Shinhan Financial Group Co., Ltd. Q4 FY2022 earnings call

• 2022 full-year group net income was KRW4.6423 trillion, excluding one-time gain from Shinhan Securities HQ building sale, net income grew 7.5% YoY. • Q4 performance fell short of consensus due to valuation loss of KRW146.4 billion for Principal Protected pre-2000 Personal Pension Trust, customer investment product-related losses of KRW180.2 billion, etc. • Group CIR was 45.5%, credit cost ratio around 33 bp, maintained stably. • Capital policy: 2022 year-end dividend per share KRW865, annual cash dividend payout ratio 23.5%, 2022 TSR 30%. • Digital strategy: Group digital platform daily visitors 22.28 million (+30% YoY), MyData service users 6.96 million, digital new business operating profit KRW9.5 billion, invested KRW260 billion in strategic investment for digital ecosystem.

Group's 2022 annual interest income rose 17.9% YoY to KRW10.6757 trillion, driven by a 15 bp quarterly increase in group margin on interest-bearing assets. Q4 bank net interest margin was 1.67%, down 1 bp QoQ due to core deposit decline and funding cost increase. Bank loans saw solid corporate loan growth (+11.2% YTD) but household loans decreased (-3.7% YTD) due to interest rate rise and DSR regulation. Group non-interest income fell 30.4% YoY due to securities-related income decline and fee income drop from capital market and real estate market deterioration. Group CIR was 45.5%, credit cost ratio around 33 bp. Bank's net income grew due to interest income increase. Shinhan Card's net income slightly declined due to funding cost rise, merchant fee cards and provisioning increase. Shinhan Securities' net income rose due to head office sale gain despite operating profit drop. Shinhan Life's net income increased due to higher operational profit. Shinhan Capital's net income grew YoY but fell QoQ due to real estate PF related provisioning and valuation loss.

• 2023 shareholder return policy: Cash dividends to be uniform quarterly and year-end, shareholder total return ratio expected 30%-40% depending on economic uncertainty and regulator stress testing results. • Board resolved to buyback and cancel KRW150 billion of treasury stock, size dependent on CET1 ratio. • Mid-term financial targets to 2025: ROE target more specific, ROTCE targets 10.5% and 12%, aim for growth in less capital-intensive areas and quality growth in capital-intensive areas with asset growth managed at nominal GDP growth rate level.

• Credit risk: Need for conservative provisioning due to uncertain economic conditions, potential impact on credit costs. • Market interest rate risk: Impact on net interest margin. • Real estate related risk: Potential issues in real estate PF business. • Customer investment product risk: Possible additional losses related to investment product sales.

Q: About net interest margin outlook?

A: In Q4 2022, funding cost rise led to net interest margin decline. In 2023, market interest rate stabilized initially but funding cost remained higher than time deposit rate, expected to stabilize from Q2. Overall, net interest margin expected to rise in 2023.

Q: Reason for CET1 ratio target 12% lower than peers?

A: Consider regulatory framework, capital buffer, internal stress testing. 12% CET1 ratio ensures sustainable financial service provision in economic crisis, and including stock buyback, 2022 TSR is 33.2% not lower than peers.

Q: Direction of data platform utilization in digital business?

A: Center on providing personalized services for customers, strengthen data governance structure, optimize internal work processes and seek new income sources using data.

Q: View on internet bank?

A: Not excluding opportunities to invest in or ally with internet banks, but foremost strengthen own digital and platform competitiveness.

Q: Predictability of quarterly dividends and regularity of stock buyback cancellation?

A: Cash dividends to be as uniform as possible, stock buyback cancellation dependent on CET1 ratio and market conditions, difficult to be fully regular.

Q: Real estate related risk and exposure in second-tier financial institutes?

A: Real estate PF business has exposure, conservative provisioning strengthens loss absorption. Will cooperate with creditors and respond to regulatory policies. Part of Principal Protected trust related securities will mature and bring valuation recovery in next quarter.

Q: Reason for mid-term target to 2025 and CET1 ratio change later?

A: 2025 is mid-term strategic plan deadline. CET1 12% target is sustainable in economic environment, and will adjust according to future situation.