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(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2009 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | ||
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
N/A | The Republic of Korea | |
(Translation of registrant’s name into English) | (Jurisdiction of incorporation or organization) |
Seoul100-102, Korea
(Address of principal executive offices)
(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person))
Title of Each Class: | Name of Each Exchange on Which Registered: | |
Common stock, par value Won 5,000 per share | New York Stock Exchange* | |
American depositary shares | New York Stock Exchange |
* | Not for trading, but only in connection with the listing of American depositary shares on the New York Stock Exchange, pursuant to the requirements of the Securities and Exchange Commission. |
None
None
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o |
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• | the terms “we,” “us,” “our,” “Shinhan Financial Group,” “SFG” and the “Group” mean Shinhan Financial Group Co., Ltd. and its consolidated subsidiaries; | |
• | the terms “Shinhan Financial Group Co., Ltd.”, “our company” and “our holding company” mean Shinhan Financial Group Co., Ltd. |
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ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
ITEM 3.A. | Selected Financial Data |
Year Ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||||||
(In billions of Won and millions of US$, except per common share data) | ||||||||||||||||||||||||
Interest and dividend income | 7,488 | 8,893 | 12,149 | 14,734 | 12,597 | $ | 10,826 | |||||||||||||||||
Interest expense | 4,014 | 4,912 | 6,979 | 8,955 | 7,376 | 6,339 | ||||||||||||||||||
Net interest income | 3,474 | 3,981 | 5,170 | 5,779 | 5,221 | 4,487 | ||||||||||||||||||
Provision (reversal) for credit losses | (183 | ) | 226 | 81 | 1,437 | 2,201 | 1,892 | |||||||||||||||||
Noninterest income | 2,945 | 3,786 | 4,738 | 4,572 | 5,685 | 4,885 | ||||||||||||||||||
Noninterest expense | 3,641 | 5,308 | 6,745 | 6,726 | 7,137 | 6,134 | ||||||||||||||||||
Income tax expense | 1,015 | 650 | 1,057 | 695 | 424 | 364 | ||||||||||||||||||
Income before extraordinary item and effect of accounting change | 1,946 | 1,583 | 2,025 | 1,493 | 1,144 | 982 | ||||||||||||||||||
Cumulative effect of a change in accounting principle, net of taxes | — | (10 | ) | — | — | — | — | |||||||||||||||||
Net income | 1,946 | 1,573 | 2,025 | 1,493 | 1,144 | $ | 982 | |||||||||||||||||
Net Income attributable to noncontrolling interest | 16 | 18 | 95 | 12 | 10 | 8 | ||||||||||||||||||
Net income attributable to the Group | 1,930 | 1,555 | 1,930 | 1,481 | 1,134 | $ | 974 | |||||||||||||||||
Net income per common shares (in currency unit): | ||||||||||||||||||||||||
Net income — basic(1)(3)(4) | 5,467 | 3,964 | 4,250 | 2,993 | 1,957 | $ | 1.68 | |||||||||||||||||
Net income — diluted(2)(3)(4) | 5,157 | 3,964 | 4,172 | 2,955 | 1,955 | 1.67 | ||||||||||||||||||
Weighted average common shares outstanding-basic (in thousands of common shares) | 351,496 | 392,340 | 403,475 | 417,673 | 461,500 | — | ||||||||||||||||||
Weighted average common shares outstanding-diluted (in thousands of common shares) | 374,212 | 392,340 | 417,228 | 432,394 | 476,221 | — |
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(1) | Basic earnings per share are calculated by dividing the net income available to holders of our common shares by the weighted average number of common shares issued and outstanding for the relevant period. | |
(2) | Dilutive earnings per share are calculated in a manner consistent with that of basic earnings per share, while giving effect to the potential dilution that could occur if convertible securities, options or other contracts to issue common shares were converted into or exercised for common shares. We have two categories of potentially dilutive common shares: (i) shares issuable upon the exercise of stock options and (ii) shares issuable upon conversion of the redeemable convertible preferred shares. In 2006, there was no dilutive effect on earnings per share due to a change in accounting policy in 2006 which resulted in the use of the number of the outstanding shares as of the beginning of the year and the election by us to grant cash in lieu of stock upon the exercise of stock options by our employees. We may in the future grant shares in lieu of cash upon the exercise of stock options by our employees, which may impact the dilutive earnings per share in the future. | |
(3) | We applied the equity method of accounting for the previous ownership interest of 7.15% in LG Card in conformity with ASC 323 (formerly APB opinion No. 18). Accordingly, the investment, our results of operation and retained earnings were retroactively adjusted as we acquired control over LG Card in 2007. | |
(4) | The computations of basic and diluted earnings per share (“EPS”) were adjusted retrospectively to include the effects of a discount offered to shareholders in connection with the rights offering in March 2009, which was due to the fact that the shares offered in the rights offering were issued and sold at a discount to the market price. |
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As of December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||||||
(In billions of Won and millions of US$, except per common share data) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | 2,434 | 1,691 | 3,580 | 1,365 | 4,363 | $ | 3,750 | |||||||||||||||||
Restricted cash | 3,644 | 6,758 | 4,745 | 7,049 | 7,974 | 6,853 | ||||||||||||||||||
Interest-bearing deposits | 627 | 725 | 1,094 | 1,627 | 2,164 | 1,860 | ||||||||||||||||||
Call loans and securities purchased under resale agreements | 1,499 | 1,243 | 802 | 3,066 | 1,346 | 1,157 | ||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||
Trading securities and other | 3,573 | 3,474 | 8,220 | 6,724 | 6,681 | 5,741 | ||||||||||||||||||
Derivatives assets | 934 | 1,363 | 1,962 | 11,977 | 4,617 | 3,967 | ||||||||||||||||||
Securities: | ||||||||||||||||||||||||
Available-for-sale securities | 21,100 | 16,894 | 22,626 | 29,016 | 27,612 | 23,729 | ||||||||||||||||||
Held-to-maturity securities | 2,963 | 7,581 | 8,224 | 8,696 | 12,794 | 10,994 | ||||||||||||||||||
Loans (net of allowance for loan losses of | 104,447 | 120,989 | 149,723 | 167,308 | 165,594 | 142,305 | ||||||||||||||||||
Customers’ liability on acceptances | 1,879 | 1,417 | 1,701 | 2,433 | 2,780 | 2,389 | ||||||||||||||||||
Premises and equipment, net | 1,876 | 2,097 | 2,455 | 2,412 | 2,437 | 2,094 | ||||||||||||||||||
Goodwill and intangible assets | 2,957 | 2,584 | 6,160 | 5,571 | 5,072 | 4,359 | ||||||||||||||||||
Security deposits | 1,078 | 1,108 | 1,294 | 1,334 | 1,323 | 1,138 | ||||||||||||||||||
Other assets | 6,068 | 7,163 | 9,036 | 12,395 | 10,153 | 8,725 | ||||||||||||||||||
Total assets | 155,079 | 175,087 | 221,622 | 260,973 | 254,910 | $ | 219,061 | |||||||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest-bearing | 83,278 | 91,578 | 103,241 | 119,762 | 140,809 | $ | 121,006 | |||||||||||||||||
Non-interest-bearing | 3,143 | 3,918 | 3,162 | 2,942 | 2,890 | 2,483 | ||||||||||||||||||
Trading liabilities | 1,048 | 1,611 | 2,509 | 11,831 | 4,565 | 3,923 | ||||||||||||||||||
Acceptances outstanding | 1,879 | 1,417 | 1,701 | 2,433 | 2,780 | 2,389 | ||||||||||||||||||
Short-term borrowings | 11,968 | 10,995 | 15,801 | 23,225 | 9,715 | 8,349 | ||||||||||||||||||
Secured borrowings | 7,502 | 8,103 | 11,452 | 10,226 | 7,944 | 6,827 | ||||||||||||||||||
Long-term debt | 26,172 | 32,574 | 46,496 | 49,652 | 44,795 | 38,495 | ||||||||||||||||||
Future policy benefit | 4,778 | 5,683 | 6,769 | 7,260 | 8,310 | 7,142 | ||||||||||||||||||
Accrued expenses and other liabilities | 7,078 | 9,244 | 13,369 | 15,678 | 12,553 | 10,787 | ||||||||||||||||||
Total liabilities | 146,846 | 165,123 | 204,500 | 243,009 | 234,361 | 201,401 | ||||||||||||||||||
Redeemable convertible preferred stock | 368 | — | — | — | — | — | ||||||||||||||||||
Redeemable preferred stock | — | — | — | — | — | — | ||||||||||||||||||
Equity: | ||||||||||||||||||||||||
Common stock | 1,795 | 1,908 | 1,981 | 1,981 | 2,371 | 2,038 | ||||||||||||||||||
Redeemable convertible preferred stock | — | — | 74 | 74 | 74 | 63 | ||||||||||||||||||
Redeemable preferred stock | — | — | 145 | 145 | 145 | 125 | ||||||||||||||||||
Additional paid-in capital | 2,407 | 2,710 | 7,147 | 7,147 | 8,038 | 6,907 | ||||||||||||||||||
Retained earnings | 3,928 | 5,205 | 6,801 | 7,710 | 8,621 | 7,409 | ||||||||||||||||||
Accumulated other comprehensive income, net of taxes | (100 | ) | 141 | 762 | 595 | 969 | 833 | |||||||||||||||||
Less: treasury stock, at cost | (245 | ) | (162 | ) | — | — | — | — | ||||||||||||||||
Total Group stockholders’ equity | 7,785 | 9,802 | 16,910 | 17,652 | 20,218 | 17,375 | ||||||||||||||||||
Noncontrolling interest | 80 | 162 | 212 | 312 | 331 | 285 | ||||||||||||||||||
Total equity | 7,865 | 9,964 | 17,122 | 17,964 | 20,549 | 17,660 | ||||||||||||||||||
Total liabilities, Redeemable Convertible Preferred Stock and equity | 155,079 | 175,087 | 221,622 | 260,973 | 254,910 | $ | 219,061 | |||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||
2005(1) | 2006(1) | 2007(1) | 2008(1) | 2009(1) | ||||||||||||||||
(In Won and US$, except ratios) | ||||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||
Cash dividends per share of common stock: | ||||||||||||||||||||
In Korean Won | 750 | 800 | 900 | 900 | — | |||||||||||||||
In U.S. dollars | $ | 0.74 | $ | 0.86 | $ | 0.96 | $ | 0.71 | $ | — | ||||||||||
Cash dividends per share of preferred stock | ||||||||||||||||||||
In Korean Won | 365 | 365 | — | 4,928 | 5,275 | |||||||||||||||
In U.S. dollars | $ | 0.36 | $ | 0.36 | $ | — | $ | 3.91 | $ | 4.53 | ||||||||||
Korean GAAP: | ||||||||||||||||||||
Cash dividends per share of common stock: | ||||||||||||||||||||
In Korean Won | 750 | 800 | 900 | 900 | — | |||||||||||||||
In U.S. dollars | $ | 0.74 | $ | 0.86 | $ | 0.96 | $ | 0.71 | $ | — | ||||||||||
Dividend ratio(2) | 15.00 | % | 16.00 | % | 18.00 | % | 18.00 | % | — | |||||||||||
Cash dividends per share of preferred stock: | ||||||||||||||||||||
In Korean Won | 1,183 | 1,427 | 1,389 | 3,558 | 3,925 | |||||||||||||||
In U.S. dollars | $ | 1.17 | $ | 1.54 | $ | 1.48 | $ | 2.82 | $ | 3.37 | ||||||||||
Dividend ratio(3) | 23.66 | % | 28.54 | % | 27.78 | % | 71.16 | % | 78.51 | % |
(1) | Represents dividends paid on the common shares of Shinhan Financial Group. | |
(2) | Represents dividends paid as a percentage of par value of | |
(3) | Represents dividends paid as a percentage of par value of |
Year Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Net income attributable to the Group as a percentage of: | ||||||||||||||||||||
Average total assets(1) | 1.29 | % | 0.93 | % | 0.91 | % | �� | 0.60 | % | 0.43 | % | |||||||||
Average total Group stockholders’ equity(1)(2) | 33.78 | 17.55 | 9.73 | 7.13 | 5.21 | |||||||||||||||
Including redeemable convertible preferred shares(3) | 30.64 | 17.17 | 9.73 | 7.13 | 5.21 | |||||||||||||||
Dividend payout ratio(4) | 14.41 | 21.66 | 18.48 | — | 37.24 | |||||||||||||||
Net interest spread(5) | 2.64 | 2.55 | 2.49 | 2.38 | 1.99 | |||||||||||||||
Net interest margin(6) | 2.70 | 2.75 | 2.82 | 2.74 | 2.31 | |||||||||||||||
Efficiency ratio(7) | 56.72 | 68.34 | 68.08 | 64.98 | 65.44 | |||||||||||||||
Cost-to-average assets ratio(8) | 2.44 | 3.18 | 3.17 | 2.71 | 2.68 | |||||||||||||||
Equity to average asset ratio(9): | 3.83 | 5.31 | 9.32 | 8.37 | 8.16 | |||||||||||||||
Including redeemable convertible preferred shares(3) | 4.22 | 5.43 | 9.32 | 8.36 | 8.15 |
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(1) | Average balances are based on (a) daily balances for Shinhan Bank and Jeju Bank and (b) quarterly balances for other subsidiaries. | |
(2) | Does not include the redeemable preferred shares or the redeemable convertible preferred shares, other than the Series 10 redeemable preferred shares and the Series 11 redeemable convertible preferred shares, which were issued in January 2007 partly as funding for the LG Card acquisition. The information for the Series 10 and Series 11 preferred shares is included in the information for 2007. The terms of the Series 10 redeemable preferred shares are different from those of other redeemable preferred shares issued by us, and the terms of the Series 11 redeemable convertible preferred shares are different from those of other redeemable convertible preferred shares issued by us. Unlike the other preferred shares, the Series 10 and Series 11 preferred shares are treated as stockholders’ equity under U.S. GAAP. For a description of the Series 10 and Series 11 preferred shares, see “Item 10.B. Memorandum and Articles of Incorporation — Description of Preferred Stock — Redeemable Preferred Stock (Series 10)” and “— Redeemable Convertible Preferred Stock (Series 11).” | |
(3) | Prior to the issuance of the Series 10 redeemable preferred shares and the Series 11 redeemable convertible preferred shares, we issued several other series of redeemable preferred shares and redeemable convertible preferred shares in August 2003, as part of the funding for the Chohung Bank acquisition. The redeemable preferred shares other than the Series 10 redeemable preferred shares are treated as debt under U.S. GAAP, and their effects on the profitability ratio are not presented in the table. The redeemable convertible preferred shares other than the Series 11 redeemable convertible preferred shares have characteristics of mezzanine securities and are treated as neither debt nor stockholders’ equity under U.S. GAAP, and their effects on the profitability ratio are shown in the table above for comparative purposes. For a description of these preferred shares, see “Item 10.B. Memorandum and Articles of Incorporation — Description of Preferred Stock.” | |
(4) | Represents the ratio of total dividends declared on common stock as a percentage of net income attributable to the Group. | |
(5) | Represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. | |
(6) | Represents the ratio of net interest income to average interest-earning assets. | |
(7) | Represents the ratio of noninterest expense to the sum of net interest income and noninterest income, a measure of efficiency for banks and financial institutions. Efficiency ratio may be reconciled to comparable line-items in our income statements for the periods indicated as follows: |
Year Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Non-interest expense(A) | 3,641 | 5,308 | 6,745 | 6,726 | 7,137 | |||||||||||||||
Divided by | ||||||||||||||||||||
The sum of net interest income and noninterest income(B) | 6,419 | 7,767 | 9,908 | 10,351 | 10,906 | |||||||||||||||
Net interest income | 3,474 | 3,981 | 5,170 | 5,779 | 5,221 | |||||||||||||||
Noninterest income | 2,945 | 3,786 | 4,738 | 4,572 | 5,685 | |||||||||||||||
Efficiency ratio ((A) as a percentage of(B)) | 56.72 | % | 68.34 | % | 68.08 | % | 64.98 | % | 65.44 | % |
(8) | Represents the ratio of noninterest expense to average total assets. | |
(9) | Represents the ratio of average stockholders’ equity (not including the redeemable preferred shares or the redeemable convertible preferred shares, other than the Series 10 redeemable preferred shares and the Series 11 redeemable convertible preferred shares) to average total assets. |
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As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Total gross loans | 105,848 | 122,446 | 151,818 | 170,541 | 169,255 | |||||||||||||||
Total allowance for loan losses | 1,512 | 1,575 | 2,099 | 3,201 | 3,638 | |||||||||||||||
Allowance for loan losses as a percentage of total loans | 1.43 | % | 1.29 | % | 1.38 | % | 1.88 | % | 2.15 | % | ||||||||||
Total non-performing loans(1) | 1,594 | 1,253 | 1,322 | 1,357 | 1,415 | |||||||||||||||
Non-performing loans as a percentage of total loans | 1.51 | % | 1.02 | % | 0.87 | % | 0.80 | % | 0.84 | % | ||||||||||
Non-performing loans as a percentage of total assets | 1.03 | % | 0.72 | % | 0.60 | % | 0.52 | % | 0.56 | % | ||||||||||
Impaired loans(2) | 2,285 | 1,375 | 1,487 | 2,178 | 2,326 | |||||||||||||||
Allowance for impaired loans | 704 | 865 | 909 | 1,181 | 1,350 | |||||||||||||||
Impaired loans as a percentage of total loans | 2.16 | % | 1.12 | % | 0.98 | % | 1.28 | % | 1.37 | % | ||||||||||
Allowance for impaired loans as a percentage of impaired loans | 30.81 | % | 62.91 | % | 61.13 | % | 54.22 | % | 58.04 | % |
(1) | Non-performing loans are defined as loans, whether corporate or consumer, that are past due more than 90 days. | |
(2) | Impaired loans include loans that are classified as “substandard” or below according to the asset classification guidelines of the Financial Services Commission, loans that are past due more than 90 days and loans that qualify as “troubled debt restructurings” under U.S. GAAP. |
As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Requisite capital ratio(1) | 132.81 | % | 139.28 | % | N/A | N/A | N/A | |||||||||||||
BIS ratio(1) | N/A | N/A | 9.85 | % | 10.19 | % | 12.60 | % | ||||||||||||
Total capital adequacy ratio of Shinhan Bank(2) | 12.23 | 12.01 | 12.09 | 13.43 | 15.13 | |||||||||||||||
Tier I capital adequacy ratio | 8.16 | 7.81 | 7.64 | 9.30 | 11.61 | |||||||||||||||
Tier II capital adequacy ratio | 4.07 | 4.20 | 4.45 | 4.13 | 3.52 | |||||||||||||||
Adjusted equity capital ratio of Shinhan Card(3) | 17.68 | 17.47 | 25.31 | 20.32 | 26.73 | |||||||||||||||
Solvency ratio for Shinhan Life Insurance(4) | 232.12 | 232.60 | 226.05 | 209.47 | 212.40 |
(1) | We were restructured as a financial holding company on September 1, 2001, and until 2006, were required to maintain minimum capital as measured by the requisite capital ratio as set forth under the guidelines issued by the Financial Services Commission applicable to financial holding companies. For 2005 and 2006, the minimum requisite capital ratio applicable to us as a holding company was 100%. Starting 2007, under the revised guidelines, the minimum requisite capital ratio applicable to us changed to the Bank for International Settlement (“BIS”) ratio of 8%. The requisite capital ratio is computed as the ratio of the net aggregate amount of our equity capital to the aggregate amounts of requisite capital. This computation is based on our consolidated financial statements in accordance with Korean GAAP. See “Item 4.B. Business Overview — |
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Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | ||
(2) | For 2005, represents information of former Shinhan Bank prior to its merger into Chohung Bank in 2006. For 2005, the total capital adequacy ratio, Tier I capital adequacy ratio and Tier II capital adequacy ratio of Chohung Bank was 10.94%, 6.52% and 4.42%, respectively. The information for 2006 and thereafter represents the information of the surviving entity following the merger. | |
(3) | Represents the ratio of total adjusted shareholders’ equity to total adjusted assets and is computed in accordance with the guidelines issued by the Financial Services Commission for credit card companies. Under these guidelines, a credit card company is required to maintain a minimum adjusted equity capital ratio of 8%. This computation is based on the nonconsolidated financial statements of the credit card company prepared in accordance with Korean GAAP. See “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | |
The information as of December 31, 2005 includes the information of former Shinhan Card and does not include the information of the credit card division of Chohung Bank. The information as of December 31, 2006 represents the information of former Shinhan Card (including that of the credit card division of Chohung Bank, which was split-merged into former Shinhan Card on April 3, 2006). The information as of December 31, 2007 represents the information for LG Card, renamed as Shinhan Card on October 1, 2007 (including that of the assets and liabilities of former Shinhan Card, which were transferred to LG Card on October 1, 2006). This information as of December 31, 2008 and 2009 represents the information of Shinhan Card. | ||
For comparison, the adjusted equity capital ratio of LG Card as of December 31, 2005 and 2006 was 25.55% and 34.25%, respectively. | ||
(4) | Solvency ratio is the ratio of the solvency margin to the standard amount of solvency margin as defined and computed in accordance with the guidelines issued by the Financial Services Commission for life insurance companies. Under these guidelines, Shinhan Life Insurance is required to maintain a minimum solvency ratio of 100%. Shinhan Life Insurance’s solvency ratio as of the end of its latest fiscal year on March 31, 2010 was 223.1%. See “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” |
As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In millions of Won, except percentages) | ||||||||||||
Risk-weighted assets | 161,849,385 | 183,741,412 | 179,083,070 | |||||||||
Tier 1 capital | 8,334,072 | 9,822,433 | 14,087,789 | |||||||||
Tier 2 capital | 8,334,072 | 9,822,433 | 9,520,300 | |||||||||
Adjustment(1) | (852,710 | ) | (921,405 | ) | (1,035,959 | ) | ||||||
Total risk-adjusted capital | 15,815,434 | 18,723,461 | 22,572,130 | |||||||||
Capital adequacy ratio (%) | 9.77 | % | 10.19 | % | 12.60 | % | ||||||
Tier 1 capital ratio (%) | 5.15 | % | 5.35 | % | 7.87 | % |
(1) | Represents the subtraction from the capital line item of capital contributions to Shinhan Life Insurance and Cardif Life Insurance Company pursuant to the Financial Supervisory Service guidelines. |
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At End of | ||||||||||||||||
Year Ended December 31, | Period | Average(1) | High | Low | ||||||||||||
(Won per US$1.00) | ||||||||||||||||
2005 | 1,010.0 | 1,023.2 | 1,059.8 | 997.0 | ||||||||||||
2006 | 930.0 | 950.1 | 1,002.9 | 913.7 | ||||||||||||
2007 | 935.8 | 928.0 | 950.2 | 903.2 | ||||||||||||
2008 | 1,262.0 | 1,105.3 | 1,507.9 | 935.2 | ||||||||||||
2009 | 1,163.7 | 1,270.0 | 1,532.8 | 1,163.7 | ||||||||||||
2010 (through June 11) | 1,245.9 | 1,148.2 | 1,253.2 | 1,104.0 | ||||||||||||
January | 1,158.7 | 1,138.2 | 1,163.1 | 1,120.0 | ||||||||||||
February | 1,159.0 | 1,155.7 | 1,170.0 | 1,144.0 | ||||||||||||
March | 1,131.2 | 1,136.1 | 1,153.0 | 1,128.0 | ||||||||||||
April | 1,108.0 | 1,115.5 | 1,126.3 | 1,104.0 | ||||||||||||
May | 1,194.5 | 1,164.8 | 1,253.2 | 1,115.0 | ||||||||||||
June (through June 11) | 1,245.9 | 1,227.3 | 1,250.4 | 1,198.5 |
Source: | Federal Reserve Bank of New York (for the periods ended on or prior to December 31, 2008) and Federal Reserve Board (for the period since January 1, 2009) |
(1) | Represents the average of the Noon Buying Rates on the last day of each month during the relevant period. |
ITEM 3.B. | Capitalization and Indebtedness |
ITEM 3.C. | Reasons for the Offer and Use of Proceeds |
ITEM 3.D. | Risk Factors |
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• | volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (particularly against U.S. dollar), interest rates and stock markets; | |
• | increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners; | |
• | adverse developments in the economies of countries to which Korea exports goods and services (such as the United States, China and Japan), or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy; | |
• | the continued emergence of China, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and relocation of the manufacturing base from Korea to China); | |
• | social and labor unrest or declining consumer confidence or spending resulting from lay-offs, increasing unemployment and lower levels of income; | |
• | uncertainty and volatility in real estate prices arising, in part, from the Government’s policy-driven tax and other regulatory measures; | |
• | a decrease in tax revenues and a substantial increase in the Government’s expenditures for unemployment compensation and other social programs that together could lead to an increased Government budget deficit; |
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• | political uncertainty or increasing strife among or within political parties in Korea, including as a result of the increasing polarization of the positions of the ruling conservative party and the progressive opposition; | |
• | a deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including such deterioration resulting from trade disputes or disagreements in foreign policy; and | |
• | any other developments that has a material adverse effect in the global economy, such as an act of war, a terrorist act or a breakout of an epidemic such as SARS, avian flu or swine flu. |
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• | a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or | |
• | the offering and sale of those shares is exempt from or is not subject to the registration requirements of the U.S. Securities Act. |
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• | sudden fluctuations in interest rates or exchange rates; | |
• | extreme difficulty in stabilizing the balance of payments; and | |
• | a substantial disturbance in the Korean financial and capital markets. |
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ITEM 4. | INFORMATION ON THE COMPANY |
ITEM 4.A. | History and Development of the Company |
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• | Secure the leading position in our core businesses. We plan to increase our market share and otherwise achieve quantitative growth in our banking and credit card businesses through quality customer service that is tailored to meet the varying needs of our diverse customer segments and is differentiated from that offered by our competitors. | |
• | Strengthen non-interest income generating businesses. While we will continue to focus on our core, interest-income generating businesses of banking and credit card services, in order to attain a more balanced overall business portfolio we plan to strengthen our non-interest income generating businesses such as asset management, insurance and securities investment by enhancing brand awareness, economy of scale and product development and distribution capabilities with respect to these businesses. We believe that this approach will help us to generate our overall revenues and earnings more consistently by reducing our interest rate exposure and we believe that such approach is timely in light of the anticipated impending end of the low interest rate environment as part of the Government’s exit strategy, which development is likely to drive up funding costs in general. | |
• | Enhance groupwide synergy with focus on the customer. In light of the wide range of financial services offered by our many subsidiaries, we believe a key driver to our future growth is to provide our customers with enhanced access to our diverse product offerings and greater incentives to use them through a more customer-friendly, one-portal financial service platform. To that end, we are developing a groupwide customer relationship management system tailored to the lifestyle and spending patterns of each customer, in order to facilitate the sharing of customer data and product distribution channels among our member companies and further strengthen our groupwide product recommendation systems for cross-selling and up-selling opportunities such as wealth management. We also seek to reduce cost at a groupwide level by encouraging our operating subsidiaries to share a common platform for general and administrative services. |
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• | Gain competitiveness in strategic growth areas. We intend to seek new business opportunities by sharing management and other resources groupwide to identify and develop potential strategic growth areas. We also plan to enhance our competitiveness in the investment banking business by redefining its business strategy at the group level. To further strengthen our foundation to become a leading global financial institution, we plan to increase our presence in select Asian markets. |
• | Operational management system. We plan to optimize the use of our groupwide resources by streamlining our corporate governance and organizational structure and enhancing our operational management system, establishing of a fairer and more accurate performance-based compensation system and further encouraging collaboration among our various business units. | |
• | Employee training. In order to attract highly qualified new recruits which are vital to sharpening our competitive edge, we plan to enhance groupwide training programs and introduce other career development programs such as the accelerated promotion of local hires in our overseas offices. | |
• | Brand promotion and corporate culture. In order to further upgrade our brand image and foster a culture of unity among our employees and synergy across our various business units in servicing our common customers, we plan to introduce a centralized brand management system, reinforce our social responsibility initiatives and encourage greater interaction and communication among staffs of our different business units. | |
• | Balanced risk-return management. In a continuing effort to attain a healthy and balanced risk-return profile, we will promote growth within the pre-defined risk tolerance level by further fine-tuning our risk management system, selectively seeking further business opportunities and strengthening our capital adequacy and liquidity groupwide. |
• | in commercial banking,our primary objective is to strengthen our competitive position and become the leading bank in Korea through enhancing customer satisfaction, locking in the loyalty of our existing banking customers and further enlarging our customer base. To this end, we plan to fully leverage the scale of our banking operation afforded by our extensive branch network, emphasize cross-selling non-banking products at our banking network, offer total financial service packages, bolster our brand image and further upgrade our customer service infrastructure, risk management systems and other operating processes. We also intend to enter, on a selective basis, into promising new businesses by strengthening our investment banking, private banking and other fee-based businesses, making significant inroads into the retirement pension market, and offering differentiated wealth management strategies and portfolios. | |
• | in credit card business,our primary objective is to further solidify our market leadership as the largest credit card service provider in Korea through differentiated and tailored customer service based on a strategy that emphasizes “soft” and “smart” aspects of enhancing customer loyalty, brand recognition and revenue expansion. We will also emphasize further optimizing our risk management through preemptive risk prevention, creating new synergy opportunities through collaboration with our other Shinhan affiliates and enhanced use of the groupwide customer relationship management system, and identifying and developing new potential growth areas. | |
• | in securities and asset management business,our primary objective is to establish a solid platform for providing leading brokerage, financial advisory and asset management services in Korea in light of the recent deregulations of the securities and asset management industries in Korea. We aim to selectively develop competitive business models and capture promising business opportunities, including wealth management and investment advisory services. We have recently merged our investment advisory affiliates to promote economy of scale and solidify our brand recognition in this market. Our near-term strategic objective is to promote cross-selling, and in order to achieve this end, we have implemented strategies to |
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enhance our research and preemptive risk management capabilities and maximize our groupwide synergy base. |
• | in insurance business,our primary objective is to enhance our market position as one of the leading insurers in Korea. To that end, we aim to maximize the use of our groupwide distribution channels, particularly in banking and credit card businesses, in order to foster direct interaction with customers. We also aim to train specialists and offer differentiated products targeting the fast-growing senior citizen population in Korea. |
Principal | Method of | |||||
Date of Acquisition | Entity | Activities | Establishment | |||
April 2002 | Jeju Bank | Regional banking | Acquisition from Korea Deposit Insurance Corporation | |||
July 2002 | Shinhan Investment Corp.(1) | Securities and investment | Acquisition from the SsangYong Group | |||
August 2002 | Shinhan BNP Paribas Investment Trust Management Co., Ltd.(2) | Investment advisory | 50:50 joint venture with BNP Paribas | |||
August 2003 | Chohung Bank(3) | Commercial banking | Acquisition from creditors | |||
December 2005 | Shinhan Life Insurance | Life insurance services | Acquisition from shareholders | |||
March 2007 | LG Card(4) | Credit card services | Acquisition from creditors |
(1) | Renamed as Shinhan Investment Corp. from Goodmorning Shinhan Securities Co., Ltd. effective August 2009. | |
(2) | In August 2002, we signed a joint venture agreement with BNP Paribas Asset Management, the asset management arm of BNP Paribas, in respect of Shinhan Investment Trust Management. In October 2002, we sold to BNP Paribas Asset Management 3,999,999 shares of Shinhan Investment Trust Management, representing 50% less one share, which was subsequently renamed as Shinhan BNP Paribas Investment Trust Management Co., Ltd. (“Shinhan BNP Paribas Investment Trust Management”). In January 2009, SH Asset Management Co., Ltd. (“SH Asset Management”) and Shinhan BNP Paribas Investment Trust Management merged to form Shinhan BNP Paribas Asset Management Co., Ltd. (“Shinhan BNP Paribas Asset Management”). | |
(3) | In August 2003, we acquired 80.04% of common shares of Chohung Bank, a nationwide commercial bank in Korea. We subsequently acquired the remaining interest in Chohung Bank through a series of transactions and delisted Chohung Bank from the Korea Exchange in July 2004. We merged former Shinhan Bank and Chohung Bank in April 2006, with Chohung Bank becoming the legal surviving entity. The newly merged bank then changed its name to “Shinhan Bank.” | |
(4) | In June 2002, the credit card division of Shinhan Bank was split off and established as our wholly-owned subsidiary, Shinhan Card Co., Ltd. In April 2006, concurrently with the merger of former Shinhan Bank and Chohung Bank, we also split off Chohung Bank’s credit card business and merged it into the former Shinhan |
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Card. In March 2007, we acquired from the creditor committee and other shareholders of LG Card the controlling equity interest in LG Card following a public tender offer. After our further acquisition of shares in July 2007 following a second public tender offer and a share swap with our shares in September 2007, LG Card became our wholly-owned subsidiary. On October 1, 2007, LG Card assumed all of the assets and liabilities of former Shinhan Card, and changed its name to Shinhan Card. On the same date, former Shinhan Card changed its name to SHC Management Co., Ltd. and commenced its liquidation process on October 1, 2009. |
• | In January 2009, Shinhan BNP Paribas Investment Trust Management Co., Ltd. and SH Asset Management, two our asset management subsidiaries, were merged, with Shinhan BNP Paribas Investment Trust Management Co., Ltd. Being the surviving legal entity and renamed as Shinhan BNP Paribas Asset Management Co., Ltd. Shinhan BNP Paribas Investment Trust Management was a 50:50 joint venture with BNP Paribas S.A., and SH Asset Management was our wholly-owned subsidiary. Following the merger, we and BNP Paribas own 65% and 35% equity interest in Shinhan BNP Paribas Asset Management, respectively. | |
• | In June 2009, we sold 3,290,002 common shares, or approximately 35%, of Cardif Life Insurance Company (formerly SH&C Life Insurance Co., Ltd.), a 50:50 joint venture with BNP Paribas Assurance (formerly known as Cardif S.A.), to BNP Paribas Assurance for | |
• | In September 2009, Shinhan Bank established Shinhan Bank Japan as its wholly-owned subsidiary to provide banking services in Japan, which were formerly provided at a branch level. | |
• | In October 2009, Shinhan Bank established Shinhan Vietnam Bank as its wholly-owned subsidiary to provide banking services in Vietnam, which were formerly provided at a branch level. | |
• | In December, 2009, Shinhan Capital made a capital contribution of | |
• | In January 2010, Shinhan Data System, an information technology service provider which was formerly a subsidiary of Shinhan Bank, became a direct subsidiary of Shinhan Financial Group in order to integrate and promote efficiency in information technology operations at the groupwide level. | |
• | On June 4, 2010, CHB Valuemeet 2001 First SPC, a special purpose company wholly owned by Shinhan Bank, was disaffiliated from Shinhan Financial Group. CHB Valuemeet 2001 First SPC was established by Shinhan Bank to securitize its impaired loan assets. |
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ITEM 4.B. | Business Overview |
• | commercial banking services, consisting of: |
• | retail banking services; | |
• | corporate banking services, primarily consisting of: |
small- and medium-sized enterprises banking; and | ||
large corporate banking; |
• | treasury and securities investment; | |
• | other banking services, including trust account management services provided by Shinhan Bank; |
• | credit card services; | |
• | securities brokerage services; | |
• | insurance services, primarily consisting of: |
• | life insurance services; and | |
• | bancassurance; |
• | asset management services, including brokerage and trading of various securities, related margin lending and deposit and trust services, and other asset management services; and | |
• | other services, including leasing and equipment financing, investment trust management, regional banking, investment banking advisory and loan collection and credit reporting. |
• | Demand deposits. Demand deposits do not accrue interest or accrue interest at a lower rate than time or savings deposits and allow the customer to deposit and withdraw funds at any time. If interest-bearing, demand deposits have interest accruing at a fixed or variable rate depending on the period and the amount of deposit. Demand deposits constituted approximately 7.8% and 7.3% of our total deposits as of December 31, 2008 and 2009, respectively. Our demand deposits paid average interest of 0.78% and 0.45% in 2008 and 2009, respectively. | |
• | Savings deposits. Savings deposits allow the customer to deposit and withdraw funds at any time and accrue interest at an adjustable interest rate, which is typically lower than the rate applicable to time or installment deposits. In 2009, the interest rate on savings deposits ranged from zero to 3.31%. Saving deposits constituted approximately 25.6% of our total deposits as of December 31, 2008 and paid average |
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interest of 2.32% in 2008, and approximately 26.1% of our total deposits as of December 31, 2009 and paid average interest of 1.22% in 2009. |
• | Certificates of deposit. Certificates of deposit typically have maturities from 30 days to five years. Interest rates on certificates of deposit are determined based on the length of the deposit and prevailing market interest rates. Certificates of deposit are sold at a discount to their face value, reflecting the interest payable on the certificates of deposit. Certificates of deposit constituted approximately 11.3% and 5.4% of our total deposits as of December 31, 2008 and 2009, respectively. Our certificates of deposit paid average interest of 5.94% and 5.48% in 2008 and 2009, respectively. | |
• | Other time deposits. Other time deposits generally require the customer to maintain a deposit for a fixed term during which the deposit accrues interest at a fixed rate or a variable rate based on certain financial indexes, including the Korea Composite Stock Price Index (KOSPI). If the deposit is withdrawn prior to the end of the fixed term, the customer is paid a lower interest rate than that originally offered. The term typically ranges from one month to five years. Other time deposits constituted approximately 55.1% and 61.1% of our total deposits as of December 31, 2008 and 2009, respectively, and paid average interest of 4.94% and 3.91% in 2008 and 2009, respectively. | |
• | Mutual installment deposits. Mutual installment deposits generally require the customer to make periodic deposits of a fixed amount over a fixed term (usually six months to five years) during which the deposit accrues interest at a fixed rate. If the deposit is withdrawn prior to the end of the fixed term, the customers are paid a lower interest rate than that originally offered. Mutual installment deposits constituted approximately 0.2% and 0.1% of our total deposits as of December 31, 2008 and 2009, respectively, and paid average interest of 3.78% and 3.70% in 2008 and 2009, respectively. |
• | Housing subscription time deposits. These deposit products are special purpose time deposits providing the customer with a preferential right to subscribe for new private apartment units under the Housing Construction Promotion Law. This law provides various measures supporting the purchase of houses and the supply of such houses by construction companies. Under this law, if a potential home-buyer subscribes for these deposit products and holds them for a certain period of time set forth in the Housing Construction Promotion Law, such customer obtains the right to subscribe for new private apartment units on a priority basis. Such preferential rights are neither transferable nor marketable in the open market. These products accrue interest at a fixed rate for one year and at an adjustable rate after one year, which are consistent with other time deposits. Required deposit amounts per account range from | |
• | Housing subscription installment savings deposits. These deposit products are monthly installment savings products providing the customer with a preferential subscription right for new private apartment units under the Housing Construction Promotion Law. Such preferential rights are neither transferable nor marketable in the open market. These deposits require monthly installments of |
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• | Mortgage and home equity loans,which are mostly comprised of mortgage loans that are used to finance home purchases and are generally secured by the home being purchased; and | |
• | Other retail loans,which are loans made to customers for any purpose other than mortgage and home equity loans and the terms of which vary based primarily upon the characteristics of the borrower and which are either unsecured or secured, or guaranteed by deposits or a third party. |
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As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Retail loans(1) | ||||||||||||
Mortgage and home-equity(2) | 31,495 | 36,183 | 40,022 | |||||||||
Other consumer(2) | 25,475 | 25,026 | 23,307 | |||||||||
Percentage of retail loans to total gross loans | 37.5 | % | 35.9 | % | 37.4 | % |
(1) | Before allowance for loan losses and excludes credit card accounts. | |
(2) | In Korea, construction companies typically require buyers of new homes (including apartment units) to make installment payments of the purchase price well in advance of the title transfer. Commercial banks, including Shinhan Bank, provide advance loans, on an unsecured basis for the time being, to retail borrowers where the use of proceeds is restricted to financing of home purchases. A significant portion of these loans are guaranteed by third parties, which may include the construction company receiving the installment payment, until construction of the home is completed. Once construction is completed and the titles to the homes are transferred to the borrowers, which may take several years, these loans become secured by the new homes purchased by these borrowers. In recognition of the unsecured nature of such loans, we classify such loans as other consumer loans. |
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As of December 31, | ||||||||||||||||||||||||
2007 | 2008 | 2009 | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Small- and medium-sized enterprises loans(1) | 62,296 | 41.0 | % | 71,212 | 41.8 | % | 69,571 | 41.1 | % | |||||||||||||||
Large corporate loans(2) | 17,871 | 11.8 | % | 23,483 | 13.7 | % | 21,238 | 12.5 | % | |||||||||||||||
Total corporate loans | 80,167 | 52.8 | % | 94,695 | 55.5 | % | 90,809 | 53.6 | % | |||||||||||||||
(1) | Represents the principal amount of loans extended to corporations meeting the definition of small- and medium-sized enterprises under the Basic Act on Small- and Medium-sized Enterprises and its Presidential Decree. | |
(2) | Includes loans to government-controlled companies. |
