EX-99.1 2 ck0001263043-ex99_1.htm EX-99.1 EX-99.1

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHINHAN FINANCIAL GROUP CO., LTD.

 

 

Separate Interim Financial Statements

 

June 30, 2024 and 2023

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

Contents

 

 

 

 

Page

 

 

 

Independent Auditors’ Review Report

 

1

 

 

Separate Interim Statements of Financial Position

 

3

 

 

 

Separate Interim Statements of Comprehensive Income

 

4

 

 

 

Separate Interim Statements of Changes in Equity

 

5

 

 

 

Separate Interim Statements of Cash Flows

 

7

 

 

 

Notes to the Separate Interim Financial Statements

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Independent Auditors’ Review Report

Based on a report originally issued in Korean

 

 

 

The Board of Directors and Stockholders

Shinhan Financial Group Co.,Ltd.:

 

 

Reviewed Financial Statements

We have reviewed the accompanying condensed separate interim financial statements of Shinhan Financial Group Co., Ltd. (the “Company”), which comprise the condensed separate interim statement of financial position as of June 30, 2024, the condensed separate interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2024 and 2023, the condensed separate interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2024 and 2023, and notes, comprising a summary of material accounting policy information and other explanatory information.

 

Management's Responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor's Review Responsibility

Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.

 

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements 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 reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above do not present fairly, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting.

 

Other Matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

 

The separate statement of financial position of the Company as of December 31, 2023, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 4, 2024, expressed an unqualified opinion. The accompanying separate statement of financial position of the Company as of December 31, 2023, presented for comparative purposes, is consistent, in all material respects, with the audited separate statement of financial position from which it has been derived.

 

 

 

 

 

 

 

 

 

 

 

 

1


 

 

 

KPMG Samjong Accounting Corp.

 

This report is effective as of August 14, 2024, 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 condensed 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.

August 14, 2024

Seoul, Korea

2


SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Financial Position

As of June 30, 2024 and December 31, 2023

 

(In millions of won)

 

Notes

 

June 30,

2024 (Unaudited)

 

December 31,

2023

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks at amortized cost

 

4, 5, 24

W

152,308

 

22

Financial assets at fair value through profit or loss

 

4, 6, 24

 

3,029,495

 

1,985,760

Loans at amortized cost

 

4, 7, 24

 

3,948,483

 

4,051,004

Property and equipment

 

24

 

8,628

 

7,586

Intangible assets

 

 

 

5,675

 

7,745

Investments in subsidiaries

 

8

 

30,722,123

 

30,723,087

Net defined benefit assets

 

11

 

788

 

7,077

Other assets

 

4, 7, 24

 

464,276

 

507,274

Total assets

 

 

W

38,331,776

 

37,289,555

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Borrowings

 

4, 9

 

19,681

 

223,722

Debt securities issued

 

4, 10, 24

 

10,649,283

 

10,389,276

Deferred tax liabilities

 

 

 

11,819

 

9,589

Other liabilities

 

4, 24

 

547,357

 

567,827

Total liabilities

 

 

 

11,228,140

 

11,190,414

 

 

 

 

 

 

 

Equity

 

12

 

 

 

 

Capital stock

 

 

 

2,969,641

 

2,969,641

Hybrid bonds

 

 

 

4,201,088

 

4,001,731

Capital surplus

 

 

 

11,350,744

 

11,350,744

Capital adjustments

 

 

 

(196,075)

 

(148,464)

Accumulated other comprehensive loss

 

 

 

(8,179)

 

(6,642)

Retained earnings

 

 

 

8,786,417

 

7,932,131

Total equity

 

 

 

27,103,636

 

26,099,141

Total liabilities and equity

 

 

W

38,331,776

 

37,289,555

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the separate interim financial statements.

3

 


SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Comprehensive Income

For the six-month periods ended June 30, 2024 and 2023

 

(In millions of won, except earnings per share data)

 

Notes

 

June 30, 2024

(Unaudited)

 

June 30, 2023

(Unaudited)

 

 

 

 

Three-month

 

Six-

month

 

Three-

month

 

Six-

month

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

21, 24

W

25,572

 

50,822

 

23,114

 

45,541

Interest expense

 

24

 

(83,519)

 

(164,829)

 

(67,497)

 

(130,894)

Net interest expense

 

13

 

(57,947)

 

(114,007)

 

(44,383)

 

(85,353)

 

 

 

 

 

 

 

 

 

 

 

Fees and commission income

 

21, 24

 

18,147

 

35,528

 

17,379

 

34,758

Fees and commission expense

 

24

 

(160)

 

(193)

 

(212)

 

(357)

Net fees and commission income

 

14

 

17,987

 

35,335

 

17,167

 

34,401

 

 

 

 

 

 

 

 

 

 

 

Dividend income

 

15, 21, 24

 

13,273

 

1,847,442

 

12,740

 

1,760,430

Net gain (loss) on financial instruments at fair value through profit or loss

 

21

 

30,436

 

43,606

 

31,613

 

83,880

Net foreign currency transaction gain

 

21

 

(266)

 

(1,077)

 

4,471

 

22,297

Reversal of (provision for) credit loss allowance

 

16, 21

 

39

 

(35)

 

1,424

 

1,436

General and administrative expense

 

17, 24

 

(35,641)

 

(68,333)

 

(34,627)

 

(62,345)

 

 

 

 

 

 

 

 

 

 

 

Operating income (expenses)

 

 

 

(32,119)

 

1,742,931

 

(11,595)

 

1,754,746

 

 

 

 

 

 

 

 

 

 

 

Non-operating income (expenses)

 

 

 

(2,912)

 

(3,271)

 

182

 

(315)

 

 

 

 

 

 

 

 

 

 

 

Profit (loss) before income taxes

 

 

 

(35,031)

 

1,739,660

 

(11,413)

 

1,754,431

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

19

 

1,259

 

2,779

 

4,534

 

24,108

Profit (loss) for the period

 

 

 

(36,290)

 

1,736,881

 

(15,947)

 

1,730,323

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) for the period, net of income tax

Items that will not be reclassified to profit or loss:

 

 

 

 

 

 

 

 

 

 

Remeasurements of the defined benefit liabilities (assets)

 

 

 

(1,537)

 

(1,537)

 

                 (763)

 

(770)

Total comprehensive income (loss) for the period

 

 

W

(37,827)

 

1,735,344

 

(16,710)

 

1,729,553

 

 

 

 

 

 

 

 

 

 

 

 Basic and diluted earnings (loss) per share in won

 

20

W

(170)

 

3,238

 

(115)

 

3,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the separate interim financial statements.

4

 


SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2024 and 2023

 

(In millions of won)

 

Capital

stock

 

Hybrid

Bonds

 

Capital

surplus

 

Capital adjust-ments

 

Accumulated other

comprehe-nsive loss

 

Retained earnings

 

Total

Balance at January 1, 2023

W

2,969,641

 

4,196,968

 

11,350,819

 

(46,114)

 

(5,210)

 

8,210,445

 

26,676,549

Total comprehensive income for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

 

-

 

-

 

-

 

-

 

1,730,323

 

1,730,323

Other comprehensive income (loss)

 

-

 

-

 

-

 

-

 

(770)

 

-

 

(770)

Remeasurements of the net defined benefit liability (asset)

 

-

 

-

 

-

 

-

 

(770)

 

-

 

(770)

 

 

-

 

-

 

-

 

-

 

(770)

 

1,730,323

 

1,729,553

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual dividends

 

-

 

-

 

-

 

-

 

-

 

(455,215)

 

(455,215)

Quarterly dividends

 

-

 

-

 

-

 

-

 

-

 

(274,357)

 

(274,357)

Dividends to hybrid bonds

 

-

 

-

 

-

 

-

 

-

 

(91,954)

 

(91,954)

Redemption of hybrid bonds

 

-

 

(134,678)

 

-

 

(322)

 

-

 

-

 

(135,000)

Transfer to retained earning of redemption loss of hybrid bonds

 

-

 

-

 

-

 

317

 

-

 

(317)

 

-

Issuance of hybrid bonds

 

-

 

398,831

 

-

 

-

 

-

 

-

 

398,831

Acquisition of treasury stock

 

-

 

-

 

-

 

(286,519)

 

-

 

-

 

(286,519)

Retirement of treasury stock

 

-

 

-

 

-

 

286,519

 

-

 

(286,576)

 

(57)

Preferred stock converted to common stock

 

-

 

-

 

(75)

 

-

 

-

 

-

 

(75)

 

 

-

 

264,153

 

(75)

 

(5)

 

-

 

(1,108,419)

 

(844,346)

Balance at June 30, 2023

(Unaudited)

W

2,969,641

 

4,461,121

 

11,350,744

 

(46,119)

 

(5,980)

 

8,832,349

 

27,561,756

 

 

5


SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Changes in Equity(Continued)

For the six-month periods ended June 30, 2024 and 2023

(Unaudited)

 

 

 

 

Capital

stock

 

Hybrid

Bonds

 

Capital

surplus

 

Capital adjust-ments

 

Accumulated other

comprehe-nsive loss

 

Retained earnings

 

Total

Balance at January 1, 2024

W

2,969,641

 

4,001,731

 

11,350,744

 

(148,464)

 

(6,642)

 

7,932,131

 

26,099,141

Total comprehensive income for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

 

-

 

-

 

-

 

-

 

1,736,881

 

1,736,881

Other comprehensive income (loss)

 

-

 

-

 

-

 

-

 

(1,537)

 

-

 

(1,537)

