Non-Banking Sector Gets Cracking

Shinhan Financial Group's net profit increases on the back of non-banking affiliates excellent results

Shinhan Financial Group said on Oct. 26 that its net profit in the first three quarters of this year reached 2.593 trillion won, including 704.2 billion won in the third quarter.
The financial group said the Q3 net profit is down 27 percent from the preceding quarter, as it included the profit from the sale of stakes in Hyundai Construction. The group said the net profit in Q3 was helped by the strict management of risk factors to preserve the health of assets, which reduced the loss provision and reductions in expenses.
Net profits of other affiliates such as Shinhan Card, Shinhan Life Insurance and Shinhan Capital have also contributed to increased net profit of the group, they said.
Officials of the group said the diversified portfolio of the group with segregated risk management policies, the strict management of expenses, a boost in effective management, excellent performances of non-banking affiliates, and the sound management of the health of the assets have all contributed to the outstanding performance results in the first three quarters of the year.
Special characteristics of the Q3 performance results include the soundness of assets and conservative policies for loss provisions, which led to steady cuts in loss provision expenses. The accumulated loss provision in Q3 amounted to 673.5 billion won, down 472.3 billion won, or 41.2 percent YoY, and down 78.9 billion won from the preceding quarter, or 27.4 percent.
In the meantime, the group's non-performing loans rate amounted to 1.38 percent, improving by 0.08 basis points, down 0.04 bp from yearend last year, showing an improvement in the health of assets, the officials said.
They also pointed out that the coverage ratio for the non-performing loans amounted to 149 percent, 1.5 times the non-performing assets, showing that the group's conservative loss provision policies continued.
They also noted as one of the outstanding features of the group's performance results the solid performances turned in by the non-banking affiliates such as Shinhan Card, Shinhan Life, and Shinhan Capital, showing off the group's segregated and diversified portfolio's success versus those of its rivals.
The non-banking sector's net profit increased 11.3 percent with the recovery of Shinhan Card and Shinhan Life operations in Q3, with its share of the group's total profit rising to 33 percent from 31 percent.
Shinhan Card's increased sales and its removal of non-effective operational factors helped the company increase its net profit 3.4 percent YoY and 3 percent from the preceding period, playing a key role in the upbeat performance of the non-banking sector.
Shinhan Life benefitted from an increase in import insurance sales and an improvement in the return on its investments in seeing its net profit rise 2.8 percent YoY and 47.6 percent from the preceding quarter, showing its share of the group's net profit will also grow.
Shinhan Capital's profit increased during Q3 due to cuts in the loss provision and rising 139.8 percent more than the preceding quarter and 28.2 percent from the previous quarter.
The group's expenses in Q3 were down 9.6 percent from the previous quarter, while expenses in the first three quarters rose only 4.8 percent YoY.
The ratio of total expenses against total profits for the group amounted to 40.2 percent, the lowest in years, led by Shinhan Bank's 39 percent. nw

Chairman Han Dong-woo of Shinhan Financial Group.
Photo on courtesy of Shinhan Financial Group