• | has positioned itself based on accumulated expertise. We believe Shinhan Bank has a good understanding of the credit risks embedded in this market segment and to develop loan and other products specifically tailored to the needs of this market segment; | |
• | operates a relationship management system to provide targeted and tailored customer service to small-and medium-sized enterprises. Shinhan Bank currently has relationship management teams in 142 corporate banking branches, of which 38 are corporate banking branches and 104 are hybrid banking branches designed to serve retail as well as small-business corporate customers. These relationship management teams market products and review and approve smaller loans that pose less credit risks; and | |
• | continues to focus on cross-selling loan products with other products. For example, when Shinhan Bank lends to small- and medium-sized enterprises, it also explores opportunities to cross-sell retail loans or deposit products to the employees of those companies or to provide financial advisory services. |
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• | treasury; | |
• | securities investment and trading; | |
• | derivatives trading; and | |
• | international business. |
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• | interest rate swaps, options, and futures relating to Korean Won interest rate risks and LIBOR risks, respectively; | |
• | cross-currency swaps largely for Korean Won against U.S. dollars, Japanese Yen and Euros; | |
• | equity and equity-linked options; | |
• | foreign currency forwards, swaps and options; | |
• | commodity forwards, options and swaps; | |
• | credit derivatives; and | |
• | KOSPI 200 indexed equity options. |
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• | variable rate trust accounts. Variable rate trust accounts are not entitled to a guaranteed return on the deposits, except in the limited cases of principal guaranteed variable rate trust accounts, for which payment of the principal amount is guaranteed. As of December 31, 2008 and 2009, under Korean GAAP, Shinhan Bank’s variable rate trust accounts amounted to | |
• | guaranteed fixed rate trust accounts. Guaranteed fixed rate trust accounts are entitled to a guaranteed return of the principal as well as an additional fixed rate of return. Upon termination of these trusts, Shinhan Bank is entitled to investment returns from the management of these trusts, net of the guaranteed returns paid to customers and any related expenses. In the past, Korean commercial banks, including Shinhan Bank, offered two types of guaranteed fixed rate trust products: general unspecified money trusts and development money trusts. However, since January 1999, banks in Korea have been prohibited from offering new guaranteed fixed rate trust products, and the guaranteed fixed rate trust products currently serviced are carryovers from the past and have been dwindling in volume as the products mature. As of December 31, 2008 and 2009, the guaranteed fixed rate trust products maintained by Shinhan Bank amounted to |
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• | credit card services, which involve providing cardholders with limited credit to purchase products and services. Cardholders can repay either (i) on a lump-sum basis in full at the end of a monthly billing cycle or (ii) to a lesser extent, on a revolving basis subject to a minimum monthly payment which is the lesser of (x) 5.0% of the amount outstanding or (y) | |
• | cash advances, for which cardholders can repay either on a lump-sum basis or a revolving basis. Currently, the lump-sum cash advances generally accrue interest at an annual rate of approximately 9.8% to 26.6% and the revolving cash advances generally accrue interest at a minimum rate of 5.0% of the outstanding balance. Cash advances may be obtained from ATM machines and bank branches. | |
• | installment purchases, which provides customers with an option to purchase products and services from select merchants on an equal principal installment basis over a fixed term, which ranges from three months to a maximum of 60 months. Currently, the outstanding installment purchase balances generally accrue interest at an annual rate of approximately 5.5% to 26.0%. | |
• | card loans, which may be unsecured, and which cardholders must repay on an equal principal installment basis over an initial fixed term of two to 24 months or in full at maturity. Currently, the outstanding principal amount of card loans accrue interest at an annual rate of approximately 7.6% to 25.8% and an upfront fee of up to 1.0% is charged on the principal amount of the loan. For delinquent cardholders, outstanding credit card receivables can also be restructured into loan, which are recorded as card loans and payment for which is made on an installment basis over a maximum term of 60 months. |
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As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In thousands, except percentages) | ||||||||||||
Shinhan Card: | ||||||||||||
Number of credit card holders(1) | 13,425 | 13,718 | 14,435 | |||||||||
Personal accounts | 13,346 | 13,617 | 14,324 | |||||||||
Corporate accounts | 79 | 101 | 111 | |||||||||
Active ratio(2) | 69.7 | % | 74.9 | % | 73.7 | % | ||||||
Number of merchants | 2,154 | 2,268 | 2,425 |
(1) | Represents the number of cardholders not subject to suspension or termination as of the relevant date. | |
(2) | Represents the ratio of accounts used at least once within the last six months to the total accounts as of yearend. |
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As of or for the Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Shinhan Card(1) | Shinhan Card(1) | Shinhan Card(1) | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Interest income: | ||||||||||||
Installments | 260 | 326 | 311 | |||||||||
Cash advances | 547 | 639 | 524 | |||||||||
Card loans(2) | 488 | 548 | 506 | |||||||||
Revolving | 227 | 240 | 214 | |||||||||
Late payments | 8 | — | — | |||||||||
Total | 1,530 | 1,753 | 1,555 | |||||||||
Credit card fees: | ||||||||||||
Merchant fees(3) | 1,179 | 1,309 | 1,422 | |||||||||
Other fees | 2 | — | — | |||||||||
Total | 1,181 | 1,309 | 1,422 | |||||||||
Charge volume:(4) | ||||||||||||
General purchases | 45,912 | 45,624 | 51,784 | |||||||||
Installment purchases | 14,269 | 17,682 | 17,814 | |||||||||
Cash advances | 20,704 | 23,945 | 21,143 | |||||||||
Total | 80,885 | 87,251 | 90,741 | |||||||||
Outstanding balance (at year end)(5): | ||||||||||||
General purchases | 3,018 | 3,046 | 3,636 | |||||||||
Installment purchases | 3,833 | 4,037 | 4,433 | |||||||||
Cash advances | 3,086 | 3,111 | 2,606 | |||||||||
Revolving purchases | 1,361 | 1,410 | 1,339 | |||||||||
Card loans(2) | 2,556 | 2,524 | 2,672 | |||||||||
Others | 791 | 470 | 391 | |||||||||
Total | 14,645 | 14,598 | 15,077 | |||||||||
Average balance | 12,106 | 14,458 | 13,585 | |||||||||
Delinquent balances(6): | ||||||||||||
From 1 day to 1 month | 790 | 663 | 404 | |||||||||
Over 1 month: | ||||||||||||
From 1 month to 3 months | 244 | 244 | 113 | |||||||||
From 3 months to 6 months | 165 | 171 | 111 | |||||||||
Over 6 months | — | — | — | |||||||||
Sub-total | 409 | 415 | 224 | |||||||||
Total | 1,199 | 1,078 | 628 | |||||||||
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As of or for the Year Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Shinhan Card(1) | Shinhan Card(1) | Shinhan Card(1) | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Delinquency ratios(7): | ||||||||||||
From 1 day to 1 month | 5.4 | % | 4.5 | % | 2.7 | % | ||||||
Over 1 month: | ||||||||||||
From 1 month to 3 months | 1.7 | % | 1.7 | % | 0.7 | % | ||||||
From 3 months to 6 months | 1.1 | % | 1.2 | % | 0.7 | % | ||||||
Over 6 months(8) | — | — | — | |||||||||
Sub-total | 2.8 | % | 2.9 | % | 1.5 | % | ||||||
Total | 8.2 | % | 7.4 | % | 4.2 | % | ||||||
Rewritten loans(9) | 350 | 220 | 194 | |||||||||
Gross charge-offs | 436 | 521 | 597 | |||||||||
Recoveries | 459 | 509 | 394 | |||||||||
Net charge-offs | (23 | ) | 12 | 203 | ||||||||
Gross charge-off ratio(10) | 3.60 | % | 3.60 | % | 4.39 | % | ||||||
Net charge-off ratio(11) | (0.19 | )% | 0.08 | % | 1.49 | % | ||||||
Non-performing loan ratio(12) : | ||||||||||||
Reported | 3.71 | % | 2.91 | % | 3.08 | % | ||||||
Managed | 2.98 | % | 2.42 | % | 2.53 | % | ||||||
Asset securitization(13) | 5,762 | 5,666 | 3,734 | |||||||||
Ratio of total assets securitized to total managed assets | 29.4 | % | 29.4 | % | 19.2 | % |
(1) | The information of Shinhan Card for 2007 includes that of LG Card (renamed as Shinhan Card on October 1, 2007) for the period from March 1, 2007 through December 31, 2007 (including that for the assets and liabilities of former Shinhan Card assumed by LG Card on October 1, 2007) and that of former Shinhan Card for the period from January 1, 2007 through September 30, 2007, presented on an aggregated basis. | |
(2) | Card loans consist of loans that are provided on either a secured or unsecured basis to cardholders according to prior agreement. Payment of principal, fees and interest on such a loan can be due either in one payment or in installments over a fixed period following a grace period. | |
(3) | Merchant fees consist of merchant membership and maintenance fees, charges associated with prepayment by Shinhan Card (on behalf of customers) of sales proceeds to merchants, processing fees relating to sales and membership applications. | |
(4) | Represents the aggregate cumulative amount charged during the year. | |
(5) | Represents amounts before allowance for loan losses. | |
(6) | Includes the unbilled balances of installment purchases. | |
(7) | Represents the ratio of delinquent balances to outstanding balances for the year. | |
(8) | The charge-off policy is generally to charge off credit card balances which are 180 days past due following internal review. | |
(9) | Represents the delinquent credit card balances for credit card purchase and cash advances which are rewritten as credit card loans, thereby reducing the balance of delinquent accounts before the application of Accounting Standard Codification (“ASC”)310-30, (formerlySOP 03-3) relating to the acquisition of LG Card, which reduced the outstanding balances by | |
(10) | Represents the ratio of gross charge-offs for the year to the average balance for the year. |
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(11) | Represents the ratio of net charge-offs for the year to the average balances for the year. | |
(12) | The reported information is presented on the Korean GAAP basis. The managed information includes, subject to certain adjustments, financial receivables that Shinhan Card has sold in asset-backed securitizations. | |
(13) | Represents credit card balances that were transferred in asset securitization transactions as presented on the Korean GAAP basis. Under U.S. GAAP, most of these transfers are not recognized as sales but are recognized as secured borrowings. |
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• | retail client services. These services include equity and bond brokerage, investment advisory and financial planning services to retail customers, with a focus on high net worth individuals. The fees generated include brokerage commissions for the purchase and sale of securities, asset management fees, interest income from credit extensions, including in the form of stock subscription loans, margin transaction loans and loans secured by deposited securities. | |
• | institutional client services: |
• | brokerage services. These services include brokerage of stocks, corporate bonds, futures and options provided to Shinhan Investment’s institutional and international customers and sale of institutional financial products. These services are currently supported by a team of 62 research analysts that specialize in equity, bonds and derivatives research. | |
• | investment banking services. These services include a wide array of investment banking services to Shinhan Investment’s corporate customers, such as domestic and international initial public offerings, M&A advisory services, bond issuances, underwriting, capital increase, asset-backed securitizations, issuance of convertible bonds and bonds with warrants, structured financing, issuance of asset-backed commercial papers, mergers and acquisitions advisory services and project financings involving infrastructure, real estate and shipbuilding. |
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Shinhan | ||||||||||||||||||||||||
Shinhan | Shinhan Investment Corp. | Life | ||||||||||||||||||||||
Shinhan Bank | Jeju Bank | Card(1) | Branches | Insurance | Total | |||||||||||||||||||
Seoul metropolitan | 410 | 2 | 12 | 59 | 55 | 538 | ||||||||||||||||||
Kyunggi Province | 195 | — | 12 | 18 | 18 | 243 | ||||||||||||||||||
Six major cities: | 172 | 1 | 17 | 21 | 37 | 248 | ||||||||||||||||||
Incheon | 57 | — | 3 | 3 | 12 | 75 | ||||||||||||||||||
Busan | 41 | 1 | 4 | 7 | 11 | 64 | ||||||||||||||||||
Kwangju | 13 | — | 3 | 3 | 4 | 23 | ||||||||||||||||||
Taegu | 27 | — | 3 | 4 | 6 | 40 | ||||||||||||||||||
Ulsan | 13 | — | 1 | 2 | 1 | 17 | ||||||||||||||||||
Taejon | 21 | — | 3 | 3 | 3 | 30 | ||||||||||||||||||
Sub-total | 777 | 3 | 41 | 98 | 110 | 1,029 | ||||||||||||||||||
Others | 148 | 37 | 28 | 20 | 50 | 283 | ||||||||||||||||||
Total | 925 | 40 | 69 | 118 | 160 | 1,312 | ||||||||||||||||||
(1) | Includes 12 card sales branches, 11 installment sales branches, 10 collection branches and 15 combined operating branches. |
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Year Established or | ||||
Business Unit | Location | Acquired | ||
Subsidiaries | ||||
Shinhan Asia Ltd. | Hong Kong SAR, China | 1982 | ||
Shinhan Bank Europe GmbH | Germany | 1994 | ||
Shinhan Bank America | New York, U.S.A. | 2003 | ||
Shinhan Vina Bank | Vietnam | 2000 | ||
Shinhan Bank (China) Limited | Beijing, China | 2008 | ||
Shinhan Khmer Bank Limited | Cambodia | 2007 | ||
Shinhan Bank Kazakhstan Limited | Kazakhstan | 2008 | ||
Shinhan Bank Canada | Toronto, Canada | 2009 | ||
Shinhan Bank Japan(1) | Tokyo, Japan | 2009 | ||
Shinhan Bank Vietnam(2) | Ho Chi Minh City, Vietnam | 2009 | ||
Branches | ||||
New York | U.S.A. | 1989 | ||
Singapore | Singapore | 1990 | ||
London | United Kingdom | 1991 | ||
Mumbai | India | 1996 | ||
Hong Kong | China | 2006 | ||
New Delhi | India | 2006 | ||
Representative Office | ||||
Mexico Representative Office | Mexico City, Mexico | 2008 | ||
Uzbekistan Representative Office | Tashkent, Uzbekistan | 2009 |
(1) | While Shinhan Bank established the subsidiary in Japan in 2009, Shinhan Bank provided banking services in Japan through a branch structure since 1986. | |
(2) | While Shinhan Bank established the subsidiary in Vietnam in 2009, Shinhan Bank provided banking services in Vietnam through a branch structure since 1995. |
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As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Corporate | ||||||||||||||||||||
Commercial and industrial(1) | 35,728 | 40,063 | 48,485 | 55,466 | 54,479 | |||||||||||||||
Other commercial(2) | 21,409 | 27,319 | 30,312 | 37,637 | 34,770 | |||||||||||||||
Lease financing | 754 | 585 | 1,370 | 1,592 | 1,560 | |||||||||||||||
Total — Corporate | 57,891 | 67,967 | 80,167 | 94,695 | 90,809 | |||||||||||||||
Consumer | ||||||||||||||||||||
Mortgages and home equity | 25,840 | 30,097 | 31,495 | 36,183 | 40,022 | |||||||||||||||
Other consumer(3) | 17,875 | 20,458 | 25,475 | 25,026 | 23,307 | |||||||||||||||
Credit cards | 4,242 | 3,924 | 14,681 | 14,637 | 15,117 | |||||||||||||||
Total — Consumer | 47,957 | 54,479 | 71,651 | 75,846 | 78,446 | |||||||||||||||
Total loans(4) | 105,848 | 122,446 | 151,818 | 170,541 | 169,255 | |||||||||||||||
(1) | Consists primarily of working capital loans, general purpose loans, bills purchased, trade-related notes and inter-bank loans. | |
(2) | Consists primarily of privately placed bonds, credit facility drawdowns and purchases of commercial paper or notes at a discount from its customers with recourse. | |
(3) | Consists of general unsecured loans and loans secured by collateral other than housing to retail customers. | |
(4) | As of December 31, 2007, 2008 and 2009, approximately 90.6%, 90.4% and 94.4% of our total gross loans, respectively, were Won-denominated. |
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Impaired | ||||||||||||||||||||||||||||
Loans and | ||||||||||||||||||||||||||||
Loans in | Guarantees | Guarantees | ||||||||||||||||||||||||||
Loans in | Foreign | Equity | Debt | and | Total | and | ||||||||||||||||||||||
Won | Currency | Securities | Securities | Acceptances | Exposure | Acceptances | ||||||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||||||
Ministry of Strategy and Finance | — | — | — | 11,633 | — | 11,633 | — | |||||||||||||||||||||
The Bank of Korea | — | — | — | 5,498 | — | 5,498 | — | |||||||||||||||||||||
Korea Development Bank | — | — | — | 2,771 | — | 2,771 | — | |||||||||||||||||||||
Korea Deposit Insurance Corporation | — | — | — | 2,582 | — | 2,582 | — | |||||||||||||||||||||
Industrial Bank of Korea | — | — | 2 | 1,805 | — | 1,807 | — | |||||||||||||||||||||
Hyundai Samho Heavy Industries Co., Ltd. | 19 | 7 | — | — | 1,497 | 1,523 | — | |||||||||||||||||||||
Hyundai Heavy Industries Co., Ltd. | 3 | 17 | 10 | 26 | 1,392 | 1,448 | — | |||||||||||||||||||||
Hana Bank | — | — | — | 1,419 | — | 1,419 | — | |||||||||||||||||||||
POSCO | — | — | 1.248 | 85 | — | 1,333 | — | |||||||||||||||||||||
Kookmin Bank | — | — | — | 1,325 | — | 1,325 | — | |||||||||||||||||||||
National Agricultural Cooperative Federation | — | — | — | 1,182 | — | 1,182 | — | |||||||||||||||||||||
Woori Bank | — | — | — | 1,074 | — | 1,074 | — | |||||||||||||||||||||
Samsung Heavy Industries Co., Ltd. | 100 | 10 | 1 | 1 | 935 | 1,047 | — | |||||||||||||||||||||
Hyundai Mipo Dockyard Co., Ltd. | — | — | 2 | — | 1,002 | 1,004 | — | |||||||||||||||||||||
STX Offshore & Shipbuilding Co., Ltd. | 20 | — | — | — | 895 | 915 | — | |||||||||||||||||||||
SH Corporation | 780 | — | — | 86 | — | 866 | — | |||||||||||||||||||||
Songdo Cosmopolitan City Development Inc. | 714 | — | — | — | — | 714 | — | |||||||||||||||||||||
Korea Electronic Power Co. | — | — | 34 | 672 | — | 706 | — | |||||||||||||||||||||
Korea Land & Housing Co. | — | — | — | 683 | — | 683 | — | |||||||||||||||||||||
Samsung Electronics Co. Ltd. | — | 641 | 40 | — | — | 681 | — | |||||||||||||||||||||
Total | 1,636 | 675 | 1,337 | 30,842 | 5,721 | 40,211 | — | |||||||||||||||||||||
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Amounts of | ||||||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||
Loans and | ||||||||||||||||||||||||||||
Loans in | Guarantees | Guarantees | ||||||||||||||||||||||||||
Loans in | Foreign | Equity | Debt | and | Total | and | ||||||||||||||||||||||
Main Debtor Groups | Won | Currency | Securities | Securities | Acceptances | Exposure | Acceptances | |||||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||||||
Hyundai Heavy Industries | 22 | 24 | 10 | 27 | 3,891 | 3,974 | — | |||||||||||||||||||||
Samsung | 695 | 747 | 237 | 463 | 1,279 | 3,421 | — | |||||||||||||||||||||
Hyundai Motors | 522 | 708 | 482 | 49 | 339 | 2,100 | — | |||||||||||||||||||||
SK | 509 | 58 | 127 | 254 | 672 | 1,620 | — | |||||||||||||||||||||
POSCO | 69 | 20 | 85 | 1,248 | 133 | 1,555 | — | |||||||||||||||||||||
STX | 137 | 27 | — | 32 | 942 | 1,138 | — | |||||||||||||||||||||
LG | 152 | 361 | 117 | 18 | 166 | 814 | — | |||||||||||||||||||||
Lotte | 260 | 6 | 325 | 19 | 88 | 698 | — | |||||||||||||||||||||
Hynix | 38 | 274 | 1 | 139 | 64 | 516 | — | |||||||||||||||||||||
Doosan | — | 160 | 48 | 8 | 268 | 484 | — | |||||||||||||||||||||
Total | 2,404 | 2,385 | 1,432 | 2,257 | 7,842 | 16,320 | — |
Percentage of Total | ||||||||
Aggregate Loan | Corporate Loan | |||||||
Industry | Balance | Balance | ||||||
(In billions of Won) | (Percentages) | |||||||
Manufacturing | 29,820 | 32.84 | % | |||||
Retail and wholesale | 11,634 | 12.81 | ||||||
Real estate, leasing and service | 18,530 | 20.41 | ||||||
Construction | 6,675 | 7.35 | ||||||
Hotel and leisure(1) | 3,283 | 3.61 | ||||||
Finance and insurance | 5,202 | 5.73 | ||||||
Transportation, storage and communication | 5,675 | 6.25 | ||||||
Other service | 9,221 | 10.15 | ||||||
Other | 769 | 0.85 | ||||||
Total | 90,809 | 100.00 | % | |||||
�� |
(1) | Consists principally of hotels, motels and restaurants. |
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Aggregate Loan | Percentage of Total | |||||||
Balance | Loan Balance | |||||||
(In billions of Won) | (Percentages) | |||||||
Commercial and industrial | ||||||||
Up to | 64 | 0.04 | % | |||||
Over | 1,625 | 0.96 | ||||||
Over | 2,458 | 1.45 | ||||||
Over | 12,111 | 7.16 | ||||||
Over | 6,634 | 3.92 | ||||||
Over | 14,887 | 8.80 | ||||||
Over | 5,425 | 3.21 | ||||||
Over | 8,525 | 5.04 | ||||||
Over | 1,751 | 1.03 | ||||||
Over | 999 | 0.59 | ||||||
Sub-total | 54,479 | 32.20 | % | |||||
Other commercial | ||||||||
Up to | 123 | 0.07 | % | |||||
Over | 1,007 | 0.59 | ||||||
Over | 860 | 0.51 | ||||||
Over | 3,611 | 2.13 | ||||||
Over | 1,994 | 1.18 | ||||||
Over | 5,492 | 3.24 | ||||||
Over | 3,614 | 2.14 | ||||||
Over | 12,557 | 7.42 | ||||||
Over | 922 | 0.54 | ||||||
Over | 4,590 | 2.71 | ||||||
Sub-total | 34,770 | 20.53 | % | |||||
Lease financing | ||||||||
Up to | 7 | 0.00 | % | |||||
Over | 368 | 0.22 | ||||||
Over | 226 | 0.13 | ||||||
Over | 122 | 0.07 | ||||||
Over | 10 | 0.01 | ||||||
Over | 55 | 0.03 | ||||||
Over | 84 | 0.05 | ||||||
Over | 541 | 0.32 | ||||||
Over | 147 | 0.09 | ||||||
Over | 0 | 0.00 | ||||||
Sub-total | 1,560 | 0.92 | % | |||||
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Aggregate Loan | Percentage of Total | |||||||
Balance | Loan Balance | |||||||
(In billions of Won) | (Percentages) | |||||||
Mortgage and home equity | ||||||||
Up to | 365 | 0.22 | % | |||||
Over | 6,617 | 3.91 | ||||||
Over | 9,248 | 5.46 | ||||||
Over | 22,106 | 13.05 | ||||||
Over | 1,481 | 0.88 | ||||||
Over | 205 | 0.12 | ||||||
Over | 0 | 0.00 | ||||||
Over | 0 | 0.00 | ||||||
Over | 0 | 0.00 | ||||||
Over | 0 | 0.00 | ||||||
Sub-total | 40,022 | 23.64 | % | |||||
Other consumer | ||||||||
Up to | 4,184 | 2.47 | % | |||||
Over | 7,424 | 4.39 | ||||||
Over | 2,905 | 1.72 | ||||||
Over | 7,139 | 4.22 | ||||||
Over | 893 | 0.53 | ||||||
Over | 659 | 0.39 | ||||||
Over | 53 | 0.03 | ||||||
Over | 50 | 0.03 | ||||||
Over | 0 | 0.00 | ||||||
Over | 0 | 0.00 | ||||||
Sub-total | 23,307 | 13.78 | % | |||||
Credit cards(1) | ||||||||
Up to | 13,515 | 7.98 | % | |||||
Over | 1,031 | 0.61 | ||||||
Over | 40 | 0.02 | ||||||
Over | 51 | 0.03 | ||||||
Over | 10 | 0.01 | ||||||
Over | 27 | 0.02 | ||||||
Over | 15 | 0.01 | ||||||
Over | 41 | 0.02 | ||||||
Over | 387 | 0.23 | ||||||
Over | 0 | 0.00 | ||||||
Sub-total | 15,117 | 8.93 | ||||||
Total | 169,255 | 100.00 | % | |||||
(1) | Includes corporate credit card purchases. |
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As of December 31, 2009 | ||||||||||||||||
Over 1 Year | ||||||||||||||||
but Not More | ||||||||||||||||
1 Year or Less | Than 5 Years | Over 5 Years | Total | |||||||||||||
(In billions of Won) | ||||||||||||||||
Corporate: | ||||||||||||||||
Commercial and industrial | 47,212 | 6,194 | 1,073 | 54,479 | ||||||||||||
Other commercial | 21,215 | 8,622 | 4,933 | 34,770 | ||||||||||||
Lease financing | 366 | 1,116 | 78 | 1,560 | ||||||||||||
Total corporate | 68,793 | 15,932 | 6,084 | 90,809 | ||||||||||||
Consumer: | ||||||||||||||||
Mortgage and home equity | 8,393 | 7,627 | 24,002 | 40,022 | ||||||||||||
Other consumer | 19,087 | 3,057 | 1,163 | 23,307 | ||||||||||||
Credit cards | 13,264 | 1,294 | 559 | 15,117 | ||||||||||||
Total consumer | 40,744 | 11,978 | 25,724 | 78,446 | ||||||||||||
Total domestic loans | 109,537 | 27,910 | 31,808 | 169,255 | ||||||||||||
As of December 31, 2009 | ||||||||||||
Due Within 1 Year | Due After 1 Year | Total | ||||||||||
(In billions of Won) | ||||||||||||
Fixed rate loans(1) | 40,611 | 10,898 | 51,509 | |||||||||
Variable rate loans(2) | 67,836 | 49,910 | 117,746 | |||||||||
Total gross loans | 108,447 | 60,808 | 169,255 | |||||||||
(1) | Fixed rate loans are loans for which the interest rate is fixed for the entire term of the loan. | |
(2) | Variable or adjustable rate loans are for which the interest rate is not fixed for the entire term of the loan. |
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As of December 31, | ||||||||||||||||||||
2005 | 2006(1) | 2007(1) | 2008(1) | 2009(1) | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Loans accounted for on a nonaccrual basis | ||||||||||||||||||||
Corporate | 1,475 | 1,187 | 1,181 | 1,457 | 1,231 | |||||||||||||||
Consumer | 367 | 241 | 174 | 148 | 187 | |||||||||||||||
Credit cards | 210 | 226 | 409 | 416 | 224 | |||||||||||||||
Sub-total | 2,052 | 1,654 | 1,764 | 2,021 | 1,642 | |||||||||||||||
Accruing loans which are contractually past due one day or more as to principal or interest | ||||||||||||||||||||
Corporate(2) | 32 | 56 | 98 | 122 | 65 | |||||||||||||||
Consumer(3) | 32 | 55 | 67 | 46 | 24 | |||||||||||||||
Credit cards | 3 | — | — | — | — | |||||||||||||||
Sub-total | 67 | 111 | 165 | 168 | 89 | |||||||||||||||
Total | 2,119 | 1,765 | 1,929 | 2,189 | 1,731 | |||||||||||||||
(1) | Excludes past due loans within the grace period in the amount of | |
(2) | Includes accruing loans which are contractually past due 90 days or more in the amount of | |
(3) | Includes accruing loans which are contractually past due 90 days or more in the amount of |
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As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Loans classified as “troubled debt restructurings” (excluding nonaccrual and past due loans) | 735 | 111 | 124 | 557 | 932 |
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Loan Classification | Loan Characteristics | |
Normal | Loans made to customers whose financial position, future cash flows and nature of business are deemed financially sound. No problems in recoverability are expected. | |
Precautionary | Loans made to customers whose financial position, future cash flows and nature of business show potential weakness, although there is no immediate risk of nonrepayment. | |
Substandard | Loans made to customers whose adverse financial position, future cash flows and nature of business have a direct effect on the repayment of the loan. | |
Doubtful | Loans made to customers whose financial position, future cash flows and nature of business are so weak that significant risk exists in the recoverability of the loan, to the extent the outstanding amount exceeds any collateral pledged. | |
Estimated loss | Loans where write-off is unavoidable. |
• | loans classified as “substandard” or below according to the asset classification guidelines of the Financial Services Commission; | |
• | loans that are more than 90 days past due; and | |
• | loans which are “troubled debt restructurings” as defined under U.S. GAAP. |
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• | prevailing economic and business conditions within Korea and foreign jurisdictions in which we operate; | |
• | industry concentrations; | |
• | changes in the size and composition of the relevant underlying portfolios; and | |
• | changes in lending policies and procedures, including underwriting standards and collection, charge-offs and recovery practices. |
As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(Percentages) | ||||||||||||
Normal | 1.94 | % | 0.77 | % | 0.82 | % | ||||||
Precautionary | 31.36 | 11.66 | 8.78 | |||||||||
Substandard | 37.28 | 23.27 | 39.49 | |||||||||
Doubtful | 83.78 | 81.97 | 86.47 | |||||||||
Estimated loss | 88.81 | 89.19 | 86.55 |
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• | mortgage and home equity loans; and | |
• | other retail loans (consisting of unsecured and secured retail loans). |
• | changes in economic and business conditions such as levels of unemployment and housing price; | |
• | changes in the nature and volume of the portfolio, including any concentration of credits; and | |
• | external factors such as regulatory or government requirements. |
• | delinquency levels of cardholders; | |
• | government policies toward the credit card industry; and | |
• | key retail performance indicators (such as ratios of household debt to disposable income and household liabilities to financial assets). |
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Past Due | Past Due | Past Due More | ||||||||||||||||||||||||||||||||||
Current | Up to 3 Months | 3-6 Months | Than 6 Months | Total | ||||||||||||||||||||||||||||||||
As of December 31, | Amount | % | Amount | % | Amount | % | Amount | % | Amount | |||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
2005 | 103,601 | 97.87 | 652 | 0.62 | 243 | 0.23 | 1,352 | 1.28 | 105,848 | |||||||||||||||||||||||||||
2006 | 120,222 | 98.18 | 971 | 0.79 | 172 | 0.14 | 1,081 | 0.89 | 122,446 | |||||||||||||||||||||||||||
2007 | 148,597 | 97.88 | 1,899 | 1.25 | 315 | 0.21 | 1,007 | 0.66 | 151,818 | |||||||||||||||||||||||||||
2008 | 167,064 | 97.96 | 2,120 | 1.24 | 420 | 0.25 | 937 | 0.55 | 170,541 | |||||||||||||||||||||||||||
2009 | 166,620 | 98.44 | 1,220 | 0.72 | 245 | 0.14 | 1,170 | 0.70 | 169,255 |
As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Total non-performing loans | 1,594 | 1,253 | 1,322 | 1,357 | 1,415 | |||||||||||||||
As a percentage of total loans | 1.51 | % | 1.02 | % | 0.87 | % | 0.80 | % | 0.84 | % |
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As of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | Ratio of | Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non- | Non- | Non- | Non- | Non- | Non- | Non- | Non- | Non- | Non- | |||||||||||||||||||||||||||||||||||||||||||||||||||
Performing | Performing | Performing | Performing | Total | Performing | Performing | Performing | Performing | Performing | Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total Loans | Loans | Loans | Total Loans | Loans | Loans | Loans | Loans | Loans | Total Loans | Loans | Loans | Total Loans | Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 35,728 | 868 | 2.43 | % | 40,063 | 760 | 1.90 | % | 48,485 | 748 | 1.54 | % | 55,466 | 755 | 1.36 | % | 54,479 | 823 | 1.51 | % | ||||||||||||||||||||||||||||||||||||||||
Other commercial | 21,409 | 387 | 1.81 | 27,319 | 256 | 0.94 | 30,312 | 272 | 0.90 | 37,637 | 332 | 0.88 | 34,770 | 337 | 0.97 | |||||||||||||||||||||||||||||||||||||||||||||
Lease financing | 754 | 8 | 1.06 | 585 | 8 | 1.37 | 1,370 | 7 | 0.51 | 1,592 | 5 | 0.31 | 1,560 | 4 | 0.26 | |||||||||||||||||||||||||||||||||||||||||||||
Total corporate | 57,891 | 1,263 | 2.18 | 67,967 | 1.024 | 1.51 | 80,167 | 1,027 | 1.28 | 94,695 | 1,092 | 1.15 | 90,809 | 1,164 | 1.28 | |||||||||||||||||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage and home equity | 25,840 | 111 | 0.43 | 30,097 | 68 | 0.23 | 31,495 | 45 | 0.14 | 36,183 | 40 | 0.11 | 40,022 | 29 | 0.07 | |||||||||||||||||||||||||||||||||||||||||||||
Other consumer | 17,875 | 172 | 0.96 | 20,458 | 119 | 0.58 | 25,475 | 85 | 0.33 | 25,026 | 54 | 0.22 | 23,307 | 51 | 0.22 | |||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 4,242 | 48 | 1.13 | 3,924 | 42 | 1.07 | 14,681 | 165 | 1.12 | 14,637 | 171 | 1.17 | 15,117 | 171 | 1.13 | |||||||||||||||||||||||||||||||||||||||||||||
Total consumer | 47,957 | 331 | 0.69 | 54,479 | 229 | 0.42 | 71,651 | 295 | 0.41 | 75,846 | 265 | 0.35 | 78,446 | 251 | 0.32 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 105,848 | 1,594 | 1.51 | % | 122,446 | 1,253 | 1.02 | % | 151,818 | 1,322 | 0.87 | % | 170,541 | 1,357 | 0.80 | % | 169,255 | 1,415 | 0.84 | % | ||||||||||||||||||||||||||||||||||||||||
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(A) As of December 31, 2009 | ||||||||||||||
Gross Principal | Allowance for Loan | |||||||||||||
Industry | Outstanding | Losses | ||||||||||||
(In billions of Won) | ||||||||||||||
1 | Borrower A | Manufacturing | 48 | 39 | ||||||||||
2 | Borrower B | Manufacturing | 24 | 11 | ||||||||||
3 | Borrower C | Manufacturing | 23 | 19 | ||||||||||
4 | Borrower D | Other service | 18 | 9 | ||||||||||
5 | Borrower E | Manufacturing | 18 | 9 | ||||||||||
6 | Borrower F | Construction | 13 | 6 | ||||||||||
7 | Borrower G | Manufacturing | 12 | 10 | ||||||||||
8 | Borrower H | Real estate, leasing and service | 10 | 9 | ||||||||||
9 | Borrower I | Construction | 10 | 5 | ||||||||||
10 | Borrower J | Manufacturing | 9 | 4 | ||||||||||
11 | Borrower K | Real estate, leasing and service | 9 | 4 | ||||||||||
12 | Borrower L | Other service | 8 | 4 | ||||||||||
13 | Borrower M | Finance and insurance | 7 | 1 | ||||||||||
14 | Borrower N | Retail and wholesale | 7 | 6 | ||||||||||
15 | Borrower O | Manufacturing | 7 | 4 | ||||||||||
16 | Borrower P | Real estate, leasing, service | 7 | 4 | ||||||||||
17 | Borrower Q | Retail and wholesale | 6 | 3 | ||||||||||
18 | Borrower R | Manufacturing | 6 | 5 | ||||||||||
19 | Borrower S | Real estate, leasing, and service | 6 | 1 | ||||||||||
20 | Borrower T | Manufacturing | 6 | 3 | ||||||||||
254 | 156 | |||||||||||||
• | identifying loans subject to a proposed sale by assessing the estimated losses from such sale based on the estimated recovery value of collateral, if any, for such non-performing loans; | |
• | identifying loans subject to charge-off based on the estimated recovery value of collateral, if any, for such non-performing loans and the estimated rate of recovery of unsecured loans; and | |
• | to a limited extent, identifying commercial loans subject to normalization efforts based on the cash-flow situation of the borrower. |
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• | making phone calls and paying visits to the borrower to request payment; | |
• | continuing to assess and evaluate assets of our borrowers; and | |
• | if necessary, initiating legal action such as foreclosures, attachment and litigation. |
• | selling non-performing loans to third parties including the Korea Asset Management Corporation; | |
• | entering into asset-backed securitization transactions with respect to non-performing loans; | |
• | using third-party collection agencies including credit information companies. |
As of December 31, | ||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||||
Loans % of | Loans % of | Loans % of | Loans % of | Loans % of | ||||||||||||||||||||||||||||||||||||
Total | Total | Total | Total | Total | ||||||||||||||||||||||||||||||||||||
Amt. | Loans | Amt. | Loans | Amt. | Loans | Amt. | Loans | Amt. | Loans | |||||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||||
Commercial and Industrial | 753 | 33.75 | % | 900 | 32.72 | % | 963 | 31.94 | % | 1,592 | 32.53 | % | 1,982 | 32.19 | % | |||||||||||||||||||||||||
Other commercial | 305 | 20.23 | 359 | 22.31 | 427 | 19.97 | 846 | 22.07 | 987 | 20.54 | ||||||||||||||||||||||||||||||
Lease financing | 16 | 0.71 | 10 | 0.48 | 16 | 0.90 | 11 | 0.93 | 13 | 0.92 | ||||||||||||||||||||||||||||||
Total corporate | 1,074 | 54.69 | 1,269 | 55.51 | 1,406 | 52.81 | 2,449 | 55.53 | 2,982 | 53.65 | ||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||
Mortgages and home equity | 19 | 24.41 | 4 | 24.58 | 4 | 20.75 | 8 | 21.22 | 11 | 23.65 | ||||||||||||||||||||||||||||||
Other consumer | 183 | 16.89 | 175 | 16.71 | 150 | 16.77 | 149 | 14.67 | 170 | 13.77 | ||||||||||||||||||||||||||||||
Credit cards | 236 | 4.01 | 127 | 3.20 | 539 | 9.67 | 595 | 8.58 | 475 | 8.93 | ||||||||||||||||||||||||||||||
Total consumer | 438 | 45.31 | 306 | 44.49 | 693 | 47.19 | 752 | 44.47 | 656 | 46.35 | ||||||||||||||||||||||||||||||
Total allowance for loan losses | 1,512 | 100.00 | % | 1,575 | 100.00 | % | 2,099 | 100.00 | % | 3,201 | 100.00 | % | 3,638 | 100.00 | % | |||||||||||||||||||||||||
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2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Balance at the beginning of the period | 2,311 | 1,512 | 1,575 | 2,099 | 3,201 | |||||||||||||||
Amounts charged against income | (255 | ) | 252 | 40 | 1,319 | 1,751 | ||||||||||||||
Gross charge-offs: | ||||||||||||||||||||
Corporate: | ||||||||||||||||||||
Commercial and industrial | 297 | 130 | 89 | 144 | 1,047 | |||||||||||||||
Other commercial | 18 | 76 | 64 | 142 | 40 | |||||||||||||||
Lease financing | — | — | 9 | 6 | (19 | ) | ||||||||||||||
Consumer: | ||||||||||||||||||||
Mortgage and home equity | 19 | — | (2 | ) | 6 | (1 | ) | |||||||||||||
Other consumer | 296 | 96 | 123 | 98 | 227 | |||||||||||||||
Credit cards | 316 | 211 | 418 | 521 | 597 | |||||||||||||||
Total gross charge-offs | (946 | ) | (513 | ) | (701 | ) | (917 | ) | (1,891 | ) | ||||||||||
Recoveries: | ||||||||||||||||||||
Corporate: | ||||||||||||||||||||
Commercial and industrial | 69 | 47 | 15 | 16 | 81 | |||||||||||||||
Other commercial | 217 | 154 | 104 | 27 | 42 | |||||||||||||||
Lease financing | 4 | 5 | — | — | 1 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Mortgage and home equity | 3 | 5 | 3 | 2 | 1 | |||||||||||||||
Other consumer | 34 | 43 | 71 | 107 | 59 | |||||||||||||||
Credit cards | 72 | 70 | 451 | 548 | 393 | |||||||||||||||
Total recoveries | 399 | 324 | 644 | 700 | 577 | |||||||||||||||
Net charge-offs | (547 | ) | (189 | ) | (57 | ) | (217 | ) | (1,314 | ) | ||||||||||
Acquisition of Shinhan Life Insurance | 3 | — | — | — | — | |||||||||||||||
Acquisition of LG Card | — | — | 541 | — | — | |||||||||||||||
Balance at the end of the period | 1,512 | 1,575 | 2,099 | 3,201 | 3,638 | |||||||||||||||
Ratio of net charge-offs during the period to average loans outstanding during the period | 0.53 | % | 0.17 | % | 0.04 | % | 0.13 | % | 0.78 | % |
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• | loans for which collection is not foreseeable due to insolvency or bankruptcy, dissolution or the termination of the debtor’s business; | |
• | loans for which collection is not foreseeable due to the death or disappearance of debtors; | |
• | loans for which collection expenses exceed the collectable amount; | |
• | loans for which collection is not possible through legal or any other means; | |
• | payments in arrears in respect of credit cards that are overdue for more than six months; | |
• | payments outstanding on unsecured retail loans that are overdue for more than six months; | |
• | payments in arrears in respect of leases that are overdue for more than 12 months; or | |
• | the portion of loans classified as “estimated loss,” net of any recovery from collateral, which is deemed to be uncollectible. |
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• | maintain the stability and diversification of our assets; | |
• | maintain adequate sources ofback-up liquidity to match our funding requirements; and | |
• | supplement income from our core lending activities. |
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As of | As of | As of | ||||||||||||||||||||||
December 31, 2007 | December 31, 2008 | December 31, 2009 | ||||||||||||||||||||||
Book | Market | Book | Market | Book | Market | |||||||||||||||||||
Value | Value | Value | Value | Value | Value | |||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||
Marketable equity securities | 3,101 | 3,101 | 2,170 | 2,170 | 2,964 | 2,964 | ||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,206 | 4,206 | 6,254 | 6,254 | 8,722 | 8,722 | ||||||||||||||||||
Debt securities by financial institutions | 10,051 | 10,051 | 15,550 | 15,550 | 11,164 | 11,164 | ||||||||||||||||||
Corporate debt securities | 2,145 | 2,145 | 1,918 | 1,918 | 2,308 | 2,308 | ||||||||||||||||||
Debt securities issued by foreign government | 48 | 48 | 123 | 123 | 170 | 170 | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 3,075 | 3,075 | 3,001 | 3,001 | 2,284 | 2,284 | ||||||||||||||||||
Total —Available-for-sale | 22,626 | 22,626 | 29,016 | 29,016 | 27,612 | 27,612 | ||||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 3,071 | 3,036 | 4,009 | 4,126 | 8,139 | 8,148 | ||||||||||||||||||
Debt securities by financial institutions | 4,858 | 4,812 | 4,279 | 4,331 | 4,093 | 4,117 | ||||||||||||||||||
Corporate debt securities | 110 | 105 | 245 | 247 | 363 | 372 | ||||||||||||||||||
Debt securities issued by foreign government | 1 | 1 | 9 | 9 | 36 | 36 | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 184 | 212 | 154 | 160 | 163 | 167 | ||||||||||||||||||
Total —Held-to-maturity | 8,224 | 8,166 | 8,696 | 8,873 | 12,794 | 12,840 | ||||||||||||||||||
Trading Securities | ||||||||||||||||||||||||
Marketable equity securities | 655 | 655 | 705 | 705 | 747 | 747 | ||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 406 | 406 | 528 | 528 | 1,524 | 1,524 | ||||||||||||||||||
Financial institutions | 3,033 | 3,033 | 3,279 | 3,279 | 2,104 | 2,104 | ||||||||||||||||||
Corporations | 2,130 | 2,130 | 1,264 | 1,264 | 1,177 | 1,177 | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 1,966 | 1,966 | 889 | 889 | 873 | 873 | ||||||||||||||||||
Other trading assets(1) | 30 | 30 | 59 | 59 | 256 | 256 | ||||||||||||||||||
Total — Trading | 8,220 | 8,220 | 6,724 | 6,724 | 6,681 | 6,681 | ||||||||||||||||||
Total securities | 39,070 | 39,012 | 44,436 | 44,613 | 47,087 | 47,133 | ||||||||||||||||||
(1) | Consists of commodity-indexed deposits. |
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As of December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Over 1 but Within | Over 5 but Within | |||||||||||||||||||||||||||||||||||||||
1 Year or Less | 5 Yrs | 10 Yrs | Over 10 Yrs | Total | ||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | |||||||||||||||||||||||||||||||
Amount | Yield(1) | Amount | Yield(1) | Amount | Yield(1) | Amount | Yield(1) | Amount | Yield(1) | |||||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||||||||
Korean Treasury securities and government agencies | 1,066 | 4.62 | % | 6,421 | 4.73 | % | 1,224 | 4.45 | % | 11 | 5.31 | % | 8,722 | 4.68 | % | |||||||||||||||||||||||||
Debt securities issued by financial institutions | 6,549 | 2.64 | 3,485 | 2.10 | 923 | 3.42 | 207 | 4.37 | 11,164 | 2.57 | ||||||||||||||||||||||||||||||
Corporate debt securities | 642 | 4.77 | 1,486 | 3.28 | 180 | 4.47 | — | — | 2,308 | 3.78 | ||||||||||||||||||||||||||||||
Debt securities issued by foreign governments | 58 | 0.71 | 66 | 4.79 | 37 | 4.30 | 9 | 4.85 | 170 | 3.30 | ||||||||||||||||||||||||||||||
Mortgage Backed Securities and Asset Backed Securities | 937 | 0.28 | 1,327 | 0.22 | 20 | 3.08 | — | — | 2,284 | 0.27 | ||||||||||||||||||||||||||||||
Total | 9,252 | 2.76 | % | 12,785 | 3.38 | % | 2,384 | 4.06 | % | 227 | 4.44 | % | 24,648 | 3.22 | % | |||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||||||||||
Korean Treasury securities and government agencies | 694 | 4.55 | % | 5,279 | 4.90 | % | 1,871 | 4.67 | % | 295 | 5.56 | % | 8,139 | 4.84 | % | |||||||||||||||||||||||||
Debt securities issued by financial institutions | 1,825 | 3.54 | 1,777 | 3.72 | 311 | 5.11 | 180 | 4.47 | 4,093 | 3.78 | ||||||||||||||||||||||||||||||
Corporate debt securities | 15 | 4.02 | 267 | 3.76 | 71 | 4.76 | 10 | 5.72 | 363 | 4.02 | ||||||||||||||||||||||||||||||
Debt securities issued by foreign governments | 10 | 2.18 | 25 | 0.50 | 1 | 0.03 | — | — | 36 | 0.93 | ||||||||||||||||||||||||||||||
Mortgage Backed Securities and Asset Backed Securities | 10 | 5.59 | 143 | 1.21 | — | — | 10 | 5.23 | 163 | 1.73 | ||||||||||||||||||||||||||||||
Total | 2,554 | 3.82 | % | 7,491 | 4.50 | % | 2,254 | 4.73 | % | 495 | 5.16 | % | 12,794 | 4.43 | % | |||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||||||||||||||
Korean Treasury securities and government agencies | 727 | 3.24 | % | 752 | 4.60 | % | 44 | 5.18 | % | 1 | 5.56 | % | 1,524 | 3.97 | % | |||||||||||||||||||||||||
Debt securities issued by financial institutions | 1,481 | 3.35 | 624 | 4.10 | — | — | — | — | 2,104 | 3.54 | ||||||||||||||||||||||||||||||
Corporate debt securities | 1,009 | 3.24 | 167 | 5.22 | — | — | 1 | 5.00 | 1,177 | 3.52 | ||||||||||||||||||||||||||||||
Mortgage Backed Securities and Asset Backed Securities | 825 | 3.73 | 48 | 6.77 | — | — | — | — | 873 | 3.90 | ||||||||||||||||||||||||||||||
Total | 4,042 | 3.38 | % | 1,591 | 4.53 | % | 44 | 5.18 | % | 2 | 5.36 | % | 5,678 | 3.71 | % | |||||||||||||||||||||||||
Total | 15,848 | 21,867 | 4,682 | 724 | 43,120 | |||||||||||||||||||||||||||||||||||
(1) | The weighted-average yield for the portfolio represents the yield to maturity for each individual security, weighted using its amortized cost. |
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As of December 31, 2009 | ||||||||
Book Value | Market Value | |||||||
(In billions of Won) | ||||||||
Name of issuer: | ||||||||
Ministry of Strategy and Finance | 11,633 | 11,621 | ||||||
The Bank of Korea | 5,498 | 5,511 | ||||||
Korea Development Bank | 2,771 | 2,767 | ||||||
Korea Deposit Insurance Corporation | 2,582 | 2,592 | ||||||
Total | 22,484 | 22,491 | ||||||
As of December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In billions of Won) | ||||||||||||
Commitments to extend credit: | ||||||||||||
Corporate | 65,611 | 49,873 | 49,590 | |||||||||
Credit cards(1) | 46,079 | 52,577 | 64,904 | |||||||||
Consumer | 6,968 | 8,350 | 8,795 | |||||||||
Commercial letters of credit(2) | 3,518 | 3,006 | 3,319 | |||||||||
Standby letters of credit, other financial and performance guarantees and liquidity facilities to special purpose entities | 12,573 | 14,859 | 13,392 | |||||||||
Total | 134,749 | 128,665 | 140,000 | |||||||||
