banking sector's surprising performance was the commissions earned in selling funds and bancassurance, which rose 15 percent compared to the same period last year. nw
President Lee In-ho of the Shinhan Financial Group.