Shinhan Bank, a key arm of Shinhan Financial Group, reclaimed its position as South Korea’s top lender with largest-ever profits in 2024, overtaking its archrival Kookmin Bank.
Buoyed by the stellar performance, Shinhan Financial announced plans to buy back and retire shares worth 500 billion won ($345 million), on top of the 150 billion won share repurchase last month.
The buybacks and dividend payments will translate into a return of 1.1 trillion won to shareholders this year, or 40-44% of its earnings compared to 39.6% in 2024.
Robust earnings from global operations drove the bank’s record-breaking earnings, with its units in Vietnam and Japan posting a double-digit income growth on-year to achieve their highest-ever profits.
Net profit at Shinhan Bank came in at 3.70 trillion won ($2.6 billion) last year, up 20.5% on-year compared to 2023, according to its parent Shinhan Financial Group’s regulatory filing on Thursday.
Shinhan Bank surpassed Kookmin Bank that reported a net profit of 3.25 trillion won last year, followed by Hana Bank’s 3.36 trillion won. The 2024 earnings catapulted Shinhan to the No. 1 position among domestic banks for the first time since 2018.
Its overseas earnings reached 733.6 billion won, accounting for 20% of the bank’s profits. Shinhan Bank Vietnam and SBK Bank, its Japanese subsidiary, chalked up net profits of 264.0 billion won and 148.6 billion won, respectively.
They offset a decrease in net interest margins following the Bank of Korea’s interest rate cuts last year, as well as a sharp fall in non-banking profits, including those from Shinhan Savings Bank and Shinhan Capital Co.
Chun Sang-young, chief financial officer of Shinhan Financial Group, said substantial provisions set aside in 2024 to cover potential loan losses weighed down earnings at some non-banking arms.
“We anticipate significant earnings growth at key (non-banking) units this year, considering the base effect and the provisions we set aside in relation to equity-linked trust products,” he said.
SHINHAN FINANCIAL GROUP PROFITS
Overall, Shinhan Financial Group’s net profit expanded 3.4% on-year to 4.52 trillion won last year. That fell short of to its highest-ever profit of 4.64 trillion won recorded in 2022, which included the proceeds of 300 billion won from the sale of Shinhan Securities Co.’s headquarters.
INTEREST INCOME
The group’s interest income grew 5.4% on-year to 11.40 trillion won, offsetting a 5.0% drop in non-interest income hit by reduced fee income from stock, foreign exchange and derivatives trading.
Net interest margins stood at 1.93% for the group and 1.58% for Shinhan Bank, down 0.04 percentage point on-year, respectively.
In the fourth quarter, one-off expenses such as lump-sum compensation for voluntary retirement and provisioning costs ate away at the results.
Increased market uncertainties also led to a decline in non-interest income as financial markets braced for the outcome of the US presidential election in November, coupled with President Yoon Suk Yeol’s short-lived martial law decree in early December.
For the fourth quarter of 2024, Shinhan Financial will pay 540 won in dividend per share.
By Jae-Won Park
wonderful@hankyung.com
Yeonhee Kim edited this article.