(1) | Credit card commitments relate to unused portion of credit card limits that may be cancelled by us, after notice to the customer, if we determine that the customer’s repayment ability is significantly impaired. Prior to January 2008, we were able to change credit card limits of all customers whose account is inactive for more than 12 months without their approval. However, following a change in the Korea Fair Trade Commission’s policy related to credit card limits effective January 2008, we now require the customer’s agreement before changing the credit card limits for customers whose repayment ability is not significantly impaired. | |
(2) | These are generally short-term and collateralized by the underlying shipments of goods to which they relate. |
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As of December 31, 2009 | ||||||||||||
Underlying | Estimated | |||||||||||
Notional | Estimated | Fair Value | ||||||||||
Amount(1) | Fair Value Assets | Liabilities | ||||||||||
(In billions of Won) | ||||||||||||
Trading: | ||||||||||||
Foreign exchange contracts: | ||||||||||||
Forward contracts | 59,473 | 1,706 | 714 | |||||||||
Options purchased | 3,378 | 316 | 7 | |||||||||
Options written | 713 | 4 | 68 | |||||||||
Sub-total | 63,564 | 2,026 | 789 | |||||||||
Interest rate contracts: | ||||||||||||
Swaps | 129,613 | 625 | 937 | |||||||||
Futures and forward contracts | 43 | — | — | |||||||||
Options purchased | 5,371 | 54 | — | |||||||||
Options written | 5,975 | — | 52 | |||||||||
Sub-total | 141,002 | 679 | 989 | |||||||||
Cross currency swaps | 23,143 | 1,285 | 1,991 |
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As of December 31, 2009 | ||||||||||||
Underlying | Estimated | |||||||||||
Notional | Estimated | Fair Value | ||||||||||
Amount(1) | Fair Value Assets | Liabilities | ||||||||||
(In billions of Won) | ||||||||||||
Equity contracts: | ||||||||||||
Swaps | 1,737 | 120 | 149 | |||||||||
Futures and forward contracts | 48 | — | — | |||||||||
Option purchased | 2,742 | 161 | 5 | |||||||||
Option written | 2,632 | 6 | 131 | |||||||||
Sub-total | 7,159 | 287 | 285 | |||||||||
Other derivatives: | ||||||||||||
Commodity swaps | 23 | — | 1 | |||||||||
Options purchased | 57 | 2 | — | |||||||||
Options written | 24 | — | 1 | |||||||||
Sub-total | 104 | 2 | 2 | |||||||||
Credit derivatives: | ||||||||||||
Protection sell | 175 | 3 | 23 | |||||||||
Total | 235,147 | 4,282 | 4,079 | |||||||||
Nontrading: | ||||||||||||
Hedge accounting: | ||||||||||||
Interest rate swaps | 90 | 2 | — | |||||||||
Sub-total | 90 | 2 | — | |||||||||
Nontrading that do not qualify for hedge accounting(2): | ||||||||||||
Interest rate swaps | 10,453 | 219 | 146 | |||||||||
Forward contracts | 24 | — | 5 | |||||||||
Cross currency swaps | 914 | 115 | 16 | |||||||||
Sub-total | 11,391 | 334 | 167 | |||||||||
Total | 11,481 | 336 | 167 | |||||||||
(1) | Notional amounts in foreign currencies were converted into Won at prevailing exchange rates as of December 31, 2009. | |
(2) | While we engage in derivatives trading activities to hedge the interest rate risk and foreign exchange risk exposure that arise from our own assets and liabilities, as these nontrading derivative contracts do not qualify for hedge accounting under U.S. GAAP, they are accounted for as trading derivatives in the financial statements. These contracts include interest rate swaps, forward contracts and cross-currency swaps held for nontrading that do not qualify for hedge accounting treatment. |
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2007 | 2008 | 2009 | ||||||||||||||||||||||
Average | Average Rate | Average | Average Rate | Average | Average Rate | |||||||||||||||||||
Balance(1) | Paid | Balance(1) | Paid | Balance(1) | Paid | |||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Interest-bearing demand deposits | 8,455 | 0.41 | % | 5,786 | 0.78 | % | 7,399 | 0.45 | % | |||||||||||||||
Savings deposits | 30,583 | 2.05 | 30,877 | 2.32 | 36,876 | 1.22 | ||||||||||||||||||
Certificates of deposit | 15,475 | 5.22 | 16,152 | 5.94 | 11,802 | 5.48 | ||||||||||||||||||
Other time deposits | 44,397 | 4.55 | 60,437 | 4.94 | 77,961 | 3.91 | ||||||||||||||||||
Mutual installment deposits(2) | 567 | 3.88 | 291 | 3.78 | 189 | 3.70 | ||||||||||||||||||
Total interest-bearing deposits(3) | 99,477 | 3.53 | % | 113,543 | 4.15 | % | 134,227 | 3.12 | % | |||||||||||||||
(1) | Average balances are based on daily balances for Shinhan Bank and Jeju Bank and quarterly balances for other subsidiaries. | |
(2) | Shinhan Bank offers mutual installment deposits which are interest-bearing deposits made periodically for a contracted term. The mutual installment deposit account enables customers to become eligible for loans which would be secured by the deposits already made. Prior to qualifying for a loan, a customer must make required periodic deposits to the mutual installment account for a contracted term of less than five years. A customer is not obliged to make the periodic deposits for the full term of the contract to obtain a loan from Shinhan Bank, but loan amounts and terms are not as favorable in the event a loan request is made prior to completion of the deposit contract term. | |
(3) | Under U.S. GAAP, interest-bearing assets do not include cover bills sold or bonds sold under repurchase agreements, which are offered to our customers as deposit products. These are reflected as short-term borrowings and secured borrowings, respectively. |
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As of December 31, 2009 | ||||||||||||||||
Mutual | ||||||||||||||||
Certificates | Other Time | Installment | ||||||||||||||
of Deposit | Deposits | Deposits | Total | |||||||||||||
(In billions of Won) | ||||||||||||||||
Maturing within three months | 2,734 | 15,152 | 27 | 17,913 | ||||||||||||
After three but within six months | 1,584 | 7,770 | 6 | 9,360 | ||||||||||||
After six but within 12 months | 2,504 | 38,937 | 3 | 41,444 | ||||||||||||
After 12 months | 947 | 4,721 | 3 | 5,671 | ||||||||||||
Total | 7,769 | 66,580 | 39 | 74,388 | ||||||||||||
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2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Highest | Weighted | Highest | Weighted | Highest | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Balances at | Average | Average | Balances at | Average | Average | Balances at | Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance | Balance | Any Month- | Interest | Year-End | Balance | Balance | Any Month- | Interest | Year-End | Balance | Balance | Any Month- | Interest | Year-End | ||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Outstanding(1) | End | Rate(2) | Interest Rate | Outstanding | Outstanding(1) | End | Rate(2) | Interest Rate | Outstanding | Outstanding(1) | End | Rate(2) | Interest Rate | ||||||||||||||||||||||||||||||||||||||||||||||
(In billions of Won, except for percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings from | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank of Korea(3) | 883 | 881 | 1,169 | 2.97 | % | 0.10-3.25 | % | 1,259 | 964 | 1,285 | 2.54 | % | 0.10-2.75 | % | 1,434 | 1,369 | 1,490 | 1.11 | % | 1.25-3.50 | % | |||||||||||||||||||||||||||||||||||||||
Call money | 1,673 | 3,173 | 4,615 | 5.49 | % | 0.75-10.25 | 4,878 | 2,875 | 4,878 | 5.41 | 0.40-6.93 | 2,398 | 3,087 | 5,943 | 2.42 | 1.35-10.50 | ||||||||||||||||||||||||||||||||||||||||||||
Other borrowings(4) | 13,245 | 12,756 | 13,245 | 3.93 | % | 0.98-7.83 | % | 17,088 | 17,874 | 19,839 | 4.12 | 1.08-8.10 | % | 5,883 | 12,723 | 18,262 | 3.85 | 0.77-6.25 | % | |||||||||||||||||||||||||||||||||||||||||
15,801 | 16,810 | 19,029 | 4.17 | % | 23,225 | 21,713 | 26,002 | 4.22 | % | 9,715 | 17,179 | 25,695 | 3.38 | % | ||||||||||||||||||||||||||||||||||||||||||||||
(1) | Average outstanding balances are calculated using daily balances for Shinhan Bank and Jeju Bank and quarterly balances for other subsidiaries. | |
(2) | Weighted-average interest rates during this year are calculated by dividing the total interest expenses by the average amount borrowed. | |
(3) | Borrowings from the Bank of Korea generally mature within one month for borrowings in Won and six months for borrowings in foreign currencies. | |
(4) | Other short-term borrowings included borrowings from trust accounts, bills sold, borrowings in domestic and foreign currencies and short-term debentures. |
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• | identifying and managing all inherent risks; | |
• | standardizing risk management process and methodology; | |
• | ensuring supervision and control of risk management independent of business activities; | |
• | continuously assessing risk preference; | |
• | preventing risk concentration; | |
• | operating a precise and comprehensive risk management system including statistical models; and | |
• | balancing profitability and risk management through risk-adjusted profit management. |
• | an embedded culture of risk management — As a basic matter, we emphasize that all of our employees embrace, adhere and are guided in their daily operations by a culture of strict risk management and the core groupwide risk management principles. | |
• | detailed risk tolerance prescriptions — Risk tolerance, defined as the allowable level of risk, is prescribed for each subsidiary and for each business segment based on a groupwide analysis of possible losses. Each of our subsidiaries is required to manage its operations within the bounds of the specified risk tolerance and not incur a concentration risk though detailed and specific risk limit control systems. | |
• | integrated groupwide risk monitoring system — We have adopted a groupwide comprehensive risk monitoring system that collects extensive risk-related information from both external and internal sources and assesses related risks based on such information. Our risk monitoring system emphasize early warning signals and preemptive measures. | |
• | development of a groupwide risk experts network — In order to enhance our overall risk management capabilities, we have a designated team of risk experts, each of whom have experience and knowledge in risk management, in charge of our groupwide risk education and build out of groupwide risk management competence. |
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• | Group Risk Management Committee —The Group Risk Management Committee consists of three outside directors of our holding company. The Group Risk Management Committee convenes at least once every quarter and may also convene on anad hocbasis as needed. Specifically, the Group Risk Management Committee does the following: (i) establish the overall risk management policies consistent with management strategies, (ii) set risk limits for the entire group and each of our subsidiaries, (iii) approve appropriate investment limits or allowed loss limits, (iv) enact and amends risk management regulations, and (v) decide other risk management-related issues the board of directors or the Group Risk Management Committee sees fit to discuss. The results of the Group Risk Management Committee meetings are reported to the board of directors of our holding company. The Group Risk Management Committee makes decisions through affirmative votes by a majority of the committee members. | |
• | Group Risk Management Council— Comprised of the holding company’s chief risk officer, risk management team head, and risk officers of each of our subsidiaries, the Group Risk Management Council provides a forum for risk management executives from each subsidiary to discuss our groupwide risk management guidelines and strategy in order to maintain consistency in the groupwide risk policies and strategies. Specifically, the Group Risk Management Council deliberates on the following: (i) changes in risk management policies and strategies for each subsidiary, (ii) matters warranting discussion of risk management at the group level and cooperation among the subsidiaries, (iii) the effect of external factors on the groupwide risk, (iv) determination of the risk appetite for our group as a whole and each of our subsidiaries, (v) risk limits of our group as a whole and each of our subsidiaries, (vi) operation of risk measuring systems for our group as a whole and each of our subsidiaries, (vii) matters requiring joint deliberation in relation to groupwide risk management and (viii) matters related to providing funds to our subsidiaries. The Group Risk Management Council has asub-council consisting of working-level risk management officers, to discuss the above-related matters in advance. | |
• | Group Chief Risk Officer— The Group Chief Risk Officer aids the Group Risk Management Committee by implementing the risk policies and strategies as well as ensuring consistency of risk management systems among our subsidiaries. Furthermore, the Group Chief Risk Officer evaluates the risk officers of each subsidiary in addition to monitoring the risk management practices of each subsidiary. | |
• | Group Risk Management Team — This team provides support and assistance to the Group Chief Risk Officer in carrying out his responsibilities. |
• | Risk Management Committee — In order to maintain the groupwide risk at an appropriate level, we have established a hierarchical risk limit system, where the Group Risk Management Committee establishes risk limits for us and our subsidiaries, and each of our subsidiaries establishes and manages risk limits in more detail by type of risk and type of product for each department and division within such subsidiary. In accordance with the group risk management policies and strategies, the risk management committee at the subsidiary level establishes its own risk management policies and strategies in more detail and the respective risk management department implements those policies and strategies. | |
• | Risk Management Team —The risk management team, operating independently from the business units of each of our subsidiaries, monitors, assesses, manages and controls the overall risk of its operations and reports all major risk-related issues to the Group Risk Management Team at the holding company level, which then reports to the Group Chief Risk Officer. |
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• | achieve profit level corresponding to the level of risks involved; | |
• | improve asset quality and achieve optimal industrial and rating loan portfolios; | |
• | focus on the small- and medium-sized enterprises and markets; | |
• | avoid excessive loan concentration to a particular borrower or sector; | |
• | focus on the borrower’s ability to repay the debt; and | |
• | provide financial support to advance the growth of select customers. |
• | credit evaluation and approval; | |
• | credit review and monitoring; and | |
• | credit risk assessment and control. |
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• | achieve profit at a level corresponding to the level of risks involved; | |
• | improve asset quality and achieve optimal asset portfolios; and | |
• | focus on borrower’s ability to repay the debt. |
• | when it receives a report of a card’s fraudulent use or loss; |
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• | at the request of a cardholder; | |
• | for cash advances, immediately upon recognition by the system that the relevant cardholder became delinquent; or | |
• | for other types of transactions, one day to three months (depending on the customer’s credit score) after recognition by the system that the relevant cardholder became delinquent. |
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• | trading activities to realize short-term trading profits in debt and stock markets and foreign exchange markets based on Shinhan Bank’s short-term forecast of changes in market situation and customer demand, for its own account as well as for the account of the trust accounts of Shinhan Bank’s customers; and | |
• | trading activities primarily to realize profits from arbitrage transactions in derivatives such as swap, forward, futures and option transactions, and, to a lesser extent, to sell derivative products to Shinhan Bank’s customers and to cover market risk incurred from those trading activities. |
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As of December 31, | ||||||||||||
Currency | 2007 | 2008 | 2009 | |||||||||
(In millions of US$) | ||||||||||||
U.S. dollars | US$ | 20.4 | US$ | (41.6 | ) | US$ | (41.6 | ) | ||||
Japanese yen | (21.0 | ) | (43.7 | ) | 23.3 | |||||||
Euro | 18.9 | (10.8 | ) | (2.7 | ) | |||||||
Others | 66.1 | 59.3 | 34.0 | |||||||||
Total | US$ | 84.4 | US$ | (36.8 | ) | US$ | 13.1 | |||||
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Trading Portfolio VaR for the Year 2009 | ||||||||||||||||
As of | ||||||||||||||||
Average | Minimum | Maximum | December 31, 2009 | |||||||||||||
(In billions of Won) | ||||||||||||||||
Shinhan Bank:(1) | ||||||||||||||||
Interest rate | 49.6 | 5.7 | 108.9 | 88.3 | ||||||||||||
Foreign exchange(2) | 30.2 | 2.5 | 89.0 | 5.5 | ||||||||||||
Equities | 12.0 | 5.3 | 49.2 | 5.3 | ||||||||||||
Option volatility(3) | 2.4 | 0.8 | 4.2 | 1.6 | ||||||||||||
Less: portfolio diversification(4) | (35.7 | ) | 13.8 | (134.5 | ) | (12.6 | ) | |||||||||
Total VaR(5) | 58.4 | 28.0 | 116.7 | 88.2 | ||||||||||||
Shinhan Investment:(1)(6) | ||||||||||||||||
Interest rate | 16.83 | 4.70 | 47.55 | 7.11 | ||||||||||||
Equities | 4.45 | 0.60 | 18.47 | 2.41 | ||||||||||||
Option volatility(3) | 0.99 | (1.44 | ) | 2.78 | 1.34 | |||||||||||
Less: portfolio diversification(4) | (5.94 | ) | 1.43 | (27.36 | ) | (4.67 | ) | |||||||||
Total VaR | 16.33 | 5.29 | 41.45 | 6.19 | ||||||||||||
(1) | Shinhan Bank and Shinhan Investment’sten-day VaR is based on a 99% confidence level. | |
(2) | Includes both trading and non-trading accounts as Shinhan Bank manages foreign exchange risk on a total position basis. | |
(3) | Volatility implied from the option price using the Black-Scholes or a similar model. | |
(4) | Calculation of portfolio diversification effects may occur on different days for different risk components. Total VaRs are less than the simple sum of the risk component VaRs due to offsets resulting from portfolio diversification. | |
(5) | Includes trading portfolio in Shinhan Bank’s bank accounts and assets in trust accounts for which it guarantees principal or fixed return. | |
(6) | The average change in market value of the portfolio of Shinhan Investment was |
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• | VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a reliable indicator of future events, particularly potential future events that are extreme in nature. | |
• | VaR may underestimate the probability of extreme market movements. | |
• | Shinhan Bank’s VaR models assume that a holding period of generally one to ten days is sufficient prior to liquidating the underlying positions, but the length of the holding period so assumed may actually be insufficient or excessive. | |
• | VaR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses. |
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• | arbitrage transactions to make profits from short-term discrepancies between the spot and derivative markets or within the derivative markets; | |
• | sales of tailor-made derivative products that meet various needs of our corporate customers, principally of Shinhan Bank and Shinhan Investment, and related transactions to reduce its exposure resulting from those sales (in the case of Shinhan Investment, these activities commenced from February 2003 when it acquired the relevant license); | |
• | taking positions in limited cases when we expect short-swing profits based on its market forecasts; and | |
• | trading to hedge our interest rate and foreign currency risk exposure as described above. |
• | computation of an internal dealing system market value (based on assessment by the quantitative analysis team of the adequacy of the formula and the model used to compute the market value as derived from the dealing system); | |
• | computation of the market value as obtained from an outside credit evaluation company; and | |
• | following comparison of the market value derived from an internal dealing system to that obtained from outside credit evaluation companies, determination as to whether to use the internally developed market value based on inter-departmental agreement. |
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• | Earnings: interest rate fluctuations have an effect on Shinhan Bank’s net interest income by affecting its interest-sensitive operating income and expenses. | |
• | Economic value of net assets: interest rate fluctuations influence Shinhan Bank’s net worth by affecting the present value of cash flows from the assets, liabilities and other transactions of Shinhan Bank. |
• | Interest Rate Gap Analysis: Interest rate gap analysis measures the difference in the amounts of interest-earning assets and interest-bearing liabilities at each maturity and re-pricing date for a specific time frame. | |
• | Duration Gap Analysis: Duration gap analysis measures durations of Shinhan Bank’s interest-earning assets and interest-bearing liabilities, which are weighted average maturities of these assets and liabilities calculated based on discounted cash flows from these assets and liabilities using yield curves. | |
• | Market Value Analysis: Market value analysis measures changes in the market value of Shinhan Bank’s interest-earning assets and interest-bearing liabilities based on the assumption of parallel shifts in interest rates. | |
• | Net Interest Income Simulation Analysis: Net interest income simulation analysis uses deterministic analysis methodology to measure changes in Shinhan Bank’s annual net interest income (interest income less interest expenses) under the current maturity structure, using different scenarios for interest rates (assuming parallel shifts) and funding requirements. |
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• | With respect to the maturities and re-pricing dates of Shinhan Bank’s assets, Shinhan Bank assumes that the maturity of Shinhan Bank’s prime rate-linked loans is the same as that of its fixed-rate loans. Shinhan Bank excludes equity securities from interest-earning assets. | |
• | With respect to the maturities and re-pricing of Shinhan Bank’s liabilities, Shinhan Bank assumes that money market deposit accounts and “non-core” demand deposits under the Financial Services Commission guidelines have a maturity of one month or less for Won-denominated accounts and three months or less for foreign currency-denominated accounts. With respect to “core” demand deposits under the Financial Services Commission guidelines, Shinhan Bank assumes that they have maturities of eight different intervals ranging from one month to five years. |
As of December 31, 2009 | ||||||||||||||||||||||||||||
0-3 | 3-6 | 6-12 | 1-2 | 2-3 | Over 3 | |||||||||||||||||||||||
Months | Months | Months | Years | Years | Years | Total | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||
Interest-earning assets | 108,386 | 19,570 | 10,588 | 8,251 | 6,242 | 14,024 | 167,061 | |||||||||||||||||||||
Fixed rates | 24,952 | 7,656 | 8,684 | 6,329 | 4,743 | 10,772 | 63,136 | |||||||||||||||||||||
Floating rates | 82,713 | 11,435 | 1,254 | 370 | 511 | 178 | 96,460 | |||||||||||||||||||||
Interest rate swaps | 720 | 480 | 650 | 1,552 | 988 | 3,075 | 7,465 | |||||||||||||||||||||
Interest-bearing liabilities | 85,790 | 17,602 | 30,625 | 11,630 | 5,344 | 14,026 | 165,017 | |||||||||||||||||||||
Fixed liabilities | 36,331 | 14,348 | 29,377 | 11,534 | 5,313 | 13,768 | 110,671 | |||||||||||||||||||||
Floating liabilities | 41,994 | 3,254 | 1,248 | 96 | 31 | 258 | 46,881 | |||||||||||||||||||||
Interest rate swaps | 7,465 | — | — | — | — | — | 7,465 | |||||||||||||||||||||
Sensitivity gap | 22,595 | 1,969 | (20,037 | ) | (3,380 | ) | 898 | (2 | ) | 2,044 | ||||||||||||||||||
Cumulative gap | 22,595 | 24,564 | 4,527 | 1,147 | 2,045 | 2,044 | 2,044 | |||||||||||||||||||||
% of total assets | 13.53 | % | 14.70 | % | 2.71 | % | 0.69 | % | 1.22 | % | 1.22 | % | 1.22 | % |
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As of December 31, 2009 | ||||||||||||||||||||||||
0-3 | 3-6 | 6-12 | 1-3 | Over 3 | ||||||||||||||||||||
Months | Months | Months | Years | Years | Total | |||||||||||||||||||
(In millions of US$, except percentages) | ||||||||||||||||||||||||
Interest-earning assets | $ | 11,628 | $ | 2,876 | $ | 1,512 | $ | 1,608 | $ | 1,675 | $ | 19,298 | ||||||||||||
Interest-bearing Liabilities | 9,735 | 3,031 | 2,472 | 3,189 | 2,085 | 20,514 | ||||||||||||||||||
Sensitivity gap | 1,893 | (156 | ) | (960 | ) | (1,581 | ) | (410 | ) | (1,215 | ) | |||||||||||||
Cumulative gap | 1,893 | 1,737 | 776 | (805 | ) | (1,215 | ) | (1,215 | ) | |||||||||||||||
% of total assets | 9.81 | % | 9.00 | % | 4.02 | % | (4.17 | )% | (6.30 | )% | (6.30 | )% |
(1) | Includes merchant banking accounts |
Duration as of | ||||
December 31, | ||||
2009(1) | ||||
(In months) | ||||
Interest-earning assets | 9.22 | |||
Interest-bearing liabilities | 9.01 | |||
Gap | 0.41 |
Market Value as of December 31, 2009(1) | ||||||||||||
Actual | 1% Point Increase | Changes | ||||||||||
(In billions of Won) | ||||||||||||
Interest-earning assets | 170,081 | 168,893 | (1,188 | ) | ||||||||
Interest-bearing liabilities | 166,467 | 165,313 | (1,154 | ) | ||||||||
Gap | 3,614 | 3,580 | (34 | ) |
(1) | Includes merchant banking accounts and derivatives for the purpose of hedging. |
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Simulated Net Interest Income for 2009 | ||||||||||||||||||||||||||||
(For Non-Trading Won-Denominated Bank Accounts)(1) | ||||||||||||||||||||||||||||
Change in Net | Change in Net | |||||||||||||||||||||||||||
Assumed Interest Rates | Interest Income | Interest Income | ||||||||||||||||||||||||||
% | % | |||||||||||||||||||||||||||
Amount | Change | Amount | Change | |||||||||||||||||||||||||
1% | 1% | (1% | (1% | (1% | (1% | |||||||||||||||||||||||
No | Point | Point | Point | Point | Point | Point | ||||||||||||||||||||||
Change | Increase | Decrease | Increase) | Increase) | Decrease) | Decrease) | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||
Simulated interest income | 9,463 | 10,556 | 8,370 | 1,093 | 11.55 | % | (1,093 | ) | (11.55 | )% | ||||||||||||||||||
Simulated interest expense | 5,507 | 6,318 | 4,696 | 811 | 14.73 | % | (811 | ) | (14.73 | )% | ||||||||||||||||||
Net interest income | 3,956 | 4,237 | 3,675 | 281 | 7.11 | % | (281 | ) | (7.11 | )% |
(1) | Excludes Merchant Banking account and derivatives for the purpose of hedging. |
VaR for the Year 2009(1) | ||||||||||||||||
Average | Minimum | Maximum | As of December 31 | |||||||||||||
(In billions of Won) | ||||||||||||||||
Interest rate mismatch — nontrading assets and liabilities | 279 | 238 | 311 | 279 |
(1) | One-year VaR results with a 99% confidence level. |
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VaR for the Year 2009(1) | ||||||||||||||||
As of | ||||||||||||||||
Average | Minimum | Maximum | December 31 | |||||||||||||
(In billions of Won) | ||||||||||||||||
Listed equities | 9.4 | 3.8 | 26.4 | 3.8 |
(1) | Ten-day VaR results with a 99.9% confidence level. |
• | maintain an appropriate level of liquidity risk through liquidity risk management based on liquidity gap ordebt-to-equity ratio at each maturity date; | |
• | assess and monitor net cash flows by currency and by maturity and continuously evaluate available sources of funds and possibility of disposal of any liquid assets; | |
• | diversify sources and uses of funds by product and by maturity to prevent excessive concentration in certain periods or products; and | |
• | prepare contingency plans to cope with liquidity crisis. |
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As of December 31, 2009 | ||||||||||||||||||||||||||||||||
Sub- | ||||||||||||||||||||||||||||||||
0-1 | 1-3 | 3-6 | 6-12 | 1-3 | Over | Standard | ||||||||||||||||||||||||||
Won-Denominated Accounts | Months | Months | Months | Month | Years | 3 Years | or Below | Total | ||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||
Assets: | 59,891 | 26,741 | 26,503 | 39,473 | 25,666 | 43,957 | 1,320 | 223,552 | ||||||||||||||||||||||||
Liabilities: | 46,440 | 21,397 | 16,365 | 53,842 | 16,606 | 50,779 | 205,403 | |||||||||||||||||||||||||
For one month or less: | ||||||||||||||||||||||||||||||||
Liquidity gap | 13,451 | |||||||||||||||||||||||||||||||
Liquidity ratio(1) | 128.96 | % | ||||||||||||||||||||||||||||||
Limit | 100.00 | % |
banking accounts)
As of December 31, 2009 | ||||||||||||||||||||||||||||||||
Sub- | ||||||||||||||||||||||||||||||||
Foreign Currencies | 7 Days or | 7 Days- | 3-6 | 6-12 | Over | Standard | ||||||||||||||||||||||||||
Denominated Accounts: | Less | 1 Months | 3 Months | Months | Months | 1 Year | or Below | Total | ||||||||||||||||||||||||
(In millions of US$, except percentages) | ||||||||||||||||||||||||||||||||
Assets: | $ | 9,791 | $ | 9,289 | $ | 13,826 | $ | 6,148 | $ | 6,059 | $ | 9,990 | $ | 152 | $ | 55,256 | ||||||||||||||||
Liabilities | 7,789 | 8,807 | 12,516 | 6,691 | 6,159 | 14,391 | 56,354 | |||||||||||||||||||||||||
For three months or less: | ||||||||||||||||||||||||||||||||
Assets | 32,907 | |||||||||||||||||||||||||||||||
Liabilities | 29,113 | |||||||||||||||||||||||||||||||
Liquidity ratio | 113.03 | % | ||||||||||||||||||||||||||||||
Limit | 85.00 | % |
(1) | In October 31, 2008, the criterion for Won-denominated liquidity ratio was changed from three months of residual maturity to one month of residual maturity. |
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7 Days or | 1 Months or | 3 Months or | 6 Months or | 1 Year or | Over | |||||||||||||||||||||||
Won-Denominated Accounts | Less | Less | Less | Less | Less | 1 Year | Total | |||||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||||||
Assets | 1,647.24 | 7,294.93 | 10,780.70 | 12,247.84 | 14,416.72 | 3,558.80 | 17,975.52 | |||||||||||||||||||||
Liabilities | 447.95 | 1,983.77 | 2,684.70 | 3,443.44 | 4,857.58 | 6,302.77 | 11,160.36 | |||||||||||||||||||||
Liquidity ratio | 401.56 | % |
• | indices that reflect the market movements such as interest rates and stock prices; |
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• | indices that reflect financial market psychology such as the size of money market funds; and | |
• | indices that reflect our internal financial condition. |
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• | general audits, including full-scale audits performed annually for the overall operations, sectional audits of selected operations performed when necessary, and periodic and irregular spot audits; | |
• | special audits, performed when the Audit Committee or standing auditor deems it necessary or pursuant to requests by the chief executive officer or supervisory authorities such as the Financial Supervisory Service; | |
• | day-to-day audits, performed by the standing auditor for material transactions or operations that are subject to approval by the heads of Shinhan Bank’s operational departments or senior executives; | |
• | real-time monitoring audits, performed by the computerized audit system to identify any irregular transactions and take any necessary actions; and | |
• | self-audits as a self-check by each operational department to ensure its compliance with our business regulations and policies, which include daily audits, monthly audits and special audits. |
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• | financially supporting its subsidiaries and the subsidiaries of its subsidiaries (the “direct and indirect subsidiaries”); | |
• | raising capital necessary for the investment in subsidiaries or providing financial support to its direct and indirect subsidiaries; | |
• | supporting the business of its direct and indirect subsidiaries for the joint development and marketing of new product and the joint utilization of facilities or IT systems; and | |
• | pursuing any other activities exempted from authorization, permission or approval under the applicable laws and regulations. |
• | when there is a change of its officers; | |
• | when there is a change of its largest shareholder; | |
• | when there is a change of principal shareholders of a bank holding company; | |
• | when the shareholding of the largest shareholder or a principal shareholder as prescribed under the Financial Holding Companies Act or a person who is in a special relationship with such largest or principal shareholder (as defined under the Presidential Decree of the Financial Holding Companies Act) changes by 1% or more of the total issued and outstanding voting shares of the financial holding company; | |
• | when there is a change of its name; | |
• | when there is a cause for dissolution; and | |
• | when it or its subsidiary ceases to control any of its respective direct and indirect subsidiaries by disposing of the shares of such direct and indirect subsidiaries. |
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• | maintain a Won liquidity ratio (defined as Won assets due within three months, including marketable securities, divided by Won liabilities due within three months) of not less than 100%; | |
• | maintain a foreign currency liquidity ratio (defined as foreign currency liquid assets due within three months divided by foreign currency liabilities due within three months) of not less than 80% except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%; | |
• | maintain a ratio of foreign currency liquid assets due within seven days less foreign currency liabilities due within seven days divided by total foreign currency assets of not less than 0%, except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%; and | |
• | maintain a ratio of foreign currency liquid assets due within a month less foreign currency liabilities due within a month divided by total foreign currency assets of not less than negative 10% except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%. |
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• | dealing (trading and underwriting of “financial investment products” (as defined below)); | |
• | brokerage (brokerage of financial investment products); | |
• | collective investment (establishment of collective investment schemes and the management thereof); | |
• | investment advice; | |
• | discretionary investment management; and | |
• | trusts (together with the five business set forth above, the “Financial Investment Businesses”). |
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• | capital increases or reductions; | |
• | stock cancellations or consolidations; | |
• | transfers of a part or all of business; | |
• | sale of assets; | |
• | closures of branch offices; | |
• | mergers or becoming a subsidiary under the Financial Holding Companies Act of a financial holding company; | |
• | acquisition of a bank by a third party; | |
• | suspensions of a part or all of business operation; or | |
• | assignments of contractual rights and obligations relating to financial transactions. |
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• | 0.85% of normal credits (or 0.9% in the case of normal credits comprising loans to certain industries including construction, retail and wholesale sales, accommodations, restaurant, real estate and lease, and 1.0% in the case of normal credits comprising loans to individuals and households and 1.5% in the case of normal credits comprising outstanding credit card receivables and card loans); | |
• | 7% of precautionary credits (or 10% in the case of precautionary credits comprising loans to individuals and households, and 15% in the case of precautionary credits comprising outstanding credit card receivables and card loans); | |
• | 20% of substandard credits; | |
• | 50% of doubtful credits (or 55% in the case of doubtful credits comprising loans to individuals and households, and 60% in the case of doubtful credits comprising outstanding credit card receivables and card loans); and | |
• | 100% of estimated loss credits. |
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• | a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) in excess of 10% (or in the case of regional banks, 15%) in the aggregate of the bank’s total issued and outstanding voting shares; or | |
• | a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) more than 4% in the aggregate of the total issued and outstanding voting shares of a bank (other than a regional bank), where such shareholder is the largest shareholder or is able to actually control the major business affairs of the bank, for example, through appointment and dismissal of the chief executive officer or of the majority of the executives. |
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• | loans bearing no profit made to a single business group in an amount exceeding 10% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month (where the loan exposure to such borrower is calculated as the sum of substandard credits, doubtful credits and estimated loss credits) except where the loan exposure to a single business group is not more than | |
• | occurrence of any financial event involving embezzlement, malfeasance or misappropriation of funds the amount of which exceeds 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions), unless the bank has lost or expects to lose not more than | |
• | any loss due to court judgments or similar decisions in civil proceedings in an amount exceeding 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month except where the loss is not more than | |
• | any event which can cause a material change in the financial status, such as resolutions for a capital increase or reduction, issuance of convertible bonds, bonds with warrants, exchangeable bonds, or depositary receipts or cancellation of shares with profit; |
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• | any event which can cause a material change in a bank’s management, such as knowledge of a proposal or confirmation of a litigation that can have a material effect on the management of the bank such as litigation regarding the effectiveness of securities issuance or amendments of rights thereunder, appointment or dismissal of an officer, or a change in bank’s largest shareholder, major shareholder, affiliate company, or a resolution for change of business objective; | |
• | any event which can cause a material change in the bank’s property, such as a natural disaster which causes damages in an amount exceeding 5% (or 2.5% in the case of a “Large Listed Company,” which refers to a company that has total assets as of the end of the most recent fiscal year of | |
• | any event which can cause a material change in the bank’s investment, such as investment in other companies in an amount exceeding 5% (or 2.5% in the case of a Large Listed Company) or more of the bank’s Tier I and Tier II capital; | |
• | any event which can cause a material change in the bank’s profit or loss; and | |
• | any other events which can have material effects on the bank’s operation, including, among others, payment of cash dividend, acquisition or disposal of treasury shares, or distribution of stock option. |
• | loans made for the purpose of speculation in commodities or securities; | |
• | loans made directly or indirectly on the pledge of a bank’s own shares, or on the pledge of shares in excess of 20% of the issued and outstanding shares of any other corporation (subject to certain exceptions with respect to financing for infrastructure projects); | |
• | loans made directly or indirectly to enable a natural or a legal person to buy the bank’s own shares; | |
• | loans made directly or indirectly to finance political campaigns and other related activities; and | |
• | loans made to any of the bank’s officers or employees other than de minimis loans of up to (1) |
• | the company issuing such shares is engaged in a business that falls under the category of financial businesses set forth by the Financial Services Commission (including private equity funds); or | |
• | the acquisition of shares by the bank is necessary for corporate restructuring of such company and is approved by the Financial Services Commission. |
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• | the total investment in companies in which the bank owns more than 15% of the outstanding shares with voting rights does not exceed 15% of the sum of Tier I and Tier II capital (less any capital deductions); or | |
• | the acquisition satisfies the requirements determined by the Financial Services Commission. |
• | up to 10% of a national bank’s outstanding voting shares with the approval of the Financial Services Commission under the condition that such non-financial group companies will not exercise voting rights in respect of such shares in excess of the 4% limit; and | |
• | in the event that a foreigner, as defined in the Foreign Investment Promotion Act, owns in excess of 4% of a national bank’s outstanding voting shares, up to 10% of such bank’s outstanding voting shares without the approval of the Financial Services Commission, and in excess of 10%, 25% or 33% of such bank’s outstanding voting shares, with the approval of the Financial Services Commission, up to the number of shares owned by such foreigner. |
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• | under the Banking Act, assets accepted in trust by a bank in Korea must be segregated from its other assets in the accounts of such bank; accordingly, banks engaged in the banking and trust businesses must maintain two separate accounts, the “banking accounts” and the “trust accounts,” and two separate sets of records which provide details of their banking and trust businesses, respectively; and | |
• | assets comprising the trust accounts are not available to depositors or other general creditors of such bank in the event the trustee is liquidated or is wound up. |
• | prohibitions against officers, directors and employees of one particular business operation from serving as an officer, director and employee in another business operation, except where an officer or a director (1) serving in two or more business operations with no significant conflict of interest in accordance with the Presidential Decree on the Financial Investment Services and Capital Markets Act or (2) serving in a trustee |
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business or a custodian business and simultaneously serving in a general office administrator business in accordance with the Financial Investment Services and Capital Markets Act; |
• | prohibitions against the joint use or sharing of computer equipment or office equipment; and | |
• | prohibitions against the sharing of information by and among officers, directors and employees engaged in the different business operations. |
• | acting as trustee of an investment trust managed by such bank; | |
• | purchasing with such bank’s own funds beneficiary certificates of an investment trust managed by such bank; | |
• | using in its sales activities information relating to the trust property of an investment trust managed by such bank; | |
• | selling through a financial institution established under the Banking Act beneficiary certificates of an investment trust managed by such bank; | |
• | establishing a short-term financial indirect investment vehicle; and | |
• | establishing a mutual fund. |
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• | set maximum limits for cash advances on credit cards; | |
• | use restrictions on debit cards with respect to per day or per transaction usage; or | |
• | aggregate issuance limits and maximum limits on the amount per card on pre-paid cards. |
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• | exerting violence or threat of violence; | |
• | informing a Related Party (a guarantor of the debtor, blood relative or fiancée of the debtor, a person living in the same household as the debtor or a person working in the same workplace as the debtor) of the debtor’s liability without just cause; | |
• | providing false information relating to the debtor’s obligation to the debtor or his or her Related Party; | |
• | threatening to sue or suing the debtor for fraud despite lack of affirmative evidence to establish that the debtor has submitted forged or false documentation with respect tohis/her capacity to make payment; | |
• | visiting or telephoning the debtor during late hours between 9:00 p.m. and 8:00 a.m.; and | |
• | utilizing other uncustomary methods to collect the receivables thereby invading the privacy or the peacefulness in the workplace of the debtor or his or her Related Party. |
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• | restrictions on the holdings by a securities company of securities issued by another company which is the largest shareholder or the major shareholder (each as defined under the Financial Investment Services and Capital Markets Act) of such securities company; and | |
• | restrictions on providing money or credit to the largest shareholder (including specially-related persons of such shareholder), major shareholders, officers and specially-related persons of the securities company. |
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* | Insurance Risk, Interest Risk, Credit Risk, Market Risk and Operation Risk are defined under the Regulation on Supervision of Insurance Business. |