Remeasurements of the net defined benefit liability (asset)

 

-

 

-

 

-

 

-

 

(1,537)

 

-

 

(1,537)

 

 

-

 

-

 

-

 

-

 

(1,537)

 

1,736,881

 

1,735,344

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual dividends

 

-

 

-

 

-

 

-

 

-

 

(268,697)

 

(268,697)

Quarterly dividends

 

-

 

-

 

-

 

-

 

-

 

(275,069)

 

(275,069)

Dividend to hybrid bonds

 

-

 

-

 

-

 

-

 

-

 

(85,806)

 

(85,806)

Redemption of hybrid bonds

 

-

 

(199,476)

 

-

 

(524)

 

-

 

-

 

(200,000)

Transfer to retained earning of redemption loss of hybrid bonds

 

-

 

-

 

-

 

102,667

 

-

 

(102,667)

 

-

Issuance of hybrid bonds

 

-

 

398,833

 

-

 

-

 

-

 

-

 

398,833

Acquisition of treasury stock

 

-

 

-

 

-

 

(300,350)

 

-

 

-

 

(300,350)

Disposal of treasury stock

 

-

 

-

 

-

 

296

 

-

 

-

 

296

Retirement of treasury stock

 

-

 

-

 

-

 

150,300

 

-

 

(150,356)

 

(56)

 

 

-

 

 199,357

 

-

 

 (47,611)

 

-

 

(882,595)

 

(730,849)

Balance at June 30, 2024

(Unaudited)

W

2,969,641

 

4,201,088

 

11,350,744

 

(196,075)

 

(8,179)

 

8,786,417

 

27,103,636

 

 

 

See accompanying notes to the separate interim financial statements.

6

 


SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Cash Flows

For the six-month periods ended June 30, 2024 and 2023

 

 

 

 

 

Six-month periods

ended June 30

(In millions of Won)

 

Notes

 

2024 (Unaudited)

 

2023 (Unaudited)

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Profit for the period

 

 

W

1,736,881

 

1,730,323

Adjustments for:

 

 

 

 

 

 

Interest income

 

13, 21

 

(50,822)

 

(45,541)

Interest expense

 

13

 

164,829

 

130,894

Dividend income

 

15, 21

 

(1,847,442)

 

(1,760,430)

Corporate tax expense

 

 

 

2,779

 

24,108

Net gain on financial instruments at fair value through profit or loss

 

 

 

(16,500)

 

(68,712)

Provision for (reversal of) credit loss allowance

 

16, 21

 

35

 

(1,436)

Employee costs

 

 

 

3,936

 

2,412

Depreciation and amortization

 

17

 

2,523

 

1,899

Net foreign currency translation gain

 

 

 

1,831

 

(20,430)

Non-operating expense

 

 

 

2,066

 

4

 

 

 

 

(1,736,765)

 

(1,737,232)

Changes in assets and liabilities:

 

 

 

 

 

 

Financial instruments at fair value through profit or loss

 

 

 

(900,773)

 

(696,371)

Other assets

 

 

 

3,533

 

(456)

Net defined benefit liabilities (assets)

 

 

 

(1,864)

 

(670)

Other liabilities

 

 

 

19,216

 

(7,394)

 

 

 

 

(879,888)

 

(704,891)

 

 

 

 

 

 

 

Interest received

 

 

 

49,695

 

43,360

Interest paid

 

 

 

(159,643)

 

(124,991)

Dividends received

 

 

 

1,847,094

 

1,758,303

Income tax paid (refund)

 

 

 

(1,187)

 

1,052

Net cash provided by operating activities

 

 

 

856,187

 

965,924

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Acquisition of financial assets at fair value through profit or loss

 

 

 

(100,000)

 

(300,000)

Lending of loans at amortized cost

 

 

 

(169,440)

 

(203,361)

Collection of loans at amortized cost

 

 

 

395,000

 

200,000

Acquisition of property and equipment

 

 

 

(2,036)

 

(1,510)

Disposal of property and equipment

 

 

 

(10)

 

-

Acquisition of intangible assets

 

 

 

(549)

 

(72)

Disposal of intangible assets

 

 

 

2,300

 

-

Increase in other assets

 

 

 

(620)

 

(1,440)

Decrease in other assets

 

 

 

72

 

1,112

Acquisition of investments in subsidiaries

 

 

 

-

 

11

Net cash used in investing activities

 

 

W

124,717

 

(305,260)

 

 

 

 

 

 

 

 

6


SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Cash Flows (Continued)

For the six-month periods ended June 30, 2024 and 2023

 

 

 

 

 

Six-month periods

ended June 30

(In millions of won)

 

Note

 

2024 (Unaudited)

 

2023 (Unaudited)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Issuance of hybrid bonds

 

 

W

398,833

 

398,831

Redemption of hybrid bonds

 

 

 

(200,000)

 

(135,000)

Issuance of debt securities

 

 

 

988,339

 

1,107,934

Repayments of debt securities issued

 

 

 

(880,000)

 

(969,626)

Increase in borrowings

 

 

 

19,450

 

163,763

Decrease in borrowings

 

 

 

(225,000)

 

(120,000)

Conversion costs for preferred stock to common stock

 

 

 

-

 

(75)

Dividends paid

 

 

 

(629,266)

 

(821,158)

Acquisition of treasury stock

 

 

 

(300,351)

 

(286,519)

Disposal of treasury stock

 

 

 

296

 

-

Costs for retirement of treasury stock

 

 

 

(56)

 

(57)

Repayments of leased liabilities

 

 

 

(793)

 

(834)

Net cash inflow from financing activities

 

 

 

(828,548)

 

(662,741)

 

 

 

 

 

 

 

Effect on the exchange rate changes of cash

 equivalents in foreign currency

 

 

 

1

 

-

 

 

 

 

 

 

 

Net increase(decrease) in cash and cash equivalents

 

 

 

152,357

 

(2,077)

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

23

 

19

 

2,186

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

23

W

152,376

 

109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the separate interim financial statements.

8

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

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 contain 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, 2023.

 

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 the controlling company, investors in associates or joint ventures account for their investments on the basis of direct equity investments, not on the investee’s reported performance and net assets.

 

(b) Use of estimates and judgments

 

The preparation of the 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, incomes and expenses. If the estimates and assumptions based on management's judgment as of the end of the interim reporting period differ from the actual circumstances, the related 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 the 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 the same as those that applied to the separate financial statements as of and for the year ended December 31, 2023 except for the method of estimation used to determine the income tax expense for the interim period.

 

9

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

3. Significant accounting policies

 

(a) The Company applies the same accounting policies applied as when preparing the annual separate financial statements for the year ended December 31, 2023, except for the following amendments that have been applied for the first time since January 1, 2024 and as described in Note 2(b).

 

i) Amendment to K-IFRS No. 1001 'Presentation of Financial Statements' - Classification of Liabilities as Current or Non-current

 

The amendments clarify that the classification of liabilities as current or non-current should be based on the substantive rights existing at the end of the reporting period and that the classification is unaffected by management’s intentions or expectations about whether the company will exercise its right to defer settlement of a liability. The amendments also introduce a definition of settlement to make clear that settlement includes the transfer to the counterparty of the company's own equity instruments, however, it would be excluded if an option to settle the liability by the transfer of the company’s own equity instruments is recognized separately from the liability in compound financial instruments. There is no significant impact on the separate financial statements from these amendments.

 

ii) Amendments to K-IFRS No. 1007, ‘Cash Flow Statement’ and K-IFRS No. 1107 ‘Financial Instruments: Disclosures’ - Supplier Finance Arrangements

 

The amendments add to the disclosure objectives in K-IFRS 1007, ‘Cash Flow Statement,’ that information about supplier finance arrangements should be disclosed to enable users of financial statements to assess the impact of those arrangements on the Company’s liabilities and cash flows. The amendments also amend K-IFRS 1107, ‘Financial Instruments: Disclosures,’ to add supplier finance arrangements as an example of a requirement to disclose information about an entity’s exposure to concentrations of liquidity risk. There is no significant impact on the separate financial statements from these amendments.

 

iii) The following new and amended standards are not expected to have a significant impact on the separate financial statements.

- Lease Liability in a Sale and Leaseback (the K-IFRS 1116 'lease')

- Disclosure of Virtual Assets (the K-IFRS 1001 'Financial statement presentation')

 

(b)
As of June 30, 2024, the newly enacted and disclosed but not yet effective new K-IFRS are as follows:

 

i) Amendment to K-IFRS No. 1021 'Effects of Changes in Foreign Exchange Rates' and No. 1101 ‘First-time adoption of K-IFRS’ – Lack of Exchangeability

 

These amendments define scenarios where exchanges with other currencies are considered possible for accounting purposes, clarify the assessment of exchangeability with other currencies, and specify requirements for estimating and disclosing the spot exchange rate in cases where no exchangeability exists. If exchange with other currencies is not possible, the spot exchange rate must be estimated on the measurement date using observable exchange rates without adjustment or employing alternative estimation techniques. These amendments are set for prospective application to fiscal years beginning on or after January 1, 2025, with early application permitted. The company is currently assessing the impacts of these amendments on the separate financial statements.

 

 

 

 

10

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

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”) manage 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 principles

 

The Group's risk management principles are as follows.

- All sales activities should be carried out in consideration of the balance between risk and profit within the preset risk propensity.

- The parent company presents best practices for group risk management, supervises compliance, and has responsibility and authority for monitoring at the group level.

- Operate a risk-related decision-making system that enhances management involvement.

