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Washington, D.C. 20549
(Mark One) | ||
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
or | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2008 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | ||
or | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report |
N/A | The Republic of Korea | |
(Translation of registrant’s name into English) | (Jurisdiction of incorporation or organization) |
Title of Each Class: | Name of Each Exchange on Which Registered: | |
Common stock, par value Won 5,000 per share | New York Stock Exchange* | |
American depositary shares | New York Stock Exchange |
* | Not for trading, but only in connection with the listing of American depositary shares on the New York Stock Exchange, pursuant to the requirements of the Securities and Exchange Commission. |
Large accelerated filerþ | Accelerated filero | Non-accelerated filero |
U.S. GAAPþ | International Financial Reporting Standards as issued by the International Accounting Standards Boardo | Othero |
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• | the terms “we,” “us,” “our,” “Shinhan Financial Group,” “SFG” and the “Group” mean Shinhan Financial Group Co., Ltd. and its consolidated subsidiaries; | |
• | the terms “Shinhan Financial Group Co., Ltd.”, “our company” and “our holding company” mean Shinhan Financial Group Co., Ltd.; | |
• | the terms “Shinhan Bank” and “SHB” refer to the surviving entity following the merger of the former Shinhan Bank into Chohung Bank effective April 3, 2006 and such entity’s consolidated subsidiaries; | |
• | the term “former Shinhan Bank” refers to Shinhan Bank and its consolidated subsidiaries as in existence prior to its merger with Chohung Bank effective April 3, 2006; | |
• | the terms “Chohung Bank,” “Chohung” and “CHB” refer to Chohung Bank and its consolidated subsidiaries as in existence prior to its merger with former Shinhan Bank effective April 3, 2006; | |
• | the term “Shinhan Card” refers to LG Card, which, on October 1, 2007, assumed all of the assets and liabilities of former Shinhan Card and was renamed as Shinhan Card, and its consolidated subsidiaries; | |
• | the term “former Shinhan Card” refers to the entity created on June 4, 2002 as a result of the spin-off of the credit card division of former Shinhan Bank, into which the credit card division of Chohung Bank was split-merged on April 3, 2006, and currently surviving under the name of SHC Management Co., Ltd. after transferring of all of its assets and liabilities to LG Card (renamed as Shinhan Card) on October 1, 2007; and | |
• | the term “LG Card” refers to LG Card and its consolidated subsidiaries. After acquisition by us of its controlling equity interest, LG Card became our subsidiary on March 19, 2007, and on October 1, 2007, LG Card assumed all of the assets and liabilities of former Shinhan Card and was renamed as Shinhan Card. |
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ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
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ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
Year Ended December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(In billions of Won and millions of US$, except per common share data) | ||||||||||||||||||||||||
Interest and dividend income | 7,712 | 7,488 | 8,893 | 12,149 | 14,734 | $ | 11,675 | |||||||||||||||||
Interest expense | 4,138 | 4,014 | 4,912 | 6,979 | 8,955 | 7,095 | ||||||||||||||||||
Net interest income | 3,574 | 3,474 | 3,981 | 5,170 | 5,779 | 4,580 | ||||||||||||||||||
Provision (reversal) for credit losses | 135 | (183 | ) | 226 | 81 | 1,437 | 1,138 | |||||||||||||||||
Noninterest income | 2,092 | 2,945 | 3,786 | 4,738 | 4,572 | 3,622 | ||||||||||||||||||
Noninterest expense | 3,451 | 3,641 | 5,308 | 6,745 | 6,726 | 5,331 | ||||||||||||||||||
Income tax expense | 682 | 1,015 | 650 | 1,057 | 695 | 551 | ||||||||||||||||||
Minority interest | 153 | 16 | 18 | 95 | 12 | 9 | ||||||||||||||||||