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• | subject to certain exceptions, owning precious metals, antiques, paintings and writings; | |
• | owning any real estate (excluding any real estate owned as a result of enforcing their own security interest) other than real estate for conducting its business as designated by the Presidential Decree. In any case, the total amount of real estate owned by an insurance company must not exceed 15% of its Total Assets; | |
• | loans made for the purpose of speculation in commodities or securities; | |
• | loans made directly or indirectly to enable a natural or legal person to buy their own shares; | |
• | loans made directly or indirectly to finance political campaigns and other similar activities; and | |
• | loans made to any of the insurance company’s officers or employees other than loans based on insurance policy or de minimis loans of up to (1) |
• | with respect to holding unlisted stock, 10% of its Total Assets; | |
• | with respect to holding foreign currency under the Foreign Exchange Transaction Act or owning offshore real estate, 30% of its Total Assets; and | |
• | with respect to the sum of margins for a futures exchange designated by the Presidential Decree or a foreign futures exchange, 3% of its Total Assets. |
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ITEM 4.C. | Organizational Structure |
• | Shinhan Asia Limited (incorporated in Hong Kong); | |
• | Shinhan Bank America (incorporated in the United States); | |
• | Shinhan Bank Canada (incorporated in Canada); | |
• | Shinhan Bank (China) Limited (incorporated in the People’s Republic of China); | |
• | Shinhan Bank Europe GmbH (incorporated in Germany); | |
• | Shinhan Bank Kazakhstan Limited (incorporated in Kazakhstan); | |
• | Shinhan Bank Japan (incorporated in Japan); | |
• | Shinhan Khmer Bank Limited (incorporated in Cambodia); | |
• | Shinhan Vina Bank (incorporated in Vietnam); | |
• | Shinhan Vietnam Bank (incorporated in Vietnam); | |
• | Shinhan Investment Corp., Europe Ltd. (incorporated in the United Kingdom); | |
• | Shinhan Investment Corp., USA Inc. (incorporated in the United States); and | |
• | Shinhan Investment Corp., Asia Ltd. (incorporated in Hong Kong). |
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ITEM 4.D. | Properties |
Area | ||||||||||
(In Square Meters) | ||||||||||
Site | ||||||||||
Type of Facility | Location | Building | (If Different) | |||||||
Registered office and corporate headquarters | 120, 2-Ga, Taepyung-Ro, Jung-Gu, Seoul 100-102, Korea | 59,519 | 5,418 | |||||||
Shinhan Investment Corp. | 23-2, Youido-Dong, Youngdungpo-Gu, Seoul, Korea 150-312 | 70,170 | 4,765 | |||||||
Shinhan Centennial Building | 117, Samgak-Dong, Jung-Gu, Seoul, Korea | 19,697 | 1,389 | |||||||
Shinhan Bank Gwanggyo Branch | 14, 1-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea | 16,727 | 6,783 | |||||||
Shinhan Myongdong Branch | 53-1, 1-Ga, Myong-Dong, Jung-Gu, Seoul, Korea | 8,936 | 1,014 | |||||||
Shinhan Youngdungpo Branch | 57, 4-Ga, Youngdungpo-Dong, Youngdungpo-Gu, Seoul, Korea | 6,171 | 1,983 | |||||||
Shinhan Back Office Support Center | 781, Janghang-Dong, Ilsan-Gu, Goyang-Si, Kyunggi Province, Korea | 24,496 | 5,856 | |||||||
Shinhan Bank Back Office and Call Center | 731, Yoksam-Dong, Kangnam-Gu, Seoul, Korea | 23,374 | 7,964 | |||||||
Shinhan Bank Back Office and Storage Center | 1704-Ga, Yongam-Dong, Sangdang-Gu, Cheongju-Si, Chungcheongbuk-Do, Korea | 5,756 | 6,398 | |||||||
Shinhan Card Yoksam-Dong Building | 790-5, Yoksam-Dong, Kangnam-Gu, Seoul, Korea | 7,348 | 1,185 |
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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ITEM 5.A. | Operating Results |
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• | Banking. In recent years, commercial banks in Korea, including Shinhan Bank, have significantly expanded lending in the areas of home and mortgage loans to individuals and loans to small- to medium-enterprises. The global economic and financial crisis significantly increased the credit risk of such loans, which represents Shinhan Bank’s core lending activities, as well as the market risks of its new |
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product offerings such as structured derivative products. The recent global crisis also increased the funding costs of foreign-denominated as well as Won-denominated borrowings, and has significantly affected liquidity in general, notwithstanding the active liquidity support provided by the Bank of Korea. Shinhan Bank’s deposit products increased in volume in the second half of 2008 due to the downturn in the Korean stock market, but the reduction in market interest rates may negatively impact the continuing popularity of our deposit products compared to other higher-yielding investment alternatives. We expect that the results of operation for our banking business will, at least in the short term, depend primarily on the strength of risk management, improvement of funding and the net interest margin and cost reduction, rather than a pricing competition among the commercial banks as was the case in the recent past, given the anticipated increases in capital and liquidity requirements by the Government in light of the recent global financial crisis. |
• | Credit cards. In large part due to growing signs of recovery from the recent global financial crisis, Shinhan Card experienced an improvement in asset quality and lower funding costs starting in the second half of 2009. However, the credit card industry in Korea is showing signs of maturation while competition remains intense and may further intensify following the introduction and greater acceptance of mobile phone payments in substitution of credit card payments. | |
• | Securities brokerage. The securities brokerage industry in Korea has faced intensified competition due to the lowered barriers of entry among different securities and investment businesses as the result of the Financial Investment Services and Capital Markets Act enacted in February 2009. If the Korean stock market were to suffer another prolonged decline as a result of another global economic and financial crisis, we expect that the results of operation of our securities brokerage business will be negatively impacted. | |
• | Life insurance. While the life insurance industry in Korea has grown substantially in recent years due to the popularity of variable insurance products whose payout is tied to the performance of the stock market, we believe that a downturn in the stock market as well as a reduction in disposable income as a result of another onset of economic difficulties in Korea may lead to increased non-payment or delayed payments of insurance premiums or termination of existing insurance contracts. Further, if the low-interest environment continues, it may create difficulties for insurance companies, including our insurance subsidiaries, in finding alternative investment sources to operate the funds received in the form of insurance premiums. |
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Certificate | ||||||||||||
Corporate | Treasury | of Deposit | ||||||||||
Bond Rates(1) | Bond Rates(2) | Rates(3) | ||||||||||
June 30, 2005 | 4.41 | 4.02 | 3.54 | |||||||||
December 31, 2005 | 5.52 | 5.08 | 4.09 | |||||||||
June 30, 2006 | 5.20 | 4.92 | 4.59 | |||||||||
December 31, 2006 | 5.29 | 4.92 | 4.86 | |||||||||
June 30, 2007 | 5.66 | 5.26 | 5.00 | |||||||||
December 31, 2007 | 6.77 | 5.74 | 5.82 | |||||||||
June 30, 2008 | 6.88 | 5.90 | 5.37 | |||||||||
December 31, 2008 | 7.72 | 3.41 | 3.93 | |||||||||
June 30, 2009 | 5.39 | 4.16 | 2.41 | |||||||||
December 31, 2009 | 5.53 | 4.41 | 2.86 |
(1) | Measured by the yield on three-year AA- rated corporate bonds. | |
(2) | Measured by the yield on three-year treasury bonds. | |
(3) | Measured by the yield on certificates of deposit (with maturity of 91 days). |
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2007 | ||||
(In billions of Won) | ||||
Cash and cash equivalents | 315 | |||
Deposits | 256 | |||
Call loans | 512 | |||
Trading assets | 2 | |||
Securities | 44 | |||
Loans, net of allowance for loan losses | 9,902 | |||
Premises and equipment, net | 129 | |||
Other assets | 719 | |||
Total assets | 11,879 | |||
Borrowings and debentures | 6,970 | |||
Other liabilities | 1,381 | |||
Total liabilities | 8,351 | |||
Fair value of net assets of LG Card | 3,528 | |||
2007 | ||||
(In billions of Won) | ||||
Cash paid | 6,707 | |||
Stock exchanged | 815 | |||
Direct acquisition costs | 8 | |||
Total purchase price | 7,530 | |||
Allocation of purchase price: | ||||
Fair value of net assets of LG Card (excluding effect of CCI and deferred taxes) | 3,831 | |||
Credit card relationship intangible asset(1) | 1,064 | |||
Deferred tax | (303 | ) | ||
Goodwill | 2,938 | |||
Total purchase price | 7,530 | |||
(1) | Credit card relationship intangible reflects the estimated fair value of the credit card relationships acquired from LG Card from which we expect to derive future benefits over the estimated life of such relationships. The customer relationship intangible is amortized over its estimated useful life on asum-of-the years’-digits basis. The estimated weighted average life of the customer relationship intangible is approximately six years. The fair value of this asset was based principally upon the estimates of (i) the profitability of the acquired accounts and (ii) the projected run-off of the acquired accounts. |
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• | loans classified as “substandard” or below according to the asset classification guidelines of the Financial Services Commission; | |
• | loans that are more than 90 days past due; and | |
• | loans which are “troubled debt restructuring” as defined under U.S. GAAP. |
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||||||||||||||||||
Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | ||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | 3,412 | 150 | 4.40 | % | 5,458 | 282 | 5.17 | % | 7,114 | 191 | 2.68 | % | ||||||||||||||||||||||||
Call loans and securities purchased under resale agreements | 2,506 | 111 | 4.43 | 2,862 | 99 | 3.46 | 5,600 | 102 | 1.82 | |||||||||||||||||||||||||||
Trading assets | 7,432 | 300 | 4.04 | 8,726 | 469 | 5.37 | 8,035 | 227 | 2.83 | |||||||||||||||||||||||||||
Securities(2) | 28,388 | 1,403 | 4.94 | 32,837 | 1,775 | 5.41 | 38,433 | 1,852 | 4.82 | |||||||||||||||||||||||||||
Loans(3): | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 47,492 | 3,071 | 6.47 | 56,002 | 3,778 | 6.75 | 54,838 | 3,186 | 5.81 | |||||||||||||||||||||||||||
Other commercial | 27,436 | 1,909 | 6.96 | 29,929 | 2,236 | 7.47 | 35,171 | 1,923 | 5.47 | |||||||||||||||||||||||||||
Lease financing | 1,201 | 69 | 5.66 | 1,487 | 94 | 6.32 | 1,592 | 100 | 6.28 | |||||||||||||||||||||||||||
Total corporate | 76,129 | 5,049 | 6.63 | 87,418 | 6,108 | 6.99 | 91,601 | 5,209 | 5.69 | |||||||||||||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||||||||||||||||||
Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | ||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
Mortgage and home equity | 30,605 | 1,938 | 6.33 | 33,579 | 2,314 | 6.89 | 37,991 | 1,775 | 4.67 | |||||||||||||||||||||||||||
Credit cards | 12,555 | 1,517 | 12.08 | 14,458 | 1,765 | 12.21 | 13,585 | 1,568 | 11.54 | |||||||||||||||||||||||||||
Other consumer | 22,625 | 1,681 | 7.43 | 25,803 | 1,922 | 7.45 | 23,869 | 1,673 | 7.01 | |||||||||||||||||||||||||||
Total consumer | 65,785 | 5,136 | 7.81 | 73,840 | 6,001 | 8.13 | 75,445 | 5,016 | 6.65 | |||||||||||||||||||||||||||
Total loans | 141,914 | 10,185 | 7.18 | 161,258 | 12,109 | 7.51 | 167,046 | 10,225 | 6.12 | |||||||||||||||||||||||||||
Other interest-earning assets | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Total interest-earning assets(4) | 183,652 | 12,149 | 6.62 | % | 211,141 | 14,734 | 6.98 | % | 226,228 | 12,597 | 5.57 | % | ||||||||||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 4,585 | — | 4,546 | — | 5,132 | — | — | |||||||||||||||||||||||||||||
Other assets | 24,716 | — | 32,514 | — | 35,381 | — | — | |||||||||||||||||||||||||||||
Total assets | 212,953 | 12,149 | 248,201 | 14,734 | 266,741 | 12,597 | ||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||
Interest-bearing demand deposits | 8,455 | 35 | 0.41 | % | 5,786 | 45 | 0.78 | % | 7,399 | 33 | 0.45 | % | ||||||||||||||||||||||||
Savings deposits | 30,583 | 626 | 2.05 | 30,877 | 716 | 2.32 | 36,876 | 449 | 1.22 | |||||||||||||||||||||||||||
Certificates of deposit | 15,475 | 808 | 5.22 | 16,152 | 959 | 5.94 | 11,802 | 647 | 5.48 | |||||||||||||||||||||||||||
Other time deposits | 44,397 | 2,020 | 4.55 | 60,437 | 2,983 | 4.94 | 77,961 | 3,052 | 3.91 | |||||||||||||||||||||||||||
Mutual installment deposits | 567 | 22 | 3.88 | 291 | 11 | 3.78 | 189 | 7 | 3.70 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 99,477 | 3,511 | 3.53 | 113,543 | 4,714 | 4.15 | 134,227 | 4,188 | 3.12 | |||||||||||||||||||||||||||
Short-term borrowings (including call money) | 16,810 | 702 | 4.18 | 21,713 | 916 | 4.22 | 17,180 | 580 | 3.38 | |||||||||||||||||||||||||||
Secured borrowings | 10,635 | 510 | 4.80 | 9,473 | 563 | 5.94 | 7,995 | 331 | 4.14 | |||||||||||||||||||||||||||
Long-term debt | 42,316 | 2,256 | 5.33 | 49,876 | 2,762 | 5.54 | 46,847 | 2,277 | 4.86 | |||||||||||||||||||||||||||
Other interest-bearing liabilities | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Total interest bearing liabilities | 169,238 | 6,979 | 4.12 | % | 194,605 | 8,955 | 4.60 | % | 206,249 | 7,376 | 3.58 | % | ||||||||||||||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Non-interest-bearing deposits | 2,736 | — | 2,615 | — | 2,439 | — | ||||||||||||||||||||||||||||||
Trading liabilities | 1,671 | — | 6,710 | — | 8,543 | — | ||||||||||||||||||||||||||||||
Bank acceptance outstanding | 339 | — | 401 | — | 2,418 | — | ||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 18,939 | — | 22,847 | — | 25,019 | — | ||||||||||||||||||||||||||||||
Total Group stockholders’ equity | 19,842 | — | 20,761 | — | 21,751 | — | ||||||||||||||||||||||||||||||
Noncontrolling interest | 188 | 262 | — | 322 | — | |||||||||||||||||||||||||||||||
Total liabilities and equity | 212,953 | 6,979 | 248,201 | 8,955 | 266,741 | 7,376 | ||||||||||||||||||||||||||||||
Net interest spread(4) | 2.49 | % | 2.38 | % | 1.99 | % | ||||||||||||||||||||||||||||||
Net interest margin(5) | 2.82 | % | 2.74 | % | 2.31 | % | ||||||||||||||||||||||||||||||
Average asset liability ratio(6) | 108.52 | % | 108.50 | % | 109.69 | % |
(1) | Average balances are based on (a) daily balances for Shinhan Bank and Jeju Bank and (b) quarterly balances for other subsidiaries. |
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(2) | Represents the average balance and yield on securities are based on amortized cost. The yield on theavailable-for-sale portfolio is based on average historical cost balances, therefore, the yield information does not give effect to changes in fair value that are reflected as a component of stockholders’ equity. | |
(3) | Non-accruing loans are included in the respective average loan balances. Income on such non-accruing loans is no longer recognized from the date the loan is placed on nonaccrual status. We reclassify loans as accruing when interest (including default interest) and principal payments are current. | |
(4) | Represents the difference between the average rate of interest earned on interest-earning assets and the average rate of interest paid on interest-bearing liabilities. | |
(5) | Represents the ratio of net interest income to average interest-earning assets. | |
(6) | Represents the ratio of average interest-earning assets to average interest-bearing liabilities. |
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From 2007 to 2008 | ||||||||||||
Interest Increase (Decrease) | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In billions of Won) | ||||||||||||
Increase (decrease) in interest income | ||||||||||||
Interest-bearing deposits | 102 | 30 | 132 | |||||||||
Call loans and securities purchased under resale agreements | 14 | (26 | ) | (12 | ) | |||||||
Trading assets | 58 | 111 | 169 | |||||||||
Securities | 233 | 139 | 372 | |||||||||
Loans: | ||||||||||||
Commercial and industrial | 569 | 138 | 707 | |||||||||
Other commercial | 181 | 146 | 327 | |||||||||
Lease financing | 17 | 8 | 25 | |||||||||
Total corporate | 767 | 292 | 1,059 | |||||||||
Mortgage and home equity | 197 | 179 | 376 | |||||||||
Credit cards | 232 | 16 | 248 | |||||||||
Other consumer | 237 | 4 | 241 | |||||||||
Total consumer | 666 | 199 | 865 | |||||||||
Total loans | 1,433 | 491 | 1,924 | |||||||||
Other interest-earning assets | — | — | — | |||||||||
Total interest income | 1,840 | 745 | 2,585 | |||||||||
Increase (decrease) in interest expense | ||||||||||||
Interest bearing deposits: | ||||||||||||
Demand deposits | (14 | ) | 24 | 10 | ||||||||
Savings deposits | 6 | 84 | 90 | |||||||||
Certificates of deposit | 37 | 114 | 151 | |||||||||
Other time deposits | 780 | 183 | 963 | |||||||||
Mutual installment deposits | (10 | ) | (1 | ) | (11 | ) | ||||||
Total interest-bearing deposits | 799 | 404 | 1,203 | |||||||||
Short-term borrowings | 207 | 7 | 214 | |||||||||
Secured borrowings | (60 | ) | 113 | 53 | ||||||||
Long-term debt | 416 | 90 | 506 | |||||||||
Other interest-bearing liabilities | — | — | — | |||||||||
Total interest expense | 1,362 | 614 | 1,976 | |||||||||
Net increase (decrease) in net interest income | 478 | 131 | 609 | |||||||||
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From 2008 to 2009 | ||||||||||||
Interest Increase (Decrease) | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In billions of Won) | ||||||||||||
Increase (decrease) in interest income | ||||||||||||
Interest-bearing deposits | 70 | (161 | ) | (91 | ) | |||||||
Call loans and securities purchased under resale agreements | 65 | (62 | ) | 3 | ||||||||
Trading assets | (35 | ) | (207 | ) | (242 | ) | ||||||
Securities | 282 | (205 | ) | 77 | ||||||||
Loans: | ||||||||||||
Commercial and industrial | (77 | ) | (515 | ) | (592 | ) | ||||||
Other commercial | 350 | (663 | ) | (313 | ) | |||||||
Lease financing | 7 | (1 | ) | 6 | ||||||||
Total corporate | 280 | (1,179 | ) | (899 | ) | |||||||
Mortgage and home equity | 276 | (815 | ) | (539 | ) | |||||||
Credit cards | (104 | ) | (93 | ) | (197 | ) | ||||||
Other consumer | (139 | ) | (110 | ) | (249 | ) | ||||||
Total consumer | 33 | (1,018 | ) | (985 | ) | |||||||
Total loans | 313 | (2,197 | ) | (1,884 | ) | |||||||
Other interest-earning assets | — | — | — | |||||||||
Total interest income | 695 | (2,832 | ) | (2,137 | ) | |||||||
Increase (decrease) in interest expense | ||||||||||||
Interest bearing deposits: | ||||||||||||
Demand deposits | 10 | (22 | ) | (12 | ) | |||||||
Savings deposits | 120 | (387 | ) | (267 | ) | |||||||
Certificates of deposit | (243 | ) | (69 | ) | (312 | ) | ||||||
Other time deposits | 761 | (692 | ) | 69 | ||||||||
Mutual installment deposits | (4 | ) | — | (4 | ) | |||||||
Total interest-bearing deposits | 644 | (1,170 | ) | (526 | ) | |||||||
Short-term borrowings | (172 | ) | (164 | ) | (336 | ) | ||||||
Secured borrowings | (79 | ) | (153 | ) | (232 | ) | ||||||
Long-term debt | (161 | ) | (324 | ) | (485 | ) | ||||||
Other interest-bearing liabilities | — | — | — | |||||||||
Total interest expense | 232 | (1,811 | ) | (1,579 | ) | |||||||
Net increase (decrease) in net interest income | 463 | (1,021 | ) | (558 | ) | |||||||
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Year Ended December 31, | ||||||||||||
2008 | 2009 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Interest and dividend income: | ||||||||||||
Interest and fees on loans | 12,109 | 10,225 | (15.6 | )% | ||||||||
Interest and dividends on securities | 1,775 | 1,852 | 4.3 | |||||||||
Trading assets | 469 | 227 | (51.6 | ) | ||||||||
Other interest income | 381 | 293 | (23.1 | ) | ||||||||
Total interest and dividend income | 14,734 | 12,597 | (14.5 | )% | ||||||||
Interest expense: | ||||||||||||
Interest on deposits | 4,714 | 4,188 | (11.2 | )% | ||||||||
Interest on short-term borrowings | 866 | 555 | (35.9 | ) | ||||||||
Interest on secured borrowings | 563 | 331 | (41.2 | ) | ||||||||
Interest on long-term debt | 2,762 | 2,277 | (17.6 | ) | ||||||||
Other interest expense | 50 | 25 | (50.0 | ) | ||||||||
Total interest expense | 8,955 | 7,376 | (17.6 | ) | ||||||||
Net interest income | 5,779 | 5,221 | (9.7 | )% | ||||||||
Net interest margin(1) | 2.74 | % | 2.31 | % |
(1) | Represents the ratio of net interest income to average interest-earning assets. See “— Average Balance Sheet and Volume and Rate Analysis — Average Balance Sheet and Related Interest.” |
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• | a 16.4% decrease in interest and fees on consumer loans from | |
• | a 15.7% decrease in interest and fees on commercial and industrial loans from | |
• | a 14.0% decrease in interest and fees on other commercial loans from | |
• | a 23.3% decrease in interest and fees on mortgage and home equity loans from | |
• | a 13.0% decrease in interest and fees on other consumer loans from |
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As of December 31, | ||||||||||||
2008 | 2009 | % Change | ||||||||||
(In billions of Won, except | ||||||||||||
percentages) | ||||||||||||
Total (reversal of) provision for loan losses (A): | ||||||||||||
Corporate | 1,288 | 1,477 | 14.7 | % | ||||||||
Mortgages and home equity | 8 | 1 | (87.5 | ) | ||||||||
Other consumer | (3 | ) | 189 | N/M | ||||||||
Credit cards | 26 | 84 | N/M | |||||||||
1,319 | 1,751 | 32.8 | % | |||||||||
Total (reversal of) provision for off-balance sheet credit instruments (B): | ||||||||||||
Guarantees and acceptances | 170 | 93 | (45.3 | )% | ||||||||
Unused portions of credit line | (52 | ) | 357 | N/M | ||||||||
118 | 450 | N/M | ||||||||||
Total provision for credit losses (A+B) | 1,437 | 2,201 | 53.2 | % | ||||||||
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As of December 31, | ||||||||||||
2008 | 2009 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Non interest income | ||||||||||||
Commissions and fees from non-trust management: | ||||||||||||
Brokerage fees and commissions(1) | 626 | 569 | (9.1 | )% | ||||||||
Other fees and commissions(2) | 1,969 | 2,132 | 8.3 | |||||||||
Net trust management fees(3) | 69 | 69 | — | |||||||||
Net trading profits | 584 | (517 | ) | N/M | ||||||||
Net gains (losses) on securities | (135 | ) | 308 | N/M | ||||||||
Gain on other investment | 317 | 268 | (15.5 | ) | ||||||||
Net gain (loss) on foreign exchange | (566 | ) | 956 | N/M | ||||||||
Insurance income | 1,329 | 1,229 | (7.5 | ) | ||||||||
Other | 379 | 671 | 77.0 | |||||||||
Total noninterest income | 4,572 | 5,685 | 24.3 | % | ||||||||
(1) | Consists of commissions, fees and markup on securities brokerage activities. | |
(2) | Includes commissions received on remittance, commissions received on imports and export letters of credit and commissions received from foreign exchange transactions. | |
(3) | Consists principally of fees from management of trust accounts in our banking operations. |
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Year Ended December 31, | ||||||||||||
2008 | 2009 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Employee compensation and other benefits | 1,817 | 2,000 | 10.1 | % | ||||||||
Depreciation and amortization | 871 | 714 | (18.0 | ) | ||||||||
General and administrative expenses | 882 | 868 | (1.6 | ) | ||||||||
Credit card fees | 700 | 742 | 6.0 | |||||||||
Provision (reversal) for other losses | (18 | ) | 166 | N/M | ||||||||
Insurance fees on deposits | 133 | 162 | 21.8 | |||||||||
Other fees and commission expenses | 422 | 454 | 7.6 | |||||||||
Taxes (except income taxes) | 179 | 143 | (20.1 | ) | ||||||||
Insurance operating expense | 1,038 | 1,456 | 40.3 | |||||||||
Other | 703 | 432 | (38.5 | ) | ||||||||
Total noninterest expenses | 6,727 | 7,137 | 6.1 | % | ||||||||
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Year Ended December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Interest and dividend income: | ||||||||||||
Interest and fees on loans | 10,185 | 12,109 | 18.9 | % | ||||||||
Interest and dividends on securities | 1,403 | 1,775 | 26.5 | |||||||||
Trading assets | 300 | 469 | 56.3 | |||||||||
Other interest income | 261 | 381 | 46.0 | |||||||||
Total interest and dividend income | 12,149 | 14,734 | 21.3 | % | ||||||||
Interest expense: | ||||||||||||
Interest on deposits | 3,511 | 4,714 | 34.3 | % | ||||||||
Interest on short-term borrowings | 660 | 866 | 31.2 | |||||||||
Interest on secured borrowings | 510 | 563 | 10.4 | |||||||||
Interest on long-term debt | 2,256 | 2,762 | 22.4 | |||||||||
Other interest expense | 42 | 50 | 19.0 | |||||||||
Total interest expense | 6,979 | 8,955 | 28.3 | |||||||||
Net interest income | 5,170 | 5,779 | 11.8 | % | ||||||||
Net interest margin(1) | 2.82 | % | 2.74 | % |
(1) | Represents the ratio of net interest income to average interest-earning assets. See “— Average Balance Sheet and Volume and Rate Analysis — Average Balance Sheet and Related Interest.” |
• | a 23.0% increase in interest and fees on commercial and industrial loans from | |
• | a 17.1% increase in interest and fees on other commercial loans from | |
• | a 19.4% increase in interest and fees on mortgage and home equity loans from | |
• | a 14.3% increase in interest and fees on other retail loans from |
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• | the increase in issuance of Won-denominated corporate debentures by Shinhan Financial Group to support the operations of Shinhan Bank and Shinhan Card; and |
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• | the increase in the use of corporate debentures (which generally bear higher interests but provide longer-term funding relative to deposit products) as Shinhan Bank’s funding source due to the faster growth in the volume of loans compared to deposits. |
As of December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Total (reversal of) provision for loan losses (A): | ||||||||||||
Corporate | 182 | 1,288 | N/M | |||||||||
Mortgages and home equity | (4 | ) | 8 | N/M | ||||||||
Other consumer | 14 | (3 | ) | N/M | ||||||||
Credit cards | (152 | ) | 26 | N/M | ||||||||
40 | 1,319 | N/M | ||||||||||
Total (reversal of) provision for off-balance sheet credit instruments (B): | ||||||||||||
Guarantees and acceptances | (12 | ) | 170 | N/M | ||||||||
Unused portions of credit line | 52 | (52 | ) | N/M | ||||||||
40 | 118 | N/M | ||||||||||
Total provision for credit losses (A+B) | 80 | 1,437 | N/M | |||||||||
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As of December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Commissions and fees from non-trust management: | �� | |||||||||||
Brokerage fees and commissions(1) | 858 | 626 | (27.0 | )% | ||||||||
Other fees and commissions(2) | 1,754 | 1,969 | 12.3 | |||||||||
Net trust management fees(3) | 73 | 69 | (5.5 | ) | ||||||||
Net trading profits | (210 | ) | 584 | N/M | ||||||||
Net gains (losses) on securities | 169 | (135 | ) | N/M | ||||||||
Gain on other investment | 181 | 317 | 75.1 | |||||||||
Net gain (loss) on foreign exchange | 146 | (566 | ) | N/M | ||||||||
Insurance income | 1,119 | 1,329 | 18.8 | |||||||||
Other | 648 | 379 | (41.5 | ) | ||||||||
Total noninterest income | 4,738 | 4,572 | (3.5 | )% | ||||||||
(1) | Consists of commissions, fees and markup on securities brokerage activities. | |
(2) | Includes commissions received on remittance, commissions received on imports and export letters of credit and commissions received from foreign exchange transactions. | |
(3) | Consists principally of fees from management of trust accounts in our banking operations. |
Year Ended December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Employee compensation and other benefits | 2,056 | 1,817 | (11.6 | )% | ||||||||
Depreciation and amortization | 812 | 871 | 7.3 | |||||||||
General and administrative expenses | 878 | 882 | 0.5 | |||||||||
Credit card fees | 665 | 700 | 5.3 | |||||||||
Provision (reversal) for other losses | 72 | (18 | ) | N/M | ||||||||
Insurance fees on deposits | 131 | 133 | 1.5 | |||||||||
Other fees and commission expenses | 446 | 422 | (5.4 | ) | ||||||||
Taxes (except income taxes) | 128 | 179 | 39.8 | |||||||||
Insurance operating expense | 1,351 | 1,038 | (23.2 | ) | ||||||||
Other | 206 | 703 | N/M | |||||||||
Total noninterest expenses | 6,745 | 6,727 | (0.3 | )% | ||||||||
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• | the following banking services, which are principally provided by Shinhan Bank: |
• | retail banking; | |
• | corporate banking; | |
• | treasury and international banking; and | |
• | other banking services; |
• | securities brokerage services, which are provided by Shinhan Investment; | |
• | credit card services, which are provided by Shinhan Card; | |
• | life insurance services, which are provided by Shinhan Life Insurance; and | |
• | other. |
Segment Results(1) | Total Revenues(2) | |||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Shinhan Bank: | ||||||||||||||||||||||||
Retail banking | 1,681 | 1,124 | 527 | 3,296 | 4,310 | 2,915 | ||||||||||||||||||
Corporate banking | 525 | 2,058 | 157 | 1,130 | 7,815 | 1,845 | ||||||||||||||||||
Treasury and international business | (696 | ) | (556 | ) | 141 | 5,199 | 27,383 | 28,251 | ||||||||||||||||
Other banking services | 1,345 | (723 | ) | 242 | 2,581 | 2,907 | 2,708 | |||||||||||||||||
Shinhan Investment | 252 | 209 | 57 | 1,940 | 1,716 | 1,470 | ||||||||||||||||||
Shinhan Card(3) | 1,082 | 1,324 | 1,101 | 3,001 | 3,590 | 3,134 | ||||||||||||||||||
Shinhan Life Insurance | 184 | 186 | 224 | 2,694 | 2,862 | 3,417 | ||||||||||||||||||
Other subsidiaries | (115 | ) | (3 | ) | (91 | ) | 249 | 657 | 395 | |||||||||||||||
Total(4) | 4,258 | 3,619 | 2,358 | 20,090 | 51,240 | 44,135 | ||||||||||||||||||
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(1) | Represents income per segment before income taxes. | |
(2) | Represents net interest income plus non-interest income. | |
(3) | Information for 2007 represents that of LG Card for the period from March 1, 2007 (the deemed acquisition date) through December 31, 2007 (including corresponding information for the assets and liabilities of former Shinhan Card (assumed by LG Card on October 1, 2007) for the period from October 1, 2007 through December 31, 2007), and corresponding information for former Shinhan Card from January 1, 2007 through September 30, 2007. Information for 2008 represents that of Shinhan Card. | |
(4) | Presented on a reported basis before elimination or adjustments. |
Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 2,328 | 2,311 | 2,245 | (0.7 | )% | (2.9 | )% | |||||||||||||
Non-interest income | 968 | 1,999 | 670 | 106.5 | (66.5 | ) | ||||||||||||||
Total revenues | 3,296 | 4,310 | 2,915 | 30.8 | (32.4 | ) | ||||||||||||||
Provision for loan losses | 222 | 362 | 558 | 63.1 | 54.1 | |||||||||||||||
Non-interest expense including depreciation and amortization | 1,393 | 2,824 | 1,830 | 102.7 | (35.2 | ) | ||||||||||||||
Segment results(1) | 1,681 | 1,124 | 527 | (33.1 | )% | (53.1 | )% | |||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 864 | 2,476 | 876 | 186.6 | % | (64.6 | )% | |||||||||||||
Non-interest income | 266 | 5,339 | 969 | N/M | (81.9 | ) | ||||||||||||||
Total revenues | 1,130 | 7,815 | 1,845 | N/M | (76.4 | ) | ||||||||||||||
Provision for loan losses | 137 | 326 | 465 | 138.0 | 42.6 | |||||||||||||||
Non-interest expense including depreciation and amortization | 468 | 5,431 | 1,223 | N/M | (77.5 | ) | ||||||||||||||
Segment results(1) | 525 | 2,058 | 157 | N/M | (92.4 | )% | ||||||||||||||
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(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income (expense) | (265 | ) | (578 | ) | 337 | 118.1 | % | N/M | ||||||||||||
Non-interest income | 5,464 | 27,961 | 27,914 | N/M | (0.2 | ) | ||||||||||||||
Total revenues | 5,199 | 27,383 | 28,251 | N/M | 3.2 | |||||||||||||||
Provision (reversal) for loan losses | 38 | (4 | ) | 51 | (110.5 | ) | N/M | |||||||||||||
Non-interest expense including depreciation and amortization | 5,857 | 27,943 | 28,059 | N/M | 0.4 | |||||||||||||||
Segment results(1) | (696 | ) | (556 | ) | 141 | (20.1 | )% | N/M | ||||||||||||
(1) | Net income (or loss) per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 815 | 135 | 243 | (83.4 | )% | 80.0 | % | |||||||||||||
Non-interest income | 1,766 | 2,772 | 2,465 | 57.0 | (11.1 | ) | ||||||||||||||
Total revenues | 2,581 | 2,907 | 2,708 | 12.6 | (6.8 | ) | ||||||||||||||
Provision for loan losses | 62 | 245 | 133 | N/M | (45.7 | ) | ||||||||||||||
Non-interest expense including depreciation and amortization | 1,174 | 3,385 | 2,333 | N/M | (31.1 | ) | ||||||||||||||
Segment results(1) | 1,345 | (723 | ) | 242 | N/M | N/M | ||||||||||||||
(1) | Net income (or loss) per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007(1) | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 2,804 | 2,958 | 2,854 | 5.5 | % | (3.5 | )% | |||||||||||||
Non-interest income | 197 | 632 | 280 | N/M | (55.7 | ) | ||||||||||||||
Total revenues | 3,001 | 3,590 | 3,134 | 19.6 | (12.7 | ) | ||||||||||||||
Provision for loan losses | 301 | 43 | 105 | (85.7 | ) | 144.2 | ||||||||||||||
Non-interest expense including depreciation and amortization | 1,618 | 2,223 | 1,928 | 37.4 | (13.3 | ) | ||||||||||||||
Segment results(2) | 1,082 | 1,324 | 1,101 | 22.4 | % | (16.8 | )% | |||||||||||||
(1) | The information of Shinhan Card for 2007 includes that of LG Card (renamed as Shinhan Card on October 1, 2007) for the period from March 1, 2007 through December 31, 2007 (including that for the assets and liabilities of former Shinhan Card assumed by LG Card on October 1, 2007) and that of former Shinhan Card for the period from January 1, 2007 through September 30, 2007, presented on an aggregated basis. | |
(2) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 137 | 184 | 147 | 34.3 | % | (20.1 | )% | |||||||||||||
Non-interest income | 1,803 | 1,532 | 1,323 | (15.0 | ) | (13.6 | ) | |||||||||||||
Total revenues | 1,940 | 1,716 | 1,470 | (11.5 | ) | (14.3 | ) | |||||||||||||
Provision for loan losses | 7 | 29 | 135 | N/M | 365.5 | |||||||||||||||
Non-interest expense including depreciation and amortization | 1,681 | 1,478 | 1,278 | (12.1 | ) | (13.5 | ) | |||||||||||||
Segment results(1) | 252 | 209 | 57 | (17.1 | )% | (72.7 | )% | |||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 293 | 357 | 419 | 21.8 | % | 17.4 | % | |||||||||||||
Non-interest income | 2,401 | 2,505 | 2,998 | 4.3 | 19.7 | |||||||||||||||
Total revenues | 2,694 | 2,862 | 3,417 | 6.2 | 19.4 | |||||||||||||||
Provision for loan losses | 1 | 9 | 13 | N/M | 44.4 | |||||||||||||||
Non-interest expense including depreciation and amortization | 2,509 | 2,667 | 3,180 | 6.3 | 19.2 | |||||||||||||||
Segment results(1) | 184 | 186 | 224 | 1.1 | % | 20.4 | % | |||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income (loss) | (23 | ) | (48 | ) | (88 | ) | 108.7 | % | 83.3 | % | ||||||||||
Non-interest income | 272 | 705 | 483 | 159.2 | (31.5 | ) | ||||||||||||||
Total revenues | 249 | 657 | 395 | 163.9 | (39.9 | ) | ||||||||||||||
Provision for loan losses | 27 | 26 | 55 | (3.7 | ) | 111.5 | ||||||||||||||
Non-interest expense including depreciation and amortization | 337 | 634 | 431 | 88.1 | (32.0 | ) | ||||||||||||||
Segment results(1) | (115 | ) | (3 | ) | (91 | ) | (97.4 | )% | N/M | |||||||||||
(1) | Net income (or loss) per segment before income taxes. |
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As of December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Cash and cash equivalents | 3,580 | 1,365 | 4,363 | (61.9 | )% | 219.6 | % | |||||||||||||
Restricted cash | 4,745 | 7,049 | 7,974 | 48.6 | 13.1 | |||||||||||||||
Interest-bearing deposits | 1,094 | 1,627 | 2,164 | 48.7 | 33.0 | |||||||||||||||
Call loans and securities purchased under resale agreements | 802 | 3,066 | 1,346 | 282.3 | (56.1 | ) | ||||||||||||||
Trading assets: | ||||||||||||||||||||
Trading securities | 8,220 | 6,724 | 6,681 | (18.2 | ) | (0.6 | ) | |||||||||||||
Derivative assets | 1,962 | 11,977 | 4,617 | 510.4 | (61.5 | ) | ||||||||||||||
Securities: | ||||||||||||||||||||
Available-for-sale securities | 22,626 | 29,016 | 27,612 | 28.2 | (4.8 | ) | ||||||||||||||
Held-to-maturity securities | 8,224 | 8,696 | 12,794 | 5.7 | 47.1 | |||||||||||||||
Loans: | ||||||||||||||||||||
Corporate | 71,651 | 94,695 | 90,809 | 32.2 | (4.1 | ) | ||||||||||||||
Consumer | 80,167 | 75,846 | 78,446 | (5.4 | ) | 3.4 | ||||||||||||||
Total loans, gross | 151,818 | 170,541 | 169,255 | 12.3 | (0.8 | ) | ||||||||||||||
Deferred origination costs (fees) | 4 | (32 | ) | (23 | ) | (900.0 | ) | (28.1 | ) | |||||||||||
Less: allowance for loan losses | 2,099 | 3,201 | 3,638 | 52.5 | 13.7 | |||||||||||||||
Total loans, net | 149,723 | 167,308 | 165,594 | 11.7 | (1.0 | ) | ||||||||||||||
Customers’ liability on acceptances | 1,701 | 2,433 | 2,780 | 43.0 | 14.3 | |||||||||||||||
Premises and equipment, net | 2,455 | 2,412 | 2,437 | (1.8 | ) | 1.0 | ||||||||||||||
Goodwill and intangible assets | 6,160 | 5,571 | 5,072 | (9.6 | ) | (9.0 | ) | |||||||||||||
Security deposits | 1,294 | 1,334 | 1,323 | 3.1 | (0.8 | ) | ||||||||||||||
Other assets | 9,036 | 12,395 | 10,153 | 37.2 | (18.1 | ) | ||||||||||||||
Total assets | 221,622 | 260,973 | 254,910 | 17.8 | % | (2.3 | )% | |||||||||||||
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As of December 31, | % Change | |||||||||||||||||||
2007 | 2008 | 2009 | 2007/2008 | 2008/2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Interest bearing | 103,241 | 119,762 | 140,809 | 16.0 | % | 17.6 | % | |||||||||||||
Noninterest bearing | 3,162 | 2,942 | 2,890 | (7.0 | ) | (1.8 | ) | |||||||||||||
Trading liabilities | 2,509 | 11,831 | 4,565 | N/M | (61.4 | ) | ||||||||||||||
Acceptances outstanding | 1,701 | 2,433 | 2,780 | 43.0 | 14.3 | |||||||||||||||
Short-term borrowings | 15,801 | 23,225 | 9,715 | 47.0 | (58.2 | ) | ||||||||||||||
Secured borrowings | 11,452 | 10,226 | 7,944 | (10.7 | ) | (22.3 | ) | |||||||||||||
Long-term debt | 46,496 | 49,652 | 44,795 | 6.8 | (9.8 | ) | ||||||||||||||
Future policy benefit | 6,769 | 7,260 | 8,310 | 7.3 | (14.5 | ) | ||||||||||||||
Accrued expenses and other liabilities | 13,369 | 15,678 | 12,553 | 17.3 | (19.9 | ) | ||||||||||||||
Total liabilities | 204,500 | 243,009 | 234,361 | 18.8 | (3.6 | ) | ||||||||||||||
The Group stockholders’ equity | 16,910 | 17,652 | 20,218 | 4.4 | 14.5 | |||||||||||||||
Noncontrolling interest | 212 | 312 | 331 | 47.2 | (6.1 | ) | ||||||||||||||
Total equity | 17,122 | 17,964 | 20,549 | 4.9 | 14.4 | |||||||||||||||
Total liabilities and equity | 221,622 | 260,973 | 254,910 | 17.8 | % | (2.3 | )% | |||||||||||||
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ITEM 5.B. | Liquidity and Capital Resources |
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As of December 31, 2009 | ||||
(In billions of Won) | ||||
Deposits | 143,699 | |||
Long-term debt | 44,795 | |||
Call money | 2,398 | |||
Borrowings from the Bank of Korea | 1,434 | |||
Other short-term borrowings | 5,883 | |||
Asset securitizations | 7,944 | |||
Stockholders’ equity(1) | 2,590 | |||
Total | 208,743 | |||
(1) | Includes redeemable preferred stock and redeemable convertible preferred stock. See Note 21 in the notes to our consolidated financial statements included in this annual report. |
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As of June 11, 2010 | ||||||||||||
S&P | Moody’s | Fitch | ||||||||||
Shinhan Bank | A− | A1 | A | |||||||||
Shinhan Card | BBB+ | — | A− |
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As of December 31, 2009 | ||||||||||||||||||||
Payments Due by Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
1 Year | 1-3 Years | 3-5 Years | 5 Years | Total | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Long-term debt(1)(2) | 13,336 | 18,373 | 7,007 | 8,315 | 47,031 | |||||||||||||||
Secured borrowings(1)(3) | 4,851 | 2,284 | 62 | 1,076 | 8,273 | |||||||||||||||
Provisions for accrued severance indemnities(4)(6) | 2 | 3 | 11 | 95 | 111 | |||||||||||||||
Deposits(1)(5) | 87,794 | 6,362 | 1,131 | 490 | 95,777 | |||||||||||||||
Total | 105,983 | 27,022 | 8,211 | 9,976 | 151,192 | |||||||||||||||
(1) | Includes estimated future interest payments. The future interest payment have been estimated using the weighted average interest rates paid for 2009 for each category and their scheduled contractual maturities. | |
(2) | Long-term debt includes senior debt, subordinated debt and Redeemable Preferred Stock, as contained in Note 15 to our consolidated financial statements. | |
(3) | See Note 14 to our consolidated financial statements included in this annual report. | |
(4) | This amount represents the amount of severance payment we are obligated to pay to the employees who are scheduled to retire during the indicated periods, as determined based on the employees’ current salary rates and the number of service years that will be accumulated upon their retirement date. In accordance with our policy |
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and the Korean Labor Standard Law, employees with one year or more of service are entitled, upon termination of employment, to receive a lump sum severance payment based upon the length of their service and the average of the last three months’ wages. | ||
(5) | Deposits include certificate of deposits, other time deposits and mutual installment deposits, as contained in Note 12 to our consolidated financial statements. | |
(6) | This amount represents provisions for accrued severance indemnities for a period of 10 years or less. |
As of December 31, 2009 | ||||||||||||||||
Commitment Expiration by Period | ||||||||||||||||
Less Than | More Than | |||||||||||||||
1 Year | 1-5 Years | 5 Years | Total | |||||||||||||
(In billions of Won) | ||||||||||||||||
Commitments to extend credit(1): | ||||||||||||||||
Corporate | 44,474 | 3,808 | 1,308 | 49,590 | ||||||||||||
Credit card lines(2) | 3,413 | 61,491 | — | 64,904 | ||||||||||||
Consumer(3) | 8,575 | 219 | 1 | 8,795 | ||||||||||||
Commercial letters of credit(4) | 3,126 | 193 | — | 3,319 | ||||||||||||
Financial standby letters of credit(5) | 431 | 44 | — | 475 | ||||||||||||
Other financial guarantees(6) | 880 | 15 | 22 | 917 | ||||||||||||
Performance letters of credit and guarantees(7) | 6,434 | 3,855 | 42 | 10,331 | ||||||||||||
Liquidity facilities to SPEs(8) | 260 | 1,203 | 206 | 1,669 | ||||||||||||
Acceptances(9) | 2,750 | 30 | — | 2,780 | ||||||||||||
Guarantee on trust accounts(10) | 437 | 3,043 | 16 | 3,496 | ||||||||||||
Total | 70,780 | 73,901 | 1,595 | 146,276 | ||||||||||||
(1) | Commitments to extend credit represent unfunded portions of authorizations to extend credit in the form of loans. The commitments expire on fixed dates and a customer is required to comply with predetermined conditions to draw funds under the commitments. | |
(2) | Credit card commitments relate to unused portion of credit card limits that may be cancelled by us, after notice to the customer, if we determine that the customer’s repayment ability is significantly impaired. Prior to April 2008, we were able to change credit card limits of all customers whose accounts are inactive for more than 12 months without their approval. However, following a change in the Korea Fair Trade Commission’s policy related to credit card limits effective April 2008, we now require the customer’s agreement before changing the credit card limits for customers whose repayment ability is not significantly impaired. | |
(3) | Excludes credit cards. |
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(4) | Commercial letters of credit are undertakings on behalf of customers authorizing third parties to draw drafts on us up to a stipulated amount under specific terms and conditions. These are generally short-term and collateralized by the underlying shipments of goods to which they relate. Commitments to extend credit, including credit lines, are in general subject to provisions that allow us to withdraw such commitments in the event there are material adverse changes affecting an obligor. | |
(5) | Financial standby letters of credit are irrevocable obligations to pay third party beneficiaries when our customers fail to repay loans or debt instruments, which are generally in foreign currencies. A substantial portion of these standby letters of credit are secured by underlying assets, including trade-related documents. | |
(6) | Other financial guarantees are used in various transactions to enhance the credit standing of our customers. They provide irrevocable assurance, subject to satisfaction of certain conditions, that we will make payment in the event that our customers fail to fulfill their obligations to third parties. These financial obligations include a return of security deposits and the payment of service fees. | |
(7) | Performance letters of credit and guarantees are issued to guarantee customers’ tender bids on construction or similar projects or to guarantee completion of such projects in accordance with contractual terms. They are also issued to support a customer’s obligation to supply products, commodities, maintenance or other services to third parties | |