- Organize and operate a risk management organization independent of the sales department.

- Operate a performance management system that clearly considers risks when making business decisions.

- Aim for proactive and practical risk management functions.

- Share a careful view of the possibility of worsening the situation even in normal times.

 

ii) 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 controlling 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 controlling company performs the risk management and supervision 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-1) Group Risk Management Committee

 

Establish a risk management system for the parent company and each subsidiary, and comprehensively manage group risk, including the establishment and approval of the group's risk policies and limits. The committee consists of directors of the parent company.

 

The Committee's resolutions are as follows.

- Establishment of basic risk management policy consistent with the management strategy.

- Determination of the risk level that can be borne by the group and each subsidiary

- Approve the appropriate investment limit or loss tolerance

- Establishment and revision of group risk management regulations and group risk council regulations

- Matters concerning the structure of the risk management organization and division of duties.

- Matters concerning the operation of the risk management system.

- Matters concerning the establishment of various limits and approval of exceeding the limits

- Decisions related to the approval of the group's internal rating law for non-retail and retail credit rating systems by the Financial Supervisory Service

- Matters concerning risk disclosure policy

- Results of crisis situation analysis and related capital management plans and financing plans

- Matters deemed necessary by the board of directors

11

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

4. Financial risk management (continued)

(a) Overview (continued)

 

- Matters required by external regulations such as the Financial Services Commission, and matters prescribed by other regulations, guidelines, etc.

- Matters deemed necessary by the Chairperson

 

ii-2) Group Risk Management Council

 

In order to maintain the Group's risk policies and strategies consistently, discuss all risk-related matters of the Group and make resolutions on matters necessary to implement the policies prescribed by the Group Risk Management Committee. The members shall be chaired by the risk management officer of the group and shall be comprised of the risk management officer of the major subsidiaries.

 

iii) Risk management framework

 

iii-1) Risk Capital Management

 

Risk capital refers to capital required 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 its 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 control risk to an appropriate level.

iii-2) Risk monitoring

 

The Group proactively manages risks by periodically identifying risk factors that may affect the group’s business environment, through a multidimensional risk monitoring system. Each subsidiary is required to report to the Company any factors that could have a material impact on the group-level risk management, and the Company prepares weekly, monthly and occasional monitoring reports to report to Group management including the CRO.

 

In addition, the Group performs preemptive risk management through a “Risk Dashboard” 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 subsidiary, 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.

 

iii-3) Risk review

 

When promoting new products and new businesses and changing major policies, risk factors are reviewed by a pre-defined checklist to block reckless promotion of businesses that are not easy to judge risks and support rational decision-making.

 

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.

 

iii-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 maintain sustainable organization. Each subsidiary maintains crisis planning for four levels of contingencies, namely, “cautious’, “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 if it is deemed necessary

12

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

to respond to the crisis at the group level, such as two or more subsidiaries entering the stage of "cautious", the Company directly takes charge of the situation so that the Company manages it on a concerted group wide basis.

13

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

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 considers reasonable and supportable information that represents a significant increase in credit risk after initial recognition, under without excessive cost or effort. This information includes default experience data held by the Company and analysis by internal credit rating experts.

 

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 predict the variation of the estimated default rate over time.

 

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, qualitative factors, days of delinquency and others estimated from changes in the internal credit rating.

 

 

 

 

 

 

 

 

14

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

 

4. Financial risk management (continued)

 

(b) Credit risk (continued)

 

i) Credit risk management (continued)

 

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 by 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, the information used to determine whether or not to default and the utilization of each information may vary depending on the situation.

 

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 this 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 by analyzing data obtained from past experience and drew correlations across credit risk for each variable. After that, the Company reflected the forward-looking information through regression estimation.

 

Key macroeconomic variables

 

Correlation with credit risk

GDP growth rate

 

(-)

Private consumption index growth rate

 

(-)

Index of equipment investment growth rate

 

(-)

Consumer price index growth rate

 

(+)

Balance on current account

 

(-)

 

The predicted correlations between the macroeconomic variables and the risk of default used by the Company are derived based on the data from the past more than ten years.

 

15

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

 

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 Company 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. The Company uses its own information to develop a statistical credit assessment model used for the estimation, and additional information observed in the market is considered for some portfolios such as a group of large corporates. When a counterparty or exposure is concentrated in specific grades, the method of measuring PD for those grades would be adjusted, and the PD by grade is estimated by considering contract expiration of the exposure.

 

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 is periodically reviewed to maintain the 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 past experience.

 

 

16

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 the 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 June 30, 2024 and December 31, 2023 are as follows:

 

 

 

 

June 30, 2024

 

December 31, 2023

Due from banks and loans at amortized cost(*1):

Banks

W

152,308

 

22

Corporations

 

3,948,483

 

4,051,004

 

 

4,100,791

 

4,051,026

Financial assets at fair value through profit or loss

 

1,639,371

 

735,155

Other financial assets at amortized cost(*1)(*2)

 

464,071

 

507,171

 

 

W

6,204,233

 

5,293,352

 

(*1) The maximum exposure amounts for due from banks, loans and other financial assets at amortized cost are measured as net of allowances.

(*2) It is comprised of accounts receivable, accrued income, and guarantee deposits.

 

17

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

12-months

ECL

 

Lifetime

ECL

 

Gross

amount

 

Allowance

 

Total, net

Due from banks and loans at amortized cost(*):

 

 

 

 

 

 

 

 

 

 

Banks

W

152,379

 

-

 

152,379

 

(71)

 

152,308

Corporations

 

3,950,332

 

-

 

3,950,332

 

(1,849)

 

3,948,483

 

 

4,102,711

 

-

 

4,102,711

 

(1,920)

 

4,100,791

Other financial assets at amortized cost

 

464,267

 

-

 

464,267

 

(196)

 

464,071

 

W

4,566,978

 

-

 

4,566,978

 

(2,116)

 

4,564,862

 

 

 

December 31, 2023

 

 

12 months

ECL

 

Lifetime

ECL

 

Gross

amount

 

Allowance

 

Total, net

Due from banks and loans at amortized cost(*):

 

 

 

 

 

 

 

 

 

 

Banks

W

22

 

-

 

22

 

-

 

22

Corporations

 

4,052,900

 

-

 

4,052,900

 

(1,896)

 

4,051,004

 

 

4,052,922

 

-

 

4,052,922

 

(1,896)

 

4,051,026

Other financial assets at amortized cost

 

507,356

 

-

 

507,356

 

(185)

 

507,171

 

W

4,560,278

 

-

 

4,560,278

 

(2,081)

 

4,558,197

(*) The credit quality of due from banks and loans is divided into Prime and Normal. The credit quality of due from banks and loans as of June 30, 2024 and December 31, 2023 is 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+

 

 

18

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

4. Financial risk management (continued)

 

(c) Liquidity risk

 

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 in financial statements 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 non-derivative financial liabilities as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

Less than 1 month

 

1 ~ 3 months

 

3 ~ 6

months

 

6 months ~ 1 year

 

1 ~ 5

years

 

More than

5 years

 

Total

Non-derivative

 financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Borrowings

 

-

 

-

 

10,000

 

10,000

 

-

 

-

 

20,000

Debt securities issued

W

224,262

 

445,016

 

382,865

 

1,462,364

 

7,929,200

 

1,226,310

 

11,670,017

Other financial liabilities

 

61,620

 

40,141

 

38,931

 

76,608

 

93,914

 

-

 

311,214

 

W

285,882

 

485,157

 

431,796

 

1,548,972

 

8,023,114

 

1,226,310

 

12,001,231

 

 

 

December 31, 2023

 

 

Less than 1 month

 

1 ~ 3 months

 

3 ~ 6

months

 

6 months ~ 1 year

 

1 ~ 5

years

 

More than

5 years

 

Total

Non-derivative

 financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Borrowings

 

-

 

65,000

 

160,000

 

-

 

-

 

-

 

225,000

Debt securities issued

W

233,951

 

97,847

 

699,244

 

1,031,484

 

8,151,841

 

1,190,936

 

11,405,303

Other financial liabilities

 

34,226

 

125,749

 

300,336

 

723

 

493

 

-

 

461,527

 

W

268,177

 

288,596

 

1,159,580

 

1,032,207

 

8,152,334

 

1,190,936

 

12,091,830

(*) The amounts include both principal and interest cash flows of financial liabilities.

 

 

19

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 published price of the trading agencies. 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 a variety of evaluation methods and makes rational assumptions 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, a method of using recent transactions between independent parties with reasonable judgement and willingness to trade, a 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 June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Assets

 

 

 

 

 

 

 

 

Financial assets measured at fair value through profit or loss

W

-

 

1,639,371

 

1,390,124

 

3,029,495

 

 

 

December 31, 2023

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Assets

 

 

 

 

 

 

 

 

Financial assets measured at fair value through profit or loss

W

-

 

735,155

 

1,250,605

 

1,985,760

 

 

 

 

 

 

 

 

 

 

 

20

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

 

Financial assets measured

 

 

 

at FVTPL

Beginning balance

W

1,250,605

 

Recognized in profit or loss

 

39,519

 

Purchases

 

100,000

 

Ending balance

W

1,390,124

 

 

 

December 31, 2023

 

 

 

Financial assets measured

 

 

 

at FVTPL

Beginning balance

W

846,384

 

Recognized in profit or loss

 

104,221

 

Purchases

 

300,000

 

Ending balance

W

1,250,605

 

 

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 June 30, 2024 and December 31, 2023 are as follows:

 

 

Classification

 

Valuation techniques

 

Type

   Book Value

 

Inputs

2024

Financial assets measured at FVTPL

 

Net asset valuation approach

 

Beneficiary certificates

1,639,371

 

Prices of underlying assets such as bonds, exchange rates

2023

Financial assets measured at FVTPL

 

Net asset valuation approach

 

Beneficiary certificates

 

735,155

 

Prices of underlying assets such as bonds, exchange rates

 

21

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

4. Financial risk management (continued)

 

(d) Measurement for the fair value of financial instruments (continued)

 

i-3-2) Information about valuation techniques and significant unobservable inputs in measuring financial instruments categorized as level 3 as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

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

 

W

1,390,124

 

Volatility of

interest rate

 

0.43%~1.21%

(*) It is calculated by applying the Hull-White model method.

