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Fundamental View
AS OF 29 Jul 2025Shinhan FG was the best-managed of the large Korean financial groups over many years. During the Asian Financial Crisis, it took advantage of the opportunity to acquire competitors and other businesses, increasing its scale and expanding its business lines.
Its performance has been more variable in the past few years. After a bumpy 2020, it had a better FY21 and FY22, thanks to rising interest rates. However, operating performance turned weak again in FY23, and its FY24 profit growth was softer than peers, impacted by non-bank performance.
In addition to owning a Big 4 bank in Korea, Shinhan FG also has a diversified non-banking business portfolio, including a leading credit card company and a top 10 securities firm.
Business Description
AS OF 29 Jul 2025- Shinhan Financial Group (Shinhan FG) is one of Korea's most diversified financial groups and the holding company of the second largest Korean bank - Shinhan Bank. It also has credit cards, securities, asset management and insurance subsidiaries.
- Shinhan Bank was set up in 1982 with seed capital from Korean residents in Japan. It was more professionally managed than the heavily politicised older banks and came through the 1997 Asian Financial Crisis in relatively good shape, taking the opportunity to acquire the larger and much longer-established Chohung Bank in 2003.
- In 2007, it made another timely acquisition, buying LG Card from its creditors after it failed during the 2003 Korean consumer lending crisis. Shinhan Card is the largest card issuer in Korea.
- Shinhan is also looking for overseas opportunities where growth is strong and Korean businesses have a presence, with a focus on Vietnam (where Shinhan Card also bought a consumer finance business in 2019) and Indonesia.
Risk & Catalysts
AS OF 29 Jul 2025As one of Korea’s “Big Four” financial groups, we believe Shinhan FG would likely receive governmental support if needed.
Asset quality pressure has been rising from domestic real estate project financing at non-bank subsidiaries, with credit costs rising from very low levels. Management has revised its FY25 credit costs outlook up from around 40 bp to the mid-to-high 40 bp range.
Loan growth has been soft this year due to both weaker demand and the need to defend its 13% CET 1 ratio target; it will also face tighter regulation on mortgage lending like its peers.
Profit growth may encounter challenges if there is volatility in the KRW, which could lead to significant FX losses, or if the high-rate environment in the US persists, causing further overseas CRE valuation losses.
Key Metric
AS OF 29 Jul 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.11% | 1.10% | 1.23% | 1.19% | 1.35% |
| ROA | 0.66% | 0.72% | 0.66% | 0.63% | 0.84% |
| ROE | 9.2% | 10.0% | 8.6% | 8.4% | 11.4% |
| Provisions/Average Loans | 0.28% | 0.34% | 0.57% | 0.51% | 0.47% |
| NPL Ratio | 0.39% | 0.41% | 0.56% | 0.71% | 0.80% |
| CET1 Ratio | 13.10% | 12.79% | 13.17% | 13.06% | 13.59% |
| Equity/Assets | 7.3% | 7.6% | 7.8% | 7.6% | 7.6% |
| Net Interest Margin | 1.81% | 1.96% | 1.97% | 1.93% | 1.90% |
CreditSight View Comment
AS OF 28 Jul 2025Shinhan FG is one of the four nation-wide commercial banking groups in Korea, with a leading credit card arm. It had over many years the best operating track record, but have shown more consistent performance with peers in recent years. More recently, its 1H25 returns remained high and just behind KBFG. Its CET 1 ratio was also slightly behind KBFG but leading the other two peers. However, it failed to deliver its commitment to enhancing its NPL coverage ratio in 2Q25, although the figure remained at a comfortable level. We have a Market perform recommendation at both group and bank levels.
Recommendation Reviewed: July 28, 2025
Recommendation Changed: September 22, 2020
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