(8) | Liquidity facilities to SPEs represent irrevocable commitments to provide contingent credit lines including commercial paper purchase agreements to special purpose entities for which we serve as the administrator. | |
(9) | Acceptances represent guarantees by us to pay a bill of exchange drawn on a customer. We expect most acceptances to be presented, but reimbursement by the customer is normally immediate. | |
(10) | Guarantees on trust accounts represent guarantee of principal issued to trust fund investors. |
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• | Allowance for loan losses; | |
• | Allowance for unused loan commitments; | |
• | Allowance for guarantees and acceptances; and | |
• | Deferred taxation. |
Year Ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009(1) | |||||||||||||||||||
(In billions of Won and millions of US$, except per share data) | ||||||||||||||||||||||||
Interest income and dividends | 8,090 | 9,473 | 13,958 | 16,681 | 13,980 | $ | 12,014 | |||||||||||||||||
Interest expense | 3,842 | 4,782 | 6,868 | 8,865 | 7,286 | 6,261 | ||||||||||||||||||
Net interest income | 4,248 | 4,691 | 7,090 | 7,816 | 6,694 | 5,753 | ||||||||||||||||||
Provision for loan losses | 649 | 575 | 739 | 1,044 | 1,579 | 1,357 | ||||||||||||||||||
Non-interest income(2) | 7,917 | 11,316 | 12,886 | 43,277 | 37,302 | 32,056 | ||||||||||||||||||
Non-interest expense(3) | 9,676 | 12,924 | 15,324 | 47,055 | 40,422 | 34,737 | ||||||||||||||||||
Income tax expenses | 264 | 670 | 549 | 968 | 667 | 573 | ||||||||||||||||||
Pre-acquisition income in subsidiaries | — | — | (874 | ) | — | — | — | |||||||||||||||||
Net income attributable to noncontrolling interest | 15 | 16 | 94 | 7 | 23 | 20 | ||||||||||||||||||
Net income attributable to the Group | 1,561 | 1,822 | 2,396 | 2,019 | 1,305 | $ | 1,122 | |||||||||||||||||
Earnings per share, basic(5) | 4,136 | 4,530 | 5,276 | 4,236 | 2,303 | $ | 1.98 | |||||||||||||||||
Earnings per share, diluted(5) | 3,910 | 4,530 | 5,155 | 4,152 | 2,290 | 1.97 | ||||||||||||||||||
Cash dividends per common share | 800 | (4) | 900 | (4) | 900 | (4) | — | (4) | 400 | (4) | 0.34 |
(1) | Won amounts are expressed in U.S. dollars at the rate of | |
(2) | Noninterest income includes fees and commissions income, gains on security valuations and disposals, gains on foreign currency transaction and gains from derivative transactions. | |
(3) | Noninterest expense is composed of fees & commissions paid or payable, general and administrative expenses, losses on securities valuations and disposals, losses on foreign currency transactions and losses from derivative transactions. | |
(4) | Represents dividends declared on the common shares of Shinhan Financial Group. | |
(5) | The computations of basic and diluted earnings per share (“EPS”) were adjusted retrospectively to include the effects of a discount offered to shareholders in connection with the rights offering in March 2009, which was due to the fact that the shares offered in the rights offering were issued and sold at a discount to the market price. |
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As of December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009(1) | |||||||||||||||||||
(In billions of Won and millions of US$) | ||||||||||||||||||||||||
Cash and due from banks | 8,476 | 11,347 | 9,677 | 13,079 | 15,855 | $ | 13,625 | |||||||||||||||||
Trading securities | 5,496 | 5,513 | 11,740 | 8,838 | 9,229 | 7,931 | ||||||||||||||||||
Investment securities | 24,746 | 25,658 | 31,638 | 38,647 | 42,062 | 36,147 | ||||||||||||||||||
Loans | 108,390 | 124,264 | 150,926 | 173,662 | 170,561 | 146,574 | ||||||||||||||||||
Less allowance for doubtful accounts | (1,741 | ) | (1,881 | ) | (2,953 | ) | (3,317 | ) | (3,597 | ) | (3,091 | ) | ||||||||||||
Property and equipment, net | 1,887 | 2,214 | 2,407 | 2,411 | 2,324 | 1,997 | ||||||||||||||||||
Goodwill, net | 1,587 | 1,437 | 4,986 | 4,528 | 4,075 | 3,502 | ||||||||||||||||||
Other assets | 12,097 | 10,168 | 13,816 | 26,167 | 14,509 | 12,469 | ||||||||||||||||||
Total assets | 160,938 | 178,720 | 222,237 | 264,015 | 255,018 | 219,154 | ||||||||||||||||||
Deposits | 91,521 | 99,744 | 110,582 | 126,764 | 147,737 | 126,960 | ||||||||||||||||||
Borrowings | 15,917 | 18,173 | 24,205 | 27,731 | 18,098 | 15,553 | ||||||||||||||||||
Debentures, net | 22,840 | 29,485 | 42,586 | 49,181 | 39,905 | 34,293 | ||||||||||||||||||
Retirement and severance benefits, net | 178 | 243 | 335 | 381 | 177 | 152 | ||||||||||||||||||
Other liabilities | 20,230 | 19,520 | 26,303 | 42,006 | 27,978 | 24,043 | ||||||||||||||||||
Total liabilities | 150,686 | 167,165 | 204,011 | 246,063 | 233,895 | 201,001 | ||||||||||||||||||
Equity | 10,252 | 11,555 | 18,226 | 17,952 | 21,123 | 18,153 | ||||||||||||||||||
Total liabilities and equity | 160,938 | 178,720 | 222,237 | 264,015 | 255,018 | $ | 219,154 | |||||||||||||||||
(1) | Won amounts are expressed in U.S. dollars at the rate of |
Year Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Net income attributable to the Group as a percentage of: | ||||||||||||||||||||
Average total assets(1) | 0.93 | 1.09 | % | 1.14 | % | 0.81 | % | 0.59 | % | |||||||||||
Average total equity(1)(2) | 17.96 | 15.53 | 11.61 | 9.40 | 6.62 | |||||||||||||||
Dividend payout ratio(3) | 17.11 | 18.96 | 16.75 | — | 14.56 | |||||||||||||||
Net interest spread(4) | 2.60 | 2.94 | 3.60 | 3.29 | 2.71 | |||||||||||||||
Net interest margin(5) | 2.74 | 3.20 | 3.93 | 3.69 | 3.01 | |||||||||||||||
Efficiency ratio(6) | 79.54 | 80.74 | 76.71 | 92.10 | 91.88 | |||||||||||||||
Cost-to-average assets ratio(7) | 5.50 | 7.74 | 7.27 | 18.89 | 15.64 | |||||||||||||||
Equity to average asset ratio(8): | 5.20 | 6.99 | 9.79 | 8.62 | 7.63 |
(1) | Average balances are based on (a) daily balances for Shinhan Bank and Jeju Bank and (b) quarterly balances for other subsidiaries. |
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(2) | Includes redeemable preferred shares and redeemable convertible preferred shares issued by us (i) in August 2003 as part of funding for the acquisition of Chohung Bank and (ii) in January 2007 as part of funding for the acquisition of LG Card. These preferred shares are treated as equity. For a more detailed description of the preferred shares issued by us, see “Item 10.B. Memorandum and Articles of Incorporation — Description of Preferred Stock — Redeemable Convertible Preferred Stock (Series 11).” | |
(3) | The dividend payout ratio represents the ratio of total dividends paid on common stock as a percentage of net income attributable to common stock. | |
(4) | Net interest spread represents the difference between the yield on average interest earning assets and cost of average interest bearing liabilities. | |
(5) | Net interest margin represents the ratio of net interest income to average interest earning assets. | |
(6) | Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income, a measure of efficiency for banks and financial institutions. Efficiency ratio may be reconciled to comparable line-items in our income statement for the periods indicated as follows: |
Year Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Non-interest expense (A) | 9,676 | 12,924 | 15,324 | 47,055 | 40,422 | |||||||||||||||
Divided by | ||||||||||||||||||||
The sum of net interest income and non-interest income (B) | 12,165 | 16,007 | 19,976 | 51,093 | 43,996 | |||||||||||||||
Net interest income | 4,248 | 4,691 | 7,090 | 7,816 | 6,694 | |||||||||||||||
Non-interest income | 7,917 | 11,316 | 12,886 | 43,277 | 37,302 | |||||||||||||||
Efficiency ratio ((A) as a percentage of (B)) | 79.54 | % | 80.74 | % | 76.71 | % | 92.10 | % | 91.88 | % |
(7) | Cost-to-average-assets ratio, a measure of cost of funding used by banks and financial institutions, represents the ratio of non-interest expense to average total assets. | |
(8) | Equity to average asset ratio represents the ratio of average stockholders’ equity to average total assets. |
As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Requisite capital ratio(1) | 132.81 | % | 139.28 | % | N/A | N/A | N/A | |||||||||||||
BIS ratio(1) | N/A | N/A | 9.85 | % | 10.19 | % | 12.6 | % | ||||||||||||
Total capital adequacy ratio of Shinhan Bank(2) | 12.23 | 12.01 | 12.09 | 13.43 | 15.13 | |||||||||||||||
Tier I capital adequacy ratio | 8.16 | 7.81 | 7.64 | 9.30 | 11.61 | |||||||||||||||
Tier II capital adequacy ratio | 4.07 | 4.20 | 4.45 | 4.13 | 3.52 | |||||||||||||||
Adjusted equity capital ratio of Shinhan Card(3) | 17.68 | 17.47 | 25.31 | 20.32 | 26.73 | |||||||||||||||
Solvency ratio for Shinhan Life Insurance(4) | 232.12 | 232.60 | 226.05 | 209.47 | 212.40 |
(1) | We were restructured as a financial holding company on September 1, 2001, and until 2006, under the guidelines issued by the Financial Services Commission applicable to financial holding companies, were required to maintain minimum capital as measured by the requisite capital ratio. For 2005 and 2006, the minimum requisite capital ratio applicable to us as a holding company was 100%. Starting 2007, under the revised guidelines, the minimum requisite capital ratio applicable to us changed to the BIS ratio of 8%. Requisite capital ratio is computed as the ratio of net aggregate amount of our equity capital to aggregate amounts of requisite capital. This computation is based on our consolidated financial statement in accordance |
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with Korean GAAP. See “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | ||
(2) | For 2005, represents information of former Shinhan Bank prior to its merger into Chohung Bank in 2006. For 2005, the total capital adequacy ratio, Tier I capital adequacy ratio and Tier II capital adequacy ratio of Chohung Bank was 10.94%, 6.52% and 4.42%, respectively. The information for 2006 and thereafter represents the information of the surviving entity following the merger. | |
(3) | Adjusted equity capital ratio is the ratio of total adjusted stockholders’ equity to total adjusted assets and is computed in accordance with the guidelines issued by the Financial Services Commission for credit card companies. Under these regulations, a credit card company is required to maintain a minimum adjusted equity capital ratio of 8%. This computation is based on the non-consolidated financial statements of the credit card company prepared in accordance with Korean GAAP. See “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | |
The information as of December 31, 2005, includes the information of former Shinhan Card and does not include the information of the credit card division of Chohung Bank. The information as of December 31, 2006, represents the information of former Shinhan Card (including that of the credit card division of Chohung Bank, which was split-merged into former Shinhan Card on April 3, 2006). The information as of December 31, 2007, represents the information for LG Card, renamed Shinhan Card on October 1, 2007 (including that of the assets and liabilities of former Shinhan Card, which were transferred to LG Card on October 1, 2007). The information as of December 31, 2008, represents the information for Shinhan Card. | ||
For comparison, the adjusted equity capital ratio of LG Card as of December 31, 2005 and 2006 was 25.55% and 34.25%, respectively. | ||
(4) | Solvency ratio is the ratio of the solvency margin to the standard amount of solvency margin as defined and computed in accordance with the regulations issued by the Financial Services Commission for life insurance companies. Under these regulations Shinhan Life Insurance is required to maintain a minimum solvency ratio of 100%. See “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” |
As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Substandard and below loans(1) | 1,195 | 1,064 | 1,513 | 1,979 | 2,359 | |||||||||||||||
Substandard and below loans as a percentage of total loans | 1.09 | % | 0.87 | % | 1.03 | % | 1.18 | % | 1.40 | % | ||||||||||
Substandard and below loans as a percentage of total assets | 0.74 | 0.60 | 0.68 | 0.75 | 0.93 | |||||||||||||||
Precautionary loans as a percentage of total loans(2) | 2.57 | 1.16 | 1.16 | 1.29 | 1.78 | |||||||||||||||
Precautionary and below loans as a percentage of total loans(2) | 3.66 | 2.03 | 2.19 | 2.47 | 3.18 | |||||||||||||||
Precautionary and below loans as a percentage of total assets(2) | 2.49 | 1.40 | 1.46 | 1.57 | 2.10 | |||||||||||||||
Allowance for loan losses as a percentage of substandard and below loans | 143.43 | 172.98 | 184.63 | 165.22 | 149.81 | |||||||||||||||
Allowance for loan losses as a percentage of precautionary and below loans(2) | 42.76 | 73.88 | 86.50 | 79.08 | 66.07 | |||||||||||||||
Allowance for loan losses as a percentage of total loans | 1.57 | 1.50 | 1.89 | 1.95 | 2.10 | |||||||||||||||
Substandard and below credits as a percentage of total credits(3) | 1.07 | 0.84 | 0.98 | 1.15 | 1.35 | |||||||||||||||
Loans in Korean Won as a percentage of deposits in Korean Won(4) | 107.79 | 115.05 | 126.58 | 125.43 | 102.90 |
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(1) | Substandard and below loans (other than loans provided from our trust accounts and confirmed guarantees and acceptances) are defined in accordance with the regulatory guidance in Korea. See “Item 4.B. Business Overview — Supervision and Regulation — Principal Regulations Applicable to Banks.” | |
(2) | As defined by the Financial Services Commission. | |
(3) | Credits include loans provided from our trust accounts (including bills purchased and privately placed debentures) and confirmed guarantees and acceptances, as well as the total loan portfolio of the banking accounts. | |
(4) | Loans in Korean Won do not include bills bought in Won, advances for customers, credit card accounts, bonds purchased under resale agreements, call loans, private placement corporate bonds and loans in restructurings that have been swapped for equity in the restructured borrower. |
2009 | ||||
(In millions of Won) | ||||
U.S. GAAP net income attributable to the Group | 1,133,852 | |||
1. Provision for credit losses | 747,247 | |||
2. Sale of loans to the Korea Asset Management Corporation | (764 | ) | ||
3. Deferred loan fees and costs | 8,660 | |||
4. Securities and derivatives for hedging purposes | ||||
a. Impairment loss and reclassification of securities | (260,905 | ) | ||
b. Reversal of hedge accounting treatment for derivatives | 217,238 | |||
c. Changes in foreign exchange rates onavailable-for-sale securities | (128,012 | ) | ||
d. Credit risk adjustments on derivatives | (172,398 | ) | ||
5. Stock-based compensation | (3,731 | ) | ||
6. Difference related to the accounting treatment of goodwill and intangible assets | 16,696 | |||
7. Recognition of noncontrolling interest | 13,876 | |||
8. Reversal of asset revaluation | (13,206 | ) | ||
9. Adjustments for redeemable preferred shares | 24,732 | |||
10. Consolidation Scope | 124,811 | |||
11. Measurement of common stock issued for acquisition of subsidiaries | — | |||
12. Adoption ofASC 740-10 (formerly FIN No. 48) | (177,454 | ) | ||
13. Difference related to the accounting treatment of the LG Card acquisition | — | |||
14. Shinhan Life Insurance deferred policy acquisition costs | (111,339 | ) | ||
15. Others | (20,160 | ) | ||
Total adjustments | 265,291 | |||
Tax effect of adjustments | (93,832 | ) | ||
Korean GAAP net income attributable to the Group | 1,305,311 | |||
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2009 | ||||
(In millions of Won) | ||||
U.S. GAAP the Group stockholders’ equity | 20,218,199 | |||
1. Provision for credit losses | (293,664 | ) | ||
2. Sale of loans to the Korea Asset Management Corporation | (39,906 | ) | ||
3. Deferred loan fees and costs | (3,253 | ) | ||
4. Securities and derivatives for hedging purposes | ||||
a. Impairment loss and reclassification of securities | 913,533 | |||
b. Reversal of hedge accounting treatment for derivatives | (66,759 | ) | ||
c. Changes in foreign exchange rates onavailable-for-sale securities | — | |||
d. Credit risk adjustments on derivatives | 85,623 | |||
5. Stock-based compensation | 12,167 | |||
6. Difference related to the accounting treatment of goodwill and intangible assets | 825,103 | |||
7. Noncontrolling interest | 331,191 | |||
8. Reversal of asset revaluation | 47,499 | |||
9. Adjustments for Redeemable Preferred Stock | (307,941 | ) | ||
10. Consolidation Scope | (376,704 | ) | ||
11. Measurement of common stock issued for acquisition of subsidiaries | 137,738 | |||
12. Adoption ofASC 740-10 | (116,520 | ) | ||
13. Difference related to the accounting treatment of the LG Card acquisition | 202,552 | |||
14. Shinhan Life Insurance’s deferred policy acquisition costs | (525,574 | ) | ||
15. Others | (101,451 | ) | ||
Total of adjustments | 723,634 | |||
Tax effect of adjustments | 181,193 | |||
Korean GAAP the Group stockholders’ equity | 21,123,026 | |||
Corporate Loans | Retail Loans | Credit Card Balances | ||||||||||
Normal(1)(2) | 0.85% or more | 1.00% or more | 1.50% or more | |||||||||
Precautionary(2) | 7.00% or more | 10.00% or more | 15.00% or more | |||||||||
Substandard | 20.00% or more | 20.00% or more | 20.00% or more | |||||||||
Doubtful | 50.00% or more | 55.00% or more | 60.00% or more | |||||||||
Estimated loss | 100.00% | 100.00% | 100.00% |
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(1) | In the case of normal credits comprising loans to borrowers in the construction, wholesale and retail, accommodation and restaurant or real estate and housing industries (as classified under the Korean Industry Classification Standard), the applicable figure is 0.90% or more. | |
(2) | In the case of credit card assets classified as normal and precautionary, the amount of provisions set aside is based on the revised provisioning rates under the Regulation on Specialized Credit Financial Business Act, which, effective as of February 11, 2008, increased the minimum provisioning requirements from 1.00% to 1.50% in respect of credit card assets classified as “normal” and from 12.00% to 15.00% in respect of credit card assets classified as “precautionary.” |
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ITEM 5.C. | Research and Development, Patents and Licenses |
ITEM 5.D. | Trend Information |
ITEM 5.E. | Off-Balance Sheet Arrangements |
ITEM 5.F. | Tabular Disclosure of Contractual Obligations |
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ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
ITEM 6.A. | Directors and Senior Management |
Name | Age | Position | Director Since | Date Term Ends(1) | ||||||
Eung Chan Ra | 71 | Chairman; Head of Board Steering Committee | September 1, 2001 | March 2013 | ||||||
Sang Hoon Shin | 61 | President and Chief Executive Officer; member of the Board Steering Committee | March 17, 2009 | March 2011 |
(1) | The date on which each term will end will be the date of the general stockholders’ meeting in the relevant year. |
Name | Age | Position | Director Since | Date Term Ends(1) | ||||||
Baek Soon Lee | 57 | Non-Executive Director | March 17, 2009 | March 2012 | ||||||
Shee Yul Ryoo | 71 | Non-Executive Director | March 30, 2005 | March 2011 | ||||||
Sung Bin Chun | 57 | Chairman of the board | March 20, 2007 | March 2011 | ||||||
Haeng Nam Chung | 69 | Outside Director | March 21, 2006 | March 2011 | ||||||
Ke Sup Yun | 65 | Outside Director | March 17, 2009 | March 2011 | ||||||
Yo Koo Kim | 60 | Outside Director | March 17, 2009 | March 2011 | ||||||
Byung-Il Kim | 64 | Outside Director | March 24, 2010 | March 2011 | ||||||
Hui Mook Kim | 52 | Outside Director | March 24, 2010 | March 2011 | ||||||
Yoji Hirakawa | 57 | Outside Director | March 24, 2009 | March 2011 | ||||||
Philippe Aguignier | 52 | Outside Director | March 24, 2010 | March 2011 |
(1) | The date on which each term will end will be the date of the general stockholders’ meeting in the relevant year. |
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Name | Age | Position | In charge of | |||||||
Buhmsoo Choi | 53 | Deputy President and Chief Financial Officer | — | Finance Management Team | ||||||
— | Investor Relations Team | |||||||||
— | Strategic Planning Team | |||||||||
— | Global Business Strategy Team | |||||||||
— | Shinhan FSB Research Institute | |||||||||
Sung Ho Wi | 52 | Deputy President | — | General Affairs Team | ||||||
— | Business Management Team | |||||||||
— | Public Relations Team | |||||||||
— | CSR & Culture Management Team | |||||||||
Chan Hee Jin | 55 | Deputy President | — | Synergy Management Team | ||||||
— | Information and Technology Planning Team | |||||||||
— | Audit Team |
ITEM 6.B. | Compensation |
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ITEM 6.C. | Board Practices |
• | the Board Steering Committee; | |
• | the Risk Management Committee; | |
• | the Audit Committee | |
• | the Outside Director Recommendation Committee; | |
• | the Compensation Committee; and | |
• | the Audit Committee Member Recommendation Committee. |
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ITEM 6.D. | Employees |
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ITEM 6.E. | Share Ownership |
Exercise Period | ||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||
Period | Number of Granted | Number of Options | ||||||||||||||||||||||
Grant Date | From | To | (In Won) | Options | Outstanding | |||||||||||||||||||
Shinhan Financial Group | ||||||||||||||||||||||||
Eung Chan Ra | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 94,416 | — | ||||||||||||||||||
(Chairman) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 95,390 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 100,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 99,447 | 99,447 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 112,794 | 112,794 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 60,000 | 60,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 55,000 | 55,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 35,000 | — | |||||||||||||||||||
Sang Hoon Shin | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 28,325 | — | ||||||||||||||||||
(President & Chief | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 77,160 | — | ||||||||||||||||||
Executive Officer) | ||||||||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 80,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 80,000 | 80,000 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 83,173 | 83,173 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 48,000 | 48,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 44,000 | 44,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 31,500 | — | |||||||||||||||||||
Shee Yul Ryoo | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 9,944 | — | ||||||||||||||||||
(Non-Executive Director) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 9,399 | — | ||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 10,000 | 10,000 | |||||||||||||||||||
Sung Bin Chun | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 10,000 | 10,000 | ||||||||||||||||||
(Chairman of the Board of Directors) | ||||||||||||||||||||||||
Buhmsoo Choi | 3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 11,000 | 11,000 | ||||||||||||||||||
(Deputy President) | 3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | ||||||||||||||||||
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Exercise Period | ||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||
Period | Number of Granted | Number of Options | ||||||||||||||||||||||
Grant Date | From | To | (In Won) | Options | Outstanding | |||||||||||||||||||
Sung Ho Wi | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,700 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 2,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,800 | 1,800 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,500 | 2,500 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 8,250 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | |||||||||||||||||||
Chan-Hee Jin | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,000 | 2,000 | ||||||||||||||||||
(Deputy President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,800 | 1,800 | ||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 8,250 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | |||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||
Baek Soon Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(President & Chief | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 2,200 | — | ||||||||||||||||||
Executive Officer) | ||||||||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 20,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 19,889 | 19,889 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 22,683 | 22,683 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 11,000 | 11,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 11,000 | 11,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 28,000 | — | |||||||||||||||||||
Jeum Joo Gweon | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,700 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,800 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | — | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 6,616 | 6,616 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,500 | 7,500 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 11,000 | 11,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | |||||||||||||||||||
Chan Park | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,800 | 1,800 | ||||||||||||||||||
(Deputy President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 6,616 | 6,616 | ||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,000 | 7,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 8,250 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | |||||||||||||||||||
Hyung Jin Kim | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
(Deputy President) | 3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 2,000 | — | ||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 3,400 | 3,400 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 4,100 | 4,100 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 7,500 | 7,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 23,405 | 12,500 | — | ||||||||||||||||||||
Young Hoon Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 2,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | 2,500 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 6,616 | 6,616 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 7,500 | 7,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | |||||||||||||||||||
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Exercise Period | ||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||
Period | Number of Granted | Number of Options | ||||||||||||||||||||||
Grant Date | From | To | (In Won) | Options | Outstanding | |||||||||||||||||||
Sung Rack Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,000 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
3/25/2004 | �� | 3/25/2006 | 3/25/2009 | 21,595 | 2,000 | — | ||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | 2,500 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,500 | 2,500 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | |||||||||||||||||||
Dong Dae Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,700 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 2,500 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | 2,500 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,500 | 2,500 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 3,500 | 3,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Se Il Oh | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 2,200 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,800 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,800 | 1,800 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,800 | 1,800 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 3,500 | 3,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Yong Byoung Cho | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,700 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,800 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,800 | 1,800 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,500 | 2,500 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Jong Bok Moon | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,500 | 1,500 | ||||||||||||||||||
(Executive Vice President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,800 | 1,800 | ||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 3,000 | 3,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
In Jong Joo | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,800 | 1,800 | ||||||||||||||||||
(Executive Vice President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,000 | 2,000 | ||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 3,500 | — | |||||||||||||||||||
Young Oh Seol | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,600 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,600 | 1,600 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,000 | 2,000 | |||||||||||||||||||
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Exercise Period | ||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||
Period | Number of Granted | Number of Options | ||||||||||||||||||||||
Grant Date | From | To | (In Won) | Options | Outstanding | |||||||||||||||||||
Shinhan Card | ||||||||||||||||||||||||
Jae Woo Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 18,873 | — | ||||||||||||||||||
(President & Chief | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 19,290 | — | ||||||||||||||||||
Executive Officer) | ||||||||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 20,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 19,889 | 19,889 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 22,559 | 22,559 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 11,000 | 11,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 22,000 | 22,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 17,600 | — | |||||||||||||||||||
Hee Geon Kim | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 14,937 | 14,937 | ||||||||||||||||||
(Deputy CEO) | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 8,250 | 8,250 | ||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 8,250 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 7,425 | — | |||||||||||||||||||
Chun Kuk Lee | 3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,000 | — | ||||||||||||||||||
(Deputy CEO) | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,200 | 1,200 | ||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,400 | 1,400 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,500 | 7,500 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 6,600 | 6,600 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Jae-Gwang Soh | 3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 6,000 | 6,000 | ||||||||||||||||||
(Deputy CEO) | 3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 5,940 | — | ||||||||||||||||||
Jeong Cheol Kim | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy CEO) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,700 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,400 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | 2,500 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 2,500 | 2,500 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,000 | 7,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 3,850 | 3,850 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Byung Gook Song | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Deputy CEO) | ||||||||||||||||||||||||
5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 2,200 | — | |||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 2,500 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | 2,500 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,800 | 1,800 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 3,500 | 3,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 3,500 | — | |||||||||||||||||||
Shinhan Investment Corp. | ||||||||||||||||||||||||
Hyu Won Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Chief Executive Officer) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 2,200 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,800 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 20,000 | 20,000 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 20,793 | 20,793 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 11,000 | 11,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 11,000 | 11,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 16,000 | — | |||||||||||||||||||
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Exercise Period | ||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||
Period | Number of Granted | Number of Options | ||||||||||||||||||||||
Grant Date | From | To | (In Won) | Options | Outstanding | |||||||||||||||||||
Ki Seung Jung | 3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,600 | — | ||||||||||||||||||
(Standing Auditor) | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,600 | — | ||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,600 | 1,600 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,500 | 7,500 | |||||||||||||||||||
Jin Kook Lee | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 14,080 | — | ||||||||||||||||||
(Vice President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 13,190 | 7,000 | ||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,500 | 7,500 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 8,250 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Byung Kuk Rhee | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,400 | 1,400 | ||||||||||||||||||
(Vice President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,600 | 1,600 | ||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 5,000 | 5,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 2,750 | 2,750 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 2,500 | — | |||||||||||||||||||
Kyoung Eun Yoon | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,600 | — | ||||||||||||||||||
(Vice President) | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 4,397 | — | ||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 5,000 | 5,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 2,500 | 2,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 2,750 | — | |||||||||||||||||||
Shinhan Life Insurance | ||||||||||||||||||||||||
Jin Won Suh | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(President & Chief | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 2,200 | — | ||||||||||||||||||
Executive Officer) | ||||||||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 20,000 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 20,000 | 20,000 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 20,679 | 20,679 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 11,000 | 11,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 22,000 | 22,000 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 16,000 | — | |||||||||||||||||||
Byung Chan Lee | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 14,939 | 14,939 | ||||||||||||||||||
(Vice President) | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 8,250 | 8,250 | ||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 8,250 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Jung Kun Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Vice President) | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,800 | — | |||||||||||||||||||
3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,500 | 2,500 | |||||||||||||||||||
3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 6,616 | 6,616 | |||||||||||||||||||
3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,000 | 7,000 | |||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 7,500 | 7,500 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Ki Won Kim | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | �� | 11,952 | 11,952 | |||||||||||||||||
(Vice President) | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 6,000 | 6,000 | ||||||||||||||||||
3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 6,600 | 6,600 | |||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 6,750 | — | |||||||||||||||||||
Ho Kyung Bae | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,000 | 1,000 | ||||||||||||||||||
(Vice President) | 3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 5,400 | — | ||||||||||||||||||
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Exercise Period | ||||||||||||||||||||||||
Exercise | ||||||||||||||||||||||||
Period | Number of Granted | Number of Options | ||||||||||||||||||||||
Grant Date | From | To | (In Won) | Options | Outstanding | |||||||||||||||||||
Jae Gun Bae | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,200 | 1,200 | ||||||||||||||||||
(Vice President) | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 1,800 | 1,800 | ||||||||||||||||||
3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 5,400 | — | |||||||||||||||||||
Choun Sik Lee | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,200 | 1,200 | ||||||||||||||||||
(Vice President) | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 1,800 | 1,800 | ||||||||||||||||||
Total | 2,291,277 | 1,265,998 | ||||||||||||||||||||||
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
ITEM 7.A. | Major Shareholders |
Number of Common | ||||||||
Shares Beneficially | Beneficial | |||||||
Name of Shareholder | Owned | Ownership % | ||||||
BNP Paribas | 30,106,276 | 6.35 | % | |||||
Shinhan Financial Group Employee Stock Ownership Association | 22,875,759 | 4.82 | % | |||||
Korea National Pension Fund | 21,105,762 | 4.45 | % | |||||
Citibank, N.A. (ADR Department) | 14,590,644 | 3.08 | % | |||||
Saudi Arabian Monetary Agency | 12,683,185 | 2.67 | % | |||||
Mirae Asset Management | 11,650,166 | 2.46 | % | |||||
Lazard Asset Management | 7,315,720 | 1.54 | % | |||||
Mizuho Corporate Bank | 5,955,000 | 1.26 | % | |||||
Samsung Life Insurance | 5,821,621 | 1.23 | % | |||||
Government of Singapore Investment Corporation | 5,578,128 | 1.18 | % | |||||
Abu Dhabi Investment Authority | 5,244,283 | 1.11 | % | |||||
DaeGyoo | 4,993,907 | 1.05 | % | |||||
Others | 326,279,136 | 68.80 | % | |||||
Total | 474,199,587 | 100.00 | % | |||||
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ITEM 7.B. | Related Party Transactions |
ITEM 7.C. | Interests of Experts and Counsel |
ITEM 8. | FINANCIAL INFORMATION |
ITEM 8.A. | Consolidated Statements and Other Financial Information |
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ITEM 8.B. | Significant Changes |
ITEM 9. | THE OFFER AND LISTING |
ITEM 9.A. | Offer and Listing Details |
Korea Exchange | New York Stock Exchange | |||||||||||||||||||||||
Closing Price per | Closing Price | |||||||||||||||||||||||
Common Stock | Average Daily | per ADS | Average Daily | |||||||||||||||||||||
High | Low | Trading Volume | High | Low | Trading Volume | |||||||||||||||||||
(Shares) | (ADSs) | |||||||||||||||||||||||
2005 | 43,100 | 24,100 | 1,210,054 | 74.31 | 51.78 | 14,419 | ||||||||||||||||||
2006 | 49,500 | 36,800 | 1,385,417 | 106.08 | 74.05 | 26,422 | ||||||||||||||||||
2007 | 66,200 | 45,450 | 1,696,165 | 148.29 | 96.75 | 36,042 | ||||||||||||||||||
2008 | 58,900 | 25,600 | 2,206,295 | 118.35 | 32.68 | 79,215 | ||||||||||||||||||
First Quarter | 52,500 | 45,150 | 1,567,340 | 113.45 | 90.97 | 66,619 | ||||||||||||||||||
Second Quarter | 58,900 | 44,550 | 1,867,102 | 118.35 | 86.79 | 52,614 | ||||||||||||||||||
Third Quarter | 50,300 | 41,500 | 2,021,075 | 98.07 | 68.47 | 74,154 | ||||||||||||||||||
Fourth Quarter | 42,000 | 25,600 | 3,369,664 | 71.00 | 32.68 | 122,474 | ||||||||||||||||||
2009 | 49,550 | 20,500 | 3,219,298 | 86.42 | 26.25 | 115,649 | ||||||||||||||||||
First Quarter | 32,950 | 20,500 | 4,361,545 | 50.34 | 26.25 | 166,528 | ||||||||||||||||||
Second Quarter | 34,000 | 25,750 | 3,983,458 | 56.66 | 38.24 | 130,567 | ||||||||||||||||||
Third Quarter | 48,950 | 32,900 | 2,750,514 | 82.87 | 50.56 | 85,639 | ||||||||||||||||||
Fourth Quarter | 49,550 | 43,200 | 1,840,262 | 86.42 | 74.28 | 82,481 | ||||||||||||||||||
2010(through June 11) | 49,100 | 39,250 | 1,753,680 | 88.35 | 66.31 | 62,520 | ||||||||||||||||||
January | 45,700 | 39,250 | 2,197,759 | 81.37 | 68.42 | 78,115 | ||||||||||||||||||
February | 43,250 | 39,650 | 1,565,404 | 75.26 | 66.37 | 64,563 | ||||||||||||||||||
March | 45,050 | 42,200 | 1,533,837 | 80.31 | 73.61 | 64.591 | ||||||||||||||||||
April | 49,100 | 45,150 | 1,867,368 | 88.35 | 81.51 | 44,962 | ||||||||||||||||||
May | 49,100 | 41,050 | 1,653,366 | 85.14 | 66.31 | 60,620 | ||||||||||||||||||
June (through June 11) | 46,300 | 43,300 | 1,620,812 | 77.69 | 69.44 | 65,178 |
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ITEM 9.B. | Plan of Distribution |
ITEM 9.C. | Markets |
• | Any person’s ownership of shares in the Korea Exchange is limited to 5% or less except for an investment trust company or investment company established under the Financial Investment Services and Capital Markets Act, or the Korean government. However, upon prior approval from the Financial Services Commission, more than 5% ownership in Korea Exchange is permitted if necessary for forming strategic alliance with a foreign stock or futures exchange; | |
• | The number of outside directors on the board of directors of the Korea Exchange shall be more than half of the total number of directors; | |
• | Any amendment to the Articles of Incorporation, transfer or consolidation of business, spin off, stock swap in its entirety or transfer of shares in its entirety of the Korea Exchange will receive prior approval from the Financial Services Commission; and | |
• | In the event the Financial Services Commission determines that the chief executive officer of the Korea Exchange is not appropriate for the position, the Financial Services Commission can request the Korea Exchange upon reasonable cause, within one month from the chief executive officer’s election, to dismiss the chief executive officer. Subsequently, the chief executive officer will be suspended from performing his duties and the Korea Exchange will elect a new chief executive officer within two months from the request. |
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Opening(1) | High | Low | Closing | |||||||||||||
2000 | 1,028.33 | 1,066.18 | 483.58 | 504.62 | ||||||||||||
2001 | 503.31 | 715.93 | 463.54 | 693.70 | ||||||||||||
2002 | 698.00 | 943.54 | 576.49 | 627.55 | ||||||||||||
2003 | 633.03 | 824.26 | 512.30 | 810.71 | ||||||||||||
2004 | 821.26 | 939.52 | 713.99 | 895.92 | ||||||||||||
2005 | 893.71 | 1383.14 | 866.17 | 1,379.37 | ||||||||||||
2006 | 1,389.27 | 1,464.70 | 1,192.09 | 1,434.46 | ||||||||||||
2007 | 1,435.26 | 2,085.45 | 1,345.08 | 1,897.13 | ||||||||||||
2008 | 1,853.45 | 1,901.13 | 892.16 | 1,124.47 | ||||||||||||
2009 | 1,157.40 | 1,723.17 | 992.69 | 1,682.77 | ||||||||||||
2010 (through June 11) | 1,696.14 | 1,757.76 | 1,532.68 | 1,675.34 |
(1) | The figures represent the daily closing price of the first trading day of the respective year. |
Previous Day’s Closing Price | Rounded Down to Won | |||
Less than 5,000 | 5 | |||
5,000 to less than 10,000 | 10 | |||
10,000 to less than 50,000 | 50 | |||
50,000 to less than 100,000 | 100 | |||
100,000 to less than 500,000 | 500 | |||
500,000 or more | 1,000 |
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Number of | Total Market Capitalization | Average Daily Trading Volume, Value | ||||||||||||||||||||||
Listed | (Thousands of | Thousands of | (Millions of | (Thousands of | ||||||||||||||||||||
Year | Companies | (Millions of Won) | Dollars)(1) | Shares | Won) | Dollars)(1) | ||||||||||||||||||
2000 | 704 | 188,041,490 | 148,393,204 | 306,163 | 2,602,211 | 2,053,796 | ||||||||||||||||||
2001 | 689 | 255,850,070 | 192,934,221 | 473,241 | 1,997,420 | 1,506,236 | ||||||||||||||||||
2002 | 683 | 258,680,756 | 215,445,465 | 857,245 | 3,041,598 | 2,533,820 | ||||||||||||||||||
2003 | 684 | 355,362,626 | 298,121,331 | 542,010 | 2,216,636 | 1,859,594 | ||||||||||||||||||
2004 | 683 | 412,588,139 | 398,597,371 | 372,895 | 2,232,109 | 2,156,419 | ||||||||||||||||||
2005 | 702 | 655,074,595 | 648,588,628 | 467,629 | 3,157,662 | 3,126,398 | ||||||||||||||||||
2006 | 731 | 704,587,508 | 757,620,976 | 279,096 | 3,435,180 | 3,693,742 | ||||||||||||||||||
2007 | 745 | 951,900,447 | 1,016,010,724 | 363,732 | 5,539,588 | 5,912,677 | ||||||||||||||||||
2008 | 763 | 576,887,540 | 457,121,664 | 355,205 | 5,189,644 | 4,112,238 | ||||||||||||||||||
2009 | 770 | 887,935,183 | 763,060,356 | 486,232 | 5,802,506 | 4,986,470 | ||||||||||||||||||
2010 (through June 11) | 771 | 932,189,643 | 748,205,830 | 408,558 | 5,275,137 | 4,233,997 |
(1) | Converted at the Noon Buying Rate at the end of the periods indicated. |
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• | odd-lot trading of shares; | |
• | acquisition of shares (which we refer to as “Converted Shares”) by exercise of warrants, conversion rights or exchange rights under bonds with warrants, convertible bonds or exchangeable bonds or withdrawal rights under depositary receipts issued outside of Korea by a Korean company; | |
• | acquisition of shares as a result of inheritance, donation, bequest or exercise of stockholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends; | |
