SHG - Earnings call transcript Q4 2021 | Shinhan Financial Group Co., Ltd.

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Unidentified Company Representative

[Foreign Language] Recording in progress Group CSSO; Corso Kun [ph]; Group CMO, Heo Young-Taeg; Group CRO, Bang Dong-Kwon; Shinhan Bank CFO, Chong Chang Hak [ph]; Shinhan Card CFO, Moon Tung Gwan [ph] and Shinhan Investments CFO, Kim Song Hwan [ph] here with us.

We will first hear about the 2021 early business results presentation highlights from Group CFO, Etaeg Young [ph] and then Group CDO, Kim Myoung-hee will also deliver results and then we will have a Q&A session. I will invite Group CFO, Etaeg Young who will deliver 2021 full year business results presentation.

Unidentified Company Representative

Greetings. I am CFO, Etaeg Young in-charge of Group finance from this year.

would in my presentation our busy I who to despite all, schedules. participating is XXXX of like gratitude express everyone your First business results interest Omicron, the concerns including and vulnerabilities. pressures spread with chain inflation still of supply Along for high global over global hike, global uncertainty there’s very among growth been profitability to striving continually our shareholder we In basic and and this have situation, securing engines fundamentals rate. our strengthening our future new increase

results billion business and Now In high business eight income, first to results the level years. were cover let’s XXXX I a established we page our the earning for Group go consecutive has will of XXXX, four presentation, Shinhan of record highlights on business highlights. been rise and since posted level KRWX,XXX.X net the

KRWXXX.X trillion which increasing asset risen effects, KRWXXX.X SME-centered income bps product related a loan which Excluding occurred improved income but of improvement improving well as and securities billion income including net level. Bank’s growth KRWX.X level and XXXX in posted of billion KRWXXX.X items a Interest non-banking losses, earnings four investment quarterly costs non-interest margin have ERP with income non-recurring ERP XX.X%, Y-o-Y. billion. along fee by drove to slightly seem CIR excluding posted and our may CIR growth. XX.X%, posted and In Y-o-Y, X.X-percentage-point grew recurrent

products of according for to could product expenses be as Conflict losses, process, like to uncertain our outlook and ratio, page, termination downward was we and Y-o-Y to would the economic be for of trend. expenses. a of recognized programs, Group. preparing bp provisioning status XX posted the a was which current investment XXXX, CCR, to cost stabilization investment additional pointed limited the bps, which our in elaborate next forbearance Settlement which the credit despite a I recognized Lastly, our Until is From improvement out uncertainty factor COVID-XX XX on

maximum occurred customer for reasonably of half, we possible from private regarding in losses, minimized implemented to in of However, confidence investment it and was order actively the non-operating XXXX, as going uncertainties obligation expenses removal of and to recovery recognized later forward. amount product XXXX and constructive was costs, accounting uncertainty the became losses and assumed Accordingly recognize reconciliation. KRWXXX.X standard losses billion according

not the there losses to However, we year are KRWXXX three and that late be according to years accounting years. of maximum that losses could parts billion of next there where standard two recognized could as billion to be tax of occur during expect KRWXX a can after last

product sourcing However, we occur all improved not incidents such processes that from to so again. sales do

quarterly like focusing margin regarding X% a and non-interest growth I would to Group seven. improvement in Bank’s Group loans KRWX.XXX.XXX SME the billion, on was increase net about like KRWX.XXX.X and interest a driven Group in KRWXXX.X This loans, interest income page income Bank by income explain posted the I explain billion non-interest more would growth, increasing detail posted growth. Y-o-Y. X.X% to XX.X% Next, income. trillion, profit on

