Exhibit 99.2
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Financial Statements
September 30, 2022 and 2021
(Unaudited)
Contents
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Report on Review of Interim Financial Statements |
| 1 |
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Separate Interim Statements of Financial Position |
| 3 |
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Separate Interim Statements of Comprehensive Income |
| 4 |
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Separate Interim Statements of Changes in Equity |
| 5 |
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Separate Interim Statements of Cash Flows |
| 6 |
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Notes to the Separate Interim Financial Statements |
| 8 |
Report on Review of Interim Financial Statements
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of
Shinhan Financial Group Co.,Ltd.
Reviewed Financial Statements
We have reviewed the accompanying separate interim financial statements of Shinhan Financial Group Co., Ltd.(the Company). These financial statements consist of the separate interim statement of financial position of the Company as at September 30, 2022, and the related separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2022 and 2021, and separate interim statements changes in equity and cash flows for the nine-month periods ended September 30, 2022 and 2021, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these separate interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to issue a report on these separate interim financial statements based on our review.
We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe the accompanying separate interim financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to Note 27 of the financial statements. As explained in Note 27, the rapid spread of the COVID-19 has had a negative impact on the global economy, which can result in an increase in expected credit losses, potential impairment of assets, and negatively affecting the Company's ability to generate revenue.
Other Matters
We have audited the separate statement of financial position of the Company as at December 31, 2021, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 3, 2022. The separate statement of financial position as at December 31, 2021, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2021.
Samil PricewaterhouseCoopers, 100 Hangang-daero, Yongsan-gu, Seoul 04386, Korea, www.samil.com
Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.
/s/ Samil PricewaterhouseCoopers
November 14, 2022
Seoul, Korea
This report is effective as of November 14, 2022, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. |
2
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Financial Position
As of September 30, 2022 and December 31, 2021
(In millions of won) |
| Note |
| September 30, 2022 (Unaudited) |
| December 31, 2021 |
Assets |
|
|
|
|
|
|
Due from banks at amortized cost |
| 4, 5, 25 |
| 148 |
| 44,913 |
Financial assets at fair value through profit or loss |
| 4, 6, 25 |
| 2,303,958 |
| 1,617,734 |
Derivative assets |
| 4, 7 |
| - |
| 17,933 |
Financial assets at amortized cost |
| 4, 8, 25 |
| 4,249,441 |
| 3,976,059 |
Property and equipment |
| 25 |
| 5,795 |
| 5,098 |
Intangible assets |
|
|
| 5,462 |
| 5,499 |
Investments in subsidiaries |
| 9 |
| 30,666,413 |
| 30,335,041 |
Assets held for sale |
|
|
| - |
| 15,385 |
Other assets |
| 4, 8, 25 |
| 760,557 |
| 798,231 |
Total assets |
|
|
| 37,991,774 |
| 36,815,893 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Derivative liabilities |
| 4, 7 |
| - |
| 6,263 |
Borrowings |
| 4, 10 |
| 20,000 |
| - |
Debt securities issued |
| 4, 11, 25 |
| 10,002,227 |
| 9,559,553 |
Net defined benefit liabilities |
| 12 |
| 3,573 |
| 1,531 |
Deferred tax liabilities |
| 20 |
| 2,059 |
| 9,151 |
Other liabilities |
| 4, 25 |
| 790,109 |
| 834,019 |
Total liabilities |
|
|
| 10,817,968 |
| 10,410,517 |
|
|
|
|
|
|
|
Equity |
| 13 |
|
|
|
|
Capital stock |
|
|
| 2,969,641 |
| 2,969,641 |
Hybrid bonds |
|
|
| 4,196,968 |
| 3,334,531 |
Capital surplus |
|
|
| 11,350,819 |
| 11,350,819 |
Capital adjustments |
|
|
| (46,114) |
| (45,797) |
Accumulated other comprehensive loss |
|
|
| (6,175) |
| (7,253) |
Retained earnings |
|
|
| 8,708,667 |
| 8,803,435 |
Total equity |
|
|
| 27,173,806 |
| 26,405,376 |
Total liabilities and equity |
|
|
| 37,991,774 |
|
36,815,893 |
See accompanying notes to the separate interim financial statements.
3
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Comprehensive Income
For the three-month and nine-month periods ended September 30, 2022 and 2021
(In millions of Korean won, except earnings per share data) |
| Note |
| September 30, 2022 (Unaudited) |
| September 30, 2021 (Unaudited) | ||||
|
|
|
| Three-month |
| Nine- month |
| Three-month |
| Nine - month |
Interest income |
| 22, 25 |
|
| �� |
|
|
|
|
|
Financial assets at amortized cost |
|
|
| 22,752 |
| 63,950 |
| 19,375 |
| 54,859 |
Interest expense |
| 25 |
| (57,684) |
| (161,165) |
| (52,785) |
| (158,879) |
Net interest expense |
| 14 |
| (34,932) |
| (97,215) |
| (33,410) |
| (104,020) |
|
|
|
|
|
|
|
|
|
|
|
Fees and commission income |
| 22, 25 |
| 18,680 |
| 52,762 |
| 15,264 |
| 45,786 |
Fees and commission expense |
| 25 |
| (293) |
| (454) |
| (251) |
| (2,356) |
Net fees and commission income |
| 15 |
| 18,387 |
| 52,308 |
| 15,013 |
| 43,430 |
|
|
|
|
|
|
|
|
|
|
|
Dividend income |
| 16, 22, 25 |
| 8,704 |
| 1,461,953 |
| 4,497 |
| 1,575,713 |
Net gain(loss) on financial assets at fair value through profit or loss |
| 22 |
| (39,178) |
| (128,036) |
| 2,338 |
| 7,056 |
Net foreign currency transaction gain |
| 22 |
| 77,780 |
| 138,429 |
| 32,204 |
| 41,463 |
Reversal of (Provision for) credit loss allowance |
| 17 |
| (653) |
| 163 |
| (87) |
| (582) |
General and administrative expenses |
| 18, 25 |
| (31,755) |
| (93,462) |
| (29,168) |
| (82,645) |
|
|
|
|
|
|
|
|
|
|
|
Operating income(loss) |
|
|
| (1,647) |
| 1,334,140 |
| (8,613) |
| 1,480,415 |
|
|
|
|
|
|
|
|
|
|
|
Non-operating income(expense) |
|
|
| 4,197 |
| 4,116 |
| (1,277) |
| (1,920) |
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) before income tax |
|
|
| 2,550 |
| 1,338,256 |
| (9,890) |
| 1,478,495 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
| 20 |
| 7,422 |
| (7,502) |
| 7,006 |
| 9,353 |
Profit (loss) for the period |
|
|
| (4,872) |
| 1,345,758 |
| (16,896) |
| 1,469,142 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income(loss) for the period, net of income tax |
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
|
|
Re-measurements of the defined benefit liability |
|
|
| - |
| 1,078 |
| - |
| 153 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for the period |
|
|
| (4,872) |
| 1,346,836 |
| (16,896) |
| 1,469,295 |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share in Korean won | 21 |
| (94) |
| 2,311 |
| (101) |
| 2,586 | |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the separate interim financial statements.
4
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Changes in Equity
For the nine-month periods ended September 30, 2022 and 2021
|
| Capital stock |
| Hybrid bonds |
| Capital surplus |
| Capital adjust-ments |
| Accumulated other comprehe-nsive loss |
| Retained earnings |
| Total
|
Balance at January 1, 2021 |
| 2,969,641 |
| 2,179,934 |
| 11,351,424 |
| (45,718) |
| (6,971) |
| 8,608,787 |
| 25,057,097 |
Total comprehensive income for the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
| - |
| - |
| - |
| - |
| - |
| 1,469,142 |
| 1,469,142 |
Other comprehensive income for the period |
| - |
| - |
| - |
| - |
| 153 |
| - |
| 153 |
|
| - |
| - |
| - |
| - |
| 153 |
| 1,469,142 |
| 1,469,295 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends |
| - |
| - |
| - |
| - |
| - |
| (803,838) |
| (803,838) |
Quarterly dividends |
| - |
| - |
| - |
| - |
| - |
| (160,223) |
| (160,223) |
Dividend to hybrid bonds |
| - |
| - |
| - |
| - |
| - |
| (88,074) |
| (88,074) |
Issuance of hybrid bonds |
| - |
| 1,154,597 |
| - |
| - |
| - |
| - |
| 1,154,597 |
Acquisition of treasury stock |
| - |
| - |
| - |
| (79) |
| - |
| - |
| (79) |
Others |
| - |
| - |
| (605) |
| - |
| - |
| - |
| (605) |
|
| - |
| 1,154,597 |
| (605) |
| (79) |
| - |
| (1,052,135) |
| 101,778 |
Balance at September 30, 2021 (Unaudited) |
| 2,969,641 |
| 3,334,531 |
| 11,350,819 |
| (45,797) |
| (6,818) |
| 9,025,794 |
| 26,628,170 |
Balance at January 1, 2022 |
| 2,969,641 |
| 3,334,531 |
| 11,350,819 |
| (45,797) |
| (7,253) |
| 8,803,435 |
| 26,405,376 |
Total comprehensive income for the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
| - |
| - |
| - |
| - |
| - |
| 1,345,758 |
| 1,345,758 |
Other comprehensive income for the period |
| - |
| - |
| - |
| - |
| 1,078 |
| - |
| 1,078 |
|
| - |
| - |
| - |
| - |
| 1,078 |
| 1,345,758 |
| 1,346,836 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends |
| - |
| - |
| - |
| - |
| - |
| (747,705) |
| (747,705) |
Quarterly dividends |
| - |
| - |
| - |
| - |
| - |
| (425,434) |
| (425,434) |
Dividend to hybrid bonds |
| - |
| - |
| - |
| - |
| - |
| (117,058) |
| (117,058) |
Repayments to hybrid bonds |
| - |
| (134,683) |
| - |
| (317) |
| - |
|
|
| (135,000) |
Issuance of hybrid bonds |
| - |
| 997,120 |
| - |
| - |
| - |
| - |
| 997,120 |
Acquisition of treasury stock |
| - |
| - |
| - |
| (150,300) |
| - |
| - |
| (150,300) |
Retirement of treasury stock |
| - |
| - |
| - |
| 150.300 |
| - |
| (150,329) |
| (29) |
|
| - |
| 862,437 |
| - |
| (317) |
| - |
| (1,440,526) |
| (578,406) |
Balance at September 30, 2022 (Unaudited) |
| 2,969,641 |
| 4,196,968 |
| 11,350,819 |
| (46,114) |
| (6,175) |
| 8,708,667 |
| 27,173,806 |
See accompanying notes to the separate interim financial statements.
