055550.KS

Group-Wide Financial Performance

• Group net income for Q2 2026 was KRW 1,820.1 billion, up 12.2% quarter-on-quarter. ROE improved 1pp YoY to 12.4% and ROTCE improved 1pp YoY to 13.9%.
• Group CET1 ratio reached 13.43% as of end-Q2 2026, up 13bps from the revised Q1 2026 level, after a capital regulation measure reduced risk-weighted assets (RWA) by KRW 3.2 trillion, maintaining a strong stable capital position amid market volatility.
• Operating profit before expense grew 8.8% QoQ, driven by solid net interest income growth. Interest income rose 3.6% QoQ supported by higher bank NIM and growing average loan balances; noninterest income rose 22.0% QoQ led by broad-based fee income growth.
• SG&A increased 8.1% QoQ due to seasonal taxes and Shinhan Securities performance fees, but the cost-to-income ratio remained stable at 36.6% nearly unchanged YoY. Credit cost rose 14.7% QoQ on a base effect from conservative prior provisioning, with the credit cost ratio improving 8bps YoY to 42bps.
• Asset quality remained stable: the group NPL coverage ratio improved 2pp QoQ from proactive nonperforming asset reduction and conservative provisioning. Bank delinquency rose slightly QoQ but had the industry's lowest net new delinquency; Shinhan Card delinquency fell 9bps QoQ.

Shareholder Return

• The Board approved a KRW 700 billion treasury share repurchase over the next 3 months, and a Q2 cash dividend of KRW 740 per share. Total committed share buyback through October 2026 will reach KRW 1.4 trillion, with an additional buyback to be announced in Q4 after reviewing annual earnings and capital adequacy.
• If current quarterly dividend levels hold, annual DPS will reach KRW 2,951, up 14.3% YoY, with total committed share buyback up 12.0% YoY. Management will maintain a flexible, forward-looking shareholder return policy aligned with the group's corporate value enhancement plan.

Strategic and Operational Initiatives

• The group is shifting focus from size growth of productive finance in H1 2026 to profitability enhancement and prioritizing high credit quality assets in H2 2026.
• Global operations are being streamlined to improve profitability, including the planned withdrawal of the New York securities subsidiary.
• Digital and sustainability initiatives are ongoing across the group, with capital market subsidiaries seeing material YoY ROCE improvement driven by fee income growth, and specialized finance subsidiaries continuing efforts to cut costs and reduce RWA exposure in low ROCE areas.

• NIM is expected to improve further in H2 2026, with an additional 3-4bps expansion projected if the expected 25bps benchmark rate hike occurs, as improving deposit funding structures and rising market rates support margin growth, aligning with the observed long-term rising trend.
• The group maintains a target ROE management range of 10% to 12% by 2027, with management accelerating improvement efforts and targeting visible ROE progress by the end of 2026.
• RWA growth is expected to remain stable at 4% to 5% annually after excluding one-off foreign exchange impacts, consistent with long-term guidance for banking sector financial holding companies.
• Second half 2026 fee income is expected to stabilize at Q2 2026 levels, with growth slower than H1 2026 amid moderating equity trading volumes but continued solid performance from wealth management product sales.
• The cost-to-income ratio (CIR) is expected to remain broadly stable over the 3-year projection period, managed within existing long-term guidance with no material deterioration expected.
• The 4% to 5% annual capital growth guidance from the Value-up 2.0 plan remains unchanged, and management will not deviate from the established plan trajectory despite recent foreign exchange rate movements.

1. Shinhan Bank: QoQ earnings growth of 12.5%, driven by top line growth, write-back of fines and lower credit costs despite higher SG&A from taxes and public charges. Revenue contribution is the largest core segment of the group.
2. Shinhan Investment Corporation + Shinhan Asset Management: 92.5% QoQ earnings growth, supported by expanded SAL ETF AUM and proprietary asset returns, with strong core capital market earnings.
3. Shinhan Card: 19.5% QoQ earnings growth, following the lapse of a one-off voluntary retirement impact and a decrease in credit costs, achieved in a difficult funding environment.
4. Shinhan Capital: 28.9% QoQ earnings decline, driven by reduced valuation gains on marketable securities that were recognized in the prior quarter, despite large credit cost improvements.
5. Shinhan Life: 81.8% QoQ earnings growth, led by significant improvement in insurance and financial gains, offsetting wider expected vs actual losses and actuarial assumption adjustments.
6. Overseas Business: 13% QoQ earnings growth, driven by expanded performance at major operations in Japan and Vietnam, with SBJ seeing expanded interest income amid rising policy rates and a strong real estate market, and MMC demonstrating resilient core earnings.