Income before extraordinary item and effect of accounting change | 1,245 | 1,930 | 1,565 | 1,930 | 1,481 | 1,173 | ||||||||||||||||||
Extraordinary gain | 28 | — | — | — | — | — | ||||||||||||||||||
Cumulative effect of a change in accounting principle, net of taxes | (23 | ) | — | (10 | ) | — | — | — | ||||||||||||||||
Net income | 1,250 | 1,930 | 1,555 | 1,930 | 1,481 | $ | 1,173 | |||||||||||||||||
Net income per common shares (in currency unit): | ||||||||||||||||||||||||
Net income — basic(1)(3) | 4,133 | 5,763 | 4,180 | 4,480 | 3,155 | $ | 2.50 | |||||||||||||||||
Net income — diluted(2)(3) | 3,704 | 5,419 | 4,180 | 4,390 | 3,110 | 2.46 | ||||||||||||||||||
Weighted average common shares outstanding-basic (in thousands of common shares) | 292,465 | 333,424 | 372,173 | 382,731 | 396,199 | |||||||||||||||||||
Weighted average common shares outstanding-diluted (in thousands of common shares) | 337,479 | 356,140 | 372,173 | 396,484 | 410,920 |
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(1) | Basic earnings per share are calculated by dividing the net income available to holders of our common shares by the weighted average number of common shares issued and outstanding for the relevant period. | |
(2) | Dilutive earnings per share are calculated in a manner consistent with that of basic earnings per share, while giving effect to the potential dilution that could occur if convertible securities, options or other contracts to issue common shares were converted into or exercised for common shares. We have two categories of potentially dilutive common shares: (i) shares issuable upon the exercise of stock options and (ii) shares issuable upon conversion of the redeemable convertible preferred shares. In 2006, there was no dilutive effect on earnings per share due to a change in accounting policy in 2006 which resulted in the use of the number of the outstanding shares as of the beginning of the year and the election by us to grant cash in lieu of stock upon the exercise of stock options by our employees. We may in the future grant shares in lieu of cash upon the exercise of stock options by our employees, which may impact the dilutive earnings per share in the future. | |
(3) | We applied the equity method of accounting for the previous ownership interest of 7.15% in LG Card in conformity with APB opinion No. 18. Accordingly, the investment, our results of operation and retained earnings were retroactively adjusted as we acquired control over LG Card in 2007. |
As of December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(In billions of Won and millions of US$, except per common share data) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | 2,444 | 2,434 | 1,691 | 3,580 | 1,365 | $ | 1,081 | |||||||||||||||||
Restricted cash | 3,301 | 3,644 | 6,758 | 4,745 | 7,049 | 5,586 | ||||||||||||||||||
Interest-bearing deposits | 220 | 627 | 725 | 1,094 | 1,627 | 1,289 | ||||||||||||||||||
Call loans and securities purchased under resale agreements | 1,591 | 1,499 | 1,243 | 802 | 3,066 | 2,429 | ||||||||||||||||||
Trading assets: | ||||||||||||||||||||||||
Trading securities and other | 4,639 | 3,573 | 3,474 | 8,220 | 6,724 | 5,328 | ||||||||||||||||||
Derivatives assets | 1,678 | 934 | 1,363 | 1,962 | 11,977 | 9,490 | ||||||||||||||||||
Securities: | ||||||||||||||||||||||||
Available-for-sale securities | 18,108 | 22,480 | 16,939 | 22,849 | 29,746 | 23,571 | ||||||||||||||||||
Held-to-maturity securities | 3,099 | 2,963 | 7,581 | 8,224 | 8,696 | 6,891 | ||||||||||||||||||
Loans (net of allowance for loan losses of | 94,752 | 104,447 | 120,989 | 149,723 | 167,308 | 132,574 | ||||||||||||||||||
Customers’ liability on acceptances | 2,012 | 1,879 | 1,417 | 1,701 | 2,433 | 1,928 | ||||||||||||||||||
Premises and equipment, net | 1,848 | 1,876 | 2,097 | 2,455 | 2,412 | 1,912 | ||||||||||||||||||
Goodwill and intangible assets | 1,660 | 2,957 | 2,584 | 6,160 | 5,571 | 4,414 | ||||||||||||||||||
Security deposits | 968 | 1,078 | 1,108 | 1,294 | 1,334 | 1,057 | ||||||||||||||||||
Other assets | 6,889 | 4,688 | 7,118 | 8,813 | 11,665 | 9,243 | ||||||||||||||||||