• | over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded subject to certain exceptions; and | |
• | sale and purchase of shares at fair value between foreigners who are part of an investor group comprised of foreign companies investing under the control of a common investment manager pursuant to applicable laws or contract. |
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ITEM 9.D. | Selling Shareholders |
ITEM 9.E. | Dilution |
ITEM 9.F. | Expenses of the Issue |
ITEM 10. | ADDITIONAL INFORMATION |
ITEM 10.A. | Share Capital |
ITEM 10.B. | Memorandum and Articles of Incorporation |
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ITEM 10.C. | Material Contracts |
ITEM 10.D. | Exchange Controls |
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ITEM 10.E. | Taxation |
• | a resident of Korea; | |
• | a corporation having its head office, principal place of business, or place of effective management in Korea (a Korean corporation); or |
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• | engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected. |
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• | a bank; | |
• | a dealer in securities or currencies; | |
• | an insurance company or one of certain financial institutions; | |
• | a regulated investment company; | |
• | a real estate investment trust; | |
• | a tax-exempt entity; |
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• | a trader in securities that has elected to use amark-to-market method of accounting for your securities holdings; | |
• | a person holding common shares or ADSs as part of a hedging, conversion, constructive sale or integrated transaction or a straddle; | |
• | a person liable for the alternative minimum tax; | |
• | a partnership or other pass-through entity for U.S. federal income tax purposes; | |
• | a person who owns or is deemed to own 10% or more of our voting stock; or | |
• | a person whose functional currency is not the U.S. dollar. |
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• | at least 75% of our gross income is passive income; or | |
• | at least 50% of the value of our assets is attributable to assets that produce or are held for the production of passive income. |
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• | the excess distribution or gain will be allocated ratably over your holding period for our common shares or ADSs; | |
• | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we are a PFIC, will be treated as ordinary income; and | |
• | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
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ITEM 10.F. | Dividends and Paying Agents |
ITEM 10.G. | Statements by Experts |
ITEM 10.H. | Documents on Display |
ITEM 10.I. | Subsidiary Information |
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 12.A. | Debt Securities |
ITEM 12.B. | Warrants and Rights |
ITEM 12.C. | Other Securities |
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ITEM 12.D. | Depositary Fees and Charges |
Item | Services | Fees | Paid by | |||||
1 | Issuance of ADSs upon deposit of common shares (excluding issuances contemplated by items 3(b) and 5 below | Up to US$5.00 per 100 ADSs (or fraction thereof) issued | Person depositing common shares or person receiving ADSs | |||||
2 | Delivery of deposited securities against surrender of ADSs | Up to US$5.00 per 100 ADSs (or fraction thereof) surrendered | Person surrendering ADSs for purpose of withdrawal of deposited securities or person to whom deposited securities are delivered | |||||
3 | Distribution of (a) cash dividends or (b) ADSs pursuant to stock dividends | No fee, to the extent prohibited by the exchange on which the ADSs are listed. If the charging of such fee is not prohibited, the fees specified in item 4 below shall be payable | Person to whom distribution is made | |||||
4 | Distribution of (a) cash proceeds (i.e., upon sale of rights and other entitlements) or (b) free shares in the form of ADSs (not constituting a stock dividend) | Up to US$2.00 per 100 ADSs (or fraction thereof) held | Person to whom distribution is made | |||||
5 | Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spinoff shares) | Up to US$5.00 per 100 ADSs (or fraction thereof) distributed | Person to whom distribution is made | |||||
6 | Depositary Services | Unless prohibited by the exchange on which the ADSs are listed, up to US$2.00 per 100 ADSs (or fraction thereof) held as of the last day of each calendar year, except to the extent of any cash dividend fee(s) charged under paragraph (3)(a) above during the applicable calendar year | Person holding ADSs on last day of calendar year | |||||
7 | Distribution of ADSs pursuant to exercise of rights to purchase additional ADSs | Up to US$2.00 per 100 ADSs (or fraction thereof) held | Person who exercises such rights |
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Reimbursement of settlement infrastructure fees (including DTC fees) | US$ | 27,531.50 | ||
Reimbursement of proxy process expenses (printing, postage and distribution) | US$ | 32,656.46 | ||
Reimbursement of legal fees | US$ | 266,895.36 | ||
Contributions towards our investor relations efforts (i.e. non-deal roadshows, investor conferences and IR agency fees) | US$ | 30,305.55 | ||
Total: | US$ | 357,388.87 |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
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ITEM 15. | CONTROLS AND PROCEDURES |
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ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. | CODE OF ETHICS |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Aggregate Fees | ||||||||||
Billed During | ||||||||||
the Year Ended | ||||||||||
December 31, | ||||||||||
Type of Services | 2008 | 2009 | Nature of Services | |||||||
(In millions of Won) | ||||||||||
Audit fees | 6,381 | 7,214 | Audit service for Shinhan Financial Group and its subsidiaries. | |||||||
Tax fees | 259 | 287 | Tax return and consulting advisory service. | |||||||
All other fees | 443 | 15 | All other services which do not meet the three categories above. | |||||||
Total | 7,083 | 7,516 | ||||||||
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ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM 16G. | CORPORATE GOVERNANCE |
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ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
ITEM 19. | EXHIBITS |
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By: | /s/ Sang Hoon Shin |
Title: | President and Chief Executive Officer |
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Page | ||||
Index to consolidated financial statements | F-1 | |||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
F-10 | ||||
F-13 |
F-1
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
F-2
Table of Contents
INTERNAL CONTROL OVER FINANCIAL REPORTING
F-3
Table of Contents
2008 | 2009 | 2009 | ||||||||||
(In millions of Korean Won, except share data) | (See Note 1) | |||||||||||
(In thousands | ||||||||||||
of US$, except | ||||||||||||
share data) | ||||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | 1,364,777 | 4,363,125 | $ | 3,749,517 | ||||||||
Restricted cash (Note 4) | 7,049,312 | 7,973,917 | 6,852,504 | |||||||||
Interest-bearing deposits | 1,626,880 | 2,164,004 | 1,859,669 | |||||||||
Call loans and securities purchased under resale agreements (Note 5) | 3,065,870 | 1,346,244 | 1,156,915 | |||||||||
Trading assets (Note 6) | 18,700,942 | 11,297,076 | 9,708,311 | |||||||||
Securities: | ||||||||||||
Available-for-sale securities (Note 7) | 29,016,011 | 27,611,895 | 23,728,694 | |||||||||
Held-to-maturity securities (Note 7) | 8,696,144 | 12,793,618 | 10,994,386 | |||||||||
Loans (net of allowance for loan losses of | 167,308,055 | 165,593,546 | 142,305,286 | |||||||||
Customers’ liability on acceptances | 2,433,097 | 2,780,290 | 2,389,284 | |||||||||
Premises and equipment, net (Note 9) | 2,412,464 | 2,437,014 | 2,094,284 | |||||||||
Intangible assets (Note 10) | 1,678,278 | 1,266,604 | 1,088,475 | |||||||||
Goodwill (Note 10) | 3,892,393 | 3,805,422 | 3,270,246 | |||||||||
Security deposits | 1,333,783 | 1,323,666 | 1,137,513 | |||||||||
Other assets (Notes 11 and 24) | 12,395,127 | 10,153,495 | 8,725,557 | |||||||||
Total Assets | 260,973,133 | 254,909,916 | $ | 219,060,641 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||
Liabilities | ||||||||||||
Deposits: | ||||||||||||
Interest-bearing (Note 12) | 119,762,461 | 140,808,902 | $ | 121,006,232 | ||||||||
Non-interest-bearing (Note 12) | 2,942,034 | 2,889,587 | 2,483,210 | |||||||||
Trading liabilities (Note 6) | 11,830,665 | 4,565,034 | 3,923,030 | |||||||||
Acceptances outstanding | 2,433,097 | 2,780,290 | 2,389,284 | |||||||||
Short-term borrowings (Note 13) | 23,224,991 | 9,714,857 | 8,348,607 | |||||||||
Secured borrowings (Note 14) | 10,225,777 | 7,944,390 | 6,827,130 | |||||||||
Long-term debt (Notes 15 and 21) | 49,651,706 | 44,794,981 | 38,495,235 | |||||||||
Future policy benefits (Note 16) | 7,260,333 | 8,310,238 | 7,141,527 | |||||||||
Accrued expenses and other liabilities (Notes 17 and 24) | 15,677,926 | 12,552,247 | 10,786,961 | |||||||||
Total Liabilities | 243,008,990 | 234,360,526 | $ | 201,401,216 | ||||||||
Commitments and contingencies (Note 31) | — | — | — | |||||||||
Equity: | ||||||||||||
Common stock, | 1,980,998 | 2,370,998 | $ | 2,037,552 | ||||||||
Redeemable convertible preferred stock, | 73,605 | 73,605 | 63,254 | |||||||||
Redeemable preferred stock, | 144,950 | 144,950 | 124,565 | |||||||||
Additional paid-in capital | 7,147,165 | 8,037,718 | 6,907,333 | |||||||||
Retained earnings (Note 22) | 7,709,897 | 8,621,915 | 7,409,372 | |||||||||
Accumulated other comprehensive income, net of taxes (Note 37) | 595,481 | 969,013 | 832,735 | |||||||||
Less: Treasury stock, at cost, 529 shares in 2008 (Note 20) | (28 | ) | — | — | ||||||||
Total the Group stockholders’ equity | 17,652,068 | 20,218,199 | $ | 17,374,811 | ||||||||
Noncontrolling interest | 312,075 | 331,191 | 284,614 | |||||||||
Total equity | 17,964,143 | 20,549,390 | 17,659,425 | |||||||||
Total liabilities and equity | 260,973,133 | 254,909,916 | $ | 219,060,641 | ||||||||
F-4
Table of Contents
2007 | 2008 | 2009 | 2009 | |||||||||||||
(In millions of Korean Won, | (See Note 1) | |||||||||||||||
except per share data) | (In thousands | |||||||||||||||
of US$, except | ||||||||||||||||
per share data) | ||||||||||||||||
Interest and dividend income | ||||||||||||||||
Interest and fees on loans | 10,185,349 | 12,109,332 | 10,224,880 | $ | 8,786,903 | |||||||||||
Interest and dividends on securities (Note 7) | 1,402,712 | 1,775,081 | 1,852,178 | 1,591,697 | ||||||||||||
Interest and dividends on trading assets | 299,759 | 468,656 | 226,732 | 194,845 | ||||||||||||
Other interest income | 261,432 | 380,871 | 293,567 | 252,282 | ||||||||||||
Total interest income | 12,149,252 | 14,733,940 | 12,597,357 | 10,825,727 | ||||||||||||
Interest expense | ||||||||||||||||
Interest on deposits | 3,510,653 | 4,714,252 | 4,188,204 | 3,599,195 | ||||||||||||
Interest on short-term borrowings (Note 13) | 659,836 | 865,695 | 555,026 | 476,970 | ||||||||||||
Interest on secured borrowings | 510,470 | 562,735 | 330,624 | 284,126 | ||||||||||||
Interest on long-term debt | 2,256,293 | 2,761,858 | 2,277,419 | 1,957,134 | ||||||||||||
Other interest expense | 41,644 | 50,028 | 24,755 | 21,275 | ||||||||||||
Total interest expense | 6,978,896 | 8,954,568 | 7,376,028 | 6,338,700 | ||||||||||||
Net interest income | 5,170,356 | 5,779,372 | 5,221,329 | 4,487,027 | ||||||||||||
Provision for credit losses (Note 8) | 80,559 | 1,436,598 | 2,201,164 | 1,891,603 | ||||||||||||
Net interest income after provision for credit losses | 5,089,797 | 4,342,774 | 3,020,165 | 2,595,424 | ||||||||||||
Non-interest income | ||||||||||||||||
Commissions and fees (Note 18) | 2,611,641 | 2,595,215 | 2,700,414 | 2,320,641 | ||||||||||||
Net trust management fees | 72,772 | 69,163 | 69,420 | 59,657 | ||||||||||||
Net trading profits (losses) (Note 6) | (209,721 | ) | 584,330 | (516,962 | ) | (444,259 | ) | |||||||||
Net gains on securities (Note 7) | 213,063 | 13,092 | 321,405 | 276,204 | ||||||||||||
Impairment loss on debt securities: | ||||||||||||||||
Gross Impairment losses on debt securities | (43,741 | ) | (148,894 | ) | (14,262 | ) | (12,256 | ) | ||||||||
Less: Impairment recognized in OCI | — | — | 957 | 822 | ||||||||||||
Net impairment losses on debt securities | (43,741 | ) | (148,894 | ) | (13,305 | ) | (11,434 | ) | ||||||||
Income from other investment | 180,880 | 317,211 | 267,546 | 229,920 | ||||||||||||
Net gains (losses) on foreign exchange | 146,351 | (566,751 | ) | 956,238 | 821,758 | |||||||||||
Insurance income | 1,119,388 | 1,329,274 | 1,229,057 | 1,056,209 | ||||||||||||
Other (Note 19) | 647,573 | 378,777 | 670,928 | 576,571 | ||||||||||||
Total non-interest income | 4,738,206 | 4,571,417 | 5,684,741 | 4,885,267 | ||||||||||||
Non-interest expense | ||||||||||||||||
Employee compensation and other benefits (Note 27) | 2,056,348 | 1,817,473 | 2,000,396 | 1,719,070 | ||||||||||||
Depreciation and amortization (Notes 9 and 10) | 812,345 | 871,416 | 713,521 | 613,175 | ||||||||||||
General and administrative expenses | 877,860 | 882,135 | 868,317 | 746,201 | ||||||||||||
Credit card fees | 665,908 | 700,403 | 741,744 | 637,429 | ||||||||||||
Provision (reversal) for other losses | 72,371 | (18,467 | ) | 166,238 | 142,859 | |||||||||||
Insurance fees on deposits | 130,560 | 132,705 | 161,586 | 138,862 | ||||||||||||
Other fees and commission expense | 445,711 | 422,146 | 454,077 | 390,217 | ||||||||||||
Taxes (except income taxes) | 128,172 | 179,009 | 143,354 | 123,193 | ||||||||||||
Insurance operating expense | 1,350,468 | 1,037,797 | 1,456,306 | 1,251,498 | ||||||||||||
Other (Note 19) | 205,248 | 702,243 | 431,816 | 371,088 | ||||||||||||
Total non-interest expense | 6,744,991 | 6,726,860 | 7,137,355 | 6,133,592 | ||||||||||||
Income before income tax expense | 3,083,012 | 2,187,331 | 1,567,551 | 1,347,099 | ||||||||||||
Income tax expense(Note 24) | 1,058,444 | 694,931 | 424,026 | 364,393 | ||||||||||||
Net income | 2,024,568 | 1,492,400 | 1,143,525 | 982,706 | ||||||||||||
Net income attributable to noncontrolling interests | 94,956 | 11,701 | 9,673 | 8,313 | ||||||||||||
Net income attributable to the Group | 1,929,612 | 1,480,699 | 1,133,852 | $ | 974,393 | |||||||||||
F-5
Table of Contents
2007 | 2008 | 2009 | 2009 | |||||||||||||
(In millions of Korean Won, except per share data) | (See Note 1) | |||||||||||||||
(In thousands | ||||||||||||||||
of US$, except | ||||||||||||||||
per share data) | ||||||||||||||||
Net income per share of common stock(Note 25) | ||||||||||||||||
Basic | ||||||||||||||||
Net income per share | 4,250 | 2,993 | 1,957 | $ | 1.68 | |||||||||||
Diluted | ||||||||||||||||
Net income per share | 4,172 | 2,955 | 1,955 | $ | 1.67 | |||||||||||
Average common shares issued and outstanding | 403,474,783 | 417,673,260 | 461,500,172 | |||||||||||||
Average diluted common shares issued and outstanding | 417,227,827 | 432,394,260 | 476,221,172 |
F-6
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||||||||||||||||||
Additional | Comprehensive | Group | Non | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Paid-in | Retained | Income (Loss), | Treasury | Stockholders’ | Controlling | Total | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Net of Taxes | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||
(In millions of Korean Won and in thousands of US $, except share and per share data) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2007 | 381,567,614 | 1,907,838 | — | — | 2,710,093 | 5,205,043 | 140,883 | (161,511 | ) | 9,802,346 | 161,935 | 9,964,281 | ||||||||||||||||||||||||||||||||
Cumulative effect of change — adoption of SFAS 155 | — | — | — | — | — | (274 | ) | 274 | — | — | — | — | ||||||||||||||||||||||||||||||||
Cumulative effect of change — adoption of FIN 48 | — | — | — | — | — | 3,815 | — | — | 3,815 | — | 3,815 | |||||||||||||||||||||||||||||||||
Adjusted balance at January 1, 2007 | 381,567,614 | 1,907,838 | — | — | 2,710,093 | 5,208,584 | 141,157 | (161,511 | ) | 9,806,161 | 161,935 | 9,968,096 | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,929,612 | — | — | 1,929,612 | 94,956 | 2,024,568 | |||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 7,958 | — | 7,958 | — | 7,958 | |||||||||||||||||||||||||||||||||
Net unrealized gains (losses) onavailable-for-sale securities | — | — | — | — | — | — | 613,085 | — | 613,085 | (4,985 | ) | 608,100 | ||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,929,612 | 621,043 | — | 2,550,655 | 89,971 | 2,640,626 | |||||||||||||||||||||||||||||||||
Issuance of common stock | 14,631,973 | 73,160 | — | — | 741,817 | — | — | — | 814,977 | — | 814,977 | |||||||||||||||||||||||||||||||||
Issuance of redeemable convertible preferred stock | — | — | 14,721,000 | 73,605 | 777,357 | — | — | — | 850,962 | — | 850,962 | |||||||||||||||||||||||||||||||||
Issuance of redeemable preferred stock | — | — | 28,990,000 | 144,950 | 2,740,326 | — | — | — | 2,885,276 | — | 2,885,276 | |||||||||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (336,994 | ) | — | — | (336,994 | ) | — | (336,994 | ) | ||||||||||||||||||||||||||||||
Acquisition of treasury stock | — | — | — | — | — | — | — | (372 | ) | (372 | ) | — | (372 | ) | ||||||||||||||||||||||||||||||
Sale of treasury stock | — | — | — | — | 177,572 | — | — | 161,855 | 339,427 | — | 339,427 | |||||||||||||||||||||||||||||||||
Other changes in noncontrolling interest | — | — | — | — | — | — | — | — | — | (40,456 | ) | (40,456 | ) | |||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 6,801,202 | 762,200 | (28 | ) | 16,910,092 | 211,450 | 17,121,542 | ||||||||||||||||||||||||||||||||
Balance at January 1, 2008 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 6,801,202 | 762,200 | (28 | ) | 16,910,092 | 211,450 | 17,121,542 | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,480,699 | — | — | 1,480,699 | 11,701 | 1,492,400 | |||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 142,257 | — | 142,257 | — | 142,257 | |||||||||||||||||||||||||||||||||
Net unrealized gains (losses) onavailable-for-sale securities | — | — | — | — | — | — | (308,976 | ) | — | (308,976 | ) | 2,855 | (306,121 | ) | ||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,480,699 | (166,719 | ) | — | 1,313,980 | 14,556 | 1,328,536 | ||||||||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (572,004 | ) | — | — | (572,004 | ) | — | (572,004 | ) | ||||||||||||||||||||||||||||||
Other changes in noncontrolling interest | — | — | — | — | — | — | — | — | — | 86,069 | 86,069 | |||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 7,709,897 | 595,481 | (28 | ) | 17,652,068 | 312,075 | 17,964,143 | ||||||||||||||||||||||||||||||||
F-7
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||||||||||||||||||
Additional | Comprehensive | Group | Non | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Paid-in | Retained | Income (Loss), | Treasury | Stockholders’ | Controlling | Total | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Net of Taxes | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||
(In millions of Korean Won and in thousands of US $, except share and per share data) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2009 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 7,709,897 | 595,481 | (28 | ) | 17,652,068 | 312,075 | 17,964,143 | ||||||||||||||||||||||||||||||||
Cumulative effect of change — adoption ofFAS 115-2 | — | — | — | — | — | 8,752 | (8,752 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||
Adjusted balance at January 1, 2009 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 7,718,649 | 586,729 | (28 | ) | 17,652,068 | 312,075 | 17,964,143 | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,133,852 | — | — | 1,133,852 | 9,673 | 1,143,525 | |||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | (67,906 | ) | — | (67,906 | ) | (311 | ) | (68,217 | ) | |||||||||||||||||||||||||||||
Net unrealized gains (losses) onavailable-for-sale securities | — | — | — | — | — | — | 449,990 | — | 449,990 | (1,458 | ) | 448,532 | ||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,133,852 | 382,084 | — | 1,515,936 | 7,904 | 1,523,840 | |||||||||||||||||||||||||||||||||
Issuance of common stock | 78,000,000 | 390,000 | — | — | 885,260 | — | — | — | 1,275,260 | — | 1,275,260 | |||||||||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (230,586 | ) | — | — | (230,586 | ) | — | (230,586 | ) | ||||||||||||||||||||||||||||||
Sale of treasury stock | — | — | — | — | (3 | ) | — | — | 28 | 25 | — | 25 | ||||||||||||||||||||||||||||||||
Changes in the Group’s ownership interest in subsidiary | — | — | — | — | 5,296 | — | 200 | — | 5,496 | (5,496 | ) | — | ||||||||||||||||||||||||||||||||
Other changes in noncontrolling interest | — | — | — | — | — | — | — | — | — | 16,708 | 16,708 | |||||||||||||||||||||||||||||||||
Balance at December 31, 2009 | 474,199,587 | 2,370,998 | 43,711,000 | 218,555 | 8,037,718 | 8,621,915 | 969,013 | — | 20,218,199 | 331,191 | 20,549,390 | |||||||||||||||||||||||||||||||||
F-8
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||||||||||||||||||||||
Additional | Comprehensive | Group | Non | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Paid-in | Retained | Income (Loss), | Treasury | Stockholders’ | Controlling | Total | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Net of Taxes | Stock | Equity | Interest | Equity | ||||||||||||||||||||||||||||||||||
(In millions of Korean Won and in thousands of US $, except share and per share data) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2009 | 396,199,587 | $ | 1,702,400 | 43,711,000 | $ | 187,819 | $ | 6,142,024 | $ | 6,625,615 | $ | 511,736 | $ | (24 | ) | $ | 15,169,570 | $ | 268,185 | $ | 15,437,755 | |||||||||||||||||||||||
Cumulative effect of change — adoption ofFAS 115-2 | — | — | — | — | — | 7,521 | (7,521 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||
Adjusted balance at January 1, 2009 | 396,199,587 | $ | 1,702,400 | 43,711,000 | $ | 187,819 | $ | 6,142,024 | $ | 6,633,136 | $ | 504,215 | $ | (24 | ) | $ | 15,169,570 | $ | 268,185 | $ | 15,437,755 | |||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 974,393 | — | — | 974,393 | 8,313 | 982,706 | |||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | (58,356 | ) | — | (58,356 | ) | (267 | ) | (58,623 | ) | |||||||||||||||||||||||||||||
Net unrealized gains (losses) onavailable-for-sale securities | — | — | — | — | — | — | 386,706 | — | 386,706 | (1,253 | ) | 385,453 | ||||||||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 974,393 | 328,350 | — | 1,302,743 | 6,793 | 1,309,536 | |||||||||||||||||||||||||||||||||
Issuance of common stock | 78,000,000 | 335,152 | — | — | 760,762 | — | — | — | 1,095,914 | — | 1,095,914 | |||||||||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (198,157 | ) | — | — | (198,157 | ) | — | (198,157 | ) | ||||||||||||||||||||||||||||||
Sale of treasury stock | — | — | — | — | (3 | ) | — | — | 24 | 21 | — | 21 | ||||||||||||||||||||||||||||||||
Changes in the Group’s ownership interest in subsidiary | — | — | — | — | 4,550 | — | 170 | — | 4,720 | (4,720 | ) | — | ||||||||||||||||||||||||||||||||
Other changes in noncontrolling interest | — | — | — | — | — | — | — | — | — | 14,356 | 14,356 | |||||||||||||||||||||||||||||||||
Balance at December 31, 2009 | 474,199,587 | $ | 2,037,552 | 43,711,000 | $ | 187,819 | $ | 6,907,333 | $ | 7,409,372 | $ | 832,735 | $ | — | $ | 17,374,811 | $ | 284,614 | $ | 17,659,425 | ||||||||||||||||||||||||
F-9
Table of Contents
2007 | 2008 | 2009 | 2009 | |||||||||||||
(In millions of Korean Won) | (See Note 1) | |||||||||||||||
(In thousands | ||||||||||||||||
of US$) | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income | 2,024,568 | 1,492,400 | 1,143,525 | $ | 982,706 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Provision for credit losses | 80,559 | 1,436,598 | 2,201,164 | 1,891,603 | ||||||||||||
Provision for future policy benefit | 618,977 | (71,059 | ) | 526,463 | 452,424 | |||||||||||
Depreciation and amortization | 812,345 | 871,416 | 713,521 | 613,175 | ||||||||||||
Accretion of discounts on long-term debt | 148,826 | 140,635 | 50,148 | 43,096 | ||||||||||||
Amortization on deferred loan origination fees and costs | 234,059 | 151,073 | 94,411 | 81,134 | ||||||||||||
Amortization on investment debt securities | 4,347 | (32,279 | ) | (18,746 | ) | (16,110 | ) | |||||||||
Net gain on equity investments | (79,863 | ) | (53,067 | ) | (61,362 | ) | (52,732 | ) | ||||||||
Net trading (profits) losses | 209,721 | (584,330 | ) | 516,962 | 444,259 | |||||||||||
Net gain on sale ofavailable-for-sale securities | (246,102 | ) | (110,463 | ) | (416,196 | ) | (357,664 | ) | ||||||||
Impairment loss on securities | 76,780 | 246,265 | 108,096 | 92,894 | ||||||||||||
Net (gain) loss on sale of premises and equipment | (7,131 | ) | (1,604 | ) | (14,140 | ) | (12,152 | ) | ||||||||
Provision (reversal) for other losses | 72,371 | (18,467 | ) | 166,238 | 142,859 | |||||||||||
Net gain on sales of other assets | (61,220 | ) | (99,821 | ) | (87,340 | ) | (75,058 | ) | ||||||||
Gain on deconsolidation | — | — | (31,933 | ) | (27,442 | ) | ||||||||||
Net unrealized foreign exchange (gains) losses | 14,267 | 805,429 | (1,093,482 | ) | (939,700 | ) | ||||||||||
Expense (reversal) on stock option | 104,042 | (114,058 | ) | 52,077 | 44,753 | |||||||||||
Impairment loss on goodwill | — | 128,394 | 59,517 | 51,147 | ||||||||||||
Impairment loss on other investments | 11,741 | 33,206 | 14,802 | 12,721 | ||||||||||||
Net gain on sale of loans | (5,301 | ) | (1,196 | ) | (26,189 | ) | (22,506 | ) | ||||||||
Net changes in: | ||||||||||||||||
Restricted cash | 2,120,453 | (2,304,511 | ) | (939,905 | ) | (807,722 | ) | |||||||||
Trading assets | (5,535,274 | ) | (7,934,088 | ) | 6,881,682 | 5,913,876 | ||||||||||
Other assets | (1,496,233 | ) | (1,714,095 | ) | 1,756,950 | 1,509,861 | ||||||||||
Trading liabilities | 895,288 | 9,322,022 | (7,265,631 | ) | (6,243,828 | ) | ||||||||||
Accrued expenses and other liabilities | 2,770,178 | 2,315,268 | (2,616,515 | ) | (2,248,542 | ) | ||||||||||
Net cash provided by operating activities | 2,767,398 | 3,903,668 | 1,714,117 | 1,473,052 | ||||||||||||
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2007 | 2008 | 2009 | 2009 | |||||||||||||
(In millions of Korean Won) | (See Note 1) | |||||||||||||||
(In thousands | ||||||||||||||||
of US$) | ||||||||||||||||
Cash flows from investing activities | ||||||||||||||||
Net change in interest-bearing deposit assets | (365,226 | ) | (533,050 | ) | (562,124 | ) | $ | (483,070 | ) | |||||||
Net change in call loans and securities purchased under resale agreements | 1,063,677 | (2,158,154 | ) | 1,483,791 | 1,275,118 | |||||||||||
Proceeds from sales ofavailable-for-sale securities | 4,330,853 | 2,473,684 | 1,561,005 | 1,341,473 | ||||||||||||
Proceeds from maturities ofavailable-for-sale securities | 7,269,091 | 7,274,598 | 12,351,877 | 10,614,770 | ||||||||||||
Purchases ofavailable-for-sale securities | (16,227,787 | ) | (16,325,479 | ) | (11,668,839 | ) | (10,027,790 | ) | ||||||||
Proceeds from maturities ofheld-to-maturity securities | 1,953,059 | 6,237,970 | 2,224,973 | 1,912,063 | ||||||||||||
Purchases ofheld-to-maturity securities | (2,547,434 | ) | (6,680,646 | ) | (6,345,609 | ) | (5,453,194 | ) | ||||||||
Loan originations and principal collections, net | (17,620,125 | ) | (16,141,642 | ) | (5,477,713 | ) | (4,707,354 | ) | ||||||||
Proceeds from sales of premises and equipment | 11,263 | 92,158 | 69,583 | 59,797 | ||||||||||||
Purchases of premises and equipment | (453,706 | ) | (411,017 | ) | (382,246 | ) | (328,489 | ) | ||||||||
Net change in security deposits | (141,982 | ) | (38,904 | ) | 6,185 | 5,315 | ||||||||||
Increase in goodwill | — | — | (3,303 | ) | (2,838 | ) | ||||||||||
Acquisition of subsidiaries, net of cash acquired | (5,960,417 | ) | (46,278 | ) | — | — | ||||||||||
Deconsolidation of subsidiaries | — | — | (1,409 | ) | (1,211 | ) | ||||||||||
Proceeds from sales of equity method investments | 12,291 | 8,613 | 121,902 | 104,758 | ||||||||||||
Acquisition of equity method investments | (58,196 | ) | (264,136 | ) | (114,535 | ) | (98,427 | ) | ||||||||
Net change in other investments | (480,268 | ) | (395,972 | ) | (749,297 | ) | (643,919 | ) | ||||||||
Net cash used in investing activities | (29,214,907 | ) | (26,908,255 | ) | (7,485,759 | ) | (6,432,998 | ) | ||||||||
Cash flows from financing activities | ||||||||||||||||
Net increase in interest-bearing deposit liabilities | 11,286,195 | 14,955,203 | 25,310,495 | 21,750,952 | ||||||||||||
Net increase (decrease) in non-interest-bearing deposits | (755,843 | ) | (220,276 | ) | (52,447 | ) | (45,071 | ) | ||||||||
Net increase (decrease) in short-term borrowings | 4,345,085 | 7,079,775 | (13,220,611 | ) | (11,361,330 | ) | ||||||||||
Proceeds from issuance of secured borrowings | 5,356,410 | 4,503,126 | 2,434,546 | 2,092,163 | ||||||||||||
Repayment of secured borrowings | (4,769,939 | ) | (5,826,397 | ) | (4,685,501 | ) | (4,026,555 | ) | ||||||||
Proceeds from issuance of long-term debt | 20,165,044 | 13,097,327 | 16,136,245 | 13,866,923 | ||||||||||||
Repayment of long-term debt | (11,225,192 | ) | (12,673,038 | ) | (17,171,152 | ) | (14,756,286 | ) | ||||||||
Proceed from the issuance of common stock | — | — | 1,275,260 | 1,095,914 | ||||||||||||
Issuance of redeemable convertible preferred stock | 850,962 | — | — | — | ||||||||||||
Issuance of redeemable preferred stock | 2,885,276 | — | — | — | ||||||||||||
Purchases of treasury stock | (372 | ) | — | — | — | |||||||||||
Sale of treasury stock | 406,795 | — | 25 | 21 | ||||||||||||
Cash dividends paid | (336,994 | ) | (572,004 | ) | (230,586 | ) | (198,157 | ) | ||||||||
Increase of noncontrolling interest | 54,981 | 2,328 | 16,690 | 14,343 | ||||||||||||
Net cash provided by financing activities | 28,262,408 | 20,346,044 | 9,812,964 | 8,432,917 | ||||||||||||
Effect of exchange rate changes on cash | 73,604 | 443,514 | (1,042,974 | ) | (896,295 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 1,888,503 | (2,215,029 | ) | 2,998,348 | 2,576,676 | |||||||||||
Cash and cash equivalents | ||||||||||||||||
Beginning of year | 1,691,303 | 3,579,806 | 1,364,777 | 1,172,841 | ||||||||||||
End of year | 3,579,806 | 1,364,777 | 4,363,125 | $ | 3,749,517 | |||||||||||
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2007 | 2008 | 2009 | 2009 | |||||||||||||
(In millions of Korean Won) | (See Note 1) | |||||||||||||||
(In thousands | ||||||||||||||||
of US$) | ||||||||||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Cash paid for interest | 6,514,034 | 8,297,836 | 8,085,712 | $ | 6,948,577 | |||||||||||
Cash paid for income taxes | 676,764 | 985,904 | 700,844 | 602,281 | ||||||||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||||||
Acquisitions: | ||||||||||||||||
Fair value of net assets acquired | 765,123 | — | — | — | ||||||||||||
Goodwill | 81,153 | — | — | — | ||||||||||||
Consideration other than cash | 814,971 | — | — | — | ||||||||||||
Securities and other investments received in connection with loan restructuring | 2,783 | — | 40,072 | 34,436 | ||||||||||||
Increase in cumulative translation adjustments, net of taxes | 7,958 | 142,257 | (67,906 | ) | (58,356 | ) | ||||||||||
Increase (decrease) in unrealized gains (losses) onavailable-for-sale securities, net of taxes | 613,359 | (308,976 | ) | 441,438 | 379,355 | |||||||||||
Increase in premises and equipment transferred from other receivables | 107,466 | — | — | — | ||||||||||||
Increase in equity method investment due to deconsolidation | — | — | 126,795 | 108,963 |
F-12
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1. | General Information and Summary of Significant Accounting Policies |
Country of | Percentage of Ownership(1) | |||||||||||||
Incorporation | 2007 | 2008 | 2009 | |||||||||||
Shinhan Bank | Korea | 100 | % | 100 | % | 100 | % | |||||||
Shinhan Investment Corp. (Formerly Good Morning Shinhan Securities Co., Ltd.)(2) | Korea | 100 | % | 100 | % | 100 | % | |||||||
Shinhan Card Co., Ltd. (Formerly LG Card Co., Ltd.)(3) | Korea | 100 | % | 100 | % | 100 | % | |||||||
Shinhan Capital Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||
Jeju Bank | Korea | 62.42 | % | 62.42 | % | 68.88 | % | |||||||
Shinhan Credit Information Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||
Shinhan Private Equity Inc. | Korea | 100 | % | 100 | % | 100 | % | |||||||
Shinhan Life Insurance Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||
SHC Management Co., Ltd. (Formerly Shinhan Card Co., Ltd.)(4) | Korea | 100 | % | 100 | % | 100 | % |
(1) | Direct and indirect ownership are combined. All holdings are in common stock of the respective subsidiaries. | |
(2) | The former Good Morning Shinhan Securities Co., Ltd. changed its name to “Shinhan Investment Corp.”. | |
(3) | On March 23, 2007, the Group acquired 78.58% of the issued and outstanding common stock of LG Card Co., Ltd. (LG Card) where the Group had owned 7.15% interest through a tender offer. On September 21, 2007, the Group completed the acquisition of the remaining LG Card shares through a tender offer and share exchange, and the Group’s ownership increased to 100%. | |
(4) | On October 1, 2007, LG Card acquired and assumed all assets, liabilities and contracts of the former Shinhan Card and changed its name to “Shinhan Card”. Also, the former Shinhan Card changed its name to “SHC Management Co., Ltd.”. |
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• | Loans classified as “substandard” or below according to asset classification guidelines of the Financial Services Commission (FSC) of the Republic of Korea. | |
• | Loans that are more than 90 days past due; and | |
• | Loans which are “troubled debt restructurings” under US GAAP |
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Buildings | 40 years | |
Equipment and furniture | 4~5 years | |
Leasehold improvements | 5 years | |
Operating lease assets | 3~5 years | |
Capitalized software costs | 4~5 years |
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2. | Accounting Changes and Future Application of Accounting Standards |
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• | Level 1 — Quoted prices for identical instruments in active markets. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain securities that are highly liquid and are actively traded inover-the-counter markets. | |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. | |
• | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurements. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques based on significant unobservable inputs, as well as management judgements or estimates that are significant to valuation. |
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3. | Business Changes and Developments |
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2007 | ||||
(In millions of Won) | ||||
Cash and cash equivalents | 315,549 | |||
Deposits | 256,207 | |||
Call loans | 511,670 | |||
Trading assets | 1,729 | |||
Securities | 43,649 | |||
Loans, net of allowance for loan losses | 9,902,214 | |||
Premises and equipment, net | 128,637 | |||
Other assets | 719,014 | |||
Total assets | 11,878,669 | |||
Borrowings and debentures | 6,970,133 | |||
Other liabilities | 1,380,991 | |||
Total liabilities | 8,351,124 | |||
Fair value of net assets of LG Card | 3,527,545 | |||
2007 | ||||
(In millions of Won) | ||||
Cash paid | 6,707,361 | |||
Stock exchanged | 814,971 | |||
Direct acquisition costs | 7,688 | |||
Total purchase price | 7,530,020 | |||
Allocation of purchase price: | ||||
Fair value of net assets of LG Card (excluding effect of CCI(1) and deferred taxes) | 3,831,102 | |||
Credit card relationship intangible asset(1) | 1,064,046 | |||
Deferred tax on fair value adjustment | (303,558 | ) | ||
Goodwill | 2,938,430 | |||
Total purchase price | 7,530,020 | |||
(1) | Credit card relationship intangible reflects the estimated fair value of the credit card relationships acquired from LG Card from which the Group expects to derive future benefits over the estimated life of such relationships. The customer relationship intangible is amortized over its estimated useful life on asum-of-the years’-digits basis. The estimated weighted average life of the customer relationship intangible is approximately 6 years. The fair value of this asset was based principally upon the estimates of (i) the profitability of the acquired accounts and (ii) the projected run-off of the acquired accounts. |
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2007 | ||||
(Unaudited) | ||||
(In millions of Won, | ||||
except per share data) | ||||
Total interest and dividend income | 12,412,978 | |||
Net income | 2,088,697 | |||
Basic earnings per share | 4,776 | |||
Diluted earnings per share | 4,744 |
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4. | Restricted Cash |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Reserve deposits with the Bank of Korea (BOK) | 5,662,362 | 6,729,167 | ||||||
Cash restricted for investment activities | 1,158,978 | 845,155 | ||||||
Other | 227,972 | 399,595 | ||||||
7,049,312 | 7,973,917 | |||||||
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5. | Call Loans and Securities Purchased under Resale Agreements |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Call loans | 733,238 | 902,667 | ||||||
Securities purchased under resale agreements | 2,332,632 | 443,577 | ||||||
3,065,870 | 1,346,244 | |||||||
6. | Trading Activities |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Debt securities: | ||||||||
Korean treasury and governmental agencies | 527,778 | 1,523,695 | ||||||
Corporations | 1,264,303 | 1,176,562 | ||||||
Mortgage-backed and asset-backed securities | 888,867 | 872,987 | ||||||
Financial institutions | 3,279,613 | 2,104,094 | ||||||
Equity securities | 704,850 | 746,962 | ||||||
Derivative instruments: | ||||||||
Foreign exchange derivatives | 9,442,225 | 3,426,615 | ||||||
Interest rate derivatives | 1,944,530 | 898,554 | ||||||
Equity derivatives | 555,322 | 286,919 | ||||||
Credit derivatives | — | 2,546 | ||||||
Commodity derivatives | 34,717 | 1,896 | ||||||
Other trading assets — commodity indexed deposits | 58,737 | 256,246 | ||||||
18,700,942 | 11,297,076 | |||||||
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2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Derivative instruments: | ||||||||
Foreign exchange derivatives | 8,703,168 | 2,800,680 | ||||||
Interest rate derivatives | 2,217,664 | 1,134,514 | ||||||
Equity derivatives | 615,175 | 285,302 | ||||||
Credit derivatives | 39,077 | 23,076 | ||||||
Commodity derivatives | 35,565 | 2,493 | ||||||
Other trading liabilities ��� commodity indexed deposits | 220,016 | 318,969 | ||||||
11,830,665 | 4,565,034 | |||||||
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Debt securities | (51,844 | ) | 128,385 | (88,422 | ) | |||||||
Equity securities | 130,559 | (108,652 | ) | 81,052 | ||||||||
Derivative instruments | (275,297 | ) | 590,779 | (513,413 | ) | |||||||
Other trading activities — commodity indexed deposits | (13,139 | ) | (26,182 | ) | 3,821 | |||||||
Net trading profits (losses) | (209,721 | ) | 584,330 | (516,962 | ) | |||||||
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7. | Securities |
2008 | 2009 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||
Cost(1) | Gains | Losses | Value | Cost(1) | Gains | Losses | Value | |||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||||||||||
Korean treasury and governmental agencies | 6,065,193 | 190,809 | 1,837 | 6,254,165 | 8,696,449 | 74,727 | 49,177 | 8,721,999 | ||||||||||||||||||||||||
Corporations | 1,818,262 | 125,761 | 25,623 | 1,918,400 | 2,222,460 | 92,521 | 7,189 | 2,307,792 | ||||||||||||||||||||||||
Financial institutions | 15,284,829 | 301,457 | 36,446 | 15,549,840 | 11,005,207 | 185,646 | 26,589 | 11,164,264 | ||||||||||||||||||||||||
Foreign governments | 106,616 | 17,477 | 564 | 123,529 | 169,087 | 2,875 | 1,794 | 170,168 | ||||||||||||||||||||||||
Mortgage-backed and asset-backed securities | 3,009,519 | 11,850 | 20,828 | 3,000,541 | 2,280,105 | 15,867 | 11,788 | 2,284,184 | ||||||||||||||||||||||||
Marketable equity securities | 2,016,378 | 287,342 | 134,184 | 2,169,536 | 2,084,668 | 924,779 | 45,959 | 2,963,488 | ||||||||||||||||||||||||
28,300,797 | 934,696 | 219,482 | 29,016,011 | 26,457,976 | 1,296,415 | 142,496 | 27,611,895 | |||||||||||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,008,480 | 118,984 | 1,333 | 4,126,131 | 8,138,424 | 65,026 | 55,677 | 8,147,773 | ||||||||||||||||||||||||
Corporations | 244,988 | 3,606 | 1,312 | 247,282 | 363,259 | 10,566 | 1,513 | 372,312 | ||||||||||||||||||||||||
Financial institutions | 4,279,235 | 60,889 | 9,252 | 4,330,872 | 4,092,996 | 47,463 | 23,061 | 4,117,398 | ||||||||||||||||||||||||
Foreign governments | 9,148 | 84 | 54 | 9,178 | 35,885 | — | 203 | 35,682 | ||||||||||||||||||||||||
Mortgage-backed and asset-backed securities | 154,293 | 5,195 | — | 159,488 | 163,054 | 4,690 | 314 | 167,430 | ||||||||||||||||||||||||
8,696,144 | 188,758 | 11,951 | 8,872,951 | 12,793,618 | 127,745 | 80,768 | 12,840,595 | |||||||||||||||||||||||||
(1) | On January 1, 2007, the Group adopted fair value election underASC 851-15 (formerly SFAS No. 155) on certain hybrid financial instruments. The fair values of those instruments were |
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2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Available-for-sale securities | ||||||||||||
Debt securities | ||||||||||||
Totalother-than-temporary impairment losses (unrealized and realized) | 43,741 | 147,695 | 11,486 | |||||||||
Unrealizedother-than-temporary impairment losses recognized in OCI | — | — | 957 | |||||||||
Net impairment losses on debt securities | 43,741 | 147,695 | 10,529 | |||||||||
Equity securities | 33,039 | 97,371 | 94,791 | |||||||||
76,780 | 245,066 | 105,320 | ||||||||||
Held-to-maturity securities | ||||||||||||
Debt securities | — | 1,199 | 2,776 | |||||||||
Totalother-than-temporary impairment losses | 76,780 | 246,265 | 108,096 | |||||||||
2009 | ||||
(In millions of Won) | ||||
Balance, beginning of year | 80,294 | |||
Additions: | ||||
Initial credit impairments | 2,807 | |||
Subsequent credit impairments | 4,838 | |||
Reductions: | ||||
For increases in expected cash flows | 23 | |||
Balance, end of year | 87,916 | |||
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2008 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 232,197 | (1,039 | ) | 141,152 | (798 | ) | 373,349 | (1,837 | ) | |||||||||||||||
Corporations | 280,811 | (8,591 | ) | 641,545 | (17,032 | ) | 922,356 | (25,623 | ) | |||||||||||||||
Financial institutions | 1,056,421 | (18,908 | ) | 609,060 | (17,538 | ) | 1,665,481 | (36,446 | ) | |||||||||||||||
Foreign governments | 14,001 | (564 | ) | — | — | 14,001 | (564 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | 925,321 | (18,398 | ) | 109,626 | (2,430 | ) | 1,034,947 | (20,828 | ) | |||||||||||||||
Marketable equity securities | 591,718 | (134,062 | ) | 8,262 | (122 | ) | 599,980 | (134,184 | ) | |||||||||||||||
3,100,469 | (181,562 | ) | 1,509,645 | (37,920 | ) | 4,610,114 | (219,482 | ) | ||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,974 | (26 | ) | 58,750 | (1,307 | ) | 63,724 | (1,333 | ) | |||||||||||||||
Corporations | 12,808 | (404 | ) | 80,899 | (908 | ) | 93,707 | (1,312 | ) | |||||||||||||||
Financial institutions | 74,843 | (3,070 | ) | 265,548 | (6,182 | ) | 340,391 | (9,252 | ) | |||||||||||||||
Foreign governments | 2,227 | (54 | ) | — | — | 2,227 | (54 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | — | — | — | — | — | — | ||||||||||||||||||
94,852 | (3,554 | ) | 405,197 | (8,397 | ) | 500,049 | (11,951 | ) | ||||||||||||||||
Total temporarily impaired securities | 3,195,321 | (185,116 | ) | 1,914,842 | (46,317 | ) | 5,110,163 | (231,433 | ) | |||||||||||||||
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2009 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,020,926 | (48,676 | ) | 73,013 | (501 | ) | 4,093,939 | (49,177 | ) | |||||||||||||||
Corporations | 557,862 | (5,794 | ) | 252,708 | (1,395 | ) | 810,570 | (7,189 | ) | |||||||||||||||
Financial institutions | 4,921,593 | (15,369 | ) | 315,941 | (11,220 | ) | 5,237,534 | (26,589 | ) | |||||||||||||||
Foreign governments | 55,949 | (1,794 | ) | — | — | 55,949 | (1,794 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | 67,085 | (5,633 | ) | 230,250 | (6,155 | ) | 297,335 | (11,788 | ) | |||||||||||||||
Marketable equity securities | 394,303 | (39,624 | ) | 108,223 | (6,335 | ) | 502,526 | (45,959 | ) | |||||||||||||||
10,017,718 | (116,890 | ) | 980,135 | (25,606 | ) | 10,997,853 | (142,496 | ) | ||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 3,542,310 | (54,868 | ) | 54,216 | (809 | ) | 3,596,526 | (55,677 | ) | |||||||||||||||
Corporations | 89,265 | (1,132 | ) | 5,462 | (381 | ) | 94,727 | (1,513 | ) | |||||||||||||||
Financial institutions | 536,707 | (21,058 | ) | 123,511 | (2,003 | ) | 660,218 | (23,061 | ) | |||||||||||||||
Foreign governments | 9,206 | (203 | ) | — | — | 9,206 | (203 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | 49,703 | (314 | ) | — | — | 49,703 | (314 | ) | ||||||||||||||||