5
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Cash Flows (Continued)
For the nine-month periods ended September 30, 2022 and 2021
|
|
|
| Nine-month periods ended September 30 | ||
|
| Note |
| 2022 (Unaudited) |
| 2021 (Unaudited) |
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Profit before income taxes |
|
|
| 1,338,256 |
| 1,478,495 |
Adjustments for: |
|
|
|
|
|
|
Interest income |
| 14 |
| (63,950) |
| (54,859) |
Interest expense |
| 14 |
| 161,165 |
| 158,879 |
Dividend income |
| 16 |
| (1,461,953) |
| (1,575,713) |
Net loss(gain) on financial instruments at fair value through profit or loss |
|
|
| 139,545 |
| (645) |
Provision for(reversal of) credit loss allowance |
| 17 |
| (163) |
| 582 |
Employee costs |
|
|
| 3,732 |
| 6,038 |
Depreciation and amortization |
| 18 |
| 2,405 |
| 2,217 |
Net foreign currency translation gain |
|
|
| (128,299) |
| (36,742) |
Non-operating expense(income) |
|
|
| (4,834) |
| 643 |
|
|
|
| (1,352,352) |
| (1,499,600) |
Changes in assets and liabilities: |
|
|
|
|
|
|
Due from banks |
|
|
| 41,000 |
| - |
Financial instruments at fair value through profit or loss |
|
|
| (364,299) |
| (42,856) |
Other assets |
|
|
| 446 |
| 1,115 |
Net defined benefit liabilities |
|
|
| 1,671 |
| 1,946 |
Other liabilities |
|
|
| (3,901) |
| (14,049) |
|
|
|
| (325,083) |
| (53,844) |
|
|
|
|
|
|
|
Interest received |
|
|
| 69,514 |
| 60,819 |
Interest paid |
|
|
| (161,890) |
| (163,161) |
Dividend received |
|
|
| 1,459,078 |
| 1,569,688 |
Income tax paid |
|
|
| (1,532) |
| (14) |
Net cash inflow from operating activities |
|
|
| 1,025,991 |
| 1,392,383 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Acquisition of financial assets at fair value through profit or loss |
|
|
| (400,000) |
| (450,024) |
Lending of loans at amortized cost |
|
|
| (420,000) |
| (833,384) |
Collection of loans at amortized cost |
|
|
| 450,000 |
| 369,000 |
Acquisition of property and equipment |
|
|
| (2,535) |
| (1,913) |
Proceeds from disposal of property and equipment |
|
|
| - |
| 45 |
Proceeds from disposal of intangible assets |
|
|
| - |
| 200 |
Increase in other assets |
|
|
| (864) |
| (1,318) |
Decrease in other assets |
|
|
| 990 |
| - |
Acquisition of investments in subsidiaries |
|
|
| (310,175) |
| (379,857) |
Disposal of investments in subsidiaries |
|
|
| 20,354 |
| - |
Net cash outflow from investing activities |
|
|
| (662,230) |
| (1,297,251) |
6
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Cash Flows (Continued)
For the nine-month periods ended September 30, 2022 and 2021
|
|
|
| Nine-month periods ended September 30 | ||
(In millions of won) |
| Note |
| 2022 (Unaudited) |
| 2021 (Unaudited) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Issuance of hybrid bonds |
|
|
| 997,120 |
| 1,154,597 |
Repayments of hybrid bonds |
|
|
| (135,000) |
| - |
Issuance of debt securities |
|
|
| 1,640,000 |
| 1,235,000 |
Repayments of debt securities issued |
|
|
| (1,446,000) |
| (1,429,000) |
Debt securities issuance costs paid |
|
|
| (2,521) |
| (2,003) |
Increase in borrowings |
|
|
| 20,000 |
| - |
Stock issuance costs paid |
|
|
| - |
| (605) |
Dividends paid |
|
|
| (1,289,590) |
| (1,051,636) |
Acquisition of treasury stock |
|
|
| (150,300) |
| (79) |
Payment for disposal of treasury stock |
|
|
| (29) |
| - |
Repayments of leased liabilities |
|
|
| (1,259) |
| (1,269) |
Net cash outflow from financing activities |
|
|
| (367,579) |
| (94,995) |
|
|
|
|
|
|
|
Effect on the exchange rate changes of cash equivalents in foreign currency |
|
|
| 2 |
| - |
|
|
|
|
|
|
|
Net increase(decrease) in cash and cash equivalents |
|
|
| (3,816) |
| 137 |
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
| 24 |
| 3,961 |
| - |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
| 24 |
| 145 |
| 137 |
See accompanying notes to the separate interim financial statements.
7
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
1. Reporting entity
Shinhan Financial Group Co., Ltd. (hereinafter referred to as "the Company") was established on September 1, 2001 for the main business purposes such as control and management of companies operating in the financial industry, and financial support for subsidiaries. In addition, the stocks were listed on the Korea Exchange on September 10, 2001, and the Company was registered with the Securities and Exchange Commission (SEC) on September 16, 2003, and on the same date, ADS (American Depositary Shares) was listed on the New York Stock Exchange (NYSE).
2. Basis of preparation
(a) | Statement of compliance |
|
The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (K-IFRS). The accompanying separate interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
The separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies of the Republic of Korea. These separate interim financial statements were prepared in accordance with K-IFRS No.1034, ‘Interim Financial Reporting’ as part of the period covered by the Company’s K-IFRS annual financial statements and contains less information than required in the annual separate financial statements. Selective comments include a description of transactions or events that are significant in understanding the changes in the financial position and management performance of the Company that occurred after December 31, 2021.
The separate interim financial statements of the Company are separate financial statements prepared in accordance with K-IFRS No. 1027 ‘Separate Financial Statements’ in which presented on the basis of direct equity investments, not on that the controlling company, equity interests in associates and joint ventures does not base the investment on the investee’s reported performance and net assets.
(b) Use of estimates and judgments
The preparation of the condensed separate interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. When estimates and assumptions based on management's judgment as of the end of the interim reporting period differ from the actual, actual results may differ from these estimates.
Estimates and underlying assumptions about estimates are continually reviewed, and changes in accounting estimates are recognized for the period in which the estimates are changed and the period to be affected in the future. Income tax expense in the interim period is measured by applying the expected annual income tax rate, i.e. the estimated average annual effective income tax rate.
In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were, except for the method of estimation used to determine the income tax expense for the interim period, the same as those that applied to the separate financial statements as of and for the year ended December 31, 2021.
8
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
3. Significant accounting policies
The Company applies the same accounting policies applied as when preparing the annual separate financial statements for the year ended December 31, 2021, except for the following amendments that has been applied for the first time since January 1, 2022 and as described in Note 2(b).
i) Amendments to K-IFRS No. 1103 'Business combination' – Reference to the Conceptual Framework
The amendments update a reference of definition of assets and liabilities to be recognized in a business combination in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets, and Korean IFRS 2121 Levies. The amendments also clarifies that contingent assets should not be recognized at the acquisition date. The Company expects that the amendments will not have a significant impact on the separate financial statements.
ii) Amendments to K-IFRS No. 1016 ‘Property, Plant and Equipment ' – Proceeds before the intended use
The amendments require the entity to recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss, and prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. The Company expects that the amendments will not have a significant impact on the separate financial statements.
iii) Amendments to K-IFRS No. 1037, ‘Provisions, Contingent Liabilities and Contingent Assets’ - Onerous Contracts: Cost of Fulfilling a Contract
The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The Company expects that the amendments will not have a significant impact on the separate financial statements.
iv) Annual Improvements to K-IFRSs 2018-2020 Cycle
For Annual Improvements to K-IFRSs 2018-2020 Cycle, the amendments will take effect for annual periods beginning after January 1, 2022 and are permitted for early application. The amendments will not have a significant impact on the separate financial statements.
- K-IFRS No. 1101 ‘First-time Adoption of K-IFRS’ - Subsidiary as a First-time Adopter
- K-IFRS No.1109, ‘Financial Instruments’ – Fees related to 10 percent test for derecognition of financial liabilities
- K-IFRS No.1041, ‘Agriculture’ - Fair value measurement
9
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4. Financial risk management
(a) Overview
As a financial services provider, Shinhan Financial Group Co., Ltd. and its subsidiaries (hereinafter referred to as the “Group”) are exposed to various risks that may occur in each business area, and the main risks are credit risk, market risk, interest rate risk and liquidity risk. These risks are recognized, measured, controlled and reported in accordance with the basic risk management policies established by the controlling company and each subsidiary.
i) Risk management organization
The Group's basic policies and strategies for risk management are established by the Risk Management Committee (hereinafter referred to as the “Group Risk Management Committee”) within the board of directors of the parent company. The Group's Chief Risk Management Officer (CRO) assists the Group Risk Management Committee and discusses risk policies and strategies of the group and each subsidiary through the Group Risk Council, which consists of each subsidiary's Chief Risk Management Officer. Subsidiaries implement the group's risk policies and strategies through risk management committees, risk-related working committees, and risk management organizations for each company, and consistently establish and implement detailed risk policies and strategies for subsidiaries. The risk management team of the parent company performs the risk management and supervision work by assisting the group's chief risk manager.
Shinhan Financial Group has a hierarchical limit system to manage the group's risks at an appropriate level. The Group Risk Management Committee sets the risk limits that can be borne by the group and each subsidiary, and the risk management committees and management level risk groups of each subsidiary establish and manage detailed risk limits by risk type, department, desk, and product.
ii) Risk management framework
ii-1) Risk Capital Management
Risk capital refers to capital necessary to compensate for losses in case of a potential risk being realized, and risk capital management refers to the process of asset management based on considerations of risk exposure and risk appetite, which is a datum point on the level of risk burden compared to available capital. As part of the Group’s risk capital management, the Group has adopted and maintains various risk planning processes and reflects such risk planning in the Group’s business and financial planning. The Group also has adopted and maintains a risk limit management system to ensure that risks in the Group’s business do not exceed prescribed limits.
ii-2) Risk monitoring
The Group proactively, preemptively and periodically review risks that may impact our overall operations, through a multidimensional risk monitoring system. Currently, each of subsidiaries is required to report to the Company any factors that could have a material impact on the group-wide risk management, and the Company reports to the Group’s Chief Risk Officer and other members of the Group’s senior management the results of risk monitoring on a weekly, monthly and on an ad hoc basis as needed.
In addition, the Group performs preemptive risk management through a “risk dashboard system” under which the Group closely monitors any increase in asset size, risk levels and sensitivity to external factors with respect to the major asset portfolios of each of subsidiaries, and to the extent such monitoring yields any warning signals, the Group promptly analyze the causes and, if necessary, formulates and implements actions in response to these warning signals.
ii-3) Risk review
The risk management departments of all subsidiaries are required to review in advance on matters relating to the adoption of new financial transactions, relating to the entry into new business concerning investment and capital increase, and relating to setting and changing limits. Through these reviews, risk factors are reviewed in advance, reckless promotion of business that may not easily detect risk factors are barred, and reasonable decision-making is supported.
10
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4. Financial risk management (continued)
(a) Overview (continued)
ii) Risk management framework (continued)
ii-3) Risk review (continued)
The risk management departments of all subsidiaries are required to review all new businesses, products and services prior to their launch and closely monitor the development of any related risks following their launch, and in the case of any action that involves more than one subsidiary, the relevant risk management departments are required to consult with the risk management team at the controlling company level prior to making any independent risk reviews.
ii-4) Crisis management
The Group maintains a group wide risk management system to detect the signals of any risk crisis and, in the event of a crisis actually happening, to respond on a timely, efficient and flexible basis so as to ensure the Group’s survival as a going concern. Each subsidiary maintains crisis planning for three levels of contingencies, namely, “alert”, “imminent crisis” and “crisis”, determination of which is made based on quantitative and qualitative monitoring and consequence analysis, and upon the happening of any such contingency, is required to respond according to a prescribed contingency plan. At the controlling company level, the Company maintains and installs crisis detection and response system which is applied consistently group-wide, and upon the happening of any contingency at two or more subsidiary level, the Company directly takes charge of the situation so that the Company manages it on a concerted group wide basis.
11
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4. Financial risk management (continued)
(b) Credit risk
i) Credit risk management |
|
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. The Company’s credit risk management encompasses all areas of credit that may result in potential economic loss, including not just transactions that are recorded on balance sheets, but also off-balance-sheet transactions such as guarantees, loan commitments and derivative transactions.
< Techniques, assumptions and input variables used to measure impairment>
i-1) Determining significant increases in credit risk since initial recognition
At the end of each reporting period, the Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.
i-1-1) Measuring the risk of default
The Company assigns an internal credit risk rating to each individual exposure based on observable data and historical experiences that have been found to have a reasonable correlation with the risk of default. The internal credit risk rating is determined by considering both qualitative and quantitative factors that indicate the risk of default, which may vary depending on the nature of the exposure and the type of borrower.
i-1-2) Measuring term structure of probability of default
Internal credit rate is a key input variable for determining term structure of probability of default. The Company accumulates information after analyzing the information regarding exposure to credit risk and default information by the type of product and borrower and results of internal credit risk assessment. For some portfolios, the Company uses information obtained from external credit rating agencies when performing these analyses. The Company applies statistical techniques to estimate the probability of default for the remaining life of the exposure from the accumulated data and to estimate changes in the estimated probability of default over time.