Total assets | 143,209 | 155,079 | 175,087 | 221,622 | 260,973 | $ | 206,793 | |||||||||||||||||
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As of December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
(In billions of Won and millions of US$, except per common share data) | ||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Interest-bearing | 79,934 | 83,278 | 91,578 | 103,241 | 119,762 | $ | 94,899 | |||||||||||||||||
Non-interest-bearing | 2,746 | 3,143 | 3,918 | 3,162 | 2,942 | 2,331 | ||||||||||||||||||
Trading liabilities | 1,758 | 1,048 | 1,611 | 2,509 | 11,831 | 9,375 | ||||||||||||||||||
Acceptances outstanding | 2,012 | 1,879 | 1,417 | 1,701 | 2,433 | 1,928 | ||||||||||||||||||
Short-term borrowings | 10,954 | 11,968 | 10,995 | 15,801 | 23,225 | 18,403 | ||||||||||||||||||
Secured borrowings | 6,308 | 7,502 | 8,103 | 11,452 | 10,226 | 8,103 | ||||||||||||||||||
Long-term debt | 23,617 | 26,172 | 32,574 | 46,496 | 49,652 | 39,344 | ||||||||||||||||||
Future policy benefit | — | 4,778 | 5,683 | 6,769 | 7,260 | 5,753 | ||||||||||||||||||
Accrued expenses and other liabilities | 9,631 | 7,078 | 9,244 | 13,369 | 15,678 | 12,423 | ||||||||||||||||||
Total liabilities | 136,960 | 146,846 | 165,123 | 204,500 | 243,009 | 192,559 | ||||||||||||||||||
Minority interest | 66 | 80 | 162 | 212 | 312 | 247 | ||||||||||||||||||
Redeemable convertible preferred stock | 736 | 368 | — | — | — | — | ||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||||
Common stock | 1,596 | 1,795 | 1,908 | 1,981 | 1,981 | 1,570 | ||||||||||||||||||
Redeemable convertible preferred stock | — | — | — | 74 | 74 | 58 | ||||||||||||||||||
Redeemable preferred stock | — | — | — | 145 | 145 | 115 | ||||||||||||||||||
Additional paid-in capital | 1,658 | 2,407 | 2,710 | 7,147 | 7,147 | 5,663 | ||||||||||||||||||
Retained earnings | 2,239 | 3,928 | 5,205 | 6,801 | 7,710 | 6,109 | ||||||||||||||||||
Accumulated other comprehensive income, net of taxes | 158 | (100 | ) | 141 | 762 | 595 | 472 | |||||||||||||||||
Less: treasury stock, at cost | (204 | ) | (245 | ) | (162 | ) | — | — | — | |||||||||||||||
Total stockholders’ equity | 5,447 | 7,785 | 9,802 | 16,910 | 17,652 | 13,987 | ||||||||||||||||||
Total liabilities, minority interest, Redeemable Convertible Preferred Stock and stockholders’ equity | 143,209 | 155,079 | 175,087 | 221,622 | 260,973 | $ | 206,793 | |||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||
2004(1) | 2005(1) | 2006(1) | 2007(1) | 2008(1) | ||||||||||||||||
(In Won and US$, except ratios) | ||||||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||
Cash dividends per share of common stock: | ||||||||||||||||||||
In Korean Won | 600 | 750 | 800 | 900 | 900 | |||||||||||||||
In U.S. dollars | $ | 0.50 | $ | 0.74 | $ | 0.86 | $ | 0.96 | $ | 0.71 | ||||||||||
Cash dividends per share of preferred stock | ||||||||||||||||||||
In Korean Won | 135.12 | 365.34 | 365.34 | — | 4,928.38 | |||||||||||||||
In U.S. dollars | $ | 0.13 | $ | 0.36 | $ | 0.36 | $ | — | $ | 3.91 | ||||||||||
Stock dividends per share of common stock | — | — | — | — | — | |||||||||||||||
Korean GAAP: | ||||||||||||||||||||
Cash dividends per share of common stock: | ||||||||||||||||||||
In Korean Won | 600 | 750 | 800 | 900 | 900 | |||||||||||||||
In U.S. dollars | $ | 0.50 | $ | 0.74 | $ | 0.86 | $ | 0.96 | $ | 0.71 | ||||||||||
Dividend ratio(2) | 12.00 | % | 15.00 | % | 16.00 | % | 18.00 | % | 18.00 | % | ||||||||||
Cash dividends per share of preferred stock: | ||||||||||||||||||||
In Korean Won | 857 | 1,183 | 1,427 | 1,389 | 3,558 | |||||||||||||||
In U.S. dollars | $ | 0.83 | $ | 1.17 | $ | 1.54 | $ | 1.48 | $ | 2.82 | ||||||||||
Dividend ratio(3) | 17.14 | % | 23.66 | % | 28.54 | % | 27.78 | % | 71.16 | % | ||||||||||
Stock dividends per share of common stock | — | — | — | — | — |
(1) | Represents dividends declared on the common shares of Shinhan Financial Group. | |
(2) | Represents dividends declared and paid as a percentage of par value of | |
(3) | Represents dividends declared and paid as a percentage of par value of |