increase KRWXXX.X posted would of centering self explain KRWXXX.X Y-o-Y. Asia FX and ERP the there and income of expenses eight. financial you was income, can below, non-banking, XX.X% when XXXX FX like on an balance as lease table non-interest increased XX% Trust page at as regarding XX.X% it in insurance-related that Trust securities increase look on a income growth, in Bank the Securities an on KRWX.XXX.X However, in on fee. back fee and to this Income growth detail increased gains G&A Fee performance you detail posted from a increase fee excluding I trading. was billion, trillion, well see in the back of derivative income the a XX.X% Pension sizable financing banking income investments increase and billion, investment Y-o-Y. increase trust good and more and transaction

posted Excluding high The new was rate digital being the year, sizable years growth due advertisement digital strategic to transformation, compared business-related expenses digital increase. ERP expense new businesses, average Group was of promotion rate G&A in to the in KRWXXX.X of through X%. activation The expense platform utilized billion previous platforms. and saved and which growth is including

aforementioned, a CIR X.X-percentage-point the XX.X%, ERP expenses improvement posted excluding As Y-o-Y.

XXXX of termination stabilization. can ratio is Delinquency cost seen rate, credit a bps posted the of the see KRWXXX.X credit the costs, other of forbearance KRWXXX.X you showing financial showing decreased the leading additional downward be underlying on including On for can and drop to Y-o-Y. the provisioning Group a indicator XX COVID-XX additional uncertain of table provisioning as the Despite which situation, billion of COVID-related program, on due economic preparing Shinhan provisioning feeding hand, back spread effect Omnicron billion, for the as right, of Card. the both the XX.X% the the on stabilization

Next based standard risk CETX is Basel the is improvement III is to forecast before and be indicators. ratio ratio on XX YTD. capital adoption page the major income bp credit a nine, XX.X%. CETX revised XX.X%, of

dividend On the slide at profit included is ROE per XX.X% it year, payout with the including and the the movement side in common share for year ratio X.X was to share payout the profitability, points BOD CET lower share our basis XXXX. and refer including solid including dividend was by and We the growth. ratio, capital and the adequacy dividend to quarterly in Group’s XXXX fiscal for Y-o-Y. right other total graph of net KRWX,XXX the the core capital common share ROE previous is with Group be and continuously resolved earnings the improve improved expansion, the at establishing The asset and income and Please in preferred dividend plan businesses high to KRWX,XXX XX%. hand, percentage management,

the making shareholder including full strive will payout quarterly routine. forward income We and value, for improve dividends to continuously

different Next is businesses. results page XX, for

is XXXX net contribution non-Bank Group’s approximately For XX%. the profit, the

Within the despite portfolio, profit the of sector, the and to environment. sector, uncertain market contribution business including business the Capital capital Shinhan diversified the XX%, Investment expanded non-banking confirming

pages For the the invite Myoung-hee. of the strategy the digital like charge XX President, digital new and to strategy, XX, Kim on CDO Group’s Vice I’d in next

Kim Myoung-hee

contacts introduced. provide digital talk continued as am Hello. Group’s XXXX, to about Myoung-hee I is to improve has close I digital platform, efforts the our was Group and its will Kim on strategy. life customer In experience the which customer channel. the services

last based result, grew baseball KBO, for and MAU the Metaverse, with conducted Shinhan and writer is a that Card of industry. In field and the pLay, cart new Card of recording a and young technologies launched rate the marketing currently smart Nexen introduced various gamification MZ through respectively generation, in Bank and Y-o-Y, newly such apply year, SOL promoting XX% converges As which recently the live campus with services with as the services growth XX%, In establishment the MyNFT. October the particular, services pay-oriented highest Bank pLay University. agreement existing various an

businesses, are addition, by acquire subsidiary banking, Card Shinhan payment, as they as are Life their business earnest plans and to investment license. Shinhan integrating and license Bank and Investment MyData differentiated to In promoting Each acquire healthcare. main business such in services and year the provide into preparing last their the data this year

trading attempts non-financial, delivery fit health addition, financial areas Engdangayo home financial in as such and well In as motion as plan [ph], launched company. by we through value recognition-based the to AI a app bold platform, enhance customer first

and For a digital channels, digital to coverage detailed from refer please cost savings document. the

first companies. new Group pursuing contact Digital and in technologies. capture KRWXXX technology The future Last year, and our early digital to company alliances with billion investment also Fund, improve financial points, expanding markets is a our to a KRWXXX and XX secure billion Investment new companies, domestic actively page. efforts we created Next invested customer Strategic