• Macroeconomic uncertainties including policy rate hikes, sustained high foreign exchange volatility, and ongoing geopolitical risks require continued conservative management of credit costs, which are currently within annual plan but monitored closely.
• Sluggish domestic demand recovery has increased corporate credit risk, and vulnerable customer segments remain under stress, requiring ongoing proactive asset quality management.
• Capital market volatility creates downside risk for fee income growth, requiring careful monitoring of trading volumes and product sales activity.
• K-shaped economic polarization and income disparity limit the expected boost to domestic consumption from recent large corporate employee bonuses, with uncertain spillover effects to broader retail lending and consumption.
• M&A activity carries capital allocation risk, and management requires potential deals to meet strict return hurdles relative to the group's cost of equity to avoid negative impacts to EPS and ROE.

Q: Will Shinhan switch to quarterly share buybacks permanently, and what is the status of rumored non-life insurance acquisition plans? / A: The 3-month buyback cycle was shortened this year due to high market volatility that makes 6-month earnings forecasting difficult. If earnings become more predictable next year, the cycle may return to 6 months, with no permanent quarterly cycle locked in. Management is reviewing multiple M&A options including non-life insurance, but no deal has been finalized. Any M&A will be pursued consistent with the Value-up 2.0 plan, within the group's stable CET1 range, and only if it improves EPS and ROE; any progress will be disclosed promptly to the market.

Q: What is Shinhan's plan for capital injection into Shinhan Securities to reach KRW 8 trillion capital for IME certification, and how does this interact with potential non-life M&A? / A: Unlike peer firms, Shinhan Securities received short-term note issuance approval only last year and still has leverage headroom for growth, so immediate capital injection is not needed. Management is open to increasing risk limits via acquisitions if there is business need, and capital allocation can proceed in parallel with any non-life insurance M&A. Capital for high ROE opportunities will not be deprioritized, as capital impacts from securities business growth are gradual rather than immediate.

Q: Why did Q2 2026 bank NIM rise only 1bps QoQ against expectations, and what is the H2 outlook? / A: The smaller than expected QoQ rise stemmed from a shift in deposit mix: strong stock markets reduced retail deposits, while large corporate deposits increased significantly, pressuring funding costs. Over a longer time series, NIM has risen gradually and consistently quarter-over-quarter. For H2, after the July 25bps benchmark rate hike and an expected additional rate hike, NIM is projected to improve a further 3-4bps, as higher deposit rates will attract more retail inflows and improve the overall funding structure.

Q: How does potential M&A impact the shareholder return policy, and what is the long-term cost outlook including AI impacts? / A: Any M&A will be pursued only if the CET1 ratio exceeds the 13-14% management range, and will not impact short-term annual shareholder returns. All potential M&A must meet the group's required return hurdle relative to its cost of equity to protect EPS and ROE. Long-term SG&A growth is expected to align with 4-5% nominal GDP/inflation growth, with CIR expected to remain stable around current levels over 3 years with no sharp deterioration, even as top-line driven expenses (like performance pay and regulatory taxes) rise gradually.

Q: Can Shinhan be flexible on year-end dividends if full-year 2026 earnings beat expectations, and what is the ROE outlook? / A: The base equal quarterly dividend will be maintained, but management is open to adding an additional special year-end dividend if earnings outperform, with a decision on additional shareholder returns including buybacks to be made in October based on year-to-date performance. The target ROE management range of 10-12% is maintained, with management accelerating improvement efforts to deliver visible results by the end of 2026, with volatility expected in line with market conditions.