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Year Ended December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Net income as a percentage of: | ||||||||||||||||||||
Average total assets(1) | 0.86 | % | 1.29 | % | 0.93 | % | 0.91 | % | 0.60 | % | ||||||||||
Average stockholders’ equity(1)(2) | 27.35 | 33.78 | 17.55 | 9.73 | 7.13 | |||||||||||||||
Including redeemable convertible preferred shares(3) | 23.62 | 30.64 | 17.17 | 9.73 | 7.13 | |||||||||||||||
Dividend payout ratio(4) | 18.62 | 14.41 | 21.66 | 18.48 | 0.00 | |||||||||||||||
Net interest spread(5) | 2.63 | 2.64 | 2.55 | 2.49 | 2.38 | |||||||||||||||
Net interest margin(6) | 2.78 | 2.70 | 2.75 | 2.82 | 2.74 | |||||||||||||||
Efficiency ratio(7) | 60.91 | 56.72 | 68.34 | 68.08 | 64.98 | |||||||||||||||
Cost-to-average assets ratio(8) | 2.49 | 2.44 | 3.18 | 3.17 | 2.71 | |||||||||||||||
Equity to average asset ratio(9): | 3.16 | 3.83 | 5.31 | 9.32 | 8.37 | |||||||||||||||
Including redeemable convertible preferred shares(3) | 3.66 | 4.22 | 5.43 | 9.32 | 8.36 |
(1) | Average balances are based on (a) daily balances for Shinhan Bank and Jeju Bank and (b) quarterly balances for other subsidiaries. | |
(2) | Does not include the redeemable preferred shares or the redeemable convertible preferred shares, other than the Series 10 redeemable preferred shares and the Series 11 redeemable convertible preferred shares, which were issued in January 2007 partly as funding for the LG Card acquisition. The information for the Series 10 and Series 11 preferred shares are included in the information for 2007. The terms of the Series 10 redeemable preferred shares are different from those of other redeemable preferred shares issued by us, and the terms of the Series 11 redeemable convertible preferred shares are different from those of other redeemable convertible preferred shares issued by us. Unlike the other preferred shares, the Series 10 and Series 11 preferred shares are treated as stockholders’ equity under U.S. GAAP. For a description of the Series 10 and Series 11 preferred shares, see Item 10 “Additional Information — Articles of Incorporation — Description of Capital Stock — Description of Redeemable Preferred Stock — Series 10 Redeemable Preferred Stock” and “— Description of Redeemable Convertible Preferred Stock — Series 11 Redeemable Convertible Preferred Stock.” | |
(3) | Prior to the issuance of the Series 10 redeemable preferred shares and the Series 11 redeemable convertible preferred shares, we issued several other series of redeemable preferred shares and redeemable convertible preferred shares in August 2003, as part of the funding for the Chohung Bank acquisition. The redeemable preferred shares other than the Series 10 redeemable preferred shares are treated as debt under U.S. GAAP, and their effects on the profitability ratio are not presented in the table. The redeemable convertible preferred shares other than the Series 11 redeemable convertible preferred shares have characteristics of mezzanine securities and are treated as neither debt nor stockholders’ equity under U.S. GAAP, and their effects on the profitability ratio are shown in the table above for comparative purposes. For a description of these preferred shares, see Item 10 “Additional Information — Articles of Incorporation — Description of Capital Stock — Description of Preferred Stock.” | |
(4) | Represents the ratio of total dividends declared on common stock as a percentage of net income. | |
(5) | Represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. | |
(6) | Represents the ratio of net interest income to average interest-earning assets. |
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(7) | Represents the ratio of noninterest expense to the sum of net interest income and noninterest income, a measure of efficiency for banks and financial institutions. Efficiency ratio may be reconciled to comparable line-items in our income statements for the periods indicated as follows: |
Year Ended December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Non-interest expense (A) | 3,451 | 3,641 | 5,308 | 6,745 | 6,726 | |||||||||||||||
