Shinhan Financial Group Co., Ltd. Q3 FY2026 earnings call

• Capital Management & Dividends: The Group CET1 ratio stood at 13.62%, improving by 12BP from the previous quarter. The Board approved a total dividend of 4.5 billion won (self-sufficiency interest) and a quarterly cash dividend of 740 won per share. Annual DPS is expected to rise 14.3% to 2,960 won.
• Strategic Acquisition: Approved the purchase of approximately 77% of Lotte Loss Insurance for 6,933 billion won. This capital relocation aims to strengthen the insurance portfolio, improve medium-term profitability, and enhance capital efficiency without external contributions.
• Asset Quality: NPL coverage ratio was recorded at 115.48%. Loan costs were managed stably at 42BP, an improvement of 4BP year-over-year, within planned management ranges.
• Cost Control: Group expenses decreased by 5.0% quarter-over-quarter due to lower seasonal tax revenues and reduced stock market recognition costs, maintaining a net profit margin of 37.6%.
• Digital & Sustainable Business: Continued focus on digital transformation and sustainable business activities, with detailed operational updates provided in subsequent slides not fully captured in this summary.

The transcript provides limited specific absolute revenue figures for individual segments, focusing instead on profit trends and growth rates. Key segment highlights include:

• Shinhan Bank: Maintained strong profitability despite a slight NIM contraction; reported stable performance in funds and wealth management.
• Shinhan Investment (Securities): Performance declined compared to the previous year due to reduced stock trading interest and increased market volatility, though it remains profitable relative to prior years.
• Shinhan Card: Improved profitability by 68.4% compared to the previous year, driven by increased business sales amidst uncertain conditions.
• Shinhan Capital: Revenue decreased by 29.7% quarter-over-quarter due to persistent payment costs and diminishing profitability from Shinhan Line.
• Shinhan Life: Revenue decreased by 31.3% quarter-over-quarter, attributed to a decrease in the number of insurers and lower evaluation values associated with Shinhan Line.

• NIM Outlook: Bank NIM is expected to remain flat through the end of the year due to intensified monthly competition and concentration of standard rate hikes. Gradual improvement is anticipated next year as six-month operating revenues stabilize.
• ROE Target: The Group’s mid-term ROE target is maintained between 10% and 12%, with a minimum floor of exceeding 10%. Improvement is expected if current losses normalize into profits.
• Insurance Market: Anticipates a decrease in the number of insurance companies due to regulatory changes, which may favor larger players like Shinhan after acquiring Lotte Loss Insurance.
• Securities Sales: Plans to increase the operating pipeline for new securities offerings to 2 trillion won next year, avoiding price/volume competition but focusing on margin stability.

• Market Volatility: Exposure to global financial market uncertainty, including rising interest rates in major countries, impacting delivery costs and bond valuation losses.
• Credit Risk: Continued credit risk centered on certain interest rates and difficult economic recovery conditions require thorough monitoring of asset volatility.
• Regulatory Changes: Regulatory guidelines affecting insurance products (e.g., termination rates increasing by more than 30%) and capital requirements (CET1/RWA fluctuations) pose operational risks.
• Acquisition Integration: Significant work remains to complete procedures related to the acquisition and integration of Lotte Loss Insurance, with potential execution risks.

Q: Analysts questioned why NIM fell slightly in Q3 despite rate hikes and asked about Q4 trajectory. / A: CFO Kang explained that while standard rates rose, intense monthly competition and a shift in deposit structures (more 6-month CDs) pressured margins. He expects NIM to remain flat until year-end, with gradual improvement next year as six-month rates stabilize and reduce funding cost volatility.

Q: An analyst asked about the rationale behind the 0.9x PBR multiple paid for Lotte Loss Insurance given future capital needs. / A: CFO Jang clarified that the 0.9x reflects net asset value from H1 2026. He argued that required capital ratios are manageable via internal group capital, limiting additional injections to ~300 billion won. The deal eliminates a ~500 billion won annual loss from existing holdings and is accretive to ROE once normalized, justifying the strategic entry into a consolidating insurance market.

Q: Questions were raised regarding the sharp decline in Securities (Shinhan Investment) revenue and brokerage performance amid falling stock prices. / A: CFO Lee noted that while Q2 was a peak, Q3 saw dramatic exchange rate declines impacting individual investor psychology. However, markets stabilized mid-October. To offset weak brokerage fees, the firm is actively selling financial products (E-RES, bonds) and leveraging bank-linked SuperSol platforms to recover lost revenue through product sales rather than pure trading volumes.

Q: Analysts inquired about the impact of OCI losses on CET1 ratios and overall capital adequacy. / A: CFO Jang detailed that RWA increased by 12 trillion won due to FX movements, dropping CET1. However, this was partially offset by favorable movements in overseas interest rate funds (reducing RWA). He emphasized that netting these OCI impacts shows a manageable 22BP effect, and the group maintains sufficient buffers to absorb volatility without breaching regulatory limits.