 

 

 

December 31, 2023

 

 

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

 

W

1,250,605

 

Volatility of

interest rate

 

0.51%~1.35%

(*) It is calculated by applying the Hull-White model method.

 

 

 

22

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 input variables

 

- 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) as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

 

June 30, 2024

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

W

631

 

(870)

 

(*) Based on 10% of increase or decrease in volatility of underlying assets, and volatility of interest rate, which are major unobservable inputs.

 

 

 

 

December 31, 2023

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

W

763

 

(905)

(*) 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

 

The carrying amount and the fair value for cash are identical and 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

 

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.

 

 

23

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

 

 

Carrying value

 

Fair value

 

Carrying value

 

Fair value

Assets:

 

 

 

 

 

 

 

 

Due from banks at amortized cost

W

152,308

 

152,308

 

22

 

22

Loans at amortized cost

 

3,948,483

 

3,895,157

 

4,051,004

 

3,961,446

Other financial assets at amortized cost

 

464,071

 

464,071

 

507,171

 

507,171

 

W

4,564,862

 

4,511,536

 

4,558,197

 

4,468,639

Liabilities:

 

 

 

 

 

 

 

 

Borrowings

 

19,681

 

19,381

 

223,722

 

221,255

Debt securities issued

W

10,649,283

 

10,582,773

 

10,389,276

 

10,238,060

Other financial liabilities

 

374,004

 

374,004

 

521,197

 

521,197

 

W

11,042,968

 

10,976,158

 

11,134,195

 

10,980,512

 

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 June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Assets:

 

 

 

 

 

 

 

 

Due from banks at amortized cost

W

152,305

 

3

 

-

 

152,308

Loans at amortized cost

 

-

 

-

 

3,895,157

 

3,895,157

Other financial assets at amortized cost

 

-

 

-

 

464,071

 

464,071

 

W

152,305

 

3

 

4,359,228

 

4,511,536

Liabilities:

 

 

 

 

 

 

 

 

Borrowings

 

-

 

19,381

 

-

 

19,381

Debt securities issued

W

-

 

10,582,773

 

-

 

10,582,773

Other financial liabilities

 

-

 

-

 

374,004

 

374,004

 

W

-

 

10,602,154

 

374,004

 

10,976,158

 

 

 

December 31, 2023

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Assets:

 

 

 

 

 

 

 

 

Due from banks at amortized cost

W

19

 

3

 

-

 

22

Loans at amortized cost

 

-

 

-

 

3,961,446

 

3,961,446

Other financial assets at amortized cost

 

-

 

-

 

507,171

 

507,171

 

W

19

 

3

 

4,468,617

 

4,468,639

Liabilities:

 

 

 

 

 

 

 

 

Borrowings

W

-

 

221,255

 

-

 

221,255

Debt securities issued

 

-

 

10,238,060

 

-

 

10,238,060

Other financial liabilities

 

-

 

-

 

521,197

 

521,197

 

W

-

 

10,459,315

 

521,197

 

10,980,512

 

24

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 June 30, 2024 and December 31, 2023 in measuring financial instruments not measured at fair value classified as level 2 or 3 is as follows:

 

 

 

June 30, 2024

 

 

Valuation technique

 

Fair value

 

Inputs

Assets:

 

 

 

 

 

 

Due from banks at amortized cost

 

-

W

3

 

-

Loans at amortized cost

 

DCF

 

3,895,157

 

Discount rate

Exchange rate

Other financial assets at amortized cost

 

DCF

 

464,071

 

Discount rate

Exchange rate

 

 

 

W

4,359,231

 

 

Liabilities:

 

 

 

 

 

 

  Borrowings

 

DCF

 

19,381

 

Discount rate

Debt securities issued

 

DCF

W

10,582,773

 

Discount rate

Exchange rate

Other financial liabilities

 

DCF

 

374,004

 

Discount rate

Exchange rate

 

 

 

W

10,976,158

 

 

 

 

 

December 31, 2023

 

 

Valuation technique

 

Fair value

 

Inputs

Assets:

 

 

 

 

 

 

Due from banks at amortized cost

 

-

W

3

 

-

Loans at amortized cost

 

DCF

 

3,961,446

 

Discount rate

Exchange rate

Other financial assets at amortized cost

 

DCF

 

507,171

 

Discount rate

Exchange rate

 

 

 

W

4,468,620

 

 

Liabilities:

 

 

 

 

 

 

Borrowings

 

DCF

W

221,255

 

Discount rate

Debt securities issued

 

DCF

 

10,238,060

 

Discount rate

Exchange rate

Other financial liabilities

 

DCF

 

521,197

 

Discount rate

Exchange rate

 

 

 

W

10,980,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(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 June 30, 2024 and December 31, 2023 are as follows:

 

 

 

 

June 30, 2024

 

 

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

W

-

 

152,308

 

-

Financial assets at fair value through profit or loss

 

3,029,495

 

-

 

-

Loans at amortized cost

 

-

 

3,948,483

 

-

Other financial assets at amortized cost

 

-

 

464,071

 

-

 

W

3,029,495

 

4,564,862

 

-

Liabilities:

 

 

 

 

 

 

Borrowings

W

-

 

-

 

19,681

Debt securities issued

 

-

 

-

 

10,649,283

Other financial liabilities

 

-

 

-

 

374,004

 

W

-

 

-

 

11,042,968

 

 

 

December 31, 2023

 

 

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

W

-

 

22

 

-

Financial assets at fair value through profit or loss

 

1,985,760

 

-

 

-

Loans at amortized cost

 

-

 

4,051,004

 

-

Other financial assets at amortized cost

 

-

 

507,171

 

-

 

W

1,985,760

 

4,558,197

 

-

Liabilities:

 

 

 

 

 

 

Borrowings

W

-

 

-

 

223,722

Debt securities issued

 

-

 

-

 

10,389,276

Other financial liabilities

 

-

 

-

 

521,197

 

W

-

 

-

 

11,134,195

 

 

 

 

 

26

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

5. Restricted due from banks

 

Guaranteed deposits on bank accounts that are subject to restriction according to the Banking Act and other related enforcement decree as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

Margin deposit for current account

W

3

 

3

 

6. Financial assets at fair value through profit or loss

 

Financial assets at fair value through profit or loss as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30,

2024

 

December 31, 2023

Beneficiary certificates

 

 

 

 

 Beneficiary certificates in Korean won

W

1,595,734

 

705,273

 Beneficiary certificates in foreign currency

 

43,637

 

29,882

 

 

1,639,371

 

735,155

Hybrid Bonds

 

 

 

 

Hybrid Bonds in Korean won

 

1,050,417

 

934,917

Hybrid Bonds in foreign currency

 

339,707

 

315,688

 

W

1,390,124

 

1,250,605

 

 

3,029,495

 

1,985,760

 

7. Loans measured at amortized cost

 

(a) Loans measured at amortized cost as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

December 31, 2023

Corporate loans

W

3,950,332

 

 

4,052,900

Less: allowance

 

(1,849)

 

 

(1,896)

 

W

3,948,483

 

 

4,051,004

 

 

 

 

 

 

 

 

27

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

7. Financial assets at amortized cost(continued)

 

(b) Changes in financial assets at amortized cost and other assets for the six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

Loans at amortized cost

 

Due from banks at amortized cost and other financial assets

 

 

 

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

W

4,052,900

 

-

 

-

 

507,378

 

-

 

-

 

4,560,278

Transfer to 12-month expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to lifetime expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to impaired financial asset

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Origination

 

170,000

 

-

 

-

 

-

 

-

 

-

 

170,000

Collection

 

(395,000)

 

-

 

-

 

-

 

-

 

-

 

(395,000)

Others (*)

 

122,432

 

-

 

-

 

109,268

 

-

 

-

 

231,700

Ending balance

W

3,950,332

 

-

 

-

 

616,646

 

-

 

-

 

4,566,978

(*) Other changes are due to dividends receivables from subsidiaries, consolidation tax receivables, accrued income, changes in foreign exchange rate, etc.

 

 

December 31, 2023

 

 

Loans at amortized cost

 

Due from banks at amortized cost and other financial assets

 

 

 

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

W

4,012,304

 

-

 

-

 

905,675

 

-

 

-

 

4,917,979

Transfer to 12-month expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to lifetime expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to impaired financial asset

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Origination

 

415,000

 

-

 

-

 

-

 

-

 

-

 

415,000

Collection

 

(400,000)

 

-

 

-

 

-

 

-

 

-

 

(400,000)

Others (*)

 

25,596

 

-

 

-

 

(398,297)

 

-

 

-

 

(372,701)

Ending balance

W

4,052,900

 

-

 

-

 

507,378

 

-

 

-

 

4,560,278

(*) Other changes are due to dividends receivables from subsidiaries, consolidation tax receivables, accrued income, changes in foreign exchange rate, etc.