Divided by | ||||||||||||||||||||
The sum of net interest income and noninterest income (B) | 5,666 | 6,419 | 7,767 | 9,908 | 10,351 | |||||||||||||||
Net interest income | 3,574 | 3,474 | 3,981 | 5,170 | 5,779 | |||||||||||||||
Noninterest income | 2,092 | 2,945 | 3,786 | 4,738 | 4,572 | |||||||||||||||
Efficiency ratio ((A) as a percentage of (B)) | 60.91 | % | 56.72 | % | 68.34 | % | 68.08 | % | 64.98 | % |
(8) | Represents the ratio of noninterest expense to average total assets. | |
(9) | Represents the ratio of average stockholders’ equity (not including the redeemable preferred shares or the redeemable convertible preferred shares, other than the Series 10 redeemable preferred shares and the Series 11 redeemable convertible preferred shares) to average total assets. |
As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Total loans | 97,080 | 105,848 | 122,446 | 151,818 | 170,541 | |||||||||||||||
Total allowance for loan losses | 2,311 | 1,512 | 1,575 | 2,099 | 3,201 | |||||||||||||||
Allowance for loan losses as a percentage of total loans | 2.38 | % | 1.43 | % | 1.29 | % | 1.38 | % | 1.88 | % | ||||||||||
Total non-performing loans(1) | 1,750 | 1,594 | 1,253 | 1,322 | 1,357 | |||||||||||||||
Non-performing loans as a percentage of total loans | 1.80 | % | 1.51 | % | 1.02 | % | 0.87 | % | 0.80 | % | ||||||||||
Non-performing loans as a percentage of total assets | 1.22 | % | 1.03 | % | 0.72 | % | 0.60 | % | 0.52 | % | ||||||||||
Impaired loans(2) | 2,646 | 2,285 | 1,375 | 1,487 | 2,178 | |||||||||||||||
Allowance for impaired loans | 885 | 704 | 865 | 909 | 1,181 | |||||||||||||||
Impaired loans as a percentage of total loans | 2.73 | % | 2.16 | % | 1.12 | % | 0.98 | % | 1.28 | % | ||||||||||
Allowance for impaired loans as a percentage of impaired loans | 33.45 | % | 30.81 | % | 62.91 | % | 61.13 | % | 54.22 | % |
(1) | Non-performing loans are defined as loans, whether corporate or consumer, that are past due more than 90 days. | |
(2) | Impaired loans include loans that are classified as “substandard” or below according to the asset classification guidelines of the Financial Services Commission, loans that are past due more than 90 days and loans that qualify as “troubled debt restructurings” under U.S. GAAP. |
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As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Requisite capital ratio(1) | 129.41 | % | 132.81 | % | 139.28 | % | N/A | N/A | ||||||||||||
BIS ratio(1) | N/A | N/A | N/A | 9.85 | % | 10.19 | % | |||||||||||||
Total capital adequacy ratio for Shinhan Bank(2) | 11.94 | 12.23 | 12.01 | 12.09 | 13.43 | |||||||||||||||
Tier I capital adequacy ratio | 7.45 | 8.16 | 7.81 | 7.64 | 9.30 | |||||||||||||||
Tier II capital adequacy ratio | 4.49 | 4.07 | 4.20 | 4.45 | 4.13 | |||||||||||||||
Total capital adequacy ratio for Chohung Bank(2) | 9.40 | 10.94 | N/A | N/A | N/A | |||||||||||||||
Tier I capital adequacy ratio | 4.99 | 6.52 | N/A | N/A | N/A | |||||||||||||||
Tier II capital adequacy ratio | 4.41 | 4.42 | N/A | N/A | N/A | |||||||||||||||
Adjusted equity capital ratio of Shinhan Card(3) | 16.48 | 17.68 | 17.47 | 25.31 | 20.32 | |||||||||||||||
Solvency ratio for Shinhan Life Insurance(4) | 265.69 | 232.12 | 232.60 | 226.05 | 209.47 |
(1) | We were restructured as a financial holding company on September 1, 2001, and until 2006, under the guidelines issued by the Financial Services Commission applicable to financial holding companies were required to maintain minimum capital as measured by the requisite capital ratio. For 2004, 2005 and 2006, the minimum requisite capital ratio applicable to us as a holding company was 100%. Starting 2007, under the revised guidelines, the minimum requisite capital ratio applicable to us changed to the Bank for International Settlement (“BIS”) ratio of 8%. Requisite capital ratio is computed as the ratio of net aggregate amount of our equity capital to aggregate amounts of requisite capital. This computation is based on our consolidated financial statement in accordance with Korean GAAP. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | |
(2) | Chohung Bank was merged with former Shinhan Bank in April 2006. Accordingly, the capital adequacy ratio information for 2006 and afterwards is not available for Chohung Bank. | |
(3) | Represents the ratio of total adjusted shareholders’ equity to total adjusted assets and is computed in accordance with the guidelines issued by the Financial Services Commission for credit card companies. Under these regulations, a credit card company is required to maintain a minimum adjusted equity capital ratio of 8%. This computation is based on the nonconsolidated financial statements of the credit card company prepared in accordance with Korean GAAP. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | |
The information as of December 31, 2004 and 2005 includes the information of former Shinhan Card and does not include the information of the credit card division of Chohung Bank. The information as of December 31, 2006 represents the information of former Shinhan Card (including that of the credit card division of Chohung Bank, which was split-merged into former Shinhan Card on April 3, 2006). The information as of December 31, 2007 represents the information for LG Card, renamed as Shinhan Card on October 1, 2007 (including that of the assets and liabilities of former Shinhan Card, which were transferred to LG Card on October 1, 2006). This information as of December 31, 2008 represents the information of Shinhan Card. | ||
For comparison, the adjusted equity capital ratio of LG Card as of December 31, 2004, 2005 and 2006 was — 6.89%, 25.55% and 34.25%, respectively. | ||
(4) | Solvency ratio is the ratio of the solvency margin to the standard amount of solvency margin as defined and computed in accordance with the regulations issued by the Financial Services Commission for life insurance companies. Under these regulations Shinhan Life Insurance is required to maintain a minimum solvency ratio of 100%. Shinhan Life Insurance’s solvency ratio as of the end of its latest fiscal year on March 31, 2009 was |
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207.74%. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” |
As of December 31, | ||||||||
2007 | 2008 | |||||||
(In millions of Won, except percentages) | ||||||||
Equity capital | 15,815,434 | 18,723,461 | ||||||
Risk-weighted assets | 161,849,385 | 183,741,412 | ||||||
Consolidated equity capital ratio | 9.77 | % | 10.19 | % | ||||
Tier 1 capital | 8,334,072 | 9,822,433 | ||||||
Tier 2 capital | 8,334,072 | 9,822,433 | ||||||
Adjustment(1) | (852,710 | ) | (921,405 | ) | ||||
Total risk-adjusted capital | 15,815,434 | 18,741,412 | ||||||
Total risk-adjusted assets | 161,849,385 | 183,741,412 | ||||||
Capital adequacy ratio (%) | 9.77 | % | 10.19 | % | ||||
Tier 1 capital ratio (%) | 5.15 | % | 5.35 | % | ||||
Tier 2 capital ratio (%) | 5.15 | % | 5.35 | % | ||||
Adjustment(1) (%) | (0.53 | )% | (0.51 | )% |
(1) | Represents the subtraction from the capital line item of capital contributions to Shinhan Life Insurance and SH&C Life Insurance pursuant to the Financial Supervisory Service guidelines. |
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At End of | ||||||||||||||||
Year Ended December 31, | Period | Average(1) | High | Low | ||||||||||||
(Won per US$1.00) | ||||||||||||||||
2004 | 1,035.1 | 1,139.3 | 1,195.1 | 1,035.1 | ||||||||||||
2005 | 1,010.0 | 1,023.2 | 1,059.8 | 997.0 | ||||||||||||
2006 | 930.0 | 950.1 | 1,002.9 | 913.7 | ||||||||||||
2007 | 935.8 | 928.0 | 950.2 | 903.2 | ||||||||||||
2008 | 1,262.0 | 1,105.3 | 1,507.9 | 935.2 | ||||||||||||
2009 (through June 19) | 1,264.2 | 1,346.7 | 1,570.1 | 1,232.1 | ||||||||||||
January | 1,380.0 | 1,354.4 | 1,391.5 | 1,292.3 | ||||||||||||
February | 1,532.8 | 1,439.6 | 1,532.8 | 1,368.7 | ||||||||||||
March | 1,372.3 | 1,449.6 | 1,570.1 | 1,334.8 | ||||||||||||
April | 1,277.0 | 1,332.1 | 1,378.3 | 1,277.0 | ||||||||||||
May | 1,249.0 | 1,254.3 | 1,277.0 | 1,232.9 | ||||||||||||
June (through June 19) | 1,264.2 | 1,250.4 | 1,269.0 | 1,232.1 |