12
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4. Financial risk management (continued)
(b) Credit risk (continued)
i) Credit risk management (continued) |
|
i-1-3) Significant increases in credit risk
The Company uses the indicators defined as per portfolio to determine the significant increase in credit risk and such indicators generally consist of changes in the risk of default estimated from changes in the internal credit risk rating, qualitative factors, days of delinquency, and others.
i-2) Risk of default
The Company considers a financial asset to be in default if it meets one or more of the following conditions:
- if a borrower is overdue 90 days or more from the contractual payment date,
- if the Company judges that it is not possible to recover principal and interest without enforcing the collateral on a financial asset
The Company uses the following indicators when determining whether a borrower is in default:
- qualitative factors (e.g. breach of contract terms),
- quantitative factors (e.g. if the same borrower does not perform more than one payment obligations to the Company, the number of days past due per payment obligation. However, in the case of a specific portfolio, the Company uses the number of days past due for each financial instrument)
- internal data and external data
The definition of default applied by the Company generally conforms to the definition of default defined for regulatory capital management purposes; however, depending on the situations, the information used to determine whether a default has incurred and the extent thereof may vary.
i-3) Reflection of forward-looking information
The Company reflects forward-looking information presented by internal experts based on a variety of information when measuring expected credit losses. For the purpose of estimating these forward-looking information, the Company utilizes the economic outlook published by domestic and overseas research institutes or government and public agencies.
The Company identified the key macroeconomic variables needed to forecast credit risk and credit losses for each portfolio as follows by analyzing past experience data and drew correlations across credit risk for each variable. After that, the Company has reflected the forward-looking information through regression estimation.
Key macroeconomic variables |
| Correlation with credit risk |
3Y corporate bonds |
| Positive |
GDP growth rate |
| Negative |
Consumer price fluctuation rate |
| Positive |
The predicted correlations between the macroeconomic variables and the risk of default, used by the Company, are derived based on data from the past more than ten years.
13
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4. Financial risk management (continued)
(b) Credit risk (continued)
i) Credit risk management (continued) |
|
i-4) Measurement of expected credit losses
Key variables used in measuring expected credit losses are as follows:
- Probability of default (“PD”)
- Loss given default (“LGD”)
- Exposure at default (“EAD”)
These variables have been estimated from historical experience data by using the statistical techniques developed internally by the Shinhan Bank and have been adjusted to reflect forward-looking information.
Estimates of PD over a specified period are estimated by reflecting characteristics of counterparties and their exposure, based on a statistical model at a specific point of time and considering the distribution of ratings so that the counterparty or exposure is not concentrated on a specific rating.
LGD refers to the expected loss if a borrower defaults. The Company calculates LGD based on the experience recovery rate measured from past default exposures. The model for measuring LGD is developed to reflect type of collateral, seniority of collateral, type of borrower, and cost of recovery. In particular, LGD for retail loan products uses loan to value (LTV) as a key variable. The recovery rate reflected in the LGD calculation is based on the present value of recovery amount, discounted at the effective interest rate.
EAD refers to the expected exposure at the time of default. The Company derives EAD reflecting a rate at which the current exposure is expected to be used additionally up to the point of default within the contractual limit. EAD of financial assets is equal to the total carrying amount of the asset, and EAD of loan commitments or financial guarantee contracts is calculated as the sum of the amount expected to be used in the future.
In measuring expected credit losses on financial assets, the Company uses the contractual maturity as the period subject to expected credit loss measurement. The contractual maturity is computed taking into account the extension right held by the borrower.
Risk factors of PD, LGD and EAD are collectively estimated according to the following criteria:
- Type of products
- Internal credit risk rating
- Type of collateral
- Loan to value (“LTV”)
- Industry that the borrower belongs to
- Location of the borrower or collateral
- Days of delinquency
The criteria for classifying groups are periodically reviewed to maintain homogeneity of the group and adjusted if necessary. The Company uses external benchmark information to supplement internal information for a particular portfolio that did not have sufficient internal data accumulated from the past experience.
14
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(b) Credit risk (continued)
i) Credit risk management (continued)
i-5) Write-off of financial assets
The Company writes off a portion of or entire loan or debt security for which the Company does not expect to receive its principal and interest. In general, the Company writes off the balance when it is deemed that the borrower has no sufficient resources or income to repay the principal and interest. Such determination on write-off is carried out in accordance with the internal rules of the Company and is carried out with the approval of Financial Supervisory Service, if necessary. The Company may continue to exercise its right of collection under its own recovery policy even after the write-off of financial assets.
ii) The Company’s maximum exposure to credit risk without taking into account of any collateral held or other credit enhancements as of September 30, 2022 and December 31, 2021 are as follows:
|
|
| September 30, 2022 |
| December 31, 2021 |
Due from banks and loans at amortized cost(*1): | Banks |
| 148 |
| 44,913 |
Corporations |
| 4,249,441 |
| 3,976,059 | |
|
| 4,249,589 |
| 4,020,972 | |
Financial assets at fair value through profit or loss |
| 1,430,171 |
| 1,053,347 | |
Derivative assets |
| - |
| 17,933 | |
Other financial assets at amortized cost(*1)(*2) |
| 759,573 |
| 797,457 | |
|
|
| 6,439,333 |
| 5,889,709 |
(*1) The maximum exposure amounts for due from banks, loan and other financial assets at amortized cost are measured as net of allowances.
(*2) Comprise accounts receivable, accrued income, guarantee deposits, etc.
15
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(b) Credit risk (continued)
iii) Information of financial assets by credit risk
Financial assets by credit risk as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||||
|
| 12-months ECL |
| Lifetime ECL |
| Gross amount |
| Allowance |
| Total, net |
Due from banks and loans at amortized cost(*): |
|
|
|
|
|
|
|
|
|
|
Banks |
| 148 |
| - |
| 148 |
| - |
| 148 |
Corporations |
| 4,254,152 |
| - |
| 4,254,152 |
| (4,711) |
| 4,249,441 |
|
| 4,254,300 |
| - |
| 4,254,300 |
| (4,711) |
| 4,249,589 |
|
|
|
|
|
|
|
|
|
|
|
Other financial assets at amortized cost |
| 760,225 |
| - |
| 760,225 |
| (652) |
| 759,573 |
|
| 5,014,525 |
| - |
| 5,014,525 |
| (5,363) |
| 5,009,162 |
|
| December 31, 2021 | ||||||||
|
| 12 months ECL |
| Lifetime ECL |
| Gross amount |
| Allowance |
| Total, net |
Due from banks and loans at amortized cost(*): |
|
|
|
|
|
|
|
|
|
|
Banks |
| 44,964 |
| - |
| 44,964 |
| (51) |
| 44,913 |
Corporations |
| 3,980,753 |
| - |
| 3,980,753 |
| (4,694) |
| 3,976,059 |
|
| 4,025,717 |
| - |
| 4,025,717 |
| (4,745) |
| 4,020,972 |
Other financial assets |
|
798,238 |
| - |
| 798,238 |
| (781) |
| 797,457 |
|
| 4,823,955 |
| - |
| 4,823,955 |
| (5,526) |
| 4,818,429 |
(*) Credit quality of due from banks and loans is divided into Prime and Normal. Credit quality of due from banks and loans as of September 30, 2022 and December 31, 2021 was classified as Prime. The distinction between Prime grade and normal grade is as follows:
Type of Borrower |
| Corporations and banks |
Grade: 1. Prime |
| Internal credit rating of BBB+ or above |
Grade: 2. Normal |
| Internal credit rating of below BBB+ |
16
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
Liquidity risk refers to the risk of unexpected losses (such as the disposal of assets abnormal pricing, the procurement of high interest rates, etc.) or insolvency due to inconsistency in funding periods between assets and liabilities or a sudden outflow of funds.
According to the Financial Holding Companies Act, the Company manages liquidity so that the total amount of assets with a residual maturity of less than one month exceeds the total amount of liabilities with a residual maturity of less than one month as of the end of each month.
Contractual maturities for financial instruments as of September 30, 2022 and December 31, 2021 are as follows:
| September 30, 2022 | |||||||||||||
|
| Less than 1 month |
| 1 ~ 3 months |
| 3 ~ 6 months |
| 6 months ~ 1 year |
| 1 ~ 5 years |
| More than 5 years |
| Total |
Non-derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
| - |
| - |
| 20,000 |
| - |
| - |
| - |
| 20,000 |
Debt securities issued |
| 573,310 |
| 26,582 |
| 483,053 |
| 751,526 |
| 7,280,545 |
| 1,681,963 |
| 10,796,979 |
Other financial liabilities |
| 17,147 |
| 272 |
| 6,435 |
| 107,045 |
| 98,655 |
| - |
| 229,554 |
|
| 590,457 |
| 26,854 |
| 509,488 |
| 858,571 |
| 7,379,200 |
| 1,681,963 |
| 11,046,533 |
|
| December 31, 2021 | |||||||||||||
|
|
| Less than 1 month |
| 1 ~ 3 months |
| 3 ~ 6 months |
| 6 months ~ 1 year |
| 1 ~ 5 years |
| More than 5 years |
| Total |
Non-derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities issued |
|
| 271,138 |
| 261,941 |
| 690,765 |
| 857,259 |
| 6,613,719 |
| 1,751,357 |
| 10,446,179 |
Other financial liabilities |
|
| 19,652 |
| 6,619 |
| 50,618 |
| 17,496 |
| 71,899 |
| - |
| 166,284 |
|
|
| 290,790 |
| 268,560 |
| 741,383 |
| 874,755 |
| 6,685,618 |
| 1,751,357 |
| 10,612,463 |
Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net and total settlement (*) |
|
| - |
| - |
| 189,391 |
| - |
| - |
| - |
| 189,391 |
(*) This is an agreement related to the acquisition of remaining stake in Shinhan Asset Trust Co., Ltd. (formerly, Asia Trust Co., Ltd.).
17
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(d) Measurement for the fair value of financial instruments
The fair values of financial instruments being traded in an active market are determined by the published market prices of each period end. The published market prices of financial instruments being held by the Company are based on the trading agencies’ notifications.
If the market for a financial instrument is not active, such as OTC (Over The Counter market) derivatives, fair value is determined either by using a valuation technique or independent third-party valuation service. The Company uses its judgement to select a variety of methods and make rational assumptions that are mainly based on market conditions existing at the end of each reporting period.
The fair value of financial instruments is determined using valuation techniques such as method of using recent transactions between independent parties with reasonable judgement and willingness to trade, method of referring to the current fair value of other financial instruments that are substantially identical, discounted cash flow model and option pricing models.
The Company classifies and discloses fair value of financial instruments into the following three-level hierarchy:
● | Level 1: Financial instruments measured at quoted prices from active markets are classified as fair value level 1. |
|
● | Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2. |
|
● | Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3. |
|
i) Financial instruments measured at fair value
i-1) The fair value hierarchy of financial assets which are presented at their fair value in the statements of financial position as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets |
|
|
|
|
|
|
|
|
Financial assets measured at fair value through profit or loss |
| - |
| 1,430,171 |
| 873,787 |
| 2,303,958 |
|
| - |
| 1,430,171 |
| 873,787 |
| 2,303,958 |
|
| December 31, 2021 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets |
|
|
|
|
|
|
|
|
Financial assets measured at fair value through profit or loss |
|
- |
|
1,053,347 |
|
564,387 |
|
1,617,734 |
Derivative assets |
| - |
| - |
| 17,933 |
| 17,933 |
|
| - |
| 1,053,347 |
| 582,320 |
| 1,635,667 |
Liabilities |
|
|
|
|
|
|
|
|
Derivative liabilities |
| - |
| - |
| 6,263 |
| 6,263 |
18
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(d) Measurement for the fair value of financial instruments (continued)
i) Financial instruments measured at fair value (continued)
i-2) Changes in level 3 of the fair value hierarchy
- Changes in level 3 of the fair value hierarchy for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 | ||
|
| Financial assets measured at FVTPL |
| Net derivative instruments |
|
|
| For sale | |
Beginning balance |
| 564,387 |
| 11,670 |
Recognized in profit or loss |
| (90,600) |
| 10,578 |
Acquisition |
| 400,000 |
| - |
Settlement |
| - |
| (22,248) |
Ending balance |
| 873,787 |
| - |
|
| December 31, 2021 | ||
|
| Financial assets measured at FVTPL |
| Net derivative instruments |
|
|
| For sale | |
Beginning balance |
| 101,446 |
| 17,259 |
Recognized in profit or loss |
| 12,917 |
| (5,589) |
Acquisition |
| 450,024 |
| - |
Ending balance |
| 564,387 |
| 11,670 |
i-3) Valuation techniques and input variables unobservable in markets
i-3-1) The valuation techniques and the fair value measurement input variables of financial instruments classified as level 2 as of September 30, 2022 and December 31, 2021 are as follows:
| Classification |
| Valuation techniques |
| Type |
| Book Value |
|
| Inputs |
2022 | Financial assets measured at FVTPL |
| Net asset valuation approach |
| Beneficiary certificates |
|
1,430,171 |
|
| Price of underlying assets such as stocks, bonds, etc. and exchange rate. |
2021 | Financial assets measured at FVTPL |
| Net asset valuation approach |
| Beneficiary certificates |
|
1,053,347 |
|
| Price of underlying assets such as stocks, bonds, etc. and exchange rate. |
19
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(d) Measurement for the fair value of financial instruments (continued)
i) Financial instruments measured at fair value (continued)
i-3-2) Information about valuation techniques and significant unobservable inputs in measuring financial instruments categorized as level 3 as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 | |||||||||
|
| Valuation technique |
| Type of financial instrument |
|
| Book value |
| Significant unobservable input |
| Range of estimates for unobservable input |
|
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
Financial assets |
|
|
|
|
|
|
|
|
| ||
Financial assets measured at FVTPL |
| Option model(*) |
| Hybrid bonds |
|
| 873,787 |
| Volatility of interest rate |
| 0.70%~1.73% |
(*) It is calculated by applying the Hull-White model method.