 

 

 

 

28

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

7. Financial assets at amortized cost(continued)

 

(c) Changes in credit loss allowance of financial assets at amortized cost and other assets for the six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

 

Loans at amortized cost

 

Due from banks at amortized cost and other financial assets

 

 

 

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning allowance

W

1,896

 

-

 

-

 

185

 

-

 

-

 

2,081

Transfer to 12 month expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to lifetime expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to impaired financial asset

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Provision(Reversal)

 

(47)

 

-

 

-

 

82

 

-

 

-

 

35

Ending allowance

W

1,849

 

-

 

-

 

267

 

-

 

-

 

2,116

 

 

 

December 31, 2023

 

 

Loans at amortized cost

 

Due from banks at amortized cost and other financial assets

 

 

 

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

12 month expected credit losses

 

Lifetime expected credit losses

 

Impaired financial asset

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning allowance

W

2,837

 

-

 

-

 

607

 

-

 

-

 

3,444

Transfer to 12 month expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to lifetime expected credit losses

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Transfer to impaired financial asset

 

-

 

-

 

-

 

-

 

-

 

-

 

-

Reversal

 

(941)

 

-

 

-

 

(422)

 

-

 

-

 

(1,363)

Ending allowance

W

1,896

 

-

 

-

 

185

 

-

 

-

 

2,081

 

29

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

8. Investments in subsidiaries

 

Investments in subsidiaries as of June 30, 2024 and December 31, 2023 are as follows:

 

 

June 30, 2024

 

December 31, 2023

Investees

 

Ownership

percentage

(%)

 

Carrying

 value

 

Ownership

percentage

(%)

 

Carrying

value

Shinhan Bank

 

100.0

W

13,617,579

 

100.0

W

13,617,579

Shinhan Card Co., Ltd

 

100.0

 

7,919,672

 

100.0

 

7,919,672

Shinhan Securities Co., Ltd

 

100.0

 

3,001,420

 

100.0

 

3,001,420

Shinhan Life Insurance Co., Ltd

 

100.0

 

4,204,533

 

100.0

 

4,204,533

Shinhan Capital Co., Ltd

 

100.0

 

558,921

 

100.0

 

558,921

Shinhan Asset Management Co., Ltd

 

100.0

 

326,206

 

100.0

 

326,206

Jeju Bank

 

75.3

 

179,643

 

75.3

 

179,643

Shinhan Savings Bank

 

100.0

 

157,065

 

100.0

 

157,065

Shinhan Asset Trust Co. Ltd

 

100.0

 

430,454

 

100.0

 

429,491

Shinhan DS

 

100.0

 

23,026

 

100.0

 

23,026

Shinhan Fund Partners Co., Ltd

 

99.8

 

50,092

 

99.8

 

50,092

Shinhan REITs Management Co., Ltd

 

100.0

 

30,000

 

100.0

 

30,000

Shinhan AI Co., Ltd(*1)

 

100.0

 

32,807

 

100.0

 

34,734

Shinhan Venture Investment Co., Ltd.

 

100.0

 

75,840

 

100.0

 

75,840

Shinhan EZ General Insurance, Ltd

 

85.1

 

106,210

 

85.1

 

106,210

SHC Management Co., Ltd

 

100.0

 

8,655

 

100.0

 

8,655

 

 

 

W

30,722,123

 

 

W

30,723,087

(*1) The difference between the carrying amount and the net fair value for the year was recognized as an impairment loss of W 1,927 million, and liquidation procedures are in progress as of June 30, 2024. (See Note 22 and Note 25)

 

9. Borrowings

 

Borrowings as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

 

 

 

June 30, 2024

 

December 31, 2023

 

Lender

 

Period

 

Interest

rate (%)

 

Amount

 

Interest

rate (%)

 

Amount

Borrowings

in Korean won

Kiwoom Securities Co., Ltd.

 

 2023.02.02

~2024.02.01

 

-

 

-

 

3.79

 

14,950

Bookook Securities Co., Ltd

 

2023.10.26

~2024.02.26

 

-

 

-

 

4.51

 

29,789

Kyobo Securities Co., Ltd.

 

2023.10.26

~2024.02.26

 

-

 

-

 

4.51

 

19,859

Bookook Securities Co., Ltd

 

2023.10.30

~2024.04.30

 

-

 

-

 

4.61

 

29,542

Kyobo Securities Co., Ltd.

 

2023.10.30

~2024.04.30

 

-

 

-

 

4.61

 

19,694

DB Financial Investment Co.,LTD.

 

2023.12.11

~2024.04.11

 

 

 

-

 

4.01

 

9,888

DB Financial Investment Co.,LTD.

 

2024.02.01

~2025.01.30

 

3.71

 

 9,782

 

-

 

-

Bookook Securities Co., Ltd

 

2024.04.11

~2024.10.11

 

3.59

 

9,899

 

 

 

-

Korea Development Bank

 

2023.10.30

~2024.04.30

 

-

 

-

 

4.74

 

100,000

 

 

 

 

 

 

W

  19,681

 

 

W

223,722

 

30

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

 

 

 

10. Debt securities issued

 

Debt securities issued as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

 

 

Interest

rate (%)

 

Amount

 

Interest

rate (%)

 

Amount

Debt securities issued in won:

 

 

 

 

 

 

 

 

Debt securities issued

 

1.40 ~ 6.17

W

8,580,000

 

1.38 ~ 6.17

W

8,470,000

  Discount

 

 

 

(6,776)

 

 

 

(6,713)

 

 

 

 

8,573,224

 

 

 

8,463,287

 

 

 

 

 

 

 

 

 

Debt securities issued in foreign currency :

 

 

 

 

 

 

 

 

Debt securities issued

 

1.37 ~ 5.06

 

1,389,200

 

1.37 ~ 5.06

 

1,289,400

Subordinated debt securities issued

 

3.34

 

694,600

 

3.34

 

644,700

Discount

 

 

 

(7,741)

 

 

 

(8,111)

 

 

 

 

2,076,059

 

 

 

1,925,989

 

 

W

10,649,283

 

 

W

10,389,276

 

 

 

 

 

 

 

 

 

11. Defined benefit assets and liabilities

(a) Defined benefit obligations and plan assets as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

Present value of defined benefit obligations

W

25,313

 

19,728

Fair value of plan assets

 

(26,101)

 

(26,805)

Recognized liability (asset) for defined benefit obligations

W

(788)

 

(7,077)

 

(b) Net income relating to defined benefit liabilities for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

c

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Current service costs

W

387

 

884

 

391

 

997

Net interest income (expense)

 

(152)

 

(177)

 

(63)

 

(50)

 

W

235

 

707

 

328

 

947

(*) Profit or loss arising from defined benefit plans is included in general and administrative expenses.

 

31

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

12. Equity

 

(a) Equity as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

Capital stock(*1)

 

 

 

 

Common stock

W

2,695,586

 

2,695,586

Preferred stock

 

274,055

 

274,055

 

 

2,969,641

 

2,969,641

 

 

 

 

 

Hybrid bonds

 

4,201,088

 

4,001,731

 

 

 

 

 

Capital surplus

 

 

 

 

Share premium

 

11,350,744

 

11,350,744

 

 

 

 

 

Capital adjustments

 

(196,075)

 

(148,464)

 

 

 

 

 

Accumulated other comprehensive loss

 

(8,179)

 

(6,642)

Retained earnings

 

 

 

 

Legal reserve (*2)

 

  2,865,461

 

2,698,360

Regulatory reserve for loan losses

 

  20,656

 

21,078

Other legal reserves

 

  2,000

 

2,000

Unappropriated retained earnings

 

5,898,300

 

5,210,693

 

 

 8,786,417

 

7,932,131

 

W

27,103,636

 

26,099,141

(*1) Due to the retirement of earned surplus reserve, the capital is different from the total face value of the issued stock.

(*2) 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 cash 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.

 

 

32

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

12. Equity (continued)

 

(b) Hybrid bonds

 

Hybrid bonds classified as other equity instruments as of June 30, 2024 and December 31, 2023 are as follows:

 

 

Issue date

 

Maturity date

 

Interest rate (%)

 

June 30, 2024

 

December 31, 2023

Hybrid bonds in KRW

June 25, 2015

 

June 25, 2045

 

4.38

W

199,455

 

199,455

September 15, 2017

 

Perpetual bond

 

4.25

 

89,783

 

89,783

April 13, 2018

 

Perpetual bond

 

4.56

 

14,955

 

14,955

June 28, 2019

 

Perpetual bond

 

3.27

 

-

 

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

 

Perpetual bond

 

3.30

 

169,581

 

169,581

 

January 25, 2022

 

Perpetual bond

 

3.90

 

560,438

 

560,438

 

January 25, 2022

 

Perpetual bond

 

4.00

 

37,853

 

37,853

 

August 26, 2022

 

Perpetual bond

 

4.93

 

343,026

 

343,026

 

August 26, 2022

 

Perpetual bond

 

5.15

 

55,803

 

55,803

 

January 30, 2023

 

Perpetual bond

 

5.14

 

398,831

 

398,831

 

July 13, 2023

 

Perpetual bond

 

5.40

 

498,815

 

498,815

 

January 31, 2024

 

Perpetual bond

 

4.49

 

398,833

 

-

Hybrid bonds in USD

May 12, 2021

 

Perpetual bond

 

2.88

 

556,007

 

556,007

 

 

 

 

 

W

4,201,088

 

4,001,731

(*) For the six-month period ended June 30, 2024, the deduction for capital related to hybrid bond issued is W 1,167 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.