(1) | Represents the average of the Noon Buying Rates on the last day of each month during the relevant period. |
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• | the length and severity of the current global and economic downturn; | |
• | volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (particularly against U.S. dollar), interest rates and stock markets; | |
• | increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners; | |
• | adverse developments in the economies of countries to which Korea exports goods and services (such as the United States, China and Japan), or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy; | |
• | the continued emergence of China, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and relocation of the manufacturing base from Korea to China); | |
• | social and labor unrest or declining consumer confidence or spending resulting from lay-offs, increasing unemployment and lower levels of income; | |
• | uncertainty and volatility in real estate prices arising, in part, from the Korean government’s policy-driven tax and other regulatory measures; |
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• | a decrease in tax revenues and a substantial increase in the Korean government’s expenditures for unemployment compensation and other social programs that together could lead to an increased government budget deficit; | |
• | political uncertainty or increasing strife among or within political parties in Korea, including as a result of the increasing polarization of the positions of the ruling conservative party and the progressive opposition; | |
• | a deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including such deterioration resulting from trade disputes or disagreements in foreign policy; and | |
• | any other developments that has a material adverse effect in the global economy, such as an act of war, a terrorist act or a breakout of an epidemic such as SARS, avian flu or swine flu. |
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• | a registration statement filed by us under the U.S. Securities Act of 1933, as amended, is in effect with respect to those shares; or | |
• | the offering and sale of those shares is exempt from or is not subject to the registration requirements of the U.S. Securities Act. |
• | sudden fluctuations in interest rates or exchange rates; | |
• | extreme difficulty in stabilizing the balance of payments; and | |
• | a substantial disturbance in the Korean financial and capital markets. |
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ITEM 4. | INFORMATION ON THE COMPANY |
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• | Further strengthen risk management. We plan to make our group-wide risk management system more comprehensive and pre-emptive in detecting and assessing any known and potential risks through early alerts and multiple contingency management plans. We will also seek to improve our overall asset quality and minimize any reputational risk by reassessing the risk profile of our core businesses and realigning their respective asset portfolios by unburdening a substantial portion of the high-risk assets. | |
• | Strengthen the profit structure. In order to improve our profitability, we plan, among others, to adopt greater differentiation in risk-profiling our products to price them more accurately, aggressively restructure low-profit and overlapping product lines and loss-leaders in our credit card business, conservatively diversify our revenue streams by taking advantage of market openings allowed by regulatory changes, deepen our banking customer relationships by capturing a greater market share of auto payroll deposit accounts and further expand cross-selling opportunities across our business units. | |
• | Improve cost efficiency. To improve our cost efficiency, we plan to focus on improving the productivity and efficiency of our banking and credit card distribution networks, eliminating overlap in back office functionalities, placing greater reliance on group-wide database and networks for information sharing, and making our work processes more efficient by implementing the six-sigma programs. | |