|
| December 31, 2021 | |||||||||
|
| Valuation technique |
| Type of financial instrument |
|
| Book value |
| Significant unobservable input |
| Range of estimates for unobservable input |
|
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
Financial assets |
|
|
|
|
|
|
|
|
| ||
Financial assets measured at FVTPL |
| Option model(*) |
| Hybrid bonds |
|
| 564,387 |
| Volatility of interest rate |
| 24.84%~58.39% |
Derivative assets |
| Binomial model |
| Equity securities |
|
| 17,933 |
| Volatility of underlying assets |
| 28.93% |
|
|
|
|
| 582,320 |
|
|
|
| ||
Financial liabilities | |||||||||||
Derivative liabilities |
| Binomial model |
| Equity securities |
|
| 6,263 |
| Volatility of underlying assets |
| 28.93% |
|
|
|
|
|
|
|
|
|
(*) It is calculated by applying the Hull-White model method.
20
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(d) Measurement for the fair value of financial instruments (continued)
i) Financial instruments measured at fair value (continued)
i-4) Sensitivity to changes in unobservable inputs
- For level 3 fair value measurement, changing one or more of the unobservable inputs used to reasonably possible alternative assumptions would have the following effect on profit (loss), and other comprehensive income (loss) as of September 30, 2022 and December 31, 2021 are as follows:
|
|
| September 30, 2022 | |||
Type of financial instrument |
| Profit (loss) for the year | ||||
| Favorable change |
| Unfavorable change | |||
Financial assets measured at FVTPL(*) | Financial assets at fair value through profit or loss |
| 1,031 |
| (1,096) |
(*) Based on 10% of increase or decrease in volatility of underlying assets, and volatility of interest rate, which are major unobservable inputs.
|
|
| December 31, 2021 | |||
Type of financial instrument |
| Profit (loss) for the year | ||||
| Favorable change |
| Unfavorable Change | |||
Financial assets measured at FVTPL(*) | Financial assets at fair value through profit or loss |
| - |
| - | |
Derivative assets |
| 1,055 |
| (1,010) | ||
|
|
| 1,055 |
| (1,010) | |
Financial liabilities measured at FVTPL(*) | Derivative liabilities |
| 1,009 |
| (1,052) |
(*) Based on 10% of increase or decrease in volatility of underlying assets, and volatility of interest rate, which are major unobservable inputs.
ii) The financial instruments measured at amortized cost
ii-1) The methods of measuring the fair value of financial instruments measured at amortized cost are as follows:
Type |
| Measurement methods of fair value |
Due from banks at amortized cost |
| The carrying amount and the fair value for cash are identical and the most of deposits are floating interest rate deposit or the next day deposit of a short-term instrument. For this reason, the carrying value approximates fair value. |
Loans at amortized cost |
| The fair value of the loans is measured by discounting the expected cash flow at the market interest rate and credit risk of the borrower, etc. |
Borrowings and debt securities issued |
| The fair value of borrowings and debt securities issued is based on the published price quotations in an active market. In case there is no data for an active market price, it is measured by discounting the contractual cash flow at the market interest rate that takes into account the residual risk. |
21
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(d) Measurement for the fair value of financial instruments (continued)
ii) The financial instruments measured at amortized cost (continued)
ii-2) The carrying value and fair value of the financial instruments measured at amortized cost as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 | ||||
|
| Carrying value |
| Fair value |
| Carrying value |
| Fair value |
Assets: |
|
|
|
|
|
|
|
|
Due from banks at amortized cost |
| 148 |
| 148 |
| 44,913 |
| 44,913 |
Loans at amortized cost |
| 4,249,441 |
| 3,887,974 |
| 3,976,059 |
| 3,919,642 |
Other financial assets |
| 759,573 |
| 759,573 |
| 797,457 |
| 797,457 |
|
| 5,009,162 |
| 4,647,695 |
| 4,818,429 |
| 4,762,012 |
Liabilities: Borrowings |
| 20,000 |
| 19,754 |
| - |
| - |
Debt securities issued |
| 10,002,227 |
| 9,334,347 |
| 9,559,553 |
| 9,521,560 |
Other financial liabilities |
| 264,398 |
| 264,398 |
| 203,350 |
| 203,350 |
|
| 10,286,625 |
| 9,618,499 |
| 9,762,903 |
| 9,724,910 |
ii-3) The fair value hierarchy of financial assets and liabilities which are not measured at their fair values in the statements of financial position but disclosed with their fair values as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets: |
|
|
|
|
|
|
|
|
Due from banks at amortized cost |
| 145 |
| 3 |
| - |
| 148 |
Loans at amortized cost |
| - |
| - |
| 3,887,974 |
| 3,887,974 |
Other financial assets |
| - |
| - |
| 759,573 |
| 759,573 |
|
| 145 |
| 3 |
| 4,647,547 |
| 4,647,695 |
Liabilities: |
|
|
|
|
|
|
|
|
Borrowings |
| - |
| 19,754 |
| - |
| 19,754 |
Debt securities issued |
| - |
| 9,334,347 |
| - |
| 9,334,347 |
Other financial liabilities |
| - |
| - |
| 264,398 |
| 264,398 |
|
| - |
| 9,354,101 |
| 264,398 |
| 9,618,499 |
|
| December 31, 2021 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets: |
|
|
|
|
|
|
|
|
Due from banks at amortized cost |
| 3,910 |
| 41,003 |
| - |
| 44,913 |
Loans at amortized cost |
| - |
| - |
| 3,919,642 |
| 3,919,642 |
Other financial assets |
| - |
| - |
| 797,457 |
| 797,457 |
|
| 3,910 |
| 41,003 |
| 4,717,099 |
| 4,762,012 |
Liabilities: |
|
|
|
|
|
|
|
|
Debt securities issued |
| - |
| 9,521,560 |
| - |
| 9,521,560 |
Other financial liabilities |
| - |
| - |
| 203,350 |
| 203,350 |
|
| - |
| 9,521,560 |
| 203,350 |
| 9,724,910 |
22
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(d) Measurement for the fair value of financial instruments (continued)
ii) The financial instruments measured at amortized cost (continued)
ii-4) Information on valuation technique and inputs used as of September 30, 2022 and December 31, 2021 in measuring financial instruments not measured at fair value classified as level 2 or 3 is as follows:
|
| September 30, 2022 | ||||
|
| Valuation technique |
| Fair value |
| Inputs |
Assets: |
|
|
|
|
|
|
Deposits at amortized cost |
| - |
| 3 |
| - |
Loans at amortized cost |
| DCF |
| 3,887,974 |
| Discount rate, Exchange rate |
Other financial assets |
| ” |
| 759,573 |
| Discount rate, Exchange rate |
|
|
|
| 4,647,550 |
|
|
Liabilities: |
|
|
|
|
|
|
Borrowings |
| DCF |
| 19,754 |
| Discount rate |
Debt securities issued |
| ” |
| 9,334,347 |
| Discount rate, Exchange rate |
Other financial liabilities |
| ” |
| 264,398 |
| Discount rate, Exchange rate |
|
|
|
| 9,618,499 |
|
|
|
| December 31, 2021 | ||||
|
| Valuation technique |
| Fair value |
| Inputs |
Assets: |
|
|
|
|
|
|
Deposits at amortized cost |
| - |
| 41,003 |
| - |
Loans at amortized cost |
| DCF |
| 3,919,642 |
| Discount rate, Exchange rate |
Other financial assets |
| ” |
| 797,457 |
| Discount rate, Exchange rate |
|
|
|
| 4,758,102 |
|
|
Liabilities: |
|
|
|
|
|
|
Debt securities issued |
| DCF |
| 9,521,560 |
| Discount rate, Exchange rate |
Other financial liabilities |
| ” |
| 203,350 |
| Discount rate, Exchange rate |
|
|
|
| 9,724,910 |
|
|
23
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
4. Financial risk management (continued)
(e) Classification by categories of financial instruments
Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of each category of financial assets and financial liabilities as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 | ||||
|
| Financial assets measured at fair value through profit or loss |
| Financial assets measured at amortized cost |
| Financial liabilities measured at amortized cost |
Assets: |
|
|
|
|
|
|
Cash and due from banks at amortized cost |
| - |
| 148 |
| - |
Financial assets at fair value through profit or loss |
| 2,303,958 |
| - |
| - |
Loans at amortized cost |
| - |
| 4,249,441 |
| - |
Other financial assets |
| - |
| 759,573 |
| - |
|
| 2,303,958 |
| 5,009,162 |
| - |
Liabilities: |
|
|
|
|
|
|
Borrowings |
| - |
| - |
| 20,000 |
Debt securities issued |
| - |
| - |
| 10,002,227 |
Other financial liabilities |
| - |
| - |
| 264,398 |
|
| - |
| - |
| 10,286,625 |
|
| December 31, 2021 | ||||||
|
| Financial assets measured at fair value through profit or loss |
| Financial assets measured at amortized cost |
| Financial liabilities measured at fair value through profit or loss |
| Financial liabilities measured at amortized cost |
Assets: |
|
|
|
|
|
|
|
|
Cash and due from banks at amortized cost |
| - |
| 44,913 |
| - |
| - |
Financial assets at fair value through profit or loss |
| 1,617,734 |
| - |
| - |
| - |
Derivative assets |
| 17,933 |
| - |
| - |
| - |
Loans at amortized cost |
| - |
| 3,976,059 |
| - |
| - |
Other financial assets |
| - |
| 797,457 |
| - |
| - |
|
| 1,635,667 |
| 4,818,429 |
| - |
| - |
Liabilities: |
|
|
|
|
|
|
|
|
Derivative liabilities |
| - |
| - |
| 6,263 |
| - |
Debt securities issued |
| - |
| - |
| - |
| 9,559,553 |
Other financial liabilities |
| - |
| - |
| - |
| 203,350 |
|
| - |
| - |
| 6,263 |
| 9,762,903 |
24
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
5. Restricted due from banks
Restricted guaranteed deposits on bank accounts as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Overdraft deposit |
| 3 |
| 3 |
Escrow account (*) |
| - |
| 41,000 |
|
| 3 |
| 41,003 |
(*) This amount is related to the share purchase of Shinhan EZ General Insurance Ltd. (formerly, BNP Paribas Cardif General Insurance) (Note 9).
6. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Beneficiary certificates |
|
|
|
|
Beneficiary certificates in Korean won |
| 1,348,902 |
| 956,755 |
Beneficiary certificates in foreign currency |
| 81,269 |
| 96,592 |
|
| 1,430,171 |
| 1,053,347 |
Hybrid Bonds |
|
|
|
|
Hybrid Bonds in Korean won |
| 579,925 |
| 247,182 |
Hybrid Bonds in foreign currency |
| 293,862 |
| 317,205 |
|
| 873,787 |
| 564,387 |
|
| 2,303,958 |
| 1,617,734 |
7. Derivatives
(a) Details of the outstanding contract amount of derivatives held as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Equity related: |
|
|
|
|
Over the counter: |
|
|
|
|
Equity options |
| - |
| 189,391 |
(b) The notional amounts and fair values of derivatives as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 | ||||
|
| Assets |
| Liabilities |
| Assets |
| Liabilities |
Equity related: |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Equity options |
| - |
| - |
| 17,933 |
| 6,263 |
25
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
8. Financial assets at amortized cost
(a) Loans at amortized cost as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
|
| December 31, 2021 |
Corporate loans |
| 4,254,152 |
|
| 3,980,753 |
Less: allowance |
| (4,711) |
|
| (4,694) |
|
| 4,249,441 |
|
| 3,976,059 |
(b) Changes in financial assets at amortized cost and other assets for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||||||||
|
| Loans at amortized cost |
| Other assets |
|
| ||||||||
|
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| 12 month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| 3,980,753 |
| - |
| - |
| 843,202 |
| - |
| - |
| 4,823,955 |
Transfer to 12 month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to life time expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Execution |
| 420,000 |
| - |
| - |
| - |
| - |
| - |
| 420,000 |
Collection |
| (450,000) |
| - |
| - |
| - |
| - |
| - |
| (450,000) |
Others (*) |
| 303,399 |
| - |
| - |
| (82,829) |
| - |
| - |
| 220,570 |
Ending balance |
| 4,254,152 |
| - |
| - |
| 760,373 |
| - |
| - |
| 5,014,525 |
(*) Amounts due to changes in dividend receivables of subsidiaries, changes in consolidated tax receivables, increase in accrued income, exchange rate fluctuations and etc.
|
| December 31, 2021 | ||||||||||||
|
| Loans at amortized cost |
| Other assets |
|
| ||||||||
|
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| 3,220,856 |
| - |
| - |
| 434,327 |
| - |
| - |
| 3,655,183 |
Transfer to 12 month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to life time expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Execution |
| 1,029,384 |
| - |
| - |
| - |
| - |
| - |
| 1,029,384 |
Collection |
| (380,000) |
| - |
| - |
| - |
| - |
| - |
| (380,000) |
Others (*) |
| 110,513 |
| - |
| - |
| 408,875 |
| - |
| - |
| 519,388 |
Ending balance |
| 3,980,753 |
| - |
| - |
| 843,202 |
| - |
| - |
| 4,823,955 |
(*) Amounts due to changes in dividend receivables of subsidiaries, changes in consolidated tax receivables, increase in accrued income, exchange rate fluctuations and etc.
26
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
8. Loans at amortized cost (continued)
(c) Changes in allowances for financial assets at amortized cost and other assets for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||||||||
|
| Loans at amortized cost |
| Other assets |
|
| ||||||||
|
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning allowance |
| 4,694 |
| - |
| - |
| 832 |
| - |
| - |
| 5,526 |
Transfer to 12 month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to life time expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Provision(Reversed) |
| 17 |
| - |
| - |
| (180) |
| - |
| - |
| (163) |
Ending balance |
| 4,711 |
| - |
| - |
| 652 |
| - |
| - |
| 5,363 |
|
| December 31, 2021 | ||||||||||||
|
| Loans at amortized cost |
| Other assets |
|
| ||||||||
|
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| 12 month expected credit loss |
| Life time expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning allowance |
| 2,401 |
| - |
| - |
| 257 |
| - |
| - |
| 2,658 |
Transfer to 12 month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to life time expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Provision |
| 2,293 |
| - |
| - |
| 575 |
| - |
| - |
| 2,868 |
Ending allowance |
| 4,694 |
| - |
| - |
| 832 |
| - |
| - |
| 5,526 |
27
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
9. Investments in subsidiaries
Investments in subsidiaries as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 | ||||||||
Investees |
| Country |
| Reporting date |
| Ownership (%) |
| Carrying value |
| Ownership (%) |
| Carrying value |
Shinhan Bank |
| Korea |
| December 31 |
| 100.0 |
| 13,617,579 |
| 100.0 |
| 13,617,579 |
Shinhan Card Co., Ltd |
| Korea |
| December 31 |
| 100.0 |
| 7,919,672 |
| 100.0 |
| 7,919,672 |
Shinhan Securities Co., Ltd.(*1) |
| Korea |
| December 31 |
| 100.0 |
| 3,001,420 |
| 100.0 |
| 3,001,420 |
Shinhan Life Insurance Co., Ltd |
| Korea |
| December 31 |
| 100.0 |
| 4,204,544 |
| 100.0 |
| 4,204,544 |
Shinhan Capital Co., Ltd |
| Korea |
| December 31 |
| 100.0 |
| 558,921 |
| 100.0 |
| 558,921 |
Shinhan Asset Management Co., Ltd(*2) |
| Korea |
| December 31 |
| 100.0 |
| 326,206 |
| 100.0 |
| 291,419 |
Shinhan Alternative Investment Management Inc(*2) |
| Korea |
| December 31 |
| - |
| - |
| 100.0 |
| 34,787 |
Jeju Bank |
| Korea |
| December 31 |
| 75.3 |
| 179,643 |
| 75.3 |
| 179,643 |
Shinhan Savings Bank(*3) |
| Korea |
| December 31 |
| 100.0 |
| 157,065 |
| 100.0 |
| 107,065 |
Shinhan Asset Trust Co. Ltd(*4) |
| Korea |
| December 31 |
| 100.0 |
| 429,491 |
| 60.0 |
| 190,378 |
Shinhan DS |
| Korea |
| December 31 |
| 100.0 |
| 23,026 |
| 100.0 |
| 23,026 |
Shinhan AITAS Co., Ltd |
| Korea |
| December 31 |
| 99.8 |
| 50,092 |
| 99.8 |
| 50,092 |
Shinhan REITs Management Co., Ltd |
| Korea |
| December 31 |
| 100.0 |
| 30,000 |
| 100.0 |
| 30,000 |
Shinhan AI Co., Ltd |
| Korea |
| December 31 |
| 100.0 |
| 42,000 |
| 100.0 |
| 42,000 |
Shinhan Venture Investment Co, Ltd |
| Korea |
| December 31 |
| 100.0 |
| 75,840 |
| 100.0 |
| 75,840 |
Shinhan EZ General Insurance, Ltd(*5) |
| Korea |
| December 31 |
| 94.5 |
| 42,259 |
| - |
| - |
SHC Management Co., Ltd |
| Korea |
| December 31 |
| 100.0 |
| 8,655 |
| 100.0 |
| 8,655 |
|
|
|
|
|
|
|
| 30,666,413 |
|
|
| 30,335,041 |
(*1) On October1, 2022, Shinhan Investment Co., Ltd has changed its name to Shinhan Securities Co., Ltd.
(*2) Shinhan Asset Management Co., Ltd. and Shinhan Alternative Investment Management Inc. merged on January 5, 2022. The company name after the merger is Shinhan Asset Management Co., Ltd.
(*3) Shinhan Savings Bank had made a capital increase as of September 30, 2022.
(*4) The Company has acquired remaining shares of Asia Trust Co. Ltd during the period, and Asia Trust Co. Ltd became its wholly-owned subsidiary. Asia Trust Co. Ltd has changed its name to Shinhan Asset Trust Co. Ltd.
(*5) During the period, the Company has acquired 94.54% shares of BNP Paribas Cardif General Insurance (7,230,174 common shares). BNP Paribas Cardif General Insurance became a subsidiary of the Company, and changed its name to Shinhan EZ General Insurance, Ltd.
28
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
10. Borrowings
Borrowings as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 | |||||
|
| Interest rate (%) |
| Amount |
| Interest rate (%) |
| Amount | |
Borrowings in won |
| 2.25 |
| 20,000 |
| - |
| - |
11. Debt securities issued
Debt securities issued as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 | ||||
|
| Interest rate (%) |
| Amount |
| Interest rate (%) |
| Amount |
Debt securities issued in won: |
|
|
|
|
|
|
|
|
Debt securities issued |
| 1.17 ~ 4.15 |
| 8,230,000 |
| 1.17 ~ 3.33 |
| 8,036,000 |
Subordinated debt securities issued |
| 3.44 |
| 350,000 |
| 3.44 |
| 350,000 |
Discount |
|
|
| (7,152) |
|
|
| (6,818) |
|
|
|
| 8,572,848 |
|
|
| 8,379,182 |
Debt securities issued in foreign currency : |
|
|
|
|
|
|
|
|
Debt securities issued |
| 1.37 |
| 717,400 |
| 1.37 |
| 592,750 |
Subordinated debt securities issued |
| 3.34 |
| 717,400 |
| 3.34 |
| 592,750 |
Discount |
|
|
| (5,421) |
|
|
| (5,129) |
|
|
|
| 1,429,379 |
|
|
| 1,180,371 |
|
|
|
| 10,002,227 |
|
|
| 9,559,553 |
29
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
12. Net defined benefit liabilities
(a) Defined benefit obligations and plan assets
Defined benefit obligations and plan assets as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Present value of defined benefit obligations |
| 23,699 |
| 21,915 |
Fair value of plan assets |
| (20,126) |
| (20,384) |
Recognized liabilities for defined benefit obligations |
| 3,573 |
| 1,531 |
(b) Expenses recognized in profit or loss for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three-month |
| Nine- month |
| Three-month |
| Nine- month |
Current service costs |
| 606 |
| 1,819 |
| 551 |
| 1,652 |
Net interest expense on the net defined benefit liabilities |
| 13 |
| 39 |
| 22 |
| 67 |
|
| 619 |
| 1,858 |
| 573 |
| 1,719 |
(*) Profit or loss arising from defined benefit plans is included in general and administrative expenses.
30
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
(a) Equity as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Capital stock |
|
|
|
|
Common stock |
| 2,608,176 |
| 2,608,176 |
Preferred stock |
| 361,465 |
| 361,465 |
|
| 2,969,641 |
| 2,969,641 |
|
|
|
|
|
Hybrid bonds |
| 4,196,968 |
| 3,334,531 |
|
|
|
|
|
Capital surplus |
|
|
|
|
Share premium |
| 11,350,819 |
| 11,350,819 |
�� |
| 11,350,819 |
| 11,350,819 |
|
|
|
|
|
Capital adjustments |
| (46,114) |
| (45,797) |
|
|
|
|
|
Accumulated other comprehensive loss |
| (6,175) |
| (7,253) |
Retained earnings |
|
|
|
|
Legal reserve(*) |
| 2,573,434 |
| 2,432,039 |
Regulatory reserve for loan losses |
| 18,524 |
| 15,552 |
Other legal reserves |
| 2,000 |
| 2,000 |
Unappropriated retained earnings |
| 6,114,709 |
| 6,353,844 |
|
| 8,708,667 |
| 8,803,435 |
|
| 27,173,806 |
| 26,405,376 |
(*) Legal reserve is restricted for the dividend to stockholders by law or legislation. According to the article 53 of the Financial Holding Companies Act, the Company is required to appropriate a legal reserve in an amount equal to at least 10% of dividends for each accounting period until the reserve equals 100% of stated capital. The legal reserve may only be used to reduce a deficit or to transfer capital.
31
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
13. Equity (continued)
(b) The details of preferred stock are as follows:
|
| The number of shares |
| Contracted dividend rate |
| Conversion request period(*) |
Convertible preferred stock |
| 17,482,000 |
| 4.0% per year based on issue price (non-cumulative, participating) |
| 2020.05.01~2023.04.30 |
(*) Preferred stocks that have not been converted for 4 years from the issuance date and until the expiration date of the period of existence are automatically converted to common stocks at the expiration date of the period of existence.
