Shinhan Financial Group Q1 Earnings Call Highlights

Key Points

• Shinhan Value Up 3.0 Plus: management rolled out an updated shareholder-value framework targeting ROE 10%–12% through 2028, a 50%+ total shareholder return with no upper cap tied to ROE and growth, and a CET1 ratio 13%+, while pledging to gradually raise dividends and use tax-exempt dividend resources and retire treasury shares.
• Q1 results and capital actions: net income was KRW 1,622.6bn (+9% YoY) with ROE at 11.9%, driven by a 26.5% jump in non‑interest income (brokerage fees +215%); group CET1 was ~13.19%, the board declared a KRW 741/share dividend and a KRW 700bn buyback, while credit costs rose 17.5% and NPL coverage declined amid trust-related items.

Shinhan Financial Group NYSE: SHG used its first-quarter 2026 earnings call to outline an updated shareholder value program while reporting higher profit and improved returns, supported by growth in non-interest income and steady capital management.

Value Up 3.0 Plus: ROE, shareholder returns, and capital buffer

Group CFO Jang Jonghoon said the company upgraded its corporate value enhancement framework, now branded “Shinhan Value Up 3.0 Plus”, after executing on its prior “10/50/50” plan introduced in July 2024. Jang said Shinhan achieved its 50% shareholder return target “ahead of schedule” and saw “meaningful improvement in PBR,” prompting management to reassess the program amid dividend tax reforms and government initiatives aimed at revitalizing Korea’s capital markets.

Under the updated framework, Jang highlighted three strategic objectives:

• ROE of 10%+, with a stated aim to manage ROE “within the 10%-12% range through 2028,” building on the bank’s earnings base and strengthening non-banking competitiveness “in a phased manner,” including a focus on capital markets through 2026.
• Total shareholder return ratio of 50%+, including removal of an upper cap and introduction of a formula intended to connect returns with ROE and growth while maintaining a principle of gradually increasing the payout ratio year over year when ROE is below cost of equity.
• CET1 ratio of 13%+, with a stated commitment to return “any excess capital generated through improvement in capital efficiency, including RWA optimization,” in principle.

Jang also said Shinhan plans to keep its equal quarterly dividend policy and gradually increase both DPS and the total dividend amount. He added that the company intends to prioritize use of tax-exempt dividend resources, subject to shareholder approval at the March annual general meeting, and reiterated communication around its previously announced target of reducing 50 million treasury shares.

Q1 profit rises 9% as non-interest income jumps

For the first quarter of 2026, Shinhan posted net income of KRW 1,622.6 billion, up 9% year over year, which Jang attributed “primarily [to] top line growth centered on non-interest income.” The company said ROE and ROTCE improved to 11.9% and 13.4%, respectively, each up 0.5 percentage points.

Operating profit before expenses rose 11% year over year, supported by higher net interest income and a “significant growth” in non-interest income.

Net interest income increased 5.9% year over year as net interest margin improved and interest income from securities rose. Jang said bank NIM improved 2 basis points quarter over quarter as loan yields increased with higher market rates and funding costs were managed. While household loans declined due to regulations, Korean won loans increased 1.4% year to date as Shinhan emphasized “productive financing” for corporate borrowers.

Non-interest income rose 26.5% year over year, driven by fee income and broader gains across segments. Brokerage fees increased 215.2% year over year on strong equity market activity, while fees tied to fund sales and bancassurance rose 54.7% and were described as benefiting from government capital-market development policies. Gains on securities declined in bond-related income due to a sharp rise in market rates but were “offset by valuation gains on other securities.” Insurance-related profit increased 8.7% year over year, with management saying it expects stable earnings through disciplined contractual service margin (CSM) management.

Capital, dividends, and buybacks

Shinhan estimated its group CET1 ratio at 13.19% at the end of the first quarter of 2026. Jang said CET1 fell 68 basis points due to RWA growth and shareholder returns, but the decline was 16 basis points versus year-end. Group RWA increased by KRW 7.3 trillion from asset growth and KRW 3.1 trillion from foreign exchange movements, which the company said remained within plan.

The board declared a cash dividend of KRW 741 per share for the first quarter, with a record date of April 30 and payment planned by May 29, according to Jang.

Shinhan also discussed a KRW 700 billion share buyback program scheduled for July 2026, with shares to be retired “immediately upon the purchase,” as described on the call.

Expenses, credit costs, and asset quality

Group SG&A expenses increased 10.4% year over year, driven by a higher education tax, though the company said it continued cost-efficiency efforts across subsidiaries. The cost-to-income ratio edged down to 36.7%.

Credit costs increased 17.5% year over year, which management attributed mainly to higher recurring credit costs, including increased write-offs at the bank and some emergence of corporate non-performing exposure. Jang said one-off credit costs related to real estate project financing have “stabilized” due to preemptive and conservative provisioning in prior periods. The group’s credit cost ratio increased 5 basis points year over year to 46 basis points, and management reiterated a full-year target in the “mid 40” basis-point range.

The group NPL coverage ratio declined by 12.4 percentage points from year-end. Group CRO Na Hoon said substandard-or-below exposures increased, and he referenced an increase in NPL of roughly KRW 40 billion to KRW 60 billion. Na said the group aims to maintain overall provisioning coverage above 110%, while maintaining a bank-level coverage ratio of about 150%. In a later exchange, management said the group’s lower coverage level also reflected the impact of Shinhan Asset Trust assets being booked as NPL due to litigation or trust-related factors, with provisions already recognized, and noted that recovery could take “a year or two.”

Subsidiary results and key Q&A themes

Jang said the securities business recorded earnings growth of 167.4% year over year, driven by higher brokerage commissions and improved proprietary trading income. Shinhan Bank earnings rose 2.6% year over year, supported by net interest income, despite declines in securities-related gains and higher credit costs and education tax. The card business saw earnings decline 14.9% year over year, as improvements in operating revenue and credit costs were offset by one-off expenses tied to a voluntary retirement program. The life insurance business weakened year over year due to higher loss ratios and a decline in insurance finance income amid rising interest rates.

During Q&A, management addressed several recurring investor topics:

• Potential capital relief and CET1 impact: Na said regulatory changes under discussion could provide roughly 10 basis points of CET1 benefit from market risk elements and potentially 20 basis points or more when including operational risk-related RWA adjustments, though he emphasized approvals were still pending. Group CSO Ko Seokhwan stressed the intention of easing was to support productive financing rather than boost shareholder returns.
• Internal hurdle rate and return framework: Jang referenced an internal view of marginal return “slightly higher than” 12.5% and discussed gradually increasing shareholder returns while ROE remains below cost of equity.
• Definition of “growth” in the TSR formula and timing: Jang said the framework assumes maintaining CET1 and discussed both capital growth and RWA growth, suggesting both would “converge within the 4%-5% band.” He added that within “the next few years,” TSR would “likely be within the 50%-60% range,” and indicated more detail could be shared around the fourth quarter. He also cited an internal calculation for 2026 suggesting a shareholder return ratio around 50.2% plus alpha, with a “max 53%,” depending on conditions.
• Tax-exempt dividends: Jang said tax-exempt dividends cannot be paid until after year-end closing, noting that the first through third quarters of 2026 would be subject to separate taxation, with a move to tax-exempt dividends after closing and an intention to provide “full tax-exempt dividends” over the next three years.
• Securities issuer business: Shinhan Securities CFO Lee Jaesung said the firm received an issuer license at year-end, began issuance in February, and had issued about KRW 240 billion so far. For the first year, Lee said the return target was about 100 basis points, with issuance size and volume to be kept under control as it becomes a “stable vehicle.”
• Bank NIM outlook: Shinhan Bank CFO Kang Yonghoon said the bank expects market rates to remain broadly stable and said the bank would aim to maintain NIM at the current level or improve it by expanding “profitable, high-quality” productive finance.
• Shinhan Life duration gap and OCI/AOCI: Shinhan Life CFO Joo Sung Han said interest rates rose more than 40 basis points versus the end of December, and the duration gap was expected to move from about 0.2 at year-end to about 1 at the end of March, which he described as an improvement. He said OCI valuation losses were offset by other factors, including consolidation-related adjustments.

Management said the company is also expanding disclosures starting with this release to include quarterly net income, RWA, and return on capital by segment. The company concluded the call by directing investors to materials posted on its website and IR channels for additional detail on the updated Value Up plan and quarterly performance.

About Shinhan Financial Group NYSE: SHG

Shinhan Financial Group is a South Korea–based financial holding company headquartered in Seoul. Established in 2001 as a banking and financial services group, it brings together a range of financial subsidiaries operating under the Shinhan brand, including commercial banking, card services, life insurance, securities and asset management businesses. The group serves both retail and corporate clients and is one of the leading diversified financial institutions in Korea.

The company's principal activities span retail and corporate banking, credit card issuance and payment services, life insurance and related protection products, brokerage and investment banking, and asset and wealth management.

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