4,227,191 | (77,575 | ) | 183,189 | (3,193 | ) | 4,410,380 | (80,768 | ) | ||||||||||||||||
Total temporarily impaired securities | 14,244,909 | (194,465 | ) | 1,163,324 | (28,799 | ) | 15,408,233 | (223,264 | ) | |||||||||||||||
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Table of Contents
• | the length of time and the extent to which fair value has been below cost; | |
• | the severity of the impairment; | |
• | the cause of the impairment and the financial condition and near-term prospects of the issuer; | |
• | the activity in the market of the issuer which may indicate adverse credit conditions; and | |
• | the Group’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. |
• | identification and evaluation of investments that have indications of possible impairment; | |
• | analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period; | |
• | discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as havingother-than-temporary impairment and those that would not supportother-than-temporary impairment; and | |
• | documentation of the results of these analyses, as required under business policies. |
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2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Interest income | 1,350,528 | 1,711,604 | 1,793,399 | |||||||||
Dividends | 52,184 | 63,477 | 58,779 | |||||||||
1,402,712 | 1,775,081 | 1,852,178 | ||||||||||
Available-for-Sale | Held-to-maturity | |||||||||||||||
Debt Securities | Debt Securities | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In millions of Won) | ||||||||||||||||
Within 1 year | 9,151,315 | 9,252,349 | 2,553,796 | 2,579,094 | ||||||||||||
Over 1 year through 5 years | 12,677,393 | 12,785,195 | 7,491,066 | 7,541,735 | ||||||||||||
Over 5 years through 10 years | 2,309,516 | 2,384,614 | 2,253,469 | 2,239,037 | ||||||||||||
Over 10 years | 235,084 | 226,249 | 495,287 | 480,729 | ||||||||||||
24,373,308 | 24,648,407 | 12,793,618 | 12,840,595 | |||||||||||||
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2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Commercial: | ||||||||
Commercial and industrial | 55,466,168 | 54,479,473 | ||||||
Other commercial | 37,637,026 | 34,770,389 | ||||||
Lease financing | 1,591,437 | 1,559,652 | ||||||
Consumer: | ||||||||
Mortgage and home equity | 36,182,970 | 40,022,157 | ||||||
Credit cards | 14,637,084 | 15,116,757 | ||||||
Other consumer | 25,026,774 | 23,306,609 | ||||||
Total loans, gross | 170,541,459 | 169,255,037 | ||||||
Deferred loan origination costs (fees) | (32,771 | ) | (23,497 | ) | ||||
170,508,688 | 169,231,540 | |||||||
Less: Allowance for loan losses | (3,200,633 | ) | (3,637,994 | ) | ||||
Total loans, net | 167,308,055 | 165,593,546 | ||||||
2007 | ||||
(In millions of Won) | ||||
Contractually required payments receivable at acquisition | 619,928 | |||
Cash flows expected to be collected at acquisition | 323,069 | |||
Fair value of acquired receivables at acquisition | 220,538 |
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2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Balance at beginning of year | 113,356 | 71,210 | ||||||
Purchases | — | — | ||||||
Accretion of accretable yield | (45,169 | ) | (52,424 | ) | ||||
Increase to expected cash flows | 3,023 | 27,336 | ||||||
Balance at end of year | 71,210 | 46,122 | ||||||
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Impaired loans with an allowance | 1,256,180 | 1,953,024 | 2,111,904 | |||||||||
Impaired loans without an allowance | 231,067 | 224,570 | 213,763 | |||||||||
Total impaired loans | 1,487,247 | 2,177,594 | 2,325,667 | |||||||||
Allowance for impaired loans | 908,630 | 1,181,446 | 1,350,209 | |||||||||
Average balance of impaired loans during the year | 1,523,274 | 1,910,041 | 2,117,768 | |||||||||
Interest income recognized on impaired loans | 59,537 | 79,251 | 48,223 |
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Loans | 385,547 | 747,183 | 1,097,275 | |||||||||
Debt securities | 42,295 | 34,710 | 28,552 | |||||||||
427,842 | 781,893 | 1,125,827 | ||||||||||
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Allowance for Off-Balance | ||||||||||||||||||||||||
Allowance for Loan Losses | Sheet Credit(1) | |||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Balance at beginning of year | 1,575,013 | 2,099,122 | 3,200,633 | 160,774 | 221,558 | 339,384 | ||||||||||||||||||
Provision for loan losses | 40,174 | 1,318,772 | 1,750,738 | — | — | — | ||||||||||||||||||
Provision for off-balance sheet credit | — | — | — | 40,385 | 117,826 | 450,426 | ||||||||||||||||||
Allowance relating to: | ||||||||||||||||||||||||
Acquisition of LG Card | 541,337 | — | — | 20,399 | — | — | ||||||||||||||||||
Charge-offs | (700,912 | ) | (916,644 | ) | (1,891,127 | ) | — | — | — | |||||||||||||||
Recoveries | 643,510 | 699,383 | 577,750 | — | — | — | ||||||||||||||||||
Balance at end of year | 2,099,122 | 3,200,633 | 3,637,994 | 221,558 | 339,384 | 789,810 | ||||||||||||||||||
(1) | The allowance for off-balance sheet credit is included in other liabilities. |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Gross lease payments receivable | 1,767,911 | 1,734,996 | ||||||
Estimated unguaranteed residual values | 11,524 | 8,522 | ||||||
Unearned income | (187,998 | ) | (183,866 | ) | ||||
1,591,437 | 1,559,652 | |||||||
Less: Deferred loan origination fee | (1,385 | ) | (523 | ) | ||||
Allowance for loan losses | (10,661 | ) | (12,866 | ) | ||||
1,579,391 | 1,546,263 | |||||||
Years Ending | (In millions of Won) | |||
2010 | 627,493 | |||
2011 | 545,734 | |||
2012 | 382,800 | |||
2013 | 93,618 | |||
2014 | 18,873 | |||
Thereafter | 66,478 | |||
1,734,996 | ||||
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9. | Premises and Equipment |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Land | 1,083,043 | 1,087,321 | ||||||
Buildings | 966,927 | 1,019,383 | ||||||
Equipment and furniture | 1,121,283 | 1,120,108 | ||||||
Capitalized software costs | 506,697 | 618,835 | ||||||
Leasehold improvements | 222,448 | 246,265 | ||||||
Construction in progress | 6,779 | 2,380 | ||||||
Operating lease assets | 93,750 | 75,197 | ||||||
Total premises and equipment, gross | 4,000,927 | 4,169,489 | ||||||
Less: Accumulated depreciation and amortization | (1,588,463 | ) | (1,732,475 | ) | ||||
Total premises and equipment, net | 2,412,464 | 2,437,014 | ||||||
10. | Goodwill and Intangible Assets |
Shinhan | ||||||||||||||||||||||||
Investment Corp | ||||||||||||||||||||||||
(formerly | ||||||||||||||||||||||||
Shinhan Bank | Goodmorning | Shinhan Card | ||||||||||||||||||||||
(formerly | Shinhan | Shinhan | (formerly | Shinhan | ||||||||||||||||||||
Chohung Bank) | Securities) | Capital | LG Card) | Life Insurance | Total | |||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||
Balance at January 1, 2008 | 632,791 | 16,079 | 1,616 | 3,037,808 | 289,800 | 3,978,094 | ||||||||||||||||||
Acquisition | 42,693 | — | — | — | — | 42,693 | ||||||||||||||||||
Disposition | — | — | — | — | — | — | ||||||||||||||||||
Impairment loss | (112,315 | ) | (16,079 | ) | — | — | — | (128,394 | ) | |||||||||||||||
Balance at December 31, 2008 | 563,169 | — | 1,616 | 3,037,808 | 289,800 | 3,892,393 | ||||||||||||||||||
Acquisition | 2,824 | — | — | 479 | — | 3,303 | ||||||||||||||||||
Disposition | (30,757 | ) | — | — | — | — | (30,757 | ) | ||||||||||||||||
Impairment loss | (59,517 | ) | — | — | — | — | (59,517 | ) | ||||||||||||||||
Balance at December 31, 2009 | 475,719 | — | 1,616 | 3,038,287 | 289,800 | 3,805,422 | ||||||||||||||||||
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Treasury & | Other | Shinhan | Shinhan | |||||||||||||||||||||||||||||||||||||||||
Retail | Institutional | Private | Corporate | International | Banking | Credit | Investment | Life | ||||||||||||||||||||||||||||||||||||
Banking | Banking | Banking | Banking | Business | Services | Card | Corp. | Insurance | Other(1) | Total | ||||||||||||||||||||||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2008 | 334,978 | 81,716 | 14,010 | 48,873 | 39,537 | 10,495 | 3,037,808 | 16,079 | 289,800 | 104,798 | 3,978,094 | |||||||||||||||||||||||||||||||||
Acquisition | — | — | — | — | — | — | — | — | — | 42,693 | 42,693 | |||||||||||||||||||||||||||||||||
Disposition | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Impairment loss | — | — | — | (48,873 | ) | (39,537 | ) | — | — | (16,079 | ) | — | (23,905 | ) | (128,394 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2008 | 334,978 | 81,716 | 14,010 | — | — | 10,495 | 3,037,808 | — | 289,800 | 123,586 | 3,892,393 | |||||||||||||||||||||||||||||||||
Acquisition | 1,614 | 393 | 67 | 235 | 191 | 51 | 479 | — | — | 273 | 3,303 | |||||||||||||||||||||||||||||||||
Disposition | — | — | — | — | — | — | — | — | — | (30,757 | ) | (30,757 | ) | |||||||||||||||||||||||||||||||
Impairment loss | — | — | — | (235 | ) | (191 | ) | — | — | — | — | (59,091 | ) | (59,517 | ) | |||||||||||||||||||||||||||||
Balance at December 31, 2009 | 336,592 | 82,109 | 14,077 | — | — | 10,546 | 3,038,287 | — | 289,800 | 34,011 | 3,805,422 | |||||||||||||||||||||||||||||||||
(1) | Relates to reporting units of merchant banking, foreign subsidiaries of Shinhan Bank, Shinhan AITAS, SH Asset Management and Shinhan Capital. |
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2008 | 2009 | |||||||||||||||||||||||||||
Weighted | Gross | Net | Gross | Net | ||||||||||||||||||||||||
Average | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||||
Years | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Brokerage customer relationship | 3.4 | 68,266 | (68,266 | ) | — | 68,266 | (68,266 | ) | — | |||||||||||||||||||
KSFC deposit | 3.4 | 10,941 | (10,941 | ) | — | 10,941 | (10,941 | ) | — | |||||||||||||||||||
Core deposit of Shinhan Bank | 8.7 | 825,476 | (583,739 | ) | 241,737 | 825,476 | (656,427 | ) | 169,049 | |||||||||||||||||||
Credit card relationship of Shinhan Card | 5.7 | 1,262,366 | (682,487 | ) | 579,879 | 1,262,366 | (901,879 | ) | 360,487 | |||||||||||||||||||
VOBA | — | 978,532 | (348,623 | ) | 629,909 | 978,532 | (468,217 | ) | 510,315 | |||||||||||||||||||
Total intangible assets subject to amortization | 4.7 | 3,145,581 | (1,694,056 | ) | 1,451,525 | 3,145,581 | (2,105,730 | ) | 1,039,851 | |||||||||||||||||||
KSFC borrowing | — | 400 | — | 400 | 400 | — | 400 | |||||||||||||||||||||
Court deposit of Shinhan Bank | — | 226,353 | — | 226,353 | 226,353 | — | 226,353 | |||||||||||||||||||||
Total intangible assets not subject to amortization | 226,753 | — | 226,753 | 226,753 | — | 226,753 | ||||||||||||||||||||||
Total intangible assets | 3,372,334 | (1,694,056 | ) | 1,678,278 | 3,372,334 | (2,105,730 | ) | 1,266,604 | ||||||||||||||||||||
Years Ending | (In millions of Won) | |||
2010 | 296,516 | |||
2011 | 209,801 | |||
2012 | 157,922 | |||
2013 | 87,534 | |||
2014 | 53,365 | |||
Thereafter | 234,713 | |||
1,039,851 | ||||
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11. | Other Assets |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Accrued interest and dividends receivable | 1,262,567 | 1,205,682 | ||||||
Receivables for foreign exchange spot contracts | 5,148,358 | 1,491,898 | ||||||
Account receivables | 933,920 | 1,648,887 | ||||||
Accrued income | 2,851 | 6,499 | ||||||
Deferred tax assets | 568,875 | 689,660 | ||||||
Other investments(1) | 2,416,258 | 2,568,663 | ||||||
Prepaid expenses | 186,019 | 167,562 | ||||||
Separate account assets | 716,737 | 1,090,887 | ||||||
Advances to suppliers | 291,672 | 199,602 | ||||||
Deferred acquisition costs | 723,411 | 829,056 | ||||||
Gold assets | 54,360 | 56,767 | ||||||
Other | 90,099 | 198,332 | ||||||
12,395,127 | 10,153,495 | |||||||
(1) | Other investments include unlisted equity securities, securities with sales restriction, fund investments and investments accounted for the equity method. |
2009 | ||||
(In millions of Won) | ||||
Private equity funds(1) | 523,116 |
(1) | Include private equity funds that invest in equity and debt securities issued by private and publicly held companies. Substantially all of these investments do not allow early redemptions. Alternatively, the Group receives distributions in accordance with the fund agreement. There are no unfunded commitments. |
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12. | Deposits |
2008 | 2009 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Balance | Interest Rate | Balance | Interest Rate | |||||||||||||
(In millions of Won, except percentages) | ||||||||||||||||
Interest-bearing deposits | ||||||||||||||||
Demand deposits | 6,673,839 | 0.78 | % | 7,529,357 | 0.45 | % | ||||||||||
Savings deposits | 31,392,168 | 2.32 | % | 37,502,198 | 1.22 | % | ||||||||||
Certificate of deposits | 13,846,645 | 5.94 | % | 7,800,821 | 5.48 | % | ||||||||||
Other time deposits | 67,614,521 | 4.94 | % | 87,822,670 | 3.91 | % | ||||||||||
Mutual installment deposits | 235,288 | 3.78 | % | 153,856 | 3.70 | % | ||||||||||
119,762,461 | 4.15 | % | 140,808,902 | 3.12 | % | |||||||||||
Non-interest-bearing deposits | ||||||||||||||||
Demand deposits | 2,942,034 | — | 2,889,587 | — | ||||||||||||
122,704,495 | 4.06 | % | 143,698,489 | 3.06 | % | |||||||||||
Years Ending | (In millions of Won) | |||
2010 | 87,793,427 | |||
2011 | 4,400,542 | |||
2012 | 1,961,868 | |||
2013 | 250,044 | |||
2014 | 881,185 | |||
Thereafter | 490,281 | |||
95,777,347 | ||||
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13. | Short-Term Borrowings |
2008 | 2009 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Balance | Interest Rate | Balance | Interest Rate | |||||||||||||
(In millions of Won, except percentages) | ||||||||||||||||
Borrowings from BOK | 1,259,290 | 2.54 | % | 1,433,730 | 1.11 | % | ||||||||||
Borrowings in foreign currencies | 5,798,825 | 2.70 | % | 1,771,522 | 3.18 | % | ||||||||||
Borrowings from trust accounts | 3,357,531 | 4.37 | % | 1,475,802 | 1.90 | % | ||||||||||
Call money | 4,877,940 | 5.41 | % | 2,398,062 | 2.42 | % | ||||||||||
Debentures in won | 3,867,141 | 5.84 | % | 708,748 | 6.03 | % | ||||||||||
Other borrowings(1) | 4,064,264 | 4.10 | % | 1,926,993 | 6.01 | % | ||||||||||
23,224,991 | 9,714,857 | |||||||||||||||
(1) | Mostly relate to borrowings from other financial institutions. |
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Table of Contents
14. | Secured Borrowings |
2008 | 2009 | |||||||||||||||||||||||||||
Secured | Collateral | Secured | Collateral | |||||||||||||||||||||||||
Maturity | Borrowings | Loans(1) | Securities | Borrowings | Loans(1) | Securities | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Work and Joy2007-1 ABS Specialty Co., Ltd. | 2012 | 400,300 | — | 400,300 | 260,300 | — | 400,300 | |||||||||||||||||||||
5.39%~5.42% collateralized bond obligation | ||||||||||||||||||||||||||||
SamsungShinhan 4th ABS Specialty Co. Ltd. | 2009 | 114,500 | — | 114,500 | — | — | — | |||||||||||||||||||||
4.13%~7.00% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan 7th Securitization Specialty L.L.C. | 2009 | 9,992 | 52,175 | 3,916 | — | — | — | |||||||||||||||||||||
5.00%~15.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Frontier 9th ABS Specialty Co., Ltd. | 2010 | 110,500 | — | 114,500 | 8,500 | — | 16,500 | |||||||||||||||||||||
4.31%~7.00% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Neo DWC 2nd ABS Specialty Co., Ltd. | 2009 | 355,050 | — | 500,000 | 400,050 | — | 400,000 | |||||||||||||||||||||
3.20%~6.30% collateralized bond obligation | ||||||||||||||||||||||||||||
Han-il U&I ABS Specialty Co., Ltd. | 2009 | 12,880 | — | 21,241 | — | — | — | |||||||||||||||||||||
5.03%~8.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Costone Delta Co., Ltd. | 2009 | 1,886 | — | 1,886 | 1,751 | — | 1,751 | |||||||||||||||||||||
10.00% collateralized bond obligation | ||||||||||||||||||||||||||||
I-Clover ABS Specialty Co., Ltd. | 2012 | 872,000 | 565,470 | 1,248,528 | 560,000 | 494,776 | 932,978 | |||||||||||||||||||||
3.00~7.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan 8th Securitization Specialty L.L.C. | 2010 | 9,859 | 20,815 | — | 4,982 | 11,655 | — | |||||||||||||||||||||
8.50%~8.90% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Mortgage 1st Securitization Specialty L.L.C. | 2039 | 797,098 | 748,712 | — | 566,037 | 588,695 | — | |||||||||||||||||||||
6.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Neo DWC 3rd ABS Specialty | 2010 | 100,049 | — | 200,000 | 60,049 | — | 200,000 | |||||||||||||||||||||
8% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2005 plus 2 ABS Specialty Co., Ltd. | 2010 | 411,144 | 685,310 | — | 206,288 | 714,604 | — | |||||||||||||||||||||
5.45% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2005 plus 3 ABS Specialty Co., Ltd. | 2009 | 155,652 | 574,674 | — | — | — | — | |||||||||||||||||||||
5.39% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2006 plus 1 A,B ABS Specialty Co., Ltd. | 2010 | 462,694 | 646,871 | — | 467,247 | 751,214 | — | |||||||||||||||||||||
4.58~6.29% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card2007-1 Securitization Specialty L.L.C. | 2011 | 277,500 | 515,958 | — | 277,500 | 441,139 | — | |||||||||||||||||||||
7.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card2007-2 Securitization Specialty L.L.C. | 2011 | 277,200 | 475,293 | — | 277,200 | 532,188 | — | |||||||||||||||||||||
7.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card2008-1 Securitization Specialty L.L.C. | 2012 | 320,658 | 529,964 | — | 320,658 | 540,361 | — | |||||||||||||||||||||
4.76% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card 2008 Trust | 2012 | 350,000 | 620,761 | — | 350,000 | 754,543 | — | |||||||||||||||||||||
8.97% collateralized bond obligation | ||||||||||||||||||||||||||||
Good Invest 2nd Securitization Specialty Co., Ltd. | 2010 | 20,048 | — | 56,242 | 61,049 | — | 59,876 | |||||||||||||||||||||
3.62%~9.00% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Mortgate 2st Securitization Specialty L.L.C. | 2040 | — | — | — | 467,040 | 561,185 | ||||||||||||||||||||||
6.00% collateralized bond obligation | ||||||||||||||||||||||||||||
KAMCO value recreation 6th Securitization Specialty L.L.C. | 2012 | — | — | — | 2,181 | 5,768 | — | |||||||||||||||||||||
5.51%~6.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Shift 1st Securitization Specialty L.L.C. | 2012 | — | — | — | 300,000 | 300,000 | — | |||||||||||||||||||||
5.04% collateralized bond obligation | ||||||||||||||||||||||||||||
Other secured borrowings | 2008 | 100 | — | 109 | — | — | — | |||||||||||||||||||||
8.00%~25.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Securities sold under repurchase agreements | 2010 | 5,166,667 | — | 6,922,056 | 3,353,558 | — | 4,340,666 | |||||||||||||||||||||
0.06%~11.5% | ||||||||||||||||||||||||||||
10,225,777 | 5,436,003 | 9,583,278 | 7,944,390 | 5,696,128 | 6,352,071 | |||||||||||||||||||||||
(1) | Represents the carrying amounts, exclusive of the related allowance for loan losses of |
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Table of Contents
15. | Long-Term Debt |
Interest | ||||||||||||||||
Rates (%) | Maturity | 2008 | 2009 | |||||||||||||
(In millions of Won) | ||||||||||||||||
Senior | ||||||||||||||||
Won-denominated | ||||||||||||||||
Notes payable to the Small Business Corporation | 2.00~ 4.75 | 2010~ 2019 | 600,106 | 765,594 | ||||||||||||
Notes payable to the Industrial Bank of Korea | 2.00~ 3.44 | 2010~ 2013 | 87,161 | 12,631 | ||||||||||||
Notes payable to the Institute of Information Technology Assessment | — | — | 11,944 | — | ||||||||||||
Notes payable to the Korea Energy Management Corporation | 0.25~ 4.75 | 2010~ 2024 | 421,584 | 490,151 | ||||||||||||
Notes payable to other Korean Government Funds | 1.00~ 5.10 | 2010~ 2024 | 363,825 | 384,001 | ||||||||||||
Fixed and floating rate debentures(1)(2) | 0.56~ 11.95 | 2010~ 2038 | 36,795,036 | 31,190,093 | ||||||||||||
Other notes payable(3) | 0.20~ 10.00 | 2010~ 2023 | 1,613,960 | 2,123,433 | ||||||||||||
Subtotal | 39,893,616 | 34,965,903 | ||||||||||||||
Foreign currency-denominated | ||||||||||||||||
Floating rate debentures(1) | 0.47~ 8.13 | 2010~ 2012 | 2,809,765 | 3,124,662 | ||||||||||||
Other fixed and floating rate notes payable | 0.95~ 6.00 | 2010~ 2013 | 1,665,043 | 1,777,590 | ||||||||||||
Subtotal | 4,474,808 | 4,902,252 | ||||||||||||||
Total senior debt | 44,368,424 | 39,868,155 | ||||||||||||||
Subordinated | ||||||||||||||||
Won-denominated | ||||||||||||||||
Hybrid bonds(4) | 5.70~ 7.02 | 2034~ 2038 | 922,469 | 1,512,572 | ||||||||||||
Fixed and floating rate debentures(1)(5) | 5.10~ 14.45 | 2010~ 2016 | 1,113,291 | 1,771,792 | ||||||||||||
Convertible debt | — | — | 299,670 | — | ||||||||||||
Bond with warrants | — | — | 282,665 | — | ||||||||||||
Other fixed rate notes payable | 12.00 | 2010 | — | 2,000 | ||||||||||||
Subtotal | 2,618,095 | 3,286,364 | ||||||||||||||
Foreign currency-denominated | ||||||||||||||||
Hybrid bonds(6) | 5.66~ 6.82 | 2035~ 2036 | 817,375 | 758,940 | ||||||||||||
Fixed and floating rate debentures(1) | 5.13~ 5.75 | 2015~ 2016 | 1,383,250 | 758,940 | ||||||||||||
Subtotal | 2,200,625 | 1,517,880 | ||||||||||||||
Total subordinated debt | 4,818,720 | 4,804,244 | ||||||||||||||
Redeemable preferred stock(7) | ||||||||||||||||
Series 4 Redeemable preferred stock | — | — | 168,504 | — | ||||||||||||
Series 5 Redeemable preferred stock | 4.04 | 2010 | 168,504 | 168,504 | ||||||||||||
Series 8 Redeemable preferred stock | 7.86 | 2010 | 10,000 | 10,000 | ||||||||||||
Total redeemable preferred stock | 347,008 | 178,504 | ||||||||||||||
Long-term debt, gross | 49,534,152 | 44,850,903 | ||||||||||||||
Less: Unamortized discounts | (51,013 | ) | (55,922 | ) | ||||||||||||
Add: Guaranteed interest | 168,567 | — | ||||||||||||||
Long-term debt, net | 49,651,706 | 44,794,981 | ||||||||||||||
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(1) | Interest rates on floating rate debt were those rates in effect at December 31, 2008 and 2009, respectively. | |
(2) | Majority of these debentures relate to miscellaneous bank borrowings from individual lenders. | |
(3) | The Group adopted fair value election underASC 851-15 (formerly SFAS No. 155) on certain hybrid financial instrument. The fair value of those instruments were | |
(4) | Shinhan Bank has a call option that can be exercised five years after the issuance date, or earlier with the approval of the Financial Supervisory Service. The call options mature in 30 years from the issuance date, but may be extended by Shinhan Bank at any time. | |
(5) | Majority of these debentures relate to miscellaneous bank borrowings from corporate lenders and Korean governmental entities. | |
(6) | Shinhan Bank has a call option that can be exercised ten years after the issuance date. The call options mature in 30 years from the issuance date. | |
(7) | See Note 21 for the terms of the redeemable preferred stock. |
Years Ending | (In millions of Won) | |||
2010 | 12,718,093 | |||
2011 | 10,870,475 | |||
2012 | 6,650,095 | |||
2013 | 3,464,365 | |||
2014 | 3,217,567 | |||
Thereafter | 7,930,308 | |||
Long-term debt, gross | 44,850,903 | |||
Less: Unamortized discount | (55,922 | ) | ||
Long-term debt, net | 44,794,981 | |||
16. | Future Policy Benefits |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Life insurance | 4,013,630 | 4,523,282 | ||||||
Annuity contracts | 1,914,616 | 1,605,018 | ||||||
Other contracts | 996,061 | 1,770,803 | ||||||
Unpaid claims and claim adjustment expenses | 336,026 | 411,135 | ||||||
7,260,333 | 8,310,238 | |||||||
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17. | Accrued Expenses and Other Liabilities |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Accrued interest and dividend payables | 3,181,871 | 2,472,424 | ||||||
Payables for foreign exchange spot contracts | 5,103,005 | 1,492,407 | ||||||
Accrued severance benefits | 323,226 | 174,525 | ||||||
Accrued expenses | 499,117 | 630,050 | ||||||
Account payables | 1,800,354 | 1,814,719 | ||||||
Advances from customers | 135,234 | 144,492 | ||||||
Unearned income | 241,936 | 159,802 | ||||||
Other withholdings (except withholding taxes) | 131,384 | 89,565 | ||||||
Income tax payable | 605,560 | 503,698 | ||||||
Withholding value-added tax and other taxes | 112,118 | 91,055 | ||||||
Deferred tax liabilities | 168,327 | 108,748 | ||||||
Security deposits received | 505,269 | 600,894 | ||||||
Due to agencies | 702,238 | 1,264,559 | ||||||
Allowance for losses on off-balance credit instruments | 339,384 | 789,810 | ||||||
Utility bill payments received on behalf of government | 396,709 | 398,445 | ||||||
Separate account liabilities | 716,737 | 1,090,887 | ||||||
Other allowances(1) | 489,723 | 364,412 | ||||||
Other | 225,734 | 361,755 | ||||||
15,677,926 | 12,552,247 | |||||||
(1) | Other allowances include assets retirement obligation, legal provision and allowance for reward on credit card use. |
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18. | Commissions and Fees |
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Brokerage fees and commissions | 857,551 | 626,033 | 568,897 | |||||||||
Other fees and commissions: | ||||||||||||
Credit card fees | 1,205,708 | 1,315,117 | 1,414,843 | |||||||||
Commissions received on remittance | 72,915 | 69,204 | 66,735 | |||||||||
Commissions received on import and export letters of credit | 56,344 | 70,043 | 66,582 | |||||||||
Financial guarantee fees | 27,249 | 40,356 | 49,691 | |||||||||
Commissions received in foreign exchange activities | 61,088 | 69,132 | 68,404 | |||||||||
Commission received as agency | 30,776 | 44,866 | 68,264 | |||||||||
Commission received as electronic charge receipt | 68,544 | 73,182 | 76,236 | |||||||||
Other fees | 231,466 | 287,282 | 320,762 | |||||||||
Total other fees and commissions | 1,754,090 | 1,969,182 | 2,131,517 | |||||||||
2,611,641 | 2,595,215 | 2,700,414 | ||||||||||
19. | Other Non-Interest Income and Other Non-Interest Expense |
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Gain on sale of premises and equipment | 17,971 | 6,524 | 31,404 | |||||||||
Gain on sales of loans | 10,288 | 12,333 | 63,729 | |||||||||
Income from operating leases | 68,362 | 48,750 | 22,329 | |||||||||
Rental income | 19,120 | 19,049 | 3,232 | |||||||||
Extinguished escheatment of deposits | 28,299 | 20,224 | 8,817 | |||||||||
Reversal of expense of suspense payments related to credit and accident | — | — | 53,856 | |||||||||
Gain on redemption of debentures | — | — | 15,967 | |||||||||
Gain from exchange of membership interest to VISA shares | 279,881 | — | — | |||||||||
Gain on hedge activity | 17,047 | 11,726 | 2,734 | |||||||||
Other lease income | 10,854 | 29,934 | 10,646 | |||||||||
Income from partnering with foreign credit card companies | 14,536 | 30,879 | 29,588 | |||||||||
Income from brokering insurance | 29,860 | 49,640 | 44,418 | |||||||||
Income from collection of legal fees | 17,774 | 17,017 | 15,809 | |||||||||
Gain on deconsolidation | — | — | 31,933 | |||||||||
Other | 133,581 | 132,701 | 336,466 | |||||||||
647,573 | 378,777 | 670,928 | ||||||||||
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2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Loss on sale of premises and equipment | 10,840 | 4,920 | 17,264 | |||||||||
Loss on loans | 6,034 | 11,530 | 38,318 | |||||||||
Impairment loss on goodwill | — | 128,394 | 59,517 | |||||||||
Impairment loss on other investment | 11,741 | 33,206 | 14,802 | |||||||||
Loss on hedge activity | 4,063 | 10,845 | 2,734 | |||||||||
Expense of suspense payments related to credit and accident | 2,157 | 15,593 | — | |||||||||
Donations | 44,326 | 178,258 | 130,331 | |||||||||
Loss on disposal of other investment | 6,640 | 5,810 | 3,620 | |||||||||
Loss on equity method | 6,594 | 10,462 | 13,403 | |||||||||
Other | 112,853 | 303,225 | 151,827 | |||||||||
205,248 | 702,243 | 431,816 | ||||||||||
20. | Common Stock |
21. | Redeemable Preferred Stock and Redeemable Convertible Preferred Stock |
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RPS issued to KDIC (Series 1 to 5) | 4.04 | % | ||
RPS issued to Strider: | ||||
Series 6 | 7.00 | % | ||
Series 7 | 7.46 | % | ||
Series 8 | 7.86 | % |
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22. | Retained Earnings |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Appropriated retained earnings for legal reserves under Korean GAAP | 819,838 | 1,021,878 | ||||||
Unappropriated retained earnings under US GAAP | 6,890,059 | 7,600,037 | ||||||
7,709,897 | 8,621,915 | |||||||
23. | Regulatory Requirements |
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2008 | 2009 | |||||||
(In millions of Won, except equity capital ratio) | ||||||||
Equity Capital | 18,723,461 | 22,572,130 | ||||||
Risk-weighted assets | 183,741,412 | 179,083,070 | ||||||
Consolidated equity capital ratio | 10.19 | % | 12.60 | % |
• | Shinhan Bank |
2008 | 2009 | |||||||
(In millions of Won, | ||||||||
except capital ratio) | ||||||||
Tier 1 capital | 12,388,534 | 14,058,510 | ||||||
Tier 2 capital | 5,500,601 | 4,264,192 | ||||||
Total risk-adjusted capital | 17,889,135 | 18,322,702 | ||||||
Total risk-weighted assets | 133,140,142 | 121,132,041 | ||||||
Total risk-based capital ratio (%) | 13.43 | % | 15.13 | % | ||||
Tier 1 capital ratio (%) | 9.30 | % | 11.61 | % | ||||
Tier 2 capital ratio (%) | 4.13 | % | 3.52 | % |
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• | Shinhan Card |
2008 | 2009 | |||||||
(In millions of Won, | ||||||||
except capital ratio) | ||||||||
Total risk-adjusted capital | 3,906,057 | 5,043,293 | ||||||
Total risk-weighted assets | 19,222,236 | 18,867,283 | ||||||
Total risk-based capital ratio (%) | 20.32 | % | 26.73 | % |
24. | Income Taxes |
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Current tax expense | ||||||||||||
National | 828,557 | 888,389 | 544,529 | |||||||||
Local | 82,855 | 88,839 | 54,453 | |||||||||
Total current tax expense | 911,412 | 977,228 | 598,982 | |||||||||
Deferred tax expense | ||||||||||||
National | 133,665 | (256,634 | ) | (159,051 | ) | |||||||
Local | 13,367 | (25,663 | ) | (15,905 | ) | |||||||
Total deferred tax expense (benefit) | 147,032 | (282,297 | ) | (174,956 | ) | |||||||
Total tax expense | 1,058,444 | 694,931 | 424,026 | |||||||||
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2007 | 2008 | 2009 | ||||||||||
(In millions of Won, except tax rates) | ||||||||||||
Statutory tax rate | 27.5 | % | 27.5 | % | 24.2 | % | ||||||
Income before income tax expense | 3,083,012 | 2,187,331 | 1,567,551 | |||||||||
Income tax calculated at the statutory tax rate | 847,828 | 601,516 | 379,347 | |||||||||
Income not assessable for tax purposes | (328,315 | ) | (104,862 | ) | (62,090 | ) | ||||||
Expenses not deductible for tax purposes | 468,802 | 96,434 | 69,835 | |||||||||
Foreign tax rate differentials | 39 | (5,573 | ) | (1,544 | ) | |||||||
Adjustment of deferred tax liability on investment in subsidiaries and associates | 20,990 | 12,195 | 540 | |||||||||
Change in statutory tax rate(1) | — | 100,756 | 582 | |||||||||
Change in valuation allowance | 48,675 | (5,683 | ) | 37,035 | ||||||||
Other | 425 | 148 | 321 | |||||||||
Income tax expense | 1,058,444 | 694,931 | 424,026 | |||||||||
(1) | Pursuant to amendments to the Corporation Income Tax Law that was enacted in December 2008, the statutory tax rates changed from 27.5% to 24.2% in 2009 and 22% in 2010 and thereafter; however, pursuant to the amendment to the Corporation Income Tax Law enacted in December 2009, the statutory tax rates changed from 22% to 24.2% in 2010 and 2011, and 22.0% will be applied from 2012 and thereafter. |
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2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Deferred income tax assets | ||||||||
Allowance for loan losses | 208,781 | 241,942 | ||||||
Other allowances | 267,724 | 286,127 | ||||||
Valuation of trading assets | 25,105 | 22,983 | ||||||
Premises and equipment | 188,426 | 216,201 | ||||||
Available-for-sale securities | 749,379 | 757,625 | ||||||
Other assets | 180,739 | 274,047 | ||||||
Future policy benefits | 104,442 | 150,495 | ||||||
Long-term debt | 40,724 | 4,534 | ||||||
Other temporary differences | 80,759 | 18,870 | ||||||
Net operating loss carryforwards | 66,181 | 100,005 | ||||||
1,912,260 | 2,072,829 | |||||||
Less: Valuation allowance | (67,879 | ) | (104,914 | ) | ||||
Deferred income tax assets | 1,844,381 | 1,967,915 | ||||||
Deferred income tax liabilities | ||||||||
Valuation of trading assets | (15,235 | ) | — | |||||
Foreign exchange contracts and derivative instruments | (40,675 | ) | (11,647 | ) | ||||
Allowance for loan losses | (228,981 | ) | (388,523 | ) | ||||
Accrued interest and dividend receivable | (78,458 | ) | (13,046 | ) | ||||
Other assets | (1,012,208 | ) | (868,990 | ) | ||||
Long-term debt | — | (28,463 | ) | |||||
Other temporary differences | (68,276 | ) | (76,334 | ) | ||||
Deferred income tax liabilities | (1,443,833 | ) | (1,387,003 | ) | ||||
Net deferred income tax assets | 400,548 | 580,912 | ||||||
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Other assets | 568,875 | 689,660 | ||||||
Accrued expenses and other liabilities | (168,327 | ) | (108,748 | ) | ||||
Net deferred income tax assets | 400,548 | 580,912 | ||||||
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Years ending | (In millions of Won) | |||
2010 | 65,132 | |||
2011 | 55,913 | |||
2012 | 164,913 | |||
2013 and thereafter | 136,698 | |||
422,656 | ||||
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Beginning balance | 231,117 | 217,636 | 153,754 | |||||||||
Increases for tax positions of current year | 12,241 | 12,740 | 681 | |||||||||
Increases for tax positions of prior years | — | — | 719 | |||||||||
Decreases for tax positions of prior years | (3,950 | ) | (38,353 | ) | (17,659 | ) | ||||||
Amounts of decreases in the unrecognized tax benefits relating to settlements | (21,772 | ) | (38,269 | ) | (3,817 | ) | ||||||
Amounts of decreases in the unrecognized tax benefits relating to a lapse of the statute of limitations | — | — | (80,767 | ) | ||||||||
Ending balance | 217,636 | 153,754 | 52,911 | |||||||||
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25. | Earnings Per Share |
2007 | 2008 | 2009 | ||||||||||
(In millions of Won, except per share data) | ||||||||||||
Basic EPS | ||||||||||||
Net income | 1,929,612 | 1,480,699 | 1,133,852 | |||||||||
Accretion and dividends on redeemable preferred stock and redeemable convertible preferred stock | (214,793 | ) | (230,586 | ) | (230,586 | ) | ||||||
Net income attributable to common stock shareholders | 1,714,819 | 1,250,113 | 903,266 | |||||||||
Weighted-average number of common stocks outstanding (in thousands) | 403,475 | 417,673 | 461,500 | |||||||||
Net income per share | ||||||||||||
Basic net earnings per share | 4,250 | 2,993 | 1,957 | |||||||||
Diluted EPS | ||||||||||||
Net income | 1,929,612 | 1,480,699 | 1,133,852 | |||||||||
Dividends on redeemable preferred stock | (189,031 | ) | (202,930 | ) | (202,930 | ) | ||||||
Net income attributable to common stock shareholders | 1,740,581 | 1,277,769 | 930,922 | |||||||||
Weighted-average number of common stocks outstanding (in thousands) | 403,475 | 417,673 | 461,500 | |||||||||
Diluted effect of redeemable convertible preferred stock (in thousands) | 13,753 | 14,721 | 14,721 | |||||||||
Weighted-average number of common stock outstanding, assuming dilution (in thousands) | 417,228 | 432,394 | 476,221 | |||||||||
Net income per share | ||||||||||||
Diluted net earnings per share | 4,172 | 2,955 | 1,955 | |||||||||
26. | Employee Severance Plans |
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2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Balance at beginning of year | 480,296 | 528,590 | ||||||
Accruals | 224,758 | 276,438 | ||||||
Increase from acquisition of subsidiaries | 2,652 | — | ||||||
Decrease from sale of subsidiaries | — | (94 | ) | |||||
Payments | (179,116 | ) | (400,512 | ) | ||||
528,590 | 404,422 | |||||||
Less: Contributions to National Pension Fund and | ||||||||
Severance Plan Assets | (205,364 | ) | (229,897 | ) | ||||
Balance at end of year | 323,226 | 174,525 | ||||||
Years Ending | (In millions of Won) | |||
2010 | 1,612 | |||
2011 | 2,319 | |||
2012 | 1,152 | |||
2013 | 3,552 | |||
2014 | 7,156 | |||
2015~2019 | 94,959 | |||
110,750 | ||||
27. | Employee Share-based Compensation and Other Benefits |
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Shinhan Financial Group | ||||
2007 | 2008 | |||
Risk-free interest rate | 4.69% | 5.16% | ||
Expected lives(1) | 5.00 years | 5.00 years | ||
Expected volatility(2) | 32.12% | 30.60% | ||
Expected dividend rate | 3.06% | 2.62% |
(1) | Expected lives are calculated based on a simplified method since the Group does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. | |
(2) | Expected volatility is based on implied volatility derived from historical volatility of the Group’s stock price. |
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Shinhan Financial Group | ||||||||
Weighted- | ||||||||
Average | ||||||||
Grant Date | ||||||||
Number of | Fair Value | |||||||
Options | per Option | |||||||
(In Won) | ||||||||
Unvested at January 1, 2008 | 3,955,998 | 8,884 | ||||||
Granted | 808,700 | 12,275 | ||||||
Vested | (2,765,738 | ) | 5,797 | |||||
Forfeited | (138,202 | ) | 11,469 | |||||
Unvested at December 31, 2008 | 1,860,758 | 14,754 | ||||||
Unvested at January 1, 2009 | 1,860,758 | 14,754 | ||||||
Granted | — | — | ||||||
Vested | (1,110,427 | ) | 16,259 | |||||
Forfeited | (76,093 | ) | 14,760 | |||||
Unvested at December 31, 2009 | 674,238 | 12,275 | ||||||
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Shinhan Financial Group | Shinhan Bank | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Exercise | Aggregate | Exercise | Aggregate | |||||||||||||||||||||
Number | Price | Intrinsic | Number | Price | Intrinsic | |||||||||||||||||||
of Options | per Option | Value | of Options | per Option | Value | |||||||||||||||||||
(In Won) | (In millions of Won) | (In Won) | (In millions of Won) | |||||||||||||||||||||
Outstanding at January 1, 2007 | 7,951,260 | 29,133 | 389,022 | 5,395 | ||||||||||||||||||||
Granted | 1,301,050 | 54,560 | — | — | ||||||||||||||||||||
Exercised | (1,036,956 | ) | 17,973 | (231,499 | ) | 5,562 | ||||||||||||||||||
Forfeited | (455,180 | ) | 43,165 | — | — | |||||||||||||||||||
Outstanding at December 31, 2007 | 7,760,174 | 34,065 | 151,986 | 157,523 | 5,150 | 330 | ||||||||||||||||||
Granted | 808,700 | 49,053 | — | — | ||||||||||||||||||||
Exercised | (1,379,042 | ) | 20,964 | (135,173 | ) | 5,175 | ||||||||||||||||||
Forfeited | (138,202 | ) | 47,729 | — | — | |||||||||||||||||||
Outstanding at December 31, 2008 | 7,051,630 | 38,078 | 12,457 | 22,350 | 5,000 | — | ||||||||||||||||||
Granted | — | — | — | — | ||||||||||||||||||||
Exercised | (777,175 | ) | 23,942 | — | — | |||||||||||||||||||
Forfeited | (76,093 | ) | 52,489 | (22,350 | ) | 5,000 | ||||||||||||||||||
Outstanding at December 31, 2009 | 6,198,362 | 39,673 | 47,594 | — | — | — | ||||||||||||||||||
Exercisable at December 31, 2009 | 4,413,697 | 34,495 | 47,594 | — | — | — | ||||||||||||||||||
Shinhan Investment Corp. (formerly Good Morning Shinhan Securities) | ||||||||||||
Weighted-Average | Aggregate | |||||||||||
Number | Exercise Price | Intrinsic | ||||||||||
of Options | per Option | Value | ||||||||||
(In Won) | (In million Won) | |||||||||||
Outstanding at January 1, 2007 | 9,104,725 | 6,879 | ||||||||||
Granted | — | — | ||||||||||
Exercised | (3,408,956 | ) | 6,751 | |||||||||
Forfeited | — | — | ||||||||||
Outstanding at December 31, 2007 | 5,695,769 | 6,956 | 14,404 | |||||||||
Granted | — | — | ||||||||||
Exercised | (342,857 | ) | 5,273 | |||||||||
Forfeited | — | — | ||||||||||
Outstanding at December 31, 2008 | 5,352,912 | 7,064 | — | |||||||||
Granted | — | — | ||||||||||
Exercised | (90,000 | ) | 6,040 | |||||||||
Forfeited | (4,812,912 | ) | 7,148 | |||||||||
Outstanding at December 31, 2009 | 450,000 | 6,370 | 327 | |||||||||
Exercisable at December 31, 2009 | 450,000 | 6,370 | 327 | |||||||||
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Shinhan Financial Group | ||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||||
Average | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||||
Remaining | Average | Average | Remaining | |||||||||||||||||||||||
Exercise | Number | Contractual | Exercise | Number | Exercise | Contractual | ||||||||||||||||||||
Price | Outstanding | Life(1) | Price | Exercisable | Price | Life(1) | ||||||||||||||||||||
(In Won) | (In Won) | |||||||||||||||||||||||||
28,006 | 1,767,408 | 2.24 | 28,006 | 1,767,408 | 28,006 | 2.24 | ||||||||||||||||||||
38,829 | 2,646,289 | 3.22 | 38,829 | 2,646,289 | 38,829 | 3.22 | ||||||||||||||||||||
54,560 | 1,110,427 | 4.22 | 54,560 | — | — | — | ||||||||||||||||||||
49,053 | 674,238 | 5.21 | 49,053 | — | — | — | ||||||||||||||||||||
6,198,362 | 3.34 | 39,673 | 4,413,697 | 34,495 | 2.83 | |||||||||||||||||||||
Shinhan Investment Corp. (formerly Good Morning Shinhan Securities) | ||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||||
Average | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||||
Remaining | Average | Average | Remaining | |||||||||||||||||||||||
Exercise | Number | Contractual | Exercise | Number | Exercise | Contractual | ||||||||||||||||||||
Price | Outstanding | Life(1) | Price | Exercisable | Price | Life(1) | ||||||||||||||||||||
(In Won) | (In Won) | |||||||||||||||||||||||||
6,370 | 450,000 | 2.40 | 6,370 | 450,000 | 6,370 | 2.40 | ||||||||||||||||||||
450,000 | 2.40 | 6,370 | 450,000 | 6,370 | 2.40 | |||||||||||||||||||||
(1) | Contractual life indicates the sum of service (vesting) period and exercisable period. |
28. | Fair Value Measurements |
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• | Level 1 — Quoted prices for identical instruments in active markets. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain securities that are highly liquid and are actively traded inover-the-counter markets. | |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. | |
• | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurements. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques based on significant unobservable inputs, as well as management judgements or estimates that are significant to valuation. |
• | Credit valuation adjustments (“CVA”) are necessary when the market price (or parameter) is not indicative of the changes in credit quality of the counterparty. As few classes of derivative contracts are listed on an exchange, the majority of derivative positions are valued using internally developed models and the Group makes an adjustment necessary to reflect the credit quality of each derivative counterparty to arrive at fair value. The adjustment also takes into account contractual factors designed to reduce the Group’s credit exposure to each counterparty, such as collateral and legal rights of offset. | |
• | Debit valuation adjustments (“DVA”) are necessary to reflect the credit quality of the Group in the valuation of liabilities measured at fair value. This adjustment is incorporated into the Group’s valuations in accordance withASC 820-10. The methodology to determine the adjustment is consistent with CVA and incorporates the Group’s credit spread as observed through the credit default swap market. |
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2008 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In millions of Won) | ||||||||||||||||
Assets measured at fair value | ||||||||||||||||
Trading assets | ||||||||||||||||
Trading securities | 2,156,756 | 4,281,378 | 227,277 | 6,665,411 | ||||||||||||
Derivative instruments | 1,549 | 11,554,585 | 420,660 | 11,976,794 | ||||||||||||
Other trading assets — commodity indexed deposits | — | 58,737 | — | 58,737 | ||||||||||||
Securities | ||||||||||||||||
Available-for-sale securities | 11,196,242 | 17,719,405 | 100,364 | 29,016,011 | ||||||||||||
Other assets | ||||||||||||||||
Hedging derivative instruments | — | 3,801 | — | 3,801 | ||||||||||||
Fund investments | — | 730,093 | — | 730,093 | ||||||||||||
Total assets | 13,354,547 | 34,347,999 | 748,301 | 48,450,847 | ||||||||||||
Liabilities measured at fair value | ||||||||||||||||
Trading liabilities | ||||||||||||||||
Derivative instruments | 274 | 11,179,770 | 430,605 | 11,610,649 | ||||||||||||
Other trading liabilities — commodity indexed deposits | — | 220,016 | — | 220,016 | ||||||||||||
Short-term borrowings | ||||||||||||||||
Securities sold short, not yet purchased | 9,417 | — | — | 9,417 | ||||||||||||
Long-term debt | ||||||||||||||||
Equity linked securities sold | — | — | 610,971 | 610,971 | ||||||||||||
Other liabilities | ||||||||||||||||
Hedging derivatives instruments | — | 12 | — | 12 | ||||||||||||
Total liabilities | 9,691 | 11,399,798 | 1,041,576 | 12,451,065 | ||||||||||||
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2009 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In millions of Won) | ||||||||||||||||
Assets measured at fair value | ||||||||||||||||
Trading assets | ||||||||||||||||
Trading securities | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and governmental agencies | 901,481 | 622,214 | - | 1,523,695 | ||||||||||||
Corporations | — | 920,794 | 255,768 | 1,176,562 | ||||||||||||
Financial institutions | 662,121 | 1,441,973 | — | 2,104,094 | ||||||||||||
