Shinhan Financial Group Co., Ltd. Q2 FY2021 earnings call

1. Achieved record high half-year net income with improved fundamentals, with bank and non-bank income at a 5-to-5 breakdown. 2. Uncertainty decreased, group’s first half provision for credit losses decreased 56% year-over-year and 9% quarter-over-quarter. 3. Strengthened corporate SOHO retail CSS approval strategy and monitored new asset inflows, expanded and revised preemptive management selection standards. 4. Successful integration of life insurance companies as of July 1, with a net income goal around KRW400 billion and expected improvement with IFRS 17 adoption. 5. Shinhan card saw improved results due to cost control in customer acquisition and merchant fees. 6. Plan to launch non-face-to-face bank collateralized loans in August and eventually make all retail products non-face-to-face.

Bank net income rose 20% year-over-year through margin management and quality asset growth. Non-banking recorded a record high half-year net income, a 68% improvement year-over-year. The non-banking breakdown shows capital market (including securities, capital and asset management) and retail finance (including card and savings bank and insurance) are evenly growing. Capital market subsidiaries with high ROE posted KRW507.4 billion, which is 43% of the group's nonbanking income, up from a 29% yearly average contribution between 2017-2020.

1. Quarterly dividend to be paid after BOD meeting in August, considering market conditions. 2. Monitoring share buyback actively if COVID-19 situation relaxes and no macroeconomic issues. 3. Expect NIM to increase by 1 BP every quarter with base rate frozen, and further improvements through loan yield and managing low margin credit lines. 4. Target to make retail loans 100% non-face-to-face for customer convenience.

Potential deterioration of SOHO loans due to resurgence of COVID-19, but group has diversified credit ratings and collateralized ratings portfolios and is developing different credit rating models.

Q: Concern about SOHO loan deterioration due to COVID-19 resurgence and outlook/response.

A: SOHO loans have favorable flow currently, with different credit rating models being developed.

Q: Integration of life-insurance, profit with IFRS 17 adoption.

A: Net income goal around KRW400 billion, expected to increase with IFRS 17, and integrated company showing positive trends.

Q: Shinhan card performance, one-off trend, and difference in Shinhan Life and Orange Life net income.

A: Shinhan card cost control led to improved results, difference due to strategic bond sales.

Q: Digital loans, non-face-to-face plans.

A: Plan to launch non-face-to-face collateralized loans in August, aiming for all retail products to be non-face-to-face.

Q: Quarterly dividend, share buyback, NIM scenario, online loan transition.

A: Quarterly dividend after BOD meeting, monitoring share buyback, NIM expectations, and retail loans target to be non-face-to-face.

Q: Fintech competitor KakaoBank, Shinhan's take.

A: Shinhan using alternative data and models to compete in mid-interest rate market, rolling out models starting August.