Shinhan defies prediction of losses

Shinhan Financial Group announced Wednesday that the corporation’s net income rose in the first quarter, despite unfavorable market conditions and the concerns of stakeholders.

Net income totaled 592 billion won ($547 million) for the corporation, six percent higher than the first quarter last year and almost 90 percent higher than what the company collected last quarter. The huge leap led to a gain of 279 billion won over the course of three months.

This was especially good news since substantial losses were anticipated for the quarter. Market interest rates have been falling continuously since the second half of last year, which inevitably caused bank interest rates to drop as well. Meanwhile, economic regulation became more stringent and competition more fierce.

As a result, Shinhan Bank - a major affiliate of the group - could only expect negative outcomes in terms of profit. Net income for the bank did decrease 8.3 percent compared to the first quarter of last year, proving that there were indeed tough challenges.

Fortunately, the bank’s loss was an exception among affiliates. The corporation was able to gain overall, made possible by non-bank affiliates recovering from risky situations. Shinhan Card, Shinhan Investment and Shinhan Life Insurance all contributed greatly to the group’s collective success amid the market’s rough patch.

The group’s core strategy was redesigning the corporate portfolio to rely less on interest income since market interest rates are falling. It sought to diversify income channels so that more non-interest income could be secured.

Shinhan Investment, for example, was able to record the highest profit recovery rate among non-bank affiliates by focusing on maximizing benefits from brokerage and sales commissions. Income derived from floor trading also increased, leading to a higher net income.

Shinhan Financial Group benefited as a whole. Non-interest income increased 310.5 percent compared to last quarter.

Shinhan simultaneously succeeded in spending less and doing business more efficiently. Compared to the same period last year, selling and administrative expenses increased by only 1 percent, while expenses actually decreased substantially when compared to last quarter.

Upon announcing the news, officials at Shinhan Financial Group were confident about their ability to ensure continuing success.

“Setting the right strategy is crucial to risk management,” officials said. “In our case, the diversification of the corporate portfolio played a significant role. With careful planning and concentrated efforts, we believe that maintaining stability will not be an issue in the future.”

BY BAE JA-HYUNG [bae.jahyung@joongang.co.kr]