[Sponsored Report] Shinhan leads in net profit for eighth year

On Feb. 4, Shinhan Financial Group announced that last year’s net profit totaled approximately 2.372 trillion won ($1.922 billion), ranking first in the industry for the eighth consecutive year.

Not only did Shinhan manage to surpass 2 trillion won in net profit, it also saw a 14 percent increase year on year from 2.08 trillion won in 2014.

The group’s interest revenue for 2015 was 6.69 trillion won, a slight decrease of 1.4 percent year on year. Although the net interest margin dropped by 27 basis points, Shinhan was able to prevent bigger losses thanks to the 8.5 percent increase year on year in the total amount of bank loans. Shinhan Bank’s loans in won constantly rose throughout the year from both households and enterprises, finishing 2015 with a year-on-year increase of 10.5 percent.

Another notable feature in the 2015 report was the improvement of performance from the non-banking sector, which saw profits increase 18.3 percent to 1.092 trillion won. This number accounts for 42 percent of the group’s total profit, a 3 percent increase compared to 2015. The main factor behind this favorable turn was a revitalization in sales - mainly from credit cards and securities - along with improved profitability from the life insurance sector.

The non-banking affiliate that showed the most visibly impressive performance was Shinhan Investment, which recorded net profit of 215 billion won, an 82.2 percent increase year on year. The main factor behind last year’s success is the rise in commission fees of the Private Wealth Management and Corporate & Investment banking sectors, which rose by 29.5 percent and 39.1 percent, respectively. The non-banking sector’s advance is a meaningful event for the group, reflecting a continuous effort over the last four years to encourage cooperation between its affiliates.

The group also saw positive outcomes in risk management demonstrated by its low bad-debt-expense ratio of 43 basis points, a record 15 points lower than the past five year’s average of 58. This is said to be a result of Shinhan’s pre-emptive risk management, which focuses on strengthening asset quality through maintaining a steady rate of growth in loan issuances.

In terms of costs, Shinhan Group’s administrative expenses showed only a slight year-on-year increase of 0.3 percent, at 4.475 trillion won. The operating expense ratio of the financial group and affiliate Shinhan Bank both fell to 52.7 percent and 54.5 percent, respectively, each seeing a 2.6 percent and 1.9 percent drop year on year.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]