(c) Hybrid bonds
Hybrid bonds classified as other equity instruments as of September 30, 2022 and December 31, 2021 are as follows:
| Issue date |
| Maturity date |
| Interest rate (%) |
| September 30, 2022 |
| December 31, 2021 |
Hybrid bonds in KRW | June 25, 2015 |
| June 25, 2045 |
| 4.38 |
| 199,455 |
| 199,455 |
September 15, 2017 |
| Perpetual bond |
| 3.77 |
| - |
| 134,683 | |
September 15, 2017 |
| Perpetual bond |
| 4.25 |
| 89,783 |
| 89,783 | |
April 13, 2018 |
| Perpetual bond |
| 4.08 |
| 134,678 |
| 134,678 | |
April 13, 2018 |
| Perpetual bond |
| 4.56 |
| 14,955 |
| 14,955 | |
August 29, 2018 |
| Perpetual bond |
| 4.15 |
| 398,679 |
| 398,679 | |
June 28, 2019 |
| Perpetual bond |
| 3.27 |
| 199,476 |
| 199,476 | |
September 17, 2020 |
| Perpetual bond |
| 3.12 |
| 448,699 |
| 448,699 | |
March 16, 2021 |
| Perpetual bond |
| 2.94 |
| 429,009 |
| 429,009 | |
March 16, 2021 January 25, 2022 January 25, 2022 |
| Perpetual bond |
| 3.30 3.90 4.00 |
| 169,581 560,438 37,853 |
| 169,581 - - | |
Perpetual bond | |||||||||
Perpetual bond | |||||||||
| August 26, 2022 |
| Perpetual bond |
| 4.93 |
| 343,026 |
| - |
| August 26, 2022 |
| Perpetual bond |
| 5.15 |
| 55,803 |
| - |
Hybrid bonds in USD | August 13, 2018 |
| Perpetual bond |
| 5.88 |
| 559,526 |
| 559,526 |
May 12, 2021 |
| Perpetual bond |
| 2.88 |
| 556,007 |
| 556,007 | |
|
|
|
|
|
|
| 4,196,968 |
| 3,334,531 |
(*) For the nine-month period ended September 30, 2022, the deduction for capital related to hybrid bond issued is W2,880 million.
The Company can make early redemption for the above bonds, after 5 or 10 years from the issue date; and has the rights to extend the maturity under the same condition.
(d) Capital adjustments
Changes in accumulated capital adjustments for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Beginning balance |
| (45,797) |
| (45,718) |
Repayments of hybrid bonds |
| (317) |
| - |
Acquisition of treasury stock |
| (150,300) |
| (79) |
Retirement of treasury stock |
| 150,300 |
| - |
Ending balance |
| (46,114) |
| (45,797) |
32
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
13. Equity (continued)
(e) Changes in accumulated other comprehensive loss for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Beginning balance |
| (7,253) |
| (6,971) |
Remeasurement of the defined benefit liabilities |
| 1,487 |
| (389) |
Tax effect |
| (409) |
| 107 |
Ending balance |
| (6,175) |
| (7,253) |
(f) Regulatory reserve for loan losses
In accordance with Supervisory Regulations on Financial Holding Companies (the “Regulations”), the Company reserves the difference between allowance for credit losses under K-IFRS and that as required by the Regulations at the account of regulatory reserve for loan losses.
i) Changes in regulatory reserve for loan losses as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Beginning balance |
| 18,524 |
| 15,552 |
Provision for regulatory reserve for loan loss |
| 1,118 |
| 2,972 |
Ending balance |
| 19,642 |
| 18,524 |
ii) Profit for the period and earnings per share after adjusted for regulatory reserve for the nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 |
Profit for the period |
| 1,345,758 |
| 1,469,142 |
Provision for regulatory reserve for loan loss |
| (1,118) |
| (2,925) |
Profit for the period adjusted for regulatory reserve |
| 1,344,640 |
| 1,466,217 |
Basic and diluted earnings per share in won factoring in regulatory reserve(*) |
| 2,309 |
| 2,580 |
(*) Dividends for hybrid bonds are deducted.
33
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
13. Equity (continued)
(g) Treasury stock
The acquisition of treasury stock for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||||
|
| Beginning balance |
| Acquisition(*) |
| Disposal |
| Retirement(*) |
| Ending balance |
The number of shares |
| 6,352 shares |
| 3,665,423 shares |
| - |
| (3,665,423) shares |
| 6,352 shares |
Carrying value |
| 227 |
| 150,300 |
| - |
| (150,300) |
| 227 |
(*) For the nine-month period ended September 30, 2022, the Company has acquired treasury stocks for the retirement of treasury stock and the treasury stocks have been retired as of April 25, 2022.
|
| December 31, 2021 | ||||||||
|
| Beginning balance |
| Acquisition(*) |
| Disposal |
| Retirement |
| Ending balance |
The number of shares |
| 3,926 shares |
| 2,426 shares |
| - |
| - |
| 6,352 shares |
Carrying value |
| 148 |
| 79 |
| - |
| - |
| 227 |
(*) The Company reacquired treasury stock that occurred during the stock exchange with Shinhan Venture Investment Co., Ltd
(h) Dividends
The details of dividends paid by the resolution of the 21st annual shareholders' meeting are as follows:
|
| September 30, 2022 |
Common stock ( |
| 723,230 |
Convertible preferred stock ( |
| 24,475 |
|
| 747,705 |
Dividends paid by the Company for the nine-month period ended September 30, 2022 are as follows:
Dividend base date |
|
| Amount |
On March 31, 2022 | Common stock ( |
| 206,277 |
| Convertible preferred stock ( |
| 6,993 |
|
|
| 213,270 |
On June 30, 2022 | Common stock ( |
| 205,171 |
Convertible preferred stock ( |
| 6,993 | |
|
| 212,164 | |
|
| 425,434 |
34
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
14. Net interest expense
Net interest expense for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | |||||
Interest income: |
| Three-month |
| Nine- month |
| Three-month |
| Nine- month | |
Due from banks at amortized cost |
| 52 |
| 109 |
| 5 |
| 35 | |
Loans at amortized cost |
| 22,646 |
| 63,662 |
| 19,341 |
| 54,735 | |
Others |
| 54 |
| 179 |
| 29 |
| 89 | |
|
| 22,752 |
| 63,950 |
| 19,375 |
| 54,859 | |
Interest expense: |
|
|
|
|
|
|
|
| |
Borrowings |
| (114) |
| (295) |
| - |
| - | |
Debt securities issued |
| (57,560) |
| (160,837) |
| (52,779) |
| (158,859) | |
Others |
| (10) |
| (33) |
| (6) |
| (20) | |
|
| (57,684) |
| (161,165) |
| (52,785) |
| (158,879) | |
Net interest expense |
| (34,932) |
| (97,215) |
| (33,410) |
| (104,020) |
15. Net fees and commission income
Net fees and commission income for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | |||||||
|
| Three-month |
| Nine- month |
| Three-month |
| Nine- month | |||
Fees and commission income: |
|
|
|
|
|
|
|
| |||
Royalty |
| 18,676 |
| 52,750 |
| 15,262 |
| 45,779 | |||
Other |
| 4 |
| 12 |
| 2 |
| 7 | |||
|
| 18,680 |
| 52,762 |
| 15,264 |
| 45,786 | |||
Fees and commission expense: |
|
|
|
|
|
|
|
| |||
Others |
| (293) |
| (454) |
| (251) |
| (2,356) | |||
Net fees and commission income |
| 18,387 |
| 52,308 |
| 15,013 |
| 43,430 |
16. Dividend income
Dividends income for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three-month |
| Nine-month |
| Three-month |
| Nine- month |
Dividend from subsidiaries |
| - |
| 1,439,500 |
| - |
| 1,569,438 |
Dividend income from hybrid bond |
| 8,704 |
| 22,453 |
| 4,497 |
| 6,275 |
|
| 8,704 |
| 1,461,953 |
| 4,497 |
| 1,575,713 |
35
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
17. Provision for (reversal of) credit losses allowance
Provision for (reversal of) credit losses allowance for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three-month |
| Nine-month |
| Three-month |
| Nine- month |
Provision for (reversal of) credit losses allowance |
| 653 |
| (163) |
| 87 |
| 582 |
18. General and administrative expenses
General and administrative expenses for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three-month |
| Nine-month |
| Three-month |
| Nine-month |
Employee benefits: |
|
|
|
|
|
|
|
|
Salaries and bonuses |
| 9,632 |
| 31,844 |
| 9,596 |
| 29,866 |
Severance benefits |
| 619 |
| 1,858 |
| 573 |
| 1,719 |
Rent |
| 258 |
| 684 |
| 249 |
| 715 |
Lease |
| 65 |
| 177 |
| 687 |
| 1,472 |
Entertainment |
| 672 |
| 1,860 |
| 553 |
| 1,571 |
Depreciation |
| 806 |
| 2,368 |
| 709 |
| 2,174 |
Amortization |
| 13 |
| 37 |
| 15 |
| 43 |
Taxes and dues |
| 264 |
| 721 |
| 143 |
| 618 |
Advertising |
| 13,209 |
| 33,532 |
| 12,090 |
| 29,589 |
Others |
| 6,217 |
| 20,381 |
| 4,553 |
| 14,878 |
|
| 31,755 |
| 93,462 |
| 29,168 |
| 82,645 |
36
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
19. Share-based payments
(a) Performance shares granted as of September 30, 2022 are as follows:
|
| Expired |
| Not expired |
Type |
| Cash-settled share-based payment | ||
|
|
| ||
Performance conditions |
| Relative stock price linked (20.0%), management index (80.0%) | ||
|
|
| ||
Exercising period |
| 4 years from the commencement date of the year to which the grant date belongs | ||
|
|
|
|
|
Estimated number of shares vested at September 30, 2022 |
| 147,002 |
| 2,620,348 |
|
|
|
|
|
Fair value per share in Korean won (*) |
|
|
|
|
(*) Based on performance-based stock compensation, the reference stock price (the arithmetic average of the weighted average share price of transaction volume for the past two month, the previous one month, and the past one week) of four years after the commencement of the grant year is paid in cash, and the fair value of the reference stock to be paid in the future is assessed as the closing price of the settlement.
(b) Share-based compensation costs
The share-based compensation costs recognized by the Company during nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 | ||||
|
| Employees of Shinhan Financial Group |
| Employees of Subsidiaries |
| Total |
Performance shares |
| 1,900 |
| 15,275 |
| 17,175 |
|
|
| September 30, 2021 | ||||
|
| Employees of Shinhan Financial Group |
| Employees of Subsidiaries |
| Total |
Stock options granted 7th(*) |
| (1) |
| (1) |
| (2) |
Performance shares |
| 4,335 |
| 33,164 |
| 37,499 |
|
| 4,334 |
| 33,163 |
| 37,497 |
(*) All stock options at the end of the previous term have expired.
37
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
19. Share-based payments (continued)
(c) Accrued expense
In accordance with the share-based compensation agreements by the Company, accrued expenses as of September 30, 2022 and December 31, 2021 are as follows.
|
| September 30, 2022 | ||||
|
| Accrued expense |
|
| ||
|
| Employees of Shinhan Financial Group |
| Employees of Subsidiaries(*) |
| Total |
Performance shares |
| 11,487 |
| 81,652 |
| 93,139 |
|
(*) The Company has granted the above share-based payment arrangements to its employees and those of its subsidiaries and the Company requires the subsidiaries to reimburse the compensation costs for their employees. As of September 30, 2022, the Company recognized the corresponding accounts receivable from the subsidiaries in the amount of W81,652 million.
|
| December 31, 2021 | ||||
|
| Accrued expense (*1) |
|
| ||
|
| Employees of Shinhan Financial Group |
| Employees of Subsidiaries (*2) |
| Total |
Performance shares |
| 10,598 |
| 82,498 |
| 93,096 |
(*1) All stock options at the end of the previous term have expired.
(*2) The Company has granted the above share-based payment arrangements to its employees and those of its subsidiaries and the Company requires the subsidiaries to reimburse the compensation costs for their employees. As of December 31, 2021, the Company recognized the corresponding accounts receivable from the subsidiaries in the amount of W 82,498 million.
38
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
20. Income taxes
Income tax expense(income) for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Current income tax expense |
| - |
| - |
| - |
| (6) |
Temporary differences |
| 7,422 |
| (7,093) |
| 7,006 |
| 9,417 |
Income tax recognized directly in equity |
| - |
| (409) |
| - |
| (58) |
Income tax expense(benefit) |
| 7,422 |
| (7,502) |
| 7,006 |
| 9,353 |
21. Earnings(loss) per share
Basic and diluted earnings(loss) per share for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Net profit (loss) for the period |
| (4,872) |
| 1,345,758 |
| (16,896) |
| 1,469,142 |
Less: |
|
|
|
|
|
|
|
|
Dividends to hybrid bonds |
| (44,815) |
| (117,058) |
| (36,787) |
| (88,074) |
Net profit (loss) available for common stock |
| (49,687) |
| 1,228,700 |
| (53,683) |
| 1,381,068 |
|
|
|
|
|
|
|
|
|
Weighted average number of common stocks outstanding (*) |
| 530,409,779 |
| 531,694,283 |
| 534,075,204 |
| 534,075,417 |
Basic and diluted earnings (loss) per share in Korean won |
| (94) |
| 2,311 |
| (101) |
| 2,586 |
(*) The number of common stocks issued is 512,934,131, and the above weighted average number of common stocks outstanding are calculated by reflecting 3,665,423 treasury stocks acquired and retired for the nine-month period ended September 30, 2022 and 17,482,000 convertible preferred shares issued on May 1, 2019.