• | Capture maximum synergy. We plan to continue to build out groupwide informational networks and shared databases in order to maximize opportunities for target marketing, up-selling and cross-selling as well as deepening customer loyalty and relationship at the group level. |
• | in commercial banking,our primary objective is to leverage our extensive banking network to serve as our main distribution channel. Accordingly, we plan to emphasize cross-selling non-banking products at our banking network, as well as offering total financial service packages. We also intend to fully leverage the scale of our banking operation to enhance brand recognition and offer customer-tailored products and services and thereby upgrade as well as expand our customer base. We also seek to establish a leading market position in promising new businesses by enhancing our investment banking, private banking and other fee- |
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based businesses, making significant inroads into the retirement pension market and offering differentiated wealth management strategies and portfolios. |
• | in credit card business,our primary objective is to solidify our market position as the largest credit card service provider in Korea. To that end, we seek to continue to focus on product innovations, refining individualized marketing strategy and maximizing opportunities for further synergy effects, including through improving our groupwide customer relations management (“CRM”) systems. | |
• | in securities and asset management business,our primary objective is to establish a solid platform for providing leading brokerage, financial advisory and asset management services in Korea in light of the recent deregulations for the securities and asset management businesses in Korea. We aim to selectively develop competitive business models, capture promising business opportunities, including wealth management and investment advisory services. We have recently merged our investment advisory affiliates to promote economy of scale and solidify our brand recognition in this market. | |
• | in insurance business,our primary objective is to enhance our market position as one of the leading insurers in Korea. To that end, we aim to maximize the use of our groupwide distribution channels, particularly in banking and credit card businesses, in order to foster direct interaction with customers. We also aim to train specialists and offer differentiated products targeting the fast-growing senior citizenry in Korea. |
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Date of Acquisition | Entity | Principal Activities | Method of Establishment | |||
April 2002 | Jeju Bank | Regional banking | Acquisition from Korea Deposit Insurance Corporation | |||
July 2002 | Good Morning Shinhan Securities Co., Ltd. | Securities and investment | Acquisition from the SsangYong Group | |||
August 2002 | Shinhan BNP Paribas Investment Trust Management Co., Ltd.(1) | Investment advisory | 50:50 joint venture with BNP Paribas | |||
August 2003 | Chohung Bank(2) | Commercial banking | Acquisition from creditors | |||
December 2005 | Shinhan Life Insurance | Life insurance services | Acquisition from shareholders | |||
March 2007 | LG Card(3) | Credit card services | Acquisition from creditors |
(1) | In August 2002, we signed a joint venture agreement with BNP Paribas Asset Management, the asset management arm of BNP Paribas, in respect of Shinhan Investment Trust Management. In October 2002, we sold to BNP Paribas Asset Management 3,999,999 shares of Shinhan Investment Trust Management, representing 50% less one share, which was subsequently renamed as Shinhan BNP Paribas Investment Trust Management Co., Ltd. (“Shinhan BNP Paribas Investment Trust Management”). In January 2009, SH Asset Management Co., Ltd. (“SH Asset Management”) and Shinhan BNP Paribas Investment Trust Management merged to form Shinhan BNP Paribas Asset Management Co., Ltd. