Shinhan Financial Group recorded a surprising third quarter net profit, posting 679 billion won, an increase of 11 percent year-on-year. The interest earnings fell due to the reductions in the net interest margin (NIM), but boosts in loans and the reduction in loan-loss provision helped to expand its net profit in the quarter, according to financial sources.
Shinhan Financial Group's 2015 Q3 cumulative net income recorded 1.9631 trillion won. Net income in Q3 recorded 679 billion won, an 11 percent increase YoY, but went down 1.9 percent on-quarter.
Three major characteristics of this quarter's performance are the following: First, interest income was guarded through sound loan growth. Second, SG&A was effectively controlled. Third, asset quality improved leading to the stabilization of the loan loss provisions, which rose in the first half as a one-off factor.
Looking at the income breakdown, despite the margin contraction, the group's interest income thanks to the continuous loan growth of the bank and the rise of the non-banking group subsidiaries interest income, including financial investment and life insurance, had a limited drop of 1.9 percent YoY and went up 1.4 percent QoQ. Non-interest income increased by 33.5 percent YoY, helped by higher fee income, financial investments as well as the growth of available for-sale securities disposition gains. Compared to the previous quarter, AFS disposition gains decreased and impairment losses increased, leading to a 40.1 percent drop in non-interest income, but the recurring non-interest income base, including fee income, is stably being maintained.
The group's G&A went up 3.4 percent YoY and is showing appropriate growth. Taking into account the performance-linked pay and securities transaction taxes following the robust sales of Shinhan Financial Investment, total G&A is being maintained at a similar level to the previous quarter. Credit costs, which rose temporarily in the previous quarter, dropped 41 percent QoQ, with the decline in the bank's provisioning and increase in write-backs.
Accordingly, the Group's credit cost ratio improved from 0.59 percent in the first half to 0.49 percent.
Taking into consideration the banking and non-banking equity contribution through Q3, net income posted 1.2636 trillion won and 874.3 billion won, respectively, and the income contribution ratio of the non-banking contribution through Q3, net income posted 1.2636 trillion won and 874.3 billion won, respectively, and the income contribution ratio of the non-banking subsidiaries posted 41 percent.
The subsidiaries’ Q3 banking income — thanks to the stabilization of Shinhan Bank credit cost — increased 15.2 percent QoQ. Non-banking in Q3 had a slight downturn in income growth, but is showing 19.6 percent growth overall, due to the stabilization of credit card and life insurance as well as the income improvement of Shinhan Financial investments.
Shinhan Bank's posted 1.2528 trillion won in Q3 net income, a 1.5 percent drop YoY, but the quarterly income increased 15.5 percent QoQ. Compared to the previous quarter, despite the interest income decline and credit cost increase following the margin contraction, non-interest income grew and G&A was effectively controlled, leading to only a slight drop for net income.
Shinhan Bank's cumulative non-interest income through Q3 posted 836.2 billion won, 18.1 percent increase YoY. Loan originating fee and trust fee income growth led to a 7.7 percent increase in fee income.
Dividend income and gains from local disposition sales, loan disposition sales grew YoY as well. On the other hand, non-interest income in Q3 went down 53.9 percent QoQ.
Shinhan Financial Group recorded a net profit of more than 1 trillion won during the first half of the year, the only one among the top-four holding companies in Korea to do so.
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