39
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
22. Operating revenue
Operating revenue for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Dividend income |
| 8,704 |
| 1,461,953 |
| 4,497 |
| 1,575,713 |
Fees and commission income |
| 18,680 |
| 52,762 |
| 15,264 |
| 45,786 |
Interest income |
| 22,752 |
| 63,950 |
| 19,375 |
| 54,859 |
Gain on financial assets at fair value through profit or loss |
| 8,408 |
| 29,269 |
| 3,494 |
| 9,885 |
Gain on foreign currency transaction |
| 219,747 |
| 388,580 |
| 87,237 |
| 144,623 |
|
| 278,291 |
| 1,996,514 |
| 129,867 |
| 1,830,866 |
23. Commitments and contingencies
(a) Commitments
As of September 30, 2022, the Company has a borrowing limit agreement for W100 billion with the Korea Development Bank, and there is no amount executed.
(b) Contingencies
As of September 30, 2022, there is one lawsuit (125 million won in litigation) pending as a defendant. The results of the lawsuit are not expected to have a significant impact on the financial statements, but additional losses may occur.
24. Statement of cash flows
(a) Cash and cash equivalents in the separate statements of cash flows as of September 30, 2022 and December 31, 2021 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
Due from financial institutions with a maturity less than three months from date of acquisition |
| 145 |
| 3,961 |
40
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
24. Statement of cash flows (continued)
(b) Changes in liabilities arising from financing activities for the nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 | ||||||
|
| Borrowings |
| Debentures |
| Lease liabilities |
| Total |
Balance at January 1, 2022 |
| - |
| 9,559,553 |
| 1,903 |
| 9,561,456 |
Changes from cash flows |
| 20,000 |
| 191,479 |
| (1,259) |
| 210,220 |
Changes from non-cash flows: |
|
|
|
|
|
|
|
|
Amortization of discount on debt securities |
| - |
| 2,837 |
| 33 |
| 2,870 |
Foreign currency difference |
| - |
| 248,358 |
| - |
| 248,358 |
Changes from others |
| - |
| - |
| 685 |
| 685 |
Balance at September 30, 2022 |
| 20,000 |
| 10,002,227 |
| 1,362 |
| 10,023,589 |
|
| September 30, 2021 | ||||||
|
| Borrowings |
| Debentures |
| Lease liabilities |
| Total |
Balance at January 1, 2021 |
| - |
| 9,920,059 |
| 1,665 |
| 9,921,724 |
Changes from cash flows |
| - |
| (196,003) |
| (1,269) |
| (197,272) |
Changes from non-cash flows: |
|
|
|
|
|
|
|
|
Amortization of discount on debt securities |
| - |
| 2,801 |
| 20 |
| 2,821 |
Foreign currency difference |
| - |
| 96,463 |
| - |
| 96,463 |
Changes from others |
| - |
| - |
| 928 |
| 928 |
Balance at September 30, 2021 |
| - |
| 9,823,320 |
| 1,344 |
| 9,824,664 |
41
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
25. Related party transactions
The Company defines subsidiaries, key managements, and their families as a range of related parties in accordance with K-IFRS No.1024, and discloses the amount of transactions between the Company and related parties and the balance of receivables and payables. For details of subsidiaries, refer to 'Note 9'.
(a) Significant transactions with the related parties for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
Related party |
| Account |
| September 30, 2022 |
| September 30, 2021 | |||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month | |||
Revenue: |
|
|
|
|
|
|
|
|
|
| |
Shinhan Bank |
| Interest income |
| 56 |
| 181 |
| 29 |
| 88 | |
|
| Fees and commission income |
| 10,421 |
| 31,262 |
| 9,609 |
| 28,827 | |
|
| Dividend income |
| - |
| 900,000 |
| - |
| 770,000 | |
|
| Reversal of credit losses |
| - |
| - |
| 11 |
| 16 | |
Shinhan Card Co., Ltd.(*1) |
| Interest income |
| 12,788 |
| 34,897 |
| 10,511 |
| 30,031 | |
|
| Fees and commission income |
| 3,563 |
| 10,687 |
| 3,064 |
| 9,191 | |
|
| Dividend income |
| 3,932 |
| 346,177 |
| - |
| 394,287 | |
|
| Other non-operating income |
| 4,893 |
| 4,979 |
| - |
| - | |
Shinhan Securities Co., Ltd. |
| Interest income |
| 5,100 |
| 14,467 |
| 4,439 |
| 12,914 | |
|
| Fees and commission income |
| 1,276 |
| 3,829 |
| 1,119 |
| 3,356 | |
|
| Dividend income |
| 2,589 |
| 107,424 |
| 2,710 |
| 10,101 | |
|
| Reversal of (provision for) credit losses |
| (230) |
| 58 |
| - |
| - | |
Shinhan Life Insurance Co., Ltd. |
| Fees and commission income |
| 2,484 |
| 4,176 |
| 846 |
| 2,041 | |
|
| Dividend income |
| - |
| - |
| - |
| 50,000 | |
Shinhan Capital Co., Ltd. |
| Interest income |
| 3,588 |
| 10,564 |
| 3,457 |
| 8,459 | |
|
| Fees and commission income |
| 473 |
| 1,417 |
| 302 |
| 905 | |
|
| Dividend income |
| 2,183 |
| 47,682 |
| 1,788 |
| 27,624 | |
Jeju Bank |
| Fees and commission income |
| 58 |
| 173 |
| 55 |
| 163 | |
|
| Dividend income |
| - |
| 2,420 |
| - |
| 2,420 | |
Shinhan Credit Information Co., Ltd.(*2) |
| Fees and commission income |
| - |
| 2 |
| 1 |
| 2 | |
Shinhan Alternative Investment Management Inc.(*3) |
| Interest income |
| - |
| - |
| 134 |
| 411 | |
|
| Fees and commission income |
| - |
| - |
| 8 |
| 23 | |
|
| Reversal of (provision for) credit losses |
| - |
| - |
| (2) |
| 8 | |
Shinhan Asset Management Co., Ltd. |
| Interest income |
| 135 |
| 402 |
| - |
| - | |
|
| Fees and commission income |
| 97 |
| 291 |
| 70 |
| 204 | |
|
| Dividend income |
| - |
| 53,000 |
| - |
| - | |
|
| Reversal of (provision for) credit losses |
| (30) |
| 237 |
| - |
| - | |
Shinhan DS |
| Interest income |
| 116 |
| 345 |
| 130 |
| 388 | |
|
| Fees and commission income |
| 7 |
| 17 |
| 4 |
| 13 | |
|
| Reversal of (provision for) credit losses |
| - |
| - |
| (7) |
| 83 | |
Shinhan AITAS Co., Ltd. |
| Fees and commission income |
| 33 |
| 98 |
| 24 |
| 74 | |
|
| Dividend income |
| - |
| 5,251 |
| - |
| 4,682 | |
Shinhan Savings Bank |
| Interest income |
| 670 |
| 2,546 |
| 954 |
| 2,524 | |
|
| Fees and commission income |
| 90 |
| 267 |
| 75 |
| 225 | |
|
| Dividend income |
| - |
| - |
| - |
| 5,000 | |
Shinhan REITS management |
| Fees and commission income |
| 21 |
| 63 |
| 19 |
| 57 | |
|
| Reversal of credit losses |
| - |
| - |
| - |
| 1 | |
Orange Life Insurance Co., Ltd.(*4) |
| Fees and commission income |
| - |
| - |
| - |
| 497 | |
|
| Dividend income |
| - |
| - |
| - |
| 311,600 | |
Shinhan Asset Trust Co. Ltd. |
| Fees and commission income |
| 141 |
| 423 |
| 68 |
| 204 | |
|
| Reversal of credit losses |
| - |
| 1 |
| - |
| - | |
Shinhan Venture Investment Co., Ltd. |
| Interest income |
| 299 |
| 548 |
| 21 |
| 43 | |
|
| Fees and commission income |
| 20 |
| 59 |
| 1 |
| 4 | |
|
| Reversal of credit losses |
| 324 |
| 338 |
| - |
| - | |
|
|
|
| 55,097 |
| 1,584,281 |
| 39,440 |
| 1,676,466 |
42
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
25. Related party transactions (continued)
(a) Significant transactions with the related parties for the nine-month periods ended September 30, 2022 and 2021 are as follows (continued):
Related party |
| Account |
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three-month |
| Nine- month |
| Three-month |
| Nine- month | ||
Expense: |
|
|
|
|
|
|
|
|
|
|
Shinhan Bank |
| Interest expenses |
| 3 |
| 12 |
| 1 |
| 6 |
|
| General and administrative expenses |
| 308 |
| 941 |
| 280 |
| 813 |
|
| Provision for credit losses |
| 25 |
| 75 |
| - |
| - |
Shinhan Card Co., Ltd. |
| Interest expenses |
| - |
| 2 |
| 1 |
| 2 |
|
| General and administrative expenses |
| 16 |
| 48 |
| 16 |
| 51 |
|
| Provision for credit losses |
| (136) |
| 324 |
| 17 |
| 82 |
Shinhan Securities Co., Ltd |
| Interest expenses |
| 43 |
| 128 |
| 42 |
| 137 |
|
| Fee expenses(*5) |
| 180 |
| 876 |
| - |
| 745 |
|
| General and administrative expenses |
| 7 |
| 7 |
| - |
| - |
|
| Provision for credit losses |
| - |
| - |
| 15 |
| 68 |
Shinhan Life Insurance Co., Ltd. |
| Interest expenses |
| 436 |
| 658 |
| 338 |
| 338 |
|
| Provision for credit losses |
| - |
| 1 |
| 2 |
| 2 |
Shinhan Capital Co., Ltd. |
| Provision for credit losses |
| (18) |
| 111 |
| 10 |
| 249 |
Shinhan Credit Information Co., Ltd |
| Provision for credit losses |
| - |
| - |
| - |
| 1 |
Shinhan DS |
| General and administrative expenses |
| 471 |
| 1,210 |
| 415 |
| 1,270 |
|
| Provision for credit losses |
| (3) |
| 55 |
| - |
| - |
Shinhan Savings Bank |
| Provision for credit losses |
| 1 |
| 223 |
| - |
| 145 |
Shinhan Asset Trust Co. Ltd. |
| Provision for credit losses |
| - |
| - |
| 1 |
| 1 |
Shinhan REITs Management Co., Ltd |
| Provision for credit losses |
| 2 |
| 5 |
| - |
| - |
Orange Life Insurance Co., Ltd.(*4) |
| Interest expenses |
| - |
| - |
| - |
| 665 |
|
| Provision for credit losses |
| - |
| - |
| - |
| 6 |
Shinhan AI Co., Ltd. |
| General and administrative expenses |
| 10 |
| 30 |
| 27 |
| 96 |
|
| Provision for credit losses |
| 2 |
| 3 |
| 1 |
| 3 |
Shinhan Venture Investment Co., Ltd. |
| Provision for credit losses |
| - |
| - |
| 49 |
| 138 |
|
|
|
| 1,347 |
| 4,709 |
| 1,215 |
| 4,818 |
(*1) Other non-operating income includes gain on disposal from the sale of Shinhan Credit Information Co., Ltd, the amount the Company received from Shinhan Card through this transaction is W20,354 million.
(*2) It is a transaction of Shinhan Credit Information Co., Ltd. before the sale.
(*3) It is a transaction of Shinhan Alternative Investment Management Inc before the merger.
(*4) It is a transaction of Orange Life Insurance Co., Ltd. before the merger.
(*5) It is related to an equity transaction and has been directly deducted from the equity.