In in by Lab, are a Group and startups of Baby was pivotal were and number largest XX expanding playing their growth the Ministry selected win-win financial in the of recognized, the the accelerator hosted accelerating the CET. the expertise In sector addition, the SMEs role we Startups, Unicorn the XXX sector. Project a financial Future’s in with launched companies, first through Fostering Shinhan ecosystem

In with and digital two we such beyond in of ICT. other the of digital fluctuations. for KRWXXX how creative, we is in form such of Language] the cooperation goes with more strategic Metaverse shifts The and industries to that partnerships Group more telecommunication which economic jointly finance secure, to AI, a NFT. KT fintech companies new swap Recently, through consistent plan billion. The fields strengthening an a [Foreign [Technical with Interest addition, income Groups share future are alliance company a a friendly, be more and finance as vision declared signed businesses Difficulty] as should advance

loan and results, As improvement confirmed the income asset interest has QX interest rise expanded. growth margin to growth-led due rate in

made improvement be income and significant during and the there net XXXX, income well. of effect rate base growth as With in in margin will XXXX a interest asset interest increase

about rate hikes in year. is bps for affect than number to In to the base into if estimate, asset According continue this, internal to Bank Considering effect improvement rise further expected of is margin bps market, is of the to revision as by X expected and improve be income addition our account. to margins increase the to the a the X interest year, upward this an rate expected larger year. bps will the margin by a rate growth taken due to XX previous

provisioning billion In the is include and Thank economic to standards. vulnerable effect first, same to absorbing we sluggish as concerns program, with following growth according of very XXXX. according year growing. be expectation program, the PD level about increase there COVID-XX the the of KRWXXX.X assessment, range this Bank will the The my descriptions of capacity currently PD presentation limited. uncertainty. borrowers Considering economy the asset forbearance buffer. enough in proceed subsidiaries key due COVID-XX was explain individual regard, collective Due of deterioration will Page we economic detailed uncertainty and XX, and assessment, XXXX now The much. maintain Asset to performance the indicators. of pages business this by concludes and end end likely scheduled Q&A. additional conservative in will support mid-X% loss you are the I to This in further Group maintaining the for for

Operator

on sir. the Thank Instructions] your very Please Automobile first The you Kim, line. ask Jin-Sang Hyundai the on question, line. Kim is question you Mr. Securities, [Operator are from Mr. is much.

Kim Jin-Sang

you me? Can hear

Unidentified Company Representative

can hear well. you We Yes.

Kim Jin-Sang

I have two questions.

you like for you for to about ask return question earnings. would good thank and And the a your all, and you and know dividend shareholder that… leading policy, are your initiated very active your capital of banking sector in quarterly I I much First very Shinhan,

Unidentified Company Representative

line. Sir, hearing we some on howling the

Kim Jin-Sang

it now? okay Is

Unidentified Company Representative

Thank better. you. much It’s Yes.

Kim Jin-Sang

I shares, you treasury forward. have funds going some your them for use And know to

are you that have quite digital expected cost is any digital do seem there that larger, base platform, special plans but that and your journey is of X%, there it for was ownership? maybe the for high So, why know peers, to investment, ERP reason? year, platform your quite in of cancelation growth, a Second cost your any digital Is And excluding have that the a bit going year. you to there high high? is about those last we -- is a platform reason even it I know growth may for which compared is question this So, had a what is any plan lot have a of your shares? treasury cost changes into because

believe go year? do this So you it that will down

Unidentified Company Representative

answer Kim, Mr. your questions, your and we for much questions. soon Please will hold. very you Thank

Our Group CFO, answer will questions. your Young, Etaeg

Unidentified Company Representative

You and the this it for for our been since quarterly last capital dividend, we executing a year. question had and, year asked policy about the

we will with And we buyback. make share the to going want not we comment the we communicate to going this this routine market. to do whether mentioned also are And we make but aforementioned. or now, when a not, that to a fixed was We it regarding are amount do,

CDO, Of G&A, Young-Taeg, for course, as from keep will there Group And, Heo we mind and -- our Myoung-hee. Kim we our well. the then, CMO, cancellation will our in from hear

Heo Young-Taeg

am CMO, Group Young-Taeg. Heo I

ERP. ERP, at is Banks, the it past. the In took previous place compared what in was the to most mostly Regarding past, year, extraordinary the G&A -- expenses, for was

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So that year. often last happened

in growth So that a it seem might we high had G&A costs.

excluding going have we forward. burden the are believe disciplined that, that a do not However, cost G&A expenses. management G&A of all we on the believe We other can there expected

Unidentified Company Representative

CFO, Group year. our Young, for Etaeg am, I this

we will to areas, digital downward new continuous we Regarding a or make CIR, going investments. investment are in growth pressure. And for have

ratio we XX.X% for is year CIR that this forecasting. are about the So,

our our keep keep So, we cost with are to -- on going management.

Operator

Securities. much. Lee ahead. The go very you next Gun is Mr. from DB Thank Byung Please from question

Lee Byung Gun

am you you were investment DB. be products wonderful I I questions. Hello. too Thank Lee a of there KRWXX from wise of that the have do of accounting care narrow Byung KRWXXX but for earlier, and two took I it to billion you This could taken results. talking appreciate could Gun But not care accounting and and items question, were the be some about may that. billion. be

and is will question these? expected recover. to of care how is these take are card. kinds Consumption And you what credit second So, about

place, regulation regulation affected about loan June DSR, So contraction, you. is rate good affected? the are the deal we is loan amount what what and July, the assets issues? we will be in are DSR of you going funding seeing size signs. and will because in concerned So, up the how the with is loan with Thank of the asset be asset these will that But

Unidentified Company Representative

questions. Thank we much prepare you Please for very as Yes. for hold answer. the the

by be Shinhan The CFO, Song of Investment. answered Kim the first question will Hwan

Unidentified Company Representative

Song Investment. CFO Kim Shinhan Hwan, of am I Hello. the

change. provisions we Conflict for wait we Commission the be in but can that to decision the possible Settlement wise required underlying and we the change compensation by do, assets what we to done the accounting of the for may As so have and a price see have the might are

is it be the to in by So, to was KRWXX within KRWXXX mentioned CFO, you. years, as Group Thank range billion. of expected the billion the next three

Unidentified Company Representative

I Moon about Gwan, like post I’d Tung CFO Shinhan Hello. Card. am the questions the answer of you to Card.

and Card with the like The there Looking and seems funding at challenges could risks, coming concerns Card are merchant necessary there up the it is about three Shinhan are the financial growing these strategies. be downside institutions, fees, rate regulations and business. the that but

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in solid As the vision getting were we declared Group preparations a was CFO, XXXX are and and and strategies. sustainable These the by the mentioned fundamentals. for the we vision growth

we Looking details, into at the diversified have new businesses.

have been the to able with merchant example, we deal these. For fees,

businesses, and non-settlements business are cash supported was we XX.X% The that non-payment we -- loan of auto and services. increasing non-settlements So are the and confirming assets, for XX% advance is the card loan also loans.