Mortgage-backed securities and asset-backed securities | — | 872,987 | — | 872,987 | ||||||||||||
Equity securities | 534,190 | 212,772 | — | 746,962 | ||||||||||||
Derivative instruments | 5,492 | 4,359,732 | 251,306 | 4,616,530 | ||||||||||||
Other trading assets — commodity indexed deposits | — | 256,246 | — | 256,246 | ||||||||||||
2,103,284 | 8,686,718 | 507,074 | 11,297,076 | |||||||||||||
Available-for-sale securities | ||||||||||||||||
Korean treasury and governmental agencies | 4,081,086 | 4,640,913 | — | 8,721,999 | ||||||||||||
Corporations | — | 2,307,792 | — | 2,307,792 | ||||||||||||
Financial institutions | 3,531,061 | 7,633,203 | — | 11,164,264 | ||||||||||||
Mortgage-backed securities and asset-backed securities | — | 2,186,982 | 97,202 | 2,284,184 | ||||||||||||
Other | — | 170,168 | — | 170,168 | ||||||||||||
7,612,147 | 16,939,058 | 97,202 | 24,648,407 | |||||||||||||
Equity securities | 2,961,285 | 2,203 | - | 2,963,488 | ||||||||||||
Other assets | ||||||||||||||||
Hedging derivative instruments | — | 1,817 | — | 1,817 | ||||||||||||
Fund investments | — | 523,116 | — | 523,116 | ||||||||||||
- | 524,933 | - | 524,933 | |||||||||||||
Total assets | 12,676,716 | 26,152,912 | 604,276 | 39,433,904 | ||||||||||||
Liabilities measured at fair value | ||||||||||||||||
Trading liabilities | ||||||||||||||||
Derivative instruments | 609 | 4,145,634 | 99,822 | 4,246,065 | ||||||||||||
Other trading liabilities — commodity indexed deposits | — | 318,969 | — | 318,969 | ||||||||||||
Short-term borrowings | ||||||||||||||||
Securities sold short, not yet purchased | 27,966 | — | — | 27,966 | ||||||||||||
Long-term debt | ||||||||||||||||
Equity linked securities sold | — | — | 1,067,457 | 1,067,457 | ||||||||||||
Other liabilities | ||||||||||||||||
Hedging derivatives instruments | — | 167 | — | 167 | ||||||||||||
Total liabilities | 28,575 | 4,464,770 | 1,167,279 | 5,660,624 | ||||||||||||
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Total Realized/Unrealized | Unrealized | |||||||||||||||||||||||||||
Gains (Losses) Recorded in | Transfers in | Purchases, | Gains | |||||||||||||||||||||||||
January 1, | Trading | and/or out | Issuances and | December 31, | (Losses) Still | |||||||||||||||||||||||
2008 | Revenues | Others(1) | of Level 3(2) | Settlements | 2008 | Held(3) | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Trading assets | ||||||||||||||||||||||||||||
Trading securities | 482,354 | (75,948 | ) | — | — | (179,129 | ) | 227,277 | (75,626 | ) | ||||||||||||||||||
Derivatives instruments | 164,648 | 296,635 | — | 52,074 | (92,697 | ) | 420,660 | 386,652 | ||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||
Available-for-sale securities | 164,949 | (6,542 | ) | (48,202 | ) | — | (9,841 | ) | 100,364 | 5,803 | ||||||||||||||||||
Trading liabilities | ||||||||||||||||||||||||||||
Derivatives instruments | 491,425 | 47,642 | — | 33,310 | (46,488 | ) | 430,605 | (98,072 | ) | |||||||||||||||||||
Long-term debt | ||||||||||||||||||||||||||||
Equity linked securities sold | 738,469 | 137,871 | — | — | 10,373 | 610,971 | 204,512 |
Total Realized/Unrealized | ||||||||||||||||||||||||||||
Gains (Losses) Recorded in | Transfers in | Purchases, | Unrealized | |||||||||||||||||||||||||
January 1, | Trading | and/or out | Issuances and | December 31, | Losses Still | |||||||||||||||||||||||
2009 | Revenues | Others(1) | of Level 3(2) | Settlements | 2009 | Held(3) | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Trading assets | ||||||||||||||||||||||||||||
Trading securities | 227,277 | 54,842 | (26,351 | ) | 255,768 | (5,117 | ) | |||||||||||||||||||||
Derivatives instruments | 420,660 | (157,835 | ) | — | 252,720 | (264,239 | ) | 251,306 | (176,980 | ) | ||||||||||||||||||
Investments | ||||||||||||||||||||||||||||
Available-for-sale securities | 100,364 | — | (7,879 | ) | — | 4,717 | 97,202 | (3,424 | ) | |||||||||||||||||||
Trading liabilities | ||||||||||||||||||||||||||||
Derivatives instruments | 430,605 | (554 | ) | — | (132,169 | ) | (199,168 | ) | 99,822 | (34,031 | ) | |||||||||||||||||
Long-term debt | ||||||||||||||||||||||||||||
Equity linked securities sold | 610,971 | 217,301 | — | — | 673,787 | 1,067,457 | (18,960 | ) |
(1) | Includes the change in fair value ofavailable-for-sale securities and other investments, change in accumulated other comprehensive income (loss), gains (losses) from sales and impairment losses. | |
(2) | Transfers into or out of Level 3 are made if the inputs used in the financial models measuring the fair values of the assets and liabilities became unobservable or observable, respectively. These transfers are effective as of the beginning of the year, and any gains or losses occurring on these assets and liabilities during the year are presented as Level 3. |
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(3) | Represents the amount of total gains or losses for the years ended December 31, 2008 and 2009, included in earnings (and accumulated other comprehensive income (loss) for changes in fair value ofavailable-for-sale investments and other investment) attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2008 and 2009. |
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2008 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
(In millions of Won) | ||||||||||||
Loans and lease receivables(1) | — | — | 438,011 | |||||||||
Goodwill(2) | 18,788 | |||||||||||
Other assets — other investments(3) | 67,201 | — | 17,755 |
2009 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
(In millions of Won) | ||||||||||||
Loans and lease receivables(1) | — | — | 432,765 | |||||||||
Goodwill(2) | — | — | — | |||||||||
Other assets — other investments(3) | — | — | 9,591 |
(1) | Represents carrying values net of allowances and cumulative impairment charges of related impaired loans and lease receivables which are collateral dependent and are evaluated based on the fair value of the underlying collateral. The fair value of the collateral for such impaired loans and lease receivables is based on the appraisal value of external valuation experts, as adjusted for significant inputs related to the foreclosure proceeding for such collateral, which inputs are deemed to be unobservable. We accordingly classify collateral dependent loans and lease receivables as Level 3. | |
(2) | The Group recorded goodwill impairment charges of | |
(3) | The Group recorded impairment charges of |
29. | Fair Value of Financial Instruments |
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2008 | 2009 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(In millions of Won) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Financial assets for which carrying value approximates fair value | 12,842,990 | 12,842,990 | 17,225,681 | 17,225,681 | ||||||||||||
Interest-bearing deposits in banks | 1,626,880 | 1,626,880 | 2,164,004 | 2,164,004 | ||||||||||||
Held-to-maturity securities | 8,696,144 | 8,872,951 | 12,793,618 | 12,840,594 | ||||||||||||
Loans | 167,308,055 | 169,075,453 | 165,593,546 | 167,393,995 | ||||||||||||
Non-marketable equity investments included in other assets | 1,900,546 | 2,587,363 | 2,045,547 | 3,437,571 | ||||||||||||
Total Financial assets | 192,374,615 | 195,005,637 | 199,822,396 | 203,061,845 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities for which carrying value approximates fair value | 6,120,236 | 6,120,236 | 5,853,609 | 5,853,609 | ||||||||||||
Deposits | 122,704,495 | 123,416,833 | 143,698,489 | 144,364,290 | ||||||||||||
Short-term borrowings | 23,215,574 | 23,215,574 | 9,686,890 | 9,686,890 | ||||||||||||
Secured borrowings | 10,225,777 | 10,288,417 | 7,944,390 | 8,078,573 | ||||||||||||
Long-term debt | 49,040,735 | 48,609,805 | 43,727,523 | 42,319,203 | ||||||||||||
Total Financial liabilities | 211,306,817 | 211,650,865 | 210,910,901 | 210,302,565 | ||||||||||||
30. | Derivative Instruments, Hedging Activities and Credit Derivatives |
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2009 | ||||||||||||
Underlying Notional | Estimated | Estimated | ||||||||||
Amount(1) | Fair Value Assets(2) | Fair Value Liabilities(2) | ||||||||||
(In millions of Won) | ||||||||||||
Trading: | ||||||||||||
Foreign exchange derivatives: | ||||||||||||
Swaps | 23,142,798 | 1,284,635 | 1,990,860 | |||||||||
Future and forward contracts | 59,473,021 | 1,706,012 | 713,785 | |||||||||
Options purchased | 3,378,289 | 316,301 | 7,557 | |||||||||
Options written | 713,053 | 4,247 | 67,728 | |||||||||
Sub-total | 86,707,161 | 3,311,195 | 2,779,930 | |||||||||
Interest rate derivatives: | ||||||||||||
Swaps | 129,612,909 | 625,178 | 936,572 | |||||||||
Future and forward contracts | 43,448 | — | — | |||||||||
Options purchased | 5,371,200 | 54,257 | — | |||||||||
Options written | 5,975,144 | — | 52,061 | |||||||||
Sub-total | 141,002,701 | 679,435 | 988,633 | |||||||||
Equity derivatives: | ||||||||||||
Swaps | 1,737,542 | 119,954 | 149,391 | |||||||||
Future and forward contracts | 47,726 | — | — | |||||||||
Options purchased | 2,741,914 | 161,412 | 5,246 | |||||||||
Options written | 2,631,994 | 5,553 | 130,665 | |||||||||
Sub-total | 7,159,176 | 286,919 | 285,302 | |||||||||
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2009 | ||||||||||||
Underlying Notional | Estimated | Estimated | ||||||||||
Amount(1) | Fair Value Assets(2) | Fair Value Liabilities(2) | ||||||||||
(In millions of Won) | ||||||||||||
Credit derivatives: | ||||||||||||
Protection sell | 174,918 | 2,546 | 23,076 | |||||||||
Sub-total | 174,918 | 2,546 | 23,076 | |||||||||
Other derivatives: | ||||||||||||
Commodity swaps | 22,523 | — | 1,320 | |||||||||
Options purchased | 56,648 | 1,896 | — | |||||||||
Options written | 24,278 | — | 1,173 | |||||||||
Sub-total | 103,449 | 1,896 | 2,493 | |||||||||
Total | 235,147,405 | 4,281,991 | 4,079,434 | |||||||||
Nontrading: | ||||||||||||
Hedge accounting: | ||||||||||||
Interest rate swaps | 90,000 | 1,817 | 167 | |||||||||
Nontrading that do not qualify for hedge accounting(3): | ||||||||||||
Foreign exchange derivatives: | ||||||||||||
Swaps | 914,287 | 115,326 | 15,541 | |||||||||
Future and forward contracts | 23,819 | 94 | 5,209 | |||||||||
Sub-total | 938,106 | 115,420 | 20,750 | |||||||||
Interest rate derivatives: | ||||||||||||
Swaps | 10,453,051 | 219,119 | 145,881 | |||||||||
Total | 11,481,157 | 336,356 | 166,798 | |||||||||
(1) | Notional amounts in foreign currencies were converted into Won at prevailing exchange rates as of December 31, 2009. | |
(2) | The fair values of the trading derivative assets/liabilities and nontrading that do not qualify for hedge accounting are presented in Note 6. The fair values of the hedging derivative assets/liabilities that qualify for hedge accounting are presented in Note 11 and Note 17. | |
(3) | While the Group engages in derivatives trading activities to hedge the interest rate risk and foreign exchange risk exposure that arise from its own assets and liabilities, as these nontrading derivative contracts do not qualify for hedge accounting under U.S. GAAP, they are accounted for as trading derivatives in the financial statements. These contracts include interest rate swaps, forward contracts and cross-currency swaps held for nontrading that do not qualify for hedge accounting treatment. |
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2009 | ||||||||
Nontrading that do not | ||||||||
Qualify for Hedge Accounting | Trading | |||||||
(In millions of Won) | ||||||||
Foreign exchange derivatives | (18,417 | ) | (293,162 | ) | ||||
Interest rate derivatives | (338,409 | ) | 73,195 | |||||
Equity derivatives | — | 20,601 | ||||||
Credit derivatives | — | 17,404 | ||||||
Commodity and other derivatives | — | 25,375 | ||||||
(356,826 | ) | (156,587 | ) | |||||
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2009 | ||||||||||||
Derivatives | Hedged Items | Total | ||||||||||
(In millions of Won) | ||||||||||||
Gain (loss) on designated and qualifying fair value hedges: | ||||||||||||
Interest rate derivatives | (2,734 | ) | 2,734 | — |
2008 | ||||||||||||
Protection Purchased | ||||||||||||
Protection | with Identical | Net Protection | ||||||||||
Sold | Underlyings(1) | Sold | ||||||||||
(In millions of Won) | ||||||||||||
Credit derivatives: | ||||||||||||
Credit default swaps | 108,025 | — | 108,025 | |||||||||
Credit linked notes | 37,725 | — | 37,725 | |||||||||
145,750 | — | 145,750 | ||||||||||
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2009 | ||||||||||||
Protection Purchased | ||||||||||||
Protection | with Identical | Net Protection | ||||||||||
Sold | Underlyings(1) | Sold | ||||||||||
(In millions of Won) | ||||||||||||
Credit derivatives: | ||||||||||||
Credit default swaps | 174,918 | — | 174,918 | |||||||||
Credit linked notes | 23,352 | — | 23,352 | |||||||||
198,270 | — | 198,270 | ||||||||||
(1) | Represents the notional amount of purchased credit derivatives where the Group is the protection seller on the identical underlying reference instrument. |
2008 | ||||||||||||||||||||
Less than | One to | Over | Total | Fair Value | ||||||||||||||||
One Year | Five Years | Five Years | Notional Amount | Asset (Liability)(2) | ||||||||||||||||
(In millions of Won) | ||||||||||||||||||||
Risk rating of reference entity: | ||||||||||||||||||||
AAA to BBB-(1) | — | 133,175 | 12,575 | 145,750 | (15,148 | ) |
2009 | ||||||||||||||||||||
Less than | One to | Over | Total | Fair Value | ||||||||||||||||
One Year | Five Years | Five Years | Notional Amount | Asset (Liability)(2) | ||||||||||||||||
(In millions of Won) | ||||||||||||||||||||
Risk rating of reference entity: | ||||||||||||||||||||
AA to CCC-(1) | 137,628 | 60,642 | — | 198,270 | 2,656 |
(1) | The Group considers ratings of BBB- or higher to meet the definition of investment grade. | |
(2) | Represents the netted amount of credit default swaps included in protection sell contracts amounting to |
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31. | Commitments and Contingencies |
Years Ending | (In millions of Won) | |||
2010 | 79,593 | |||
2011 | 48,971 | |||
2012 | 29,585 | |||
2013 | 14,276 | |||
2014 | 4,931 | |||
Thereafter | 14,581 | |||
191,937 | ||||
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Commitments to extend credit: | ||||||||
Corporate | 49,872,646 | 49,590,230 | ||||||
Credit card | 52,577,454 | 64,904,222 | ||||||
Consumer(1) | 8,350,144 | 8,794,536 | ||||||
Commercial letters of credit | 3,005,711 | 3,319,107 | ||||||
113,805,955 | 126,608,095 | |||||||
(1) | Excludes credit card. |
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Maximum | ||||||||||||||||||||||||
Total | Current | Amount of | Potential | |||||||||||||||||||||
Notional | Carrying | Recourse or | Amount of | |||||||||||||||||||||
Expire Within | Expire After | Amount | Liability | Collateral | Future | |||||||||||||||||||
One Year | One Year | Outstanding | Amount(1) | Held | Payments | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Financial stand-by letters of credit | 430,754 | 44,622 | 475,376 | 18,718 | 393,575 | 475,376 | ||||||||||||||||||
Other financial guarantees | 880,384 | 36,894 | 917,278 | 6,742 | 839,552 | 917,278 | ||||||||||||||||||
Performance letters of credit and guarantees | 6,434,272 | 3,896,876 | 10,331,148 | 282,241 | 9,358,181 | 10,331,148 | ||||||||||||||||||
Liquidity facilities to SPEs | 259,682 | 1,408,900 | 1,668,582 | 31,024 | — | 1,668,582 | ||||||||||||||||||
Loans sold with recourse | — | — | — | — | — | — | ||||||||||||||||||
Guarantees on trust accounts | 437,172 | 3,058,360 | 3,495,532 | — | — | 3,495,532 | ||||||||||||||||||
8,442,264 | 8,445,652 | 16,887,916 | 338,725 | 10,591,308 | 16,887,916 | |||||||||||||||||||
(1) | Includes allowance for guarantees and liabilities recorded under ASC 460 (formerly FIN 45). |
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2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Restricted cash | 42,479 | 72,806 | ||||||
Trading securities | 2,938,989 | 3,031,946 | ||||||
Available-for-sale securities | 7,342,153 | 1,933,160 | ||||||
Held-to-maturity securities | 5,278,368 | 5,087,576 | ||||||
Loans | 7,687,576 | 5,862,846 | ||||||
Real estate | 25,298 | 16,227 | ||||||
Other assets | 7,161 | 5,455 | ||||||
23,322,024 | 16,010,016 | |||||||
32. | Concentrations of Geographic and Credit Risks |
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2008 | 2009 | |||||||||||||||||||||||
Credit | On-Balance | Off-Balance | Credit | On-Balance | Off-Balance | |||||||||||||||||||
Exposure | Sheet | Sheet | Exposure | Sheet | Sheet | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Commercial and industrial | 107,999,663 | 55,466,168 | 52,533,495 | 101,768,977 | 54,479,473 | 47,289,504 | ||||||||||||||||||
Other commercial | 52,840,975 | 37,637,026 | 15,203,949 | 53,782,606 | 34,770,389 | 19,012,217 | ||||||||||||||||||
Lease financing | 1,591,437 | 1,591,437 | — | 1,559,652 | 1,559,652 | — | ||||||||||||||||||
Mortgage and home equity | 36,605,643 | 36,182,970 | 422,673 | 40,525,281 | 40,022,157 | 503,124 | ||||||||||||||||||
Credit cards | 67,214,538 | 14,637,084 | 52,577,454 | 80,020,979 | 15,116,757 | 64,904,222 | ||||||||||||||||||
Other consumer | 32,954,245 | 25,026,774 | 7,927,471 | 31,598,021 | 23,306,609 | 8,291,412 | ||||||||||||||||||
299,206,501 | 170,541,459 | 128,665,042 | 309,255,516 | 169,255,037 | 140,000,479 | |||||||||||||||||||
33. | Related Party Transactions |
2008 | 2009 | |||||||
(In millions of Won) | ||||||||
Loans at beginning of the year | 109,557 | 254,463 | ||||||
New loans | 180,232 | 33,594 | ||||||
Repayments | (35,326 | ) | (280,370 | ) | ||||
Loans at end of the year | 254,463 | 7,687 | ||||||
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2007 | 2008 | 2009 | ||||||||||||||||||||||
Executives, | Executives, | Executives, | ||||||||||||||||||||||
Directors and | Directors and | Directors and | ||||||||||||||||||||||
Trust | Affiliated | Trust | Affiliated | Trust | Affiliated | |||||||||||||||||||
Accounts | Parties | Accounts | Parties | Accounts | Parties | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Loans | — | 109,557 | — | 254,463 | — | 7,687 | ||||||||||||||||||
Trust fees payable | 5,836 | — | 9,514 | — | 10,299 | — | ||||||||||||||||||
Short-term borrowings | 1,044,059 | — | 929,175 | — | 772,373 | — | ||||||||||||||||||
Other liabilities | 41,479 | — | 39,365 | — | 16,489 | — | ||||||||||||||||||
Net trust management fees | 62,641 | — | 33,567 | — | 28,960 | — | ||||||||||||||||||
Interest expense on short-term borrowings | 44,675 | — | 42,929 | — | 24,449 | — | ||||||||||||||||||
Interest on loans | — | 3,668 | — | 5,844 | — | 329 |
34. | Segment Reporting |
• | Retail banking— Activities within this segment include savings and demand deposits, consumer loans and mortgages of individual customers and sole proprietors with lending limits of | |
• | Corporate banking — Activities within this segment include loans, overdrafts, other credit facilities, deposits in foreign currencies and other foreign currency activities. The corporate banking segment’s assets and liabilities are mainly from transactions with customers including small and medium sized private companies, publicly traded enterprises and sole proprietors with lending limits greater than | |
• | Treasury and international business— Activities within this segment include Shinhan Bank’s internal asset and liability management, proprietary trading in securities and derivatives, proprietary investment in security portfolios using Shinhan Bank’s capital, and international business. | |
• | Other banking services— Activities within this segment include Shinhan Bank’s impaired loan management, administration of Shinhan Bank, and trust account management services. | |
• | Securities brokerage services— Activities within this segment include a full range of brokerage services, investment advice and financial planning to retail customers, and various investment banking services to corporate customers conducted through Shinhan Investment Corp. (formerly Good Morning Shinhan Securities). |
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• | Credit card— Activities within this segment include processing domestic as well as overseas credit and debit card operations conducted through Shinhan Card. The credit card segment’s assets and liabilities are mainly from transactions with individual or corporate cardholders and card merchants. | |
• | Life insurance— Activities within this segment include Shinhan Life Insurance’s providing life-insurance products and financial consulting services, by various sales distributions such as FC, TM, CM and Bancasurance (bank alliances including Shinhan Bank), which meet the needs of individual and group customers who want health insurance, whole life insurance and pension plan, etc. |
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2007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury & | Other | Securities | Subtotal | US | Inter- | |||||||||||||||||||||||||||||||||||||||||||
Retail | Corporate | International | Banking | Brokerage | Credit | Life | before | GAAP | Segment | |||||||||||||||||||||||||||||||||||||||
Banking | Banking | Business | Services | Services(1) | Card(2) | Insurance | Other | Elimination | Adjustments | Transactions(3) | Total | |||||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 2,328,020 | 863,827 | (265,242 | ) | 815,499 | 137,274 | 2,804,150 | 292,659 | 92,810 | 7,068,997 | (1,581,689 | ) | (316,952 | ) | 5,170,356 | |||||||||||||||||||||||||||||||||
Non-interest income | 967,520 | 265,988 | 5,463,967 | 1,766,806 | 1,803,377 | 197,496 | 2,401,362 | 3,414,529 | 16,281,045 | (11,102,429 | ) | (440,410 | ) | 4,738,206 | ||||||||||||||||||||||||||||||||||
Total revenues | 3,295,540 | 1,129,815 | 5,198,725 | 2,582,305 | 1,940,651 | 3,001,646 | 2,694,021 | 3,507,339 | 23,350,042 | (12,684,118 | ) | (757,362 | ) | 9,908,562 | ||||||||||||||||||||||||||||||||||
Provision(reversal) for credit losses | 222,432 | 136,542 | 37,535 | 63,112 | 6,960 | 301,406 | 1,234 | (26,475 | ) | 742,746 | (726,059 | ) | 63,872 | 80,559 | ||||||||||||||||||||||||||||||||||
Non-interest expense | 1,280,449 | 463,689 | 5,855,173 | 1,042,168 | 1,666,125 | 1,539,765 | 2,501,624 | 626,413 | 14,975,406 | (8,726,318 | ) | (316,442 | ) | 5,932,646 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 112,157 | 4,331 | 1,404 | 132,482 | 14,869 | 77,981 | 7,795 | 29,729 | 380,748 | 442,888 | (11,291 | ) | 812,345 | |||||||||||||||||||||||||||||||||||
Net income (loss) before tax | 1,680,502 | 525,253 | (695,387 | ) | 1,344,543 | 252,697 | 1,082,494 | 183,368 | 2,877,672 | 7,251,142 | (3,674,629 | ) | (493,501 | ) | 3,083,012 | |||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 473,033 | 147,850 | (195,740 | ) | 378,466 | 75,920 | 194,420 | 51,335 | (545,223 | ) | 580,061 | 517,298 | (38,915 | ) | 1,058,444 | |||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 94,956 | 94,956 | ||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to the Group | 1,207,469 | 377,403 | (499,647 | ) | 966,077 | 176,777 | 888,074 | 132,033 | 3,422,895 | 6,671,081 | (4,191,927 | ) | (549,542 | ) | 1,929,612 | |||||||||||||||||||||||||||||||||
US GAAP adjustments | 114,637 | 227,325 | (1,059,718 | ) | (36,445 | ) | (30,913 | ) | 55,501 | (138,793 | ) | (3,323,521 | ) | (4,191,927 | ) | — | — | — | ||||||||||||||||||||||||||||||
Intersegment transactions | (1,671 | ) | (359,599 | ) | 5,144 | (644 | ) | 14,860 | (204,560 | ) | 50,391 | (53,463 | ) | (549,542 | ) | — | — | — | ||||||||||||||||||||||||||||||
Net income (loss) attributable to the Group | 1,320,435 | 245,129 | (1,554,221 | ) | 928,988 | 160,724 | 739,015 | 43,631 | 45,911 | 1,929,612 | — | — | 1,929,612 | |||||||||||||||||||||||||||||||||||
Segments’ total assets | 76,218,864 | 38,958,864 | 30,535,586 | 29,392,573 | 6,685,978 | 16,880,921 | 7,410,857 | 45,991,211 | 252,074,854 | (11,470,798 | ) | (18,982,152 | ) | 221,621,904 | ||||||||||||||||||||||||||||||||||
(1) | Securities brokerage business is conducted through Shinhan Investment Corp. (formerly Good Morning Shinhan Securities). | |
(2) | Credit card business is conducted through Shinhan Card and the credit card segment in Shinhan Bank (formerly Chohung Bank). | |
(3) | Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system. |
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2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury & | Other | Securities | Subtotal | US | Inter- | |||||||||||||||||||||||||||||||||||||||||||
Retail | Corporate | International | Banking | Brokerage | Credit | Life | before | GAAP | Segment | |||||||||||||||||||||||||||||||||||||||
Banking | Banking | Business | Services | Services(1) | Card(2) | Insurance | Other | Elimination | Adjustments | Transactions(3) | Total | |||||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 2,309,914 | 2,476,414 | (578,185 | ) | 134,540 | 184,408 | 2,958,371 | 357,085 | (500,365 | ) | 7,342,182 | (1,528,543 | ) | (34,267 | ) | 5,779,372 | ||||||||||||||||||||||||||||||||
Non-interest income | 1,999,084 | 5,339,037 | 27,961,314 | 2,773,492 | 1,531,926 | 631,799 | 2,505,032 | 5,028,456 | 47,770,140 | (42,109,891 | ) | (1,088,832 | ) | 4,571,417 | ||||||||||||||||||||||||||||||||||
Total revenues | 4,308,998 | 7,815,451 | 27,383,129 | 2,908,032 | 1,716,334 | 3,590,170 | 2,862,117 | 4,528,091 | 55,112,322 | (43,638,434 | ) | (1,123,099 | ) | 10,350,789 | ||||||||||||||||||||||||||||||||||
Provision(reversal) for credit losses | 361,749 | 326,219 | (3,660 | ) | 244,541 | 29,009 | 43,110 | 9,189 | 33,407 | 1,043,564 | 457,233 | (64,199 | ) | 1,436,598 | ||||||||||||||||||||||||||||||||||
Non-interest expense | 2,718,954 | 5,426,404 | 27,940,895 | 3,261,292 | 1,463,084 | 2,159,435 | 2,657,719 | 1,071,084 | 46,698,867 | (40,193,949 | ) | (649,474 | ) | 5,855,444 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 105,439 | 4,650 | 1,607 | 124,384 | 14,832 | 63,250 | 8,816 | 19,322 | 342,300 | 529,116 | — | 871,416 | ||||||||||||||||||||||||||||||||||||
Net income (loss) before tax | 1,122,856 | 2,058,178 | (555,713 | ) | (722,185 | ) | 209,409 | 1,324,375 | 186,393 | 3,404,278 | 7,027,591 | (4,430,834 | ) | (409,426 | ) | 2,187,331 | ||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 309,441 | 74,099 | (51,527 | ) | 124,396 | 53,108 | 383,800 | 47,160 | 44,888 | 985,365 | (191,269 | ) | (99,165 | ) | 694,931 | |||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 11,701 | 11,701 | ||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to the Group | 813,415 | 1,984,079 | (504,186 | ) | (846,581 | ) | 156,301 | 940,575 | 139,233 | 3,359,390 | 6,042,226 | (4,239,565 | ) | (321,962 | ) | 1,480,699 | ||||||||||||||||||||||||||||||||
US GAAP adjustments | (53,561 | ) | (480,122 | ) | 149,673 | (8,694 | ) | (15,169 | ) | (503,266 | ) | 256,082 | (3,584,508 | ) | (4,239,565 | ) | — | — | — | |||||||||||||||||||||||||||||
Intersegment transactions | 24,855 | (416,592 | ) | (2,033 | ) | 9,177 | (9,375 | ) | 248,781 | 6,717 | (183,492 | ) | (321,962 | ) | — | — | — | |||||||||||||||||||||||||||||||
Net income (loss) attributable to the Group | 784,709 | 1,087,365 | (356,546 | ) | (846,098 | ) | 131,757 | 686,090 | 402,032 | (408,610 | ) | 1,480,699 | — | — | 1,480,699 | |||||||||||||||||||||||||||||||||
Segments’ total assets | 84,746,067 | 46,860,042 | 50,672,104 | 31,290,886 | 7,315,710 | 17,051,579 | 8,517,262 | 48,041,984 | 294,495,634 | (15,492,069 | ) | (18,030,432 | ) | 260,973,133 | ||||||||||||||||||||||||||||||||||
(1) | Securities brokerage business is conducted through Shinhan Investment Corp. (formerly Good Morning Shinhan Securities). | |
(2) | Credit card business is conducted through Shinhan Card. | |
(3) | Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management . |
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2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury & | Other | Securities | Subtotal | US | Inter- | |||||||||||||||||||||||||||||||||||||||||||
Retail | Corporate | International | Banking | Brokerage | Credit | Life | before | GAAP | Segment | |||||||||||||||||||||||||||||||||||||||
Banking | Banking | Business | Services | Services(1) | Card(2) | Insurance | Other | Elimination | Adjustments | Transactions(3) | Total | |||||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 2,245,178 | 876,033 | 336,678 | 242,709 | 147,002 | 2,853,957 | 419,116 | (663,136 | ) | 6,457,537 | (1,217,995 | ) | (18,213 | ) | 5,221,329 | |||||||||||||||||||||||||||||||||
Non-interest income | 669,676 | 968,840 | 27,913,513 | 2,465,668 | 1,323,276 | 280,041 | 2,997,633 | 3,957,527 | 40,576,174 | (34,322,618 | ) | (568,815 | ) | 5,684,741 | ||||||||||||||||||||||||||||||||||
Total revenues | 2,914,854 | 1,844,873 | 28,250,191 | 2,708,377 | 1,470,278 | 3,133,998 | 3,416,749 | 3,294,391 | 47,033,711 | (35,540,613 | ) | (587,028 | ) | 10,906,070 | ||||||||||||||||||||||||||||||||||
Provision(reversal) for credit losses | 558,072 | 465,414 | 50,960 | 132,530 | 135,192 | 104,910 | 12,453 | 131,996 | 1,591,527 | 635,409 | (25,772 | ) | 2,201,164 | |||||||||||||||||||||||||||||||||||
Non-interest expense | 1,750,268 | 1,216,338 | 28,057,444 | 2,225,703 | 1,256,340 | 1,887,058 | 3,166,479 | 759,233 | 40,318,863 | (33,403,844 | ) | (491,185 | ) | 6,423,834 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 79,463 | 7,010 | 1,270 | 107,614 | 21,718 | 41,476 | 13,442 | 46,906 | 318,899 | 394,622 | — | 713,521 | ||||||||||||||||||||||||||||||||||||
Net income (loss) before tax | 527,051 | 156,111 | 140,517 | 242,530 | 57,028 | 1,100,554 | 224,375 | 2,356,256 | 4,804,422 | (3,166,800 | ) | (70,071 | ) | 1,567,551 | ||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 156,969 | 46,494 | 41,850 | 72,232 | 12,844 | 243,799 | 50,402 | 26,264 | 650,854 | (181,802 | ) | (45,026 | ) | 424,026 | ||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 9,673 | 9,673 | ||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to the Group | 370,082 | 109,617 | 98,667 | 170,298 | 44,184 | 856,755 | 173,973 | 2,329,992 | 4,153,568 | (2,984,998 | ) | (34,718 | ) | 1,133,852 | ||||||||||||||||||||||||||||||||||
US GAAP adjustments | (90,671 | ) | (250,439 | ) | 247,069 | 11,610 | 39,585 | (216,509 | ) | (90,485 | ) | (2,635,158 | ) | (2,984,998 | ) | — | — | — | ||||||||||||||||||||||||||||||
Intersegment transactions | 15,684 | (327,712 | ) | 59,836 | (39,297 | ) | 14,447 | 284,414 | 33,881 | (75,971 | ) | (34,718 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Net income (loss) attributable to the Group | 295,095 | (468,534 | ) | 405,572 | 142,611 | 98,216 | 924,660 | 117,369 | (381,137 | ) | 1,133,852 | — | — | 1,133,852 | ||||||||||||||||||||||||||||||||||
Segments’ total assets | 93,012,758 | 37,373,660 | 40,836,217 | 31,014,717 | 7,551,810 | 17,556,352 | 10,054,742 | 50,983,388 | 288,383,644 | (16,355,259 | ) | (17,118,469 | ) | 254,909,916 | ||||||||||||||||||||||||||||||||||
(1) | Securities brokerage business is conducted through Shinhan Investment Corp. (formerly Good Morning Shinhan Securities). | |
(2) | Credit card business is conducted through Shinhan Card. | |
(3) | Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system. |
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35. | Trust Accounts |
36. | Securitizations and Variable Interest Entities |
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Asset-Backed | Investment | Guaranteed Fixed | ||||||||||||||
Securitizations | Trusts | Rate Money Trusts | Total | |||||||||||||
(In millions of Won) | ||||||||||||||||
December 31, 2008 | ||||||||||||||||
Consolidated Assets | ||||||||||||||||
Loans | 7,359,077 | 43,720 | 599 | 7,403,396 | ||||||||||||
Securities | 2,627,863 | 1,680,910 | 1,787 | 4,310,560 | ||||||||||||
Other assets | 500,497 | 191,689 | 3,483 | 695,669 | ||||||||||||
Total Assets(1) | 10,487,437 | 1,916,319 | 5,869 | 12,409,625 | ||||||||||||
Consolidated Liabilities | ||||||||||||||||
Total Liabilities(1) | 5,155,354 | 6,035 | 6,991 | 5,168,380 | ||||||||||||
December 31, 2009 | ||||||||||||||||
Consolidated Assets | ||||||||||||||||
Loans | 5,857,865 | 99,124 | 141 | 5,957,130 | ||||||||||||
Securities | 1,939,535 | 1,606,396 | 1,368 | 3,547,299 | ||||||||||||
Other assets | 422,529 | 371,661 | 1,656 | 795,846 | ||||||||||||
Total Assets(1) | 8,219,929 | 2,077,181 | 3,165 | 10,300,275 | ||||||||||||
Consolidated Liabilities | ||||||||||||||||
Total Liabilities(1) | 4,746,732 | 359,076 | 5,527 | 5,111,335 | ||||||||||||
(1) | Total assets and total liabilities of consolidated VIEs are reported net of intercompany balances that have been eliminated in consolidation. |
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Guaranteed | ||||||||||||||||||||||||
Principal Money | ||||||||||||||||||||||||
SPEs Created for | Trusts & | |||||||||||||||||||||||
Asset-Backed | Structured | Investment | Performance | Other | ||||||||||||||||||||
Securitizations | Financing | Trusts | Based Trusts | Vehicles | Total | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Maximum exposure to loss(1) | 4,757,476 | 12,014,374 | 1,495,887 | 3,510,352 | 1,609,127 | 23,387,216 | ||||||||||||||||||
Total assets of VIEs | 16,611,636 | 27,685,011 | 7,744,614 | 3,687,839 | 12,522,675 | 68,251,775 | ||||||||||||||||||
On-Balance Sheet Assets | ||||||||||||||||||||||||
Loans | 1,821,505 | 6,536,367 | — | — | 141,078 | 8,498,950 | ||||||||||||||||||
Securities | 1,218,770 | 160,582 | 833,148 | — | 200,680 | 2,413,180 | ||||||||||||||||||
Other assets | 27,907 | 4,230 | 53 | — | 663 | 32,853 | ||||||||||||||||||
Total | 3,068,182 | 6,701,179 | 833,201 | — | 342,421 | 10,944,983 | ||||||||||||||||||
On-Balance Sheet Liabilities | 17,525 | 4,998 | 32 | — | 2,241 | 24,796 | ||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||
Maximum exposure to loss(1) | 5,684,514 | 9,179,376 | 803,815 | 3,480,492 | 443,435 | 19,591,632 | ||||||||||||||||||
Total assets of VIEs | 16,629,900 | 33,698,441 | 8,796,449 | 3,700,384 | 11,750,970 | 74,576,144 | ||||||||||||||||||
On-Balance Sheet Assets | ||||||||||||||||||||||||
Loans | 1,597,388 | 7,084,670 | — | — | 254,618 | 8,936,676 | ||||||||||||||||||
Securities | 601,086 | 185,236 | 724,527 | — | 72,006 | 1,582,855 | ||||||||||||||||||
Other assets | 75,501 | 1,490 | — | — | 1,447 | 78,438 | ||||||||||||||||||
Total | 2,273,975 | 7,271,396 | 724,527 | — | 328,071 | 10,597,969 | ||||||||||||||||||
On-Balance Sheet Liabilities | 3,883 | 516 | — | — | 873 | 5,272 | ||||||||||||||||||
(1) | The Group’s maximum exposure to loss often differs from the carrying amount of assets and liabilities in Group’s balance sheet that relate to the Group’s variable interest in the VIEs. The maximum exposure to loss is dependent on the nature of the Group’s variable interest in the VIEs and is limited to the notional amounts of certain liquidity facilities, other credit support, derivatives and investments the Group has made in the VIEs. |
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37. | Other Comprehensive Income |
Foreign | Net Unrealized | Accumulated | ||||||||||
Currency | Gain on | Other | ||||||||||
Translation | Available-for- | Comprehensive | ||||||||||
Adjustments | Sale Securities | Income | ||||||||||
(In millions of Won) | ||||||||||||
Balance at January 1, 2007 | (37,762 | ) | 178,645 | 140,883 | ||||||||
Cumulative adjustment for accounting change, net of tax effect of | — | 274 | 274 | |||||||||
Foreign currency translation adjustment, net of tax effect of | 7,958 | — | 7,958 | |||||||||
Unrealized net gains onavailable-for-sale securities, net of tax effect of | — | 696,471 | 696,471 | |||||||||
Reclassifications from other comprehensive income to net income, net of tax effect | — | (83,386 | ) | (83,386 | ) | |||||||
Balance at December 31, 2007 | (29,804 | ) | 792,004 | 762,200 | ||||||||
Foreign currency translation adjustment, net of tax effect of | 142,257 | — | 142,257 | |||||||||
Unrealized net gains onavailable-for-sale securities, net of tax effect of | — | (214,571 | ) | (214,571 | ) | |||||||
Reclassifications from other comprehensive income to net income, net of tax effect | — | (94,405 | ) | (94,405 | ) | |||||||
Balance at December 31, 2008 | 112,453 | 483,028 | 595,481 | |||||||||
Cumulative adjustment for accounting change, net of tax effect of | — | (8,752 | ) | (8,752 | ) | |||||||
Foreign currency translation adjustment, net of tax effect of | (67,906 | ) | — | (67,906 | ) | |||||||
Unrealized net gains onavailable-for-sale securities, net of tax effect of | — | 580,596 | 580,596 | |||||||||
Changes in the Group’s ownership interest in subsidiary, net of tax effect of | — | 200 | 200 | |||||||||
Reclassifications from other comprehensive income to net income, net of tax effect of | — | (130,606 | ) | (130,606 | ) | |||||||
Balance at December 31, 2009 | 44,547 | 924,466 | 969,013 | |||||||||
38. | Shinhan Financial Group Co., Ltd. |
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2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Cash dividends paid by: | ||||||||||||
Consolidated subsidiaries | 489,990 | 1,931,865 | 136,241 | |||||||||
Equity method investees | 4,915 | 12,010 | 25,210 | |||||||||
494,905 | 1,943,875 | 161,451 | ||||||||||
2008 | 2009 | |||||||
(In millions of Korean Won) | ||||||||
Assets | ||||||||
Deposits with banking subsidiary | 670,815 | 429,825 | ||||||
Receivables from subsidiaries: | ||||||||
Non-banking subsidiaries | 2,410,000 | 1,575,000 | ||||||
Investment (at equity) in subsidiaries: | ||||||||
Banking subsidiaries | 12,693,260 | 13,674,187 | ||||||
Non-banking subsidiaries | 10,353,528 | 10,971,879 | ||||||
Premises and equipment | 2,237 | 3,685 | ||||||
Other assets | 206,928 | 160,843 | ||||||
Total assets | 26,336,768 | 26,815,419 | ||||||
Liabilities and stockholders’ equity | ||||||||
Short-term debt | 1,155,300 | 674,000 | ||||||
Long-term debt | 7,411,010 | 5,767,797 | ||||||
Accrued expenses and other liabilities | 118,390 | 155,423 | ||||||
Total liabilities | 8,684,700 | 6,597,220 | ||||||
Stockholders’ equity | 17,652,068 | 20,218,199 | ||||||
Total liabilities and stockholders’ equity | 26,336,768 | 26,815,419 | ||||||
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Table of Contents
2007 | 2008 | 2009 | ||||||||||
(In millions of Korean Won) | ||||||||||||
Income | ||||||||||||
Dividends from banking subsidiaries | 301,123 | 406,516 | 11,099 | |||||||||
Dividends from non banking subsidiaries | 193,782 | 1,537,359 | 150,352 | |||||||||
Interest income from banking subsidiaries | — | 7,329 | 3,725 | |||||||||
Interest income from non banking subsidiaries | 63,762 | 116,914 | 119,666 | |||||||||
Other income | 54,408 | 148,008 | 203,230 | |||||||||
Total income | 613,075 | 2,216,126 | 488,072 | |||||||||
Expenses | ||||||||||||
Interest expense | 401,342 | 442,683 | 443,816 | |||||||||
Salaries and employee benefits | 33,720 | 4,813 | 26,975 | |||||||||
Other expense | 23,042 | 44,445 | 57,996 | |||||||||
Total expenses | 458,104 | 491,941 | 528,787 | |||||||||
Income (Loss) before income tax expense and undistributed net income (loss) of subsidiaries | 154,971 | 1,724,185 | (40,715 | ) | ||||||||
Income tax expense | 33,235 | 14,560 | 26,756 | |||||||||
Income (loss) before undistributed net income (loss) of subsidiaries | 121,736 | 1,709,625 | (67,471 | ) | ||||||||
Equity in undistributed net income (loss) of subsidiaries: | ||||||||||||
Banking subsidiaries | 967,433 | 261,237 | 470,423 | |||||||||
Non-banking subsidiaries | 840,443 | (490,163 | ) | 730,900 | ||||||||
Net income | 1,929,612 | 1,480,699 | 1,133,852 | |||||||||
F-101
Table of Contents
2007 | 2008 | 2009 | ||||||||||
(In millions of Won) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income | 1,929,612 | 1,480,699 | 1,133,852 | |||||||||
Less: Net income of subsidiaries | (2,302,781 | ) | (1,714,949 | ) | (1,362,774 | ) | ||||||
Parent Company net loss | (373,169 | ) | (234,250 | ) | (228,922 | ) | ||||||
Depreciation on premises and equipment | 714 | 811 | 893 | |||||||||
Cash dividends from subsidiaries and equity method investees | 494,905 | 1,943,875 | 161,451 | |||||||||
Other expense (income) | 29,088 | 27,208 | (27,002 | ) | ||||||||
Unrealized foreign exchange gain | — | — | (10,818 | ) | ||||||||
Loss on valuation of trading derivatives | — | — | 14,224 | |||||||||
Other assets, net | 27,131 | 8,427 | 57,923 | |||||||||
Accrued expense and other liabilities, net | 35,480 | (5,062 | ) | 21,343 | ||||||||
Net cash provided by (used in) operating activities | 214,149 | 1,741,009 | (10,908 | ) | ||||||||
Cash flows from investing activities | ||||||||||||
Net change in receivables from subsidiaries | (229,928 | ) | (995,000 | ) | 835,000 | |||||||
Increase in investment in subsidiaries | (7,215,876 | ) | (967,011 | ) | (31,048 | ) | ||||||
Decrease in investment in subsidiaries | — | 977,471 | 52,631 | |||||||||
Net change in premises and equipment | (556 | ) | (1,503 | ) | (2,302 | ) | ||||||
Net change in other assets (including assets relating to LG Card acquisition in 2007) | (16,190 | ) | (45,678 | ) | 1,008 | |||||||
Net cash provided by (used in) investing activities | (7,462,550 | ) | (1,031,721 | ) | 855,289 | |||||||
Cash flows from financing activities | ||||||||||||
Net change in short-term debt | 1,135,000 | (99,700 | ) | (481,300 | ) | |||||||
Proceeds from issuance of long-term debt | 3,350,000 | 1,480,000 | 712,160 | |||||||||
Repayments of long-term debt | (972,362 | ) | (978,763 | ) | (2,360,905 | ) | ||||||
Proceed from the issuance of stock | 3,736,238 | — | 1,275,260 | |||||||||
Net change in treasury stock | (48 | ) | — | — | ||||||||
Cash dividends paid | (336,994 | ) | (572,004 | ) | (230,586 | ) | ||||||
Net cash provided by (used in) financing activities | 6,911,834 | (170,467 | ) | (1,085,371 | ) | |||||||
Net increase (decrease) in cash and due from banks | (336,567 | ) | 538,821 | (240,990 | ) | |||||||
Cash and due from banks, beginning of year | 468,561 | 131,994 | 670,815 | |||||||||
Cash and due from banks, end of year | 131,994 | 670,815 | 429,825 | |||||||||
Cash paid for interest | 375,573 | 421,180 | 438,978 |
F-102
Table of Contents
1 | .1 | Articles of Incorporation, last amended as of March 24, 2010 (in English)† | ||
2 | .1 | Form of Common Stock Certificate (in English)†* | ||
2 | .2 | Form of Deposit Agreement to be entered into among Shinhan Financial Group, Citibank, N.A., as depositary, and all owners and holders from time to time of American depositary shares issued thereunder, including the form of American depositary receipt* | ||
2 | .3 | Long-term debt instruments of Shinhan Financial Group, Shinhan Bank and other consolidated subsidiaries for which financial statements are required to be filed are omitted pursuant to Item 601(b)(4)(iii) ofRegulation S-K. Shinhan Financial Group agrees to furnish the Commission on request a copy of any instrument defining the rights of holders of its long-term debt and that of any subsidiary for which consolidated or unconsolidated financial statements are required to be filed.* | ||
4 | .1 | Stock Purchase Agreement by and between Korea Deposit Insurance Corporation and Shinhan Financial Group dated July 9, 2003** | ||
4 | .2 | Investment Agreement by and between Shinhan Financial Group and Korea Deposit Insurance Corporation dated July 9, 2003* | ||
4 | .3 | Agreed Terms, dated June 22, 2004, by and among the President of Korea Deposit Insurance Corporation, CEO of Shinhan Financial Group, CEO of Chohung Bank, Chairman of the National Financial Industry Labor Union of Korea and the Head of the Chohung Bank Chapter of the National Financial Industry Labor Union* | ||
4 | .4 | Merger Agreement between Shinhan Bank and Chohung Bank (in English)†*** | ||
4 | .5 | Split-Merger Agreement between Shinhan Card and Chohung Bank (in English)†*** | ||
4 | .6 | Form of Share Purchase Agreement, dated January 17, 2006, by and between Shinhan Financial Group and the holders of the redeemable preferred shares and the redeemable convertible shares issued by Shinhan Financial Group as part of the funding for the acquisition of LG Card Co., Ltd. (in English)†*** | ||
4 | .7 | LG Card Acquisition Agreement, dated 2006, between Korea Development Bank and 13 other financial institutions, on the one hand, and Shinhan Financial Group†**** | ||
8 | .1 | List of all subsidiaries of Shinhan Financial Group | ||
12 | .1 | Certifications of our Chief Executive Officer required byRule 13a-14(a) of the Exchange Act | ||
12 | .2 | Certifications of our Chief Financial Officer required byRule 13a-14(a) of the Exchange Act | ||
13 | .1 | Certifications of our Chief Executive Officer required byRule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) | ||
13 | .2 | Certifications of our Chief Financial Officer required byRule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) |
† | A fair and accurate translation from Korean into English. | |
* | Incorporated by reference to the registrant’s previous filing onForm 20-F(No. 001-31798), filed on September 15, 2003. | |
** | Incorporated by reference to the registrant’s previous filing onForm 20-F(No. 001-31798), filed on September 15, 2003. Confidential treatment has been requested for certain portions of the Stock Purchase Agreement. | |
*** | Incorporated by reference to the registrant’s previous filing onForm 20-F(No. 001-31798), filed on June 30, 2006. | |
**** | Incorporated by reference to registrant’s previous filing onForm 20-F(No. 001-31798), filed on June 30, 2008. |
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