43
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
25. Related party transactions (continued)
(b) Significant balances with the related parties as of September 30, 2022 and December 31, 2021 are as follows:
| Related party |
| Account |
| September 30, 2022 |
| December 31, 2021 |
|
|
|
|
|
|
|
|
| Assets: |
|
|
|
|
|
|
| Shinhan Bank |
| Due from banks |
| 148 |
| 3,913 |
|
|
| Property and equipment |
| 306 |
| 1,240 |
|
|
| Other assets |
| 347,421 |
| 323,796 |
| Shinhan Card Co., Ltd. |
| Financial assets at fair value through profit or loss (*1) |
| 356,512 |
| - |
|
|
| Loans |
| 2,296,964 |
| 2,189,765 |
|
|
| Reserve for loan losses |
| (1,599) |
| (1,817) |
|
|
| Property and equipment |
| 145 |
| 82 |
|
|
| Other assets |
| 91,040 |
| 202,664 |
| Shinhan Securities Co., Ltd. |
| Financial assets at fair value through profit or loss (*2) |
| 293,862 |
| 317,204 |
|
|
| Loans |
| 842,228 |
| 695,889 |
|
|
| Reserve for loan losses |
| (841) |
| (802) |
|
|
| Other assets |
| 211,832 |
| 166,409 |
| Shinhan Life Insurance Co., Ltd. |
| Other assets |
| 7,382 |
| 7,501 |
| Shinhan Capital Co., Ltd. |
| Financial assets at fair value through profit or loss (*3) |
| 223,415 |
| 247,182 |
|
|
| Loans |
| 866,960 |
| 817,100 |
|
|
| Reserve for loan losses |
| (865) |
| (942) |
|
|
| Other assets |
| 46,265 |
| 70,188 |
| Shinhan Asset Management Co., Ltd. |
| Loans |
| 38,000 |
| - |
|
|
| Reserve for loan losses |
| (333) |
| - |
|
|
| Other assets |
| 3,403 |
| 2,015 |
| Jeju Bank |
| Other assets |
| 2,388 |
| 2,420 |
| Shinhan Credit Information Co., Ltd. |
| Other assets |
| - |
| 1,178 |
| Shinhan DS |
| Loans |
| 20,000 |
| 24,000 |
|
|
| Reserve for loan losses |
| (85) |
| (143) |
|
|
| Property and equipment |
| 624 |
| 570 |
|
|
| Other assets |
| 3,696 |
| 2,013 |
44
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
25. Related party transactions (continued)
(b) Significant balances with the related parties as of September 30, 2022 and December 31, 2021 are as follows (continued):
| Related party |
| Account |
| September 30, 2022 |
| December 31, 2021 |
| Assets: |
|
|
|
|
|
|
| Shinhan AITAS Co., Ltd. |
| Other assets |
| 797 |
| 891 |
| Shinhan Savings Bank |
| Loans |
| 150,000 |
| 200,000 |
|
|
| Reserve for loan losses |
| (637) |
| (859) |
|
|
| Other assets |
| 9,075 |
| 9,085 |
| Shinhan Asset Trust Co. Ltd |
| Other assets |
| 757 |
| 439 |
| Shinhan REITS management |
| Other assets |
| 300 |
| 1,821 |
| Shinhan A.I. Co. Ltd |
| Other assets |
| 256 |
| 315 |
| Shinhan Venture Investment Co, Ltd |
| Loans |
| 40,000 |
| 16,000 |
|
|
| Reserve for loan losses |
| (351) |
| (13) |
|
|
| Other assets |
| 208 |
| 1,444 |
| Shinhan Alternative Investment Management Inc(*4) |
| Loans |
| - |
| 38,000 |
|
|
| Reserve for loan losses |
| - |
| (118) |
|
|
| Other assets |
| - |
| 2,187 |
| Shinhan EZ General Insurance, Ltd. |
| Other assets |
| 12 |
| - |
|
|
|
|
| 5,849,285 |
| 5,340,617 |
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
| Shinhan Bank |
| Other liabilities |
| 2,061 |
| 3,487 |
| Shinhan Card Co., Ltd. |
| Other liabilities |
| 22,453 |
| 616 |
| Shinhan Securities Co., Ltd. |
| Other liabilities |
| 31 |
| 89 |
| Shinhan Life Insurance Co., Ltd. |
| Debt security issued in won
|
| 30,000 |
| 50,000 |
| 〃 |
| Other liabilities |
| 92,736 |
| 47,758 |
| Shinhan Capital Co., Ltd. |
| Other liabilities |
| 1 |
| 1 |
| Shinhan DS |
| Other liabilities |
| 186 |
| 9 |
| Shinhan Savings Bank |
| Other liabilities |
| 45 |
| 55 |
| Shinhan REITS management |
| Other liabilities |
| 104 |
| - |
| Shinhan A.I. Co. Ltd |
| Other liabilities |
| 119 |
| - |
| Shinhan Venture Investment Co., Ltd. |
| Other liabilities |
| 122 |
| 24 |
|
|
|
|
| 147,858 |
| 102,039 |
(*1) It includes loss on financial assets at fair value through profit or loss of W43,388 million for the nine-month period ended September 30, 2022.
(*2) It includes loss on financial assets at fair value through profit or loss of W90,048 million and W2,881 million for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021.
(*3) It includes loss on financial assets at fair value through profit or loss of W23,769 million and W4,263 million for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021.
(*4) It is the balance with Shinhan Alternative Investment Management Inc. before the merger.
45
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
25. Related party transactions (continued)
(c) Right-of-use assets and lease liabilities recognised through lease transactions with related parties as of September 30, 2022 and December 31, 2021 are as follows:
Related parties |
| September 30, 2022 |
| December 31, 2021 |
Right-of-use assets |
|
|
|
|
Shinhan Bank |
| 306 |
| 1,240 |
Shinhan Card Co., Ltd. |
| 145 |
| 82 |
|
| 451 |
| 1,322 |
|
|
|
|
|
Lease liabilities |
|
|
|
|
Shinhan Bank |
| 247 |
| 977 |
Shinhan Card Co., Ltd. |
| 150 |
| 88 |
|
| 397 |
| 1,065 |
(d) Major fund transactions
Major fund transactions with related parties for the nine-month period ended September 30, 2022 and for the year ended December 31, 2021 are as follows:
|
| September 30, 2022 | ||||||||||
|
| Beginning balance |
| Lending |
| Purchase(*3) |
| Collection |
| Others(*1) |
| Ending balance |
Shinhan Card Co., Ltd. |
| 2,189,765 |
| 300,000 |
| 400,000 |
| (300,000) |
| 63,711 |
| 2,653,476 |
Shinhan Securities Co., Ltd. |
| 1,013,093 |
| - |
| - |
| - |
| 122,996 |
| 1,136,089 |
Shinhan Capital Co., Ltd. |
| 1,064,283 |
| - |
| - |
| - |
| 26,091 |
| 1,090,374 |
Shinhan Asset Management Co., Ltd.(*2) |
| 38,000 |
| - |
| - |
| - |
| - |
| 38,000 |
Shinhan Savings Bank |
| 200,000 |
| - |
| - |
| (50,000) |
| - |
| 150,000 |
Shinhan DS |
| 24,000 |
| 20,000 |
| - |
| (24,000) |
| - |
| 20,000 |
Shinhan Venture Investment Co., Ltd. |
| 16,000 |
| 100,000 |
| - |
| (76,000) |
| - |
| 40,000 |
|
| 4,545,141 |
| 420,000 |
| 400,000 |
| (450,000) |
| 212,798 |
| 5,127,939 |
(*1) Other transactions are the amount due to financial asset evaluation and foreign currency translation.
(*2) This is the loan for Shinhan Alternative Investment Management Inc before the merger.
(*3) The purchase amount of hybrid bonds issued by subsidiaries includes W190,000 million acquired from Shinhan Securities Co., Ltd.
|
| December 31, 2021 | ||||||||||
|
| Beginning balance |
| Lending |
| Purchase |
| Collection |
| Others(*) |
| Ending balance |
Shinhan Card Co., Ltd. |
| 1,935,200 |
| 513,684 |
| - |
| (300,000) |
| 40,881 |
| 2,189,765 |
Shinhan Securities Co., Ltd. |
| 638,656 |
| - |
| 300,024 |
| - |
| 74,413 |
| 1,013,093 |
Shinhan Capital Co., Ltd. |
| 531,446 |
| 374,700 |
| 150,000 |
| - |
| 8,137 |
| 1,064,283 |
Shinhan Alternative Investment Management Inc. |
| 43,000 |
| - |
| - |
| (5,000) |
| - |
| 38,000 |
Shinhan Savings Bank |
| 150,000 |
| 100,000 |
| - |
| (50,000) |
| - |
| 200,000 |
Shinhan DS |
| 24,000 |
| - |
| - |
| - |
| - |
| 24,000 |
Shinhan Venture Investment Co., Ltd. |
| - |
| 41,000 |
| - |
| (25,000) |
| - |
| 16,000 |
|
| 3,322,302 |
| 1,029,384 |
| 450,024 |
| (380,000) |
| 123,431 |
| 4,545,141 |
(*) Other transactions are the amount due to financial asset evaluation and foreign currency conversion.
46
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
25. Related party transactions (continued)
(e) The main investment-related transactions of related parties as of September 30, 2022 and December 31, 2021 are as follows:
Related party |
| September 30, 2022 |
| December 31, 2021 |
Shinhan Savings Bank |
| 50,000 |
| - |
Shinhan Capital Co., Ltd. |
| - |
| 150,000 |
Shinhan DS |
| - |
| 10,000 |
Shinhan Asset Management Co., Ltd.(*) |
| - |
| 20,000 |
|
| 50,000 |
| 180,000 |
(*) This is the investment-related transaction with Shinhan Alternative Investment Management Inc. before the merger.
(f) Compensation of key management personnel (executives) for the three-month and nine-month periods ended September 30, 2022 and 2021 are as follows:
|
| September 30, 2022 |
| September 30, 2021 | ||||
|
| Three-month |
| Nine- month |
| Three-month |
| Nine-month |
Salaries |
| 1,590 |
| 5,672 |
| 1,448 |
| 4,533 |
Severance benefits |
| 46 |
| 139 |
| 22 |
| 67 |
Share-based payment expenses(*) |
| 22 |
| 1,613 |
| 741 |
| 2,986 |
|
| 1,658 |
| 7,424 |
| 2,211 |
| 7,586 |
(*) Expenses recognized during the vesting period under the agreement on share-based payments.
(g) Shinhan Securities Co., Ltd, the subsidiary, acquired Debt securities and Hybrid bonds of W358 billion, W345 billion issued by the Company for the nine-month periods ended September 30, 2022 and 2021
(h) As of September 30, 2022, the deposit of credit card use provided by Shinhan Card Co., Ltd., a subsidiary company, is W4,000 million.
26. Events after the reporting period
(a) Quarterly dividend resolution
The Company has decided to pay a quarterly dividend of W 400 per share for common stock and convertible preferred stock by a resolution of the Board of Directors on October 6, 2022 and paid a quarterly dividend on October 26, 2022. The total amount of dividend is W212,164 million, and the dividend base date is September 30, 2022.
(b) | Acquisition and retirement of treasury stocks |
To enhance shareholder value, the Company has decided acquisition and retirement of W150 billion worth of treasury stocks by a resolution of the Board of Directors on October 6, 2022. Acquisition and retirement of treasury stocks will be completed in November, 2022.
(c) | Paid-in capital increase of the Shinhan EZ General Insurance, Ltd. |
The Company participated in the W 80 billion capital increase conducted by Shinhan EZ General Insurance, Ltd., the subsidiary and paid W63,830 million on November 3, 2022. As a result, the Company’s ownership ratio of Shinhan EZ General Insurance, Ltd. is decreased from 94.54% to 85.1%.
47
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
(In millions of won)
27. Uncertainty due to changes in domestic and global economic conditions
The rapid spread of the COVID-19 is negatively affecting the global economy. The Company uses forward-looking information to estimate expected credit losses in accordance with Korean IFRS No.1109 ‘Financial Instruments’, and the default rate as of June 30, 2022 was re-estimated and reflected in the measurement of expected credit loss allowance using the changed forward-looking information on Corporate bond’s rate of return and GDP growth rate, Consumer price fluctuation rate, which are major variables for calculating the default rate.
As of September 30, 2022, the economic environment has remained uncertain. Expected credit losses may change depending on the end of the COVID-19 and the pace of economic recovery. The Company will continue to monitor the impact of the COVID-19 on the economy.
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