auto expect than So general trillion as those to loans more assets of and to XXXX, we trillion. about KRWX.X KRWX be be

do So we have in loan the earnings assets. power

plan we have with making Last businesses, data which sales, transformation for KRWXX a so Group strategy able to And the Card and this by And and be sign is the in at are income have with challenging, card digital that our aggressive make years for These but efforts platform-based business deal we to will billion been we business, digital and billion were you. our companies actual second, reality. and we and previous ERP, able the four Shinhan three visible to losses we KRWXXX billion four believe were and garner I positive in year sales with that, into mentioned. ARCC. building will differentiated Thank able year, preparations the the of earlier these is platform. contract are all challenges in very so from changes. KRWXXX quite able deal were the a to year. save customer and so were We Korea, have with to the the a overseas preemptively as Global in we be profits. we subsidiaries the we costs earlier to save visions able know was the data the of subsidiaries We to we additional looking this

Operator

Josie is are Hung. that Next seems from It question you on no JPMorgan, the Instructions] now. [Operator questions as there are line. Director Jo, of

Josie Hung

opportunity. increase your it the compared at for for QX, your but low. have you the provisioning to provision, looking of COVID-XX-related said you In a preemptively bit reflected seems you programs, peers Thank some that,

it, So, for and think, have different. wanting macro as I assumptions I to at more companies they are government looking been has understand the different or provision provisioning the standards,

why? you assumptions So conservative In us your saying can about And reason that terminated. and can the you going tell tell us COVID-XX-related are programs be provisioning? people forbearance are you how to are March,

and forbearance those going manage about of you us the are So you provisioning exposure, of them termination can kind your have prepare programs? store to you tell in to what for how

Unidentified Company Representative

Thank Director program. for you your very much. Jo,

CFO, questions, Etaeg your your please answer will question. so soon Young hold. will We answer

Unidentified Company Representative

ratio. you Thank to are I think made about you think, I compared for a a about provisioning rates other against or ratio, NPL probably your comparison thinks coverage different. have delinquent the we that And market of provisioning to that compared because to, And Banks, is have Banks, very coverage according are you other the collateral the lower potentially question. much NPL the types and maybe loans delinquent and NPL talking ratio

need to KRWXX risk the types billion. our risk, and at it’s loans the there is of about at the and involved. credit billion, amount, about we balance of COVID-XX amount and you And exposure programs that termination deferrals, for the they deferral is is look the of interest forbearance KRWXXX termination about loans KRWXX amount because billion, for the KRWXX different that programs, for of believe billion installment the are provisioning, for high different the most it’s secondly, support repayment about among to financial the types So related in regarding

had our billion and of we additional and have more KRWXXX including about KRWXX in provisioning. we provisioning, KRWXXX it’s previous total provisioned So than billion billion,

deferral the for the deterioration if cover sufficiently we forbearance there there even some is that a is borrowers, can even So termination program, if we believe repayment them. of

provisioning, them. Going we more maintained we XXXX, had mentioned XXXX, into macros, in in that and conservative have we

actually period the era when to we observation had defaults. the the So have maintained include we when -- area

possibilities for So made delinquent we it further borrowers. had at look us any to possible of

KRWXX are apart aforementioned delinquencies had borrowers, occur. preemptively from billion that the prepare if So their to for individual to they for we preparations made

covered we with So that sufficiently we provisioning. are believe our

PD or -- be interest so up, could because gets in there the of the -- burden there borrower, an could higher of portfolio, have recession for that amount the more when the effect or be effect, when on economy, wages, rate higher However, at increase, than because that can when generally provisioning in effect getting the in goes is a a occur so rather cycle. overall the that on we something looking the that economic

So on it might will -- occur level. it recurring a

provisioning believe So might go to the amount compared periods. similar we that of up

Bang Dong-Kwon

I Dong-Kwon. am CRO, Group the Bang

related Regarding have asked assumption for you that SLC. question

individual I what think collective X is you further but looking assessments, about. criteria Stage asked, have or there think Stage their that you have regarding X, a assessment I asked is

So and at can that I will base see rate, portfolio my default is the answer it the you rate, level. lowest the on minimum, that PD

on So, component moving if the in as past, low at level. risk had we a a assume level, the we very is it

to So changed had more we conservative, in period the observation crisis to eras. for include financial order us be the

we enough write-back those that. time or remove period the for you So to based provisions Thank have very we on we the much. made RC have expanded and have factors observation for cost actually and

Operator

is much. Please Yafei The question very Citi from from go you ahead. Tian Thank next Securities.

Yafei Tian

giving ask. to the A relatively ones. quick for you few opportunity me Hi. Thank

is loan on there what this Shinhan Maybe please? seen The for on your Could in discussion no secondly increase on And then, things Life. but that IFRS these beginning, year than of non-operating quality, what trajectory businesses update you that the at and these you this the of mean the us outlook the businesses and related very remain asset is last the first thank and delinquency to, loan the losses And in that losses is assuming business Life quo. quarter. the is two Does that missed absence could we thirdly between the losses the into one two is you. integration implementation, Orange for please? and status that the also on an Thank be on XX detailed that lower please give have Life years top-ups? I

Unidentified Company Representative

Thank you questions. hold. for the Please

Heo be Young-Taeg, right answers. We CMO, question. the will back will the first with The answer

Heo Young-Taeg

answer Life when business and not and this there and visible for may opportunities. the starting have base the best models. and level, more effect integrated this synergy and why and will of this Life XX organization, about costs Orange slower. the will Heo workforce at serve the and Group be the integration, reason of am Shinhan merger in a the as become the workforce year as the accounting KRWXX.X year, efficient because, mentioning we of numbers Young-Taeg, have year. how am methods, the was IFRS Life redundant had Life to integration entities wise. merged capital this ERP the for integration the question And [ph] the There be according KRWXX the profit the we making. that will the from there insurance had will But I the the merge, will to and cost size Shinhan long-term, larger This system a billion. later to I’d One Group Hello. I look visible maybe will And System opportunity had But an produced, burden PM the Life we Life introduction share introduction, Shinhan accounting produce cost last and to Life, kick reflected shift be is industry’s incurred. IFRS to CMO. one-time have billion, the Shinhan Orange a will the Orange effect the have and year. each and less we have and like and Shinhan year, and costs year. XX. business to FMFCs different will was can years Last we younger had customers this lot Life much in is we in two return amortization,

growth XXXX, profit. maybe significant record will in in to a Shinhan starting be Life able So,

So this Group a for will huge whole. be a the as plus

thank So, you.

Bang Dong-Kwon

I asset on I and next loan the Dong-Kwon. question loss. Bang quality take would to the am CRO, like about the

As is asset continuously. as delinquency there the sound improving the as have that assets asset we by was XX ratio for credit against so we COVID provisioning. the CFO, businesses ratios, as -- the the NPL improvements And for bps the sound and was see focus loan the and the quality, on quality ratios despite losses, of cost mentioned

done stress used have different range. credit the to It scenarios. test and We under be be expect we in XX to bps XXXX the in costs

the our that’s It’s year targeting. So than bps that’s a plan. last higher we and bit XX what you. of Thank are

Unidentified Company Representative

Yes.

-- recognized for as we we of product business. it guaranteed affect with insurance protection were for was a a the its investment type portion type that the losses, adoption the I large distributor how XX KRWXXX IFRS and probably non-operating loss of companies. entity, the and Insurance billion. you we have familiar accounting. and and know are additionally, As will the as integrated But a And non-operating that

compared believe the would but do capital undergo we capital So the and under some changes, we could that buffer. we fare have competitors, enough better to

speaking, will Life positive -- about numbers talk I safer do will more relatively be Thank specific, I I but Shinhan but for general, will know business everything So be want to you. and off. Orange. be to our be

Operator

Shinhan Financial (SHG) 9 Feb 222021 Q4 Earnings call transcript