 

(c) Capital adjustments

 

i) Changes in accumulated capital adjustments for the six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

Beginning balance

W

(148,464)

 

(46,114)

Disposal of retained earnings

 

102,667

 

317

Repayment of hybrid bonds

 

(524)

 

(102,667)

Acquisition of treasury stock

 

(300,350)

 

(486,919)

Disposal of treasury stock

 

296

 

-

Retirement of treasury stock

 

150,300

 

486,919

Ending balance

W

(196,075)

 

(148,464)

 

ii) Changes in treasury stocks for the six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

 

June 30, 2024

 

 

Beginning balance

 

Acquisition(*)

 

 

Disposal

Retirement (*)

 

Ending balance

The number of shares

 

6,352

 

6,541,412

 

 

(6,353)

(3,366,257)

 

3,175,154

33

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

Book value

W

227

 

300,350

 

 

(227)

(150,300)

 

150,050

 

 

 

 

 

 

 

 

 

 

 

(*) The Company acquired treasury stocks for retirement during the current half year and completed the profit cancellation of 3,366,257 shares on March 22, 2024.

 

34

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

12. Equity (continued)

 

 

 

June 30, 2023

 

 

Beginning balance

 

Acquisition (*)

 

 

Retirement (*)

 

Ending balance

The number of shares

 

6,352

 

7,919,751

 

 

(7,919,751)

 

6,352

Book value

W

227

 

286,519

 

 

(286,519)

 

227

 

 

 

 

 

 

 

 

 

 

(*) The Company acquired treasury stocks for retirement during the previous period, and completed profit cancellation of 3,676,470 shares, 4,243,281 shares on March 28, 2023, June 16, 2023, respectively.

 

(d) Changes in accumulated other comprehensive loss for the six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

Beginning balance

W

(6,642)

 

(5,210)

Remeasurement of the defined benefit liabilities(assets)

 

(2,088)

 

(1,936)

Tax effect

 

551

 

504

Ending balance

W

(8,179)

 

(6,642)

 

(e) 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 June 30, 2024 and December 31, 2023 are as follows

 

 

 

June 30, 2024

 

December 31, 2023

Beginning balance

W

20,656

 

21,078

Planned regulatory reserve for loan losses

 

(2)

 

(422)

Ending balance

W

20,654

 

20,656

 

ii) Profit for the period and earnings per share after adjusted for regulatory reserve for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

Profit for the period

W

1,736,881

 

1,730,323

Provision for regulatory reserve for loan losses

 

2

 

469

Profit for the period adjusted for regulatory reserve

W

1,736,883

 

1,730,792

Basic and diluted earnings per share in won factoring in regulatory reserve (*)

W

3,238

 

3,134

(*) Dividends for hybrid bonds are deducted.

35

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

13. Net interest expense

 

Net interest expense for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Interest income:

 

 

 

 

 

 

 

 

Cash and due from banks at amortized cost

W

1,409

 

1,531

 

2

 

176

Loans at amortized cost

 

24,053

 

48,633

 

22,985

 

45,114

Others

 

110

 

658

 

127

 

251

 

 

25,572

 

50,822

 

23,114

 

45,541

Interest expense:

 

 

 

 

 

 

 

 

Borrowings

 

(761)

 

(3,076)

 

(164)

 

(366)

Debt securities issued

 

(82,739)

 

(161,714)

 

(67,311)

 

(130,486)

Others

 

(19)

 

(39)

 

(22)

 

(42)

 

 

(83,519)

 

(164,829)

 

(67,497)

 

(130,894)

Net interest expense

W

(57,947)

 

(114,007)

 

(44,383)

 

(85,353)

 

14. Net fees and commission income

 

Net fees and commission income for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

c

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Fees and commission income:

 

 

 

 

 

 

 

 

Royalty

W

18,144

 

35,519

 

17,375

 

34,751

Others

 

3

 

9

 

4

 

7

 

 

18,147

 

35,528

 

17,379

 

34,758

Fees and commission expense:

 

 

 

 

 

 

 

 

Others

 

(160)

 

(193)

 

(212)

 

(357)

Net Fees and commission income:

W

17,987

 

35,335

 

17,167

 

34,401

 

15. Dividend income

 

Dividends income for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

c

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Dividends from subsidiaries

W

-

 

1,821,424

 

-

 

1,736,958

Dividends from hybrid bonds

 

13,273

 

26,018

 

12,740

 

23,472

 

W

13,273

 

1,847,442

 

12,740

 

1,760,430

 

 

 

36

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

16. Provision for (reversal of) credit loss allowance

 

Provision for (reversal of) credit loss allowance for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Provision for (reversal of) credit loss allowance

W

(39)

 

35

 

(1,424)

 

(1,436)

 

17. General and administrative expenses

 

General and administrative expenses for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-month

 

Six-month

 

Three-month

 

Six-month

Salaries:

 

 

 

 

 

 

 

 

Salary expenses and bonuses

W

10,740

 

22,422

 

10,919

 

22,403

Severance benefits

 

235

 

707

 

328

 

947

Rent

 

478

 

934

 

241

 

465

Lease

 

58

 

124

 

85

 

175

Entertainment

 

463

 

906

 

497

 

1,089

Depreciation

 

1,147

 

2,247

 

956

 

1,856

Amortization

 

141

 

276

 

24

 

43

Taxes and dues

 

193

 

476

 

197

 

575

Advertising

 

13,824

 

27,195

 

14,351

 

23,562

Others

 

8,362

 

13,046

 

7,029

 

11,230

 

W

35,641

 

68,333

 

34,627

 

62,345

 

37

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

18. Share-based payments

 

(a) Performance shares granted as of June 30, 2024 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 June 30, 2024

 

170,874

 

 2,653,191

 

 

 

 

 

Fair value per share in Korean won (*)

 

W44,222, W33,122, W37,387, W37,081 and W 38,156 for the expiration of the exercising period from 2019 to 2023

 

W 48,150

(*) 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 months, 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

Based on the share-based payment arrangements held by the Company, the share-based compensation costs for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

 

Employees of

 

 

 

 

Shinhan

Financial

Group

 

Subsidiaries

 

Total

Performance shares

W

3,229

 

25,753

 

28,982

 

 

 

 

June 30, 2023

 

 

Employees of

 

 

 

 

Shinhan

Financial

Group

 

Subsidiaries

 

Total

Performance shares

W

1,465

 

8,068

 

9,533

 

38

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

18. Share-based payments (continued)

 

(c) Share-based compensation payable

 

In accordance with the share-based compensation agreements by the Company, the share-based compensation payable as of June 30, 2024 and December 31, 2023 are as follows.

 

 

 

June 30, 2024

 

 

Accrued expense

 

 

 

 

Shinhan

Financial

Group

 

Subsidiaries (*)

 

Total

Performance shares

W

14,675

 

119,423

 

134,098

(*) As of June 30, 2024, the Company recognized accounts receivable W 119,423 million to be preserved from the subsidiary as the amount to be paid to the executives and employees of the subsidiary.

 

 

 

December 31, 2023

 

 

Accrued expense

 

 

 

 

Shinhan

Financial

Group

 

Subsidiaries (*)

 

Total

Performance shares

W

16,079

 

111,056

 

127,135

(*) As of December 31, 2023, the Company recognized accounts receivable W 111,056 million to be preserved from the subsidiary as the amount to be paid to the executives and employees of the subsidiary.

 

 

39

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won, except per share data)

 

19. Income taxes

 

Income tax expense for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Current income tax expense

W

(3)

 

(3)

 

-

 

-

Temporary differences

 

711

 

2,231

 

4,260

 

23,841

Income tax recognized directly in equity

 

551

 

551

 

274

 

267

Income tax expense (benefit)

W

1,259

 

2,779

 

4,534

 

24,108

(*) The Company does not recognize deferred tax assets and liabilities related to global minimum tax laws by applying the temporary exception provision for deferred tax in K-IFRS No. 1012.

 

 

20. Earnings per share

 

Basic and diluted earnings per share for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Net profit (loss) for the period

W

(36,290)

 

1,736,881

 

(15,947)

 

1,730,323

Less:

 

 

 

 

 

 

 

 

Dividends to hybrid bonds

 

(50,070)

 

(85,806)

 

(44,030)

 

(91,954)

Net profit (loss) available for common stock

W

(86,360)

 

1,651,075

 

(59,977)

 

1,638,369

 

 

 

 

 

 

 

 

 

Weighted average number of common stocks outstanding (*)

 

508,306,029

 

509,942,342

 

520,676,621

 

522,896,062

Basic and diluted earnings (loss) per share in Korean won

W

(170)

 

3,238

 

(115)

 

3,133

(*) The number of common shares issued by the Company is 509,393,214 shares as of June 30, 2024. The weighted average number of common shares outstanding, stated above, is calculated by reflecting changes in treasury stocks that were retired after the acquisition during the current and previous quarter.

40

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

21. Operating income

 

Operating income for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Dividend income

W

13,273

 

1,847,442

 

12,740

 

1,760,430

Fees and commission income

 

18,147

 

35,528

 

17,379

 

34,758

Interest income

 

25,572

 

50,822

 

23,114

 

45,541

Gain on financial assets at fair value through profit or loss

 

28,807

 

44,183

 

31,613

 

83,880

Gain on foreign currency transaction

 

63,685

 

149,615

 

14,253

 

71,272

Reversal of credit loss allowance

 

-

 

-

 

1,424

 

1,436

 

W

149,484

 

2,127,590

 

100,523

 

1,997,317

 

22. Commitments and contingencies

 

(a) The commitments with financial institutions as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

 

June 30, 2024

 

December 31, 2023

 

Financial institutions

 

 

Borrowing Limit

 

Balance after Execution

 

Borrowing Limit

 

Balance after Execution

Borrowing agreement

in Korean won

Korea Development Bank

 

W

100,000

 

-

 

100,000

 

100,000

Kookmin Bank

 

 

200,000

 

-

 

200,000

 

-

Hana Bank

 

 

200,000

 

-

 

200,000

 

-

 

 

 

W

500,000

 

-

 

500,000

 

100,000

 

 

 

 

 

 

 

 

 

(b) Liquidation of Subsidiary Company

The Company's subsidiary Shinhan AI is in the process of liquidation after transferring its major assets to our subsidiary Shinhan Bank in January 2024. Accordingly, the Company established a pledge for Shinhan Bank's time deposits of W 31,000 million held by Shinhan AI. (See Note 25)

 

 

41

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

23. Statement of cash flows

 

(a) Cash and cash equivalents in the separate statements of cash flows as of June 30, 2024 and December 31, 2023 are as follows:

 

 

 

June 30, 2024

 

December 31, 2023

Due from financial institutions with a maturity less

than three months from date of acquisition

W

152,376

 

19

 

(b) Changes in liabilities arising from financing activities for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

 

Borrowings

 

Debt securities issued

 

Lease liabilities

 

Total

Balance at January 1, 2024

W

223,722

 

10,389,276

 

1,933

 

10,614,931

Changes from cash flows

 

(205,550)

 

108,339

 

(793)

 

(98,004)

Changes from non-cash flows:

 

 

 

 

 

 

 

 

Amortization of discount on debentures

 

1,509

 

2,624

 

39

 

4,172

Foreign currency difference

 

-

 

149,044

 

-

 

149,044

Other changes:

 

-

 

-

 

473

 

473

Balance at June 30, 2024

W

19,681

 

10,649,283

 

1,652

 

10,670,616

 

 

June 30, 2023

 

 

Borrowings

 

Debt securities issued

 

Lease liabilities

 

Total

Balance at January 1, 2023

W

20,000

 

9,815,457

 

979

 

9,836,436

Changes from cash flows

 

43,763

 

138,308

 

(834)

 

181,237

Changes from non-cash flows:

 

 

 

 

 

 

 

 

Amortization of discount on debentures

 

252

 

2,312

 

43

 

2,607

Foreign currency difference

 

-

 

45,033

 

-

 

45,033

Other changes

 

-

 

-

 

1,772

 

1,772

Balance at June 30, 2023

W

64,015

 

10,001,110

 

1,960

 

10,067,085

 

 

 

42

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

24. Related party transactions

 

The Company defines subsidiaries, key managements, and their families as elated parties in accordance with K-IFRS No.1024, and discloses the balance of receivables/payables and others arising from transactions with related parties. For details of subsidiaries, refer to 'Note 8'.

 

(a) Significant transactions with the related parties for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

Account

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Revenue:

 

 

 

 

 

 

 

 

 

 

Shinhan Bank

 

Interest income

W

111

 

200

 

127

 

251

 

Fees and commission income

 

12,800

 

23,221

 

10,420

 

20,841

 

Dividend income

 

-

 

1,196,396

 

-

 

1,157,105

 

Reversal of credit losses

 

-

 

-

 

237

 

241

Shinhan Card Co., Ltd.

 

Interest income

 

13,295

 

27,973

 

13,204

 

25,763

 

Fees and commission income

 

3,107

 

6,670

 

3,562

 

7,125

 

Dividend income

 

7,926

 

326,306

 

7,947

 

270,712

 

Reversal of credit losses

 

117

 

88

 

562

 

601

Shinhan Securities Co., Ltd.

 

Interest income

 

5,364

 

10,503

 

5,016

 

9,994

 

Fees and commission income

 

486

 

1,762

 

1,277

 

2,553

 

Dividend income

 

2,691

 

45,666

 

2,591

 

105,083

 

Reversal of credit losses

 

-

 

-

 

319

 

305

Shinhan Life Insurance Co., Ltd.

 

Fees and commission income

 

1,256

 

2,440

 

1,184

 

2,368

 

Dividend income

 

-

 

165,338

 

-

 

162,257

 

Reversal of credit losses

 

-

 

-

 

2

 

3

Shinhan Capital Co., Ltd.

 

Interest income

 

3,277

 

6,665

 

3,560

 

7,102

 

Fees and commission income

 

525

 

997

 

472

 

944

 

Dividend income

 

2,157

 

80,334

 

2,203

 

49,800

 

Reversal of credit losses

 

13

 

27

 

243

 

226

Jeju Bank

 

Fees and commission income

 

(38)

 

20

 

57

 

115

 

Dividend income

 

-

 

2,420

 

-

 

2,420

 

Reversal of credit losses

 

-

 

-

 

1

 

1

Shinhan Asset Management Co., Ltd.

 

Fees and commission income

 

(15)

 

82

 

97

 

194

 

Dividend income

 

-

 

24,400

 

-

 

7,000

 

Reversal of credit losses

 

-

 

-

 

2

 

2

Shinhan DS

 

Interest income

 

94

 

206

 

145

 

277

 

Fees and commission income

 

5

 

11

 

6

 

11

 

Reversal of credit losses

 

2

 

4

 

6

 

9

Shinhan Fund Partners Co., Ltd.

 

Fees and commission income

 

19

 

52

 

32

 

65

 

Dividend income

 

-

 

6,083

 

-

 

6,054

Shinhan Savings Bank

 

Interest income

 

670

 

1,338

 

674

 

1,338

 

Fees and commission income

 

77

 

167

 

90

 

178

 

Reversal of credit losses

 

-

 

-

 

47

 

46

Shinhan REITS management

 

Fees and commission income

 

17

 

38

 

21

 

42

Shinhan Asset Trust

 

Interest income

 

930

 

1,002

 

-

 

-

43

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

 

Fees and commission income

 

(93)

 

48

 

141

 

282

 

Dividend income

 

499

 

499

 

-

 

-

Shinhan Venture Investment Co., Ltd.

 

Interest income

 

574

 

1,220

 

385

 

815

 

Fees and commission income

 

-

 

20

 

19

 

39

 

Reversal of credit losses

 

-

 

-

 

6

 

6

 

 

 

W

55,866

 

1,932,196

 

54,655

 

1,842,168

44

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

24. Related party transactions (continued)

 

(a) Significant transactions with the related parties for the six-month periods ended June 30, 2024 and 2023 are as follows (continued):

 

Related party

 

Account

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-

month

 

Six-

month

Expense:

 

 

 

 

 

 

 

 

 

 

Shinhan Bank

 

Interest expenses

W

7

 

18

 

154

 

295

 

General and administrative expenses

 

596

 

1,206

 

255

 

487

 

Provision for credit losses

 

4

 

1

 

-

 

-

Shinhan Card Co., Ltd.

 

Interest expenses

 

1

 

2

 

3

 

5

 

General and administrative expenses

 

14

 

33

 

108

 

121

Shinhan Securities Co., Ltd.

 

Interest expenses

 

41

 

83

 

37

 

71

 

Fees and commission expense (*)

 

-

 

470

 

299

 

832

 

General and administrative expenses

 

3

 

3

 

24

 

39

 

Provision for credit losses

 

11

 

27

 

-

 

-

Shinhan Life Insurance Co., Ltd.

 

Interest expenses

 

217

 

435

 

218

 

433

 

Provision for credit losses

 

-

 

1

 

-

 

-

Shinhan Asset Management Co., Ltd.

 

Provision for credit losses

 

9

 

9

 

-

 

-

Shinhan DS

 

General and administrative expenses

 

499

 

914

 

460

 

863

Shinhan Fund Partners Co., Ltd.

 

Provision for credit losses

 

-

 

1

 

-

 

-

Shinhan Asset Trust Co. Ltd.

 

Provision for credit losses

 

(4)

 

43

 

3

 

5

Shinhan A.I. Co. Ltd.

 

General and administrative expenses

 

-

 

-

 

10

 

20

Shinhan Venture Investment Co., Ltd.

 

Provision for credit losses

 

-

 

1

 

-

 

-

 

 

 

W

1,398

 

3,247

 

1,571

 

3,171

(*) It consists of commissions paid for acquisitions of hybrid bonds for retirement of treasury stocks, and it was directly deducted from the equity.

 

 

45

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

24. Related party transactions (continued)

 

(b) Significant balances with the related parties as of June 30, 2024 and December 31, 2023 are as follows:

 

Creditor

 

Debtor

 

Account

 

June 30,

2024

 

December 31,

2023

Assets:

 

 

 

 

 

 

 

 

Shinhan Financial Group Co., Ltd.

 

Shinhan Bank

 

Cash and due from banks

W

1,123

 

22

 

 

Property and equipment

 

559

 

1,003

 

 

Other assets

 

184,969

 

184,059

 

Shinhan Card Co., Ltd.

 

 

Financial assets at fair value through profit or loss (*1)

 

711,095

 

699,787

 

 

 

Loans

 

2,027,356

 

2,233,665

 

 

Reserve for loan losses

 

(949)

 

(1,045)

 

 

Property and equipment

 

129

 

162

 

 

Other assets

 

136,791

 

119,351

 

Shinhan Securities Co., Ltd

 

 

Financial assets at fair value through profit or loss (*2)

 

339,707

 

315,688

 

 

Loans

 

815,460

 

756,878

 

 

Reserve for loan losses

 

(382)

 

(354)

 

 

Other assets

 

24,466

 

24,500

 

Shinhan Life Insurance Co., Ltd.

 

Other assets

 

10,987

 

10,152

 

Shinhan Capital Co.,Ltd.

 

 

Financial assets at fair value through profit or loss (*3)

 

239,484

 

235,130

 

 

Loans

 

787,840

 

837,880

 

 

Reserve for loan losses

 

(369)

 

(392)

 

 

Other assets

 

25,676

 

34,237

 

Shinhan Asset Management Co., Ltd.

 

Other assets

 

25,704

 

7,305

 

Jeju Bank

 

Other assets

 

2,943

 

3,059

 

Shinhan DS

 

Loans

 

9,778

 

14,949

 

 

Reserve for loan losses

 

(5)

 

(7)

 

 

Property and equipment

 

310

 

402

 

 

Intangible assets

 

113

 

55

 

 

Other assets

 

1,945

 

4,690

 

Shinhan Fund Partners

Co., Ltd.

 

Other assets

 

3,812

 

941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

24. Related party transactions (continued)

 

(b) Significant balances with the related parties June 30, 2024 and December 31, 2023 are as follows (continued):

 

Creditor

 

Debtor

 

Account

 

June 30,

2024

 

December 31,

2023

Assets:

 

 

 

 

 

 

 

 

 

Shinhan Savings Bank

 

Loans

 

150,000

 

150,000

 

 

Reserve for loan losses

 

(70)

 

(70)

 

 

Other assets

 

4,346

 

3,701

 

Shinhan Asset Trust Co. Ltd.

 

Financial assets at fair value through profit or loss (*4)

 

99,838

 

-

 

 

 

Loans

 

100,000

 

-

 

 

 

Reserve for loan losses

 

(47)

 

-

 

 

 

Other assets

 

2,458

 

9,647

 

Shinhan REITS management

 

Other assets

 

2,978

 

2,491

 

Shinhan AI Co., Ltd.

 

Other assets

 

-

 

327

 

Shinhan Venture Investment Co., Ltd.

 

Loans

 

59,897

 

59,528

 

 

Reserve for loan losses

 

(28)

 

(28)

 

 

Other assets

 

3,361

 

1,687

 

Shinhan EZ General Insurance, Ltd

 

Other assets

 

136

 

89

 

 

 

 

 

W

5,771,411

 

5,709,489

Liabilities:

 

 

 

 

 

 

 

 

Shinhan Bank.

 

Shinhan Financial Group

Co., Ltd.

 

 

Other liabilities

W

31,057

 

3,824

Shinhan Card Co., Ltd.

 

 

Other liabilities

 

22,094

 

22,302

Shinhan Securities Co., Ltd

 

 

Other liabilities

 

9,458

 

206,112

Shinhan Life

 Insurance Co., Ltd.

 

 

Debt security issued in won

 

30,000

 

30,000

 

 

 

Other liabilities

 

96,218

 

70,934

Shinhan Capital Co., Ltd.

 

 

Other liabilities

 

40

 

18

Shinhan DS

 

 

Other liabilities

 

157

 

22

Shinhan Savings Bank

 

 

Other liabilities

 

45

 

1,337

Shinhan AI Co., Ltd.

 

 

Other liabilities

 

10

 

199

 

 

 

 

 

W

189,079

 

334,748

(*1) The amount is for the book value for the purchase of hybrid bonds, and it includes a gain of W 11,308 million and W 56,828 million on financial assets at fair value through profit or loss for the period ended June 30, 2024 and for the year ended December 31, 2023, respectively.

(*2) The amount is for the book value for the purchase of hybrid bonds, and it includes a loss of W 415 million and a gain of W 25,406 million on financial assets at fair value through profit or loss for the period ended June 30, 2024 and for the year ended December 31, 2023, respectively.

(*3) The amount is for the book value for the purchase of hybrid bonds , and it includes a gain of W 4,353 million and W 17,011 million on financial assets at fair value through profit or loss for the period ended June 30, 2024 and for the year ended December 31, 2023, respectively.

(*4) The amount is for the book value for the purchase of hybrid bonds, and it includes a loss of W 162 million on financial assets at fair value through profit or loss for the period ended June 30, 2024.

 

 

 

47

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

24. Related party transactions (continued)

 

(c) Right-of-use assets and lease liabilities recognize through lease transactions with related parties as of June 30, 2024 and December 31, 2023 are as follows:

 

Related parties

 

June 30, 2024

 

December 31, 2023

Right-of-use assets

 

 

 

 

 Shinhan Bank.

W

559

 

1,003

Shinhan Card Co., Ltd.

 

129

 

162

 

W

688

 

1,165

 

 

 

 

 

Lease liabilities

 

 

 

 

 Shinhan Bank.

W

487

 

967

Shinhan Card Co., Ltd.

 

138

 

171

 

W

625

 

1,138

 

(d) Financing transaction
 

Major financing transactions with related parties for the six-month period ended June 30, 2024 and for the year ended December 31, 2023 are as follows:

 

 

 

 

June 30, 2024

 

 

Beginning balance

 

Lending

 

Acquisition(*1)

Collection

 

Others(*2)

 

Ending balance

Shinhan Card Co., Ltd.

W

2,933,452

 

-

 

-

(250,000)

 

54,999

 

2,738,451

Shinhan Securities Co., Ltd

 

1,072,565

 

-

 

-

-

 

82,602

 

1,155,167

Shinhan Capital Co., Ltd.

 

1,073,011

 

-

 

-

(70,000)

 

24,313

 

1,027,324

Shinhan Asset Trust Co. Ltd.

 

-

 

100,000

 

100,000

-

 

(162)

 

199,838

Shinhan Savings Bank

 

150,000

 

-

 

-

-

 

-

 

150,000

Shinhan DS

 

14,949

 

10,000

 

-

(15,000)

 

(170)

 

9,779

Shinhan Venture Investment Co., Ltd.

 

59,528

 

60,000

 

-

(60,000)

 

369

 

59,897

 

W

5,303,505

 

170,000

 

100,000

(395,000)

 

161,951

 

5,340,456

(*1) The purchase amount of hybrid bonds issued by subsidiaries.

(*2) Other transactions include financial asset assessment, foreign currency translation, etc.

 

 

 

 

December 31, 2023

 

 

Beginning balance

 

Lending

 

Acquisition(*1)

 

Collection

 

Others (*2)

 

Ending balance

Shinhan Card Co., Ltd.

W

2,567,898

 

250,000

 

300,000

 

(250,000)

 

65,554

 

2,933,452

Shinhan Securities Co., Ltd

 

1,029,211

 

-

 

-

 

-

 

43,354

 

1,072,565

Shinhan Capital Co., Ltd.

 

1,051,580

 

-

 

-

 

-

 

21,431

 

1,073,011

Shinhan Savings Bank

 

150,000

 

-

 

-

 

-

 

-

 

150,000

Shinhan DS

 

20,000

 

15,000

 

-

 

(20,000)

 

(51)

 

14,949

Shinhan Venture Investment Co., Ltd.

 

40,000

 

150,000

 

-

 

(130,000)

 

(472)

 

59,528

 

W

4,858,689

 

415,000

 

300,000

 

(400,000)

 

129,816

 

5,303,505

(*1) The purchase amount of hybrid bonds issued by subsidiaries includes W 90,000 million acquired from Shinhan Securities Co., Ltd.

(*2) Other transactions include financial asset assessment, foreign currency translation, etc.

 

48

 


SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2024 and 2023 (Unaudited), and December 31, 2023

(In millions of won)

 

24. Related party transactions (continued)

 

(e) Management Compensation

 

Compensation for key management executives for the six-month periods ended June 30, 2024 and 2023 are as follows:

 

 

 

June 30, 2024

 

June 30, 2023

 

 

Three-

month

 

Six-

month

 

Three-month

 

Six-

month

Short-term employee benefits

W

1,127

 

2,332

 

914

 

3,152

Severance benefits

 

32

 

64

 

39

 

78

Share-based payment expenses (*)

 

814

 

1,800

 

395

 

1,246

 

W

1,973

 

4,196

 

1,348

 

4,476

(*) Expenses recognized during the vesting period under the agreement on share-based payments.

 

(f) Shinhan Securities Co., Ltd., a subsidiary, acquired debt securities and hybrid bonds of W 135 billion and W 220 billion issued by the Company for the six-month periods ended June 30, 2024 and 2023, respectively.

 

(g) As of June 30, 2024, the agreed limit for credit card use provided by Shinhan Card Co., Ltd., a subsidiary, is W 23 billion.

 

(h) As of June 30, 2024, Shinhan AI, a subsidiary, is in the process of liquidation, and the Company has established a pledge for Shinhan Bank’s time deposits, amounting to W 31 billion, held by Shinhan AI. (See Note 22 and Note 25)

 

25. Events after the reporting period

 

(a) Quarterly dividend resolution

 

The Company decided to pay a quarterly dividend of W540 per share for common stocks at the board of directors on July 26, 2024. The amount of total dividends is W 273,358 million with the dividend record date of June 30, 2024.

 

(b) Liquidation of Subsidiary Company

 

Our subsidiary Shinhan AI completed the liquidation process in July 2024. As a result, the Company received W 32,679 million of the remaining assets and terminated the pledge for Shinhan Bank's time deposit of W 31,000 million held by Shinhan AI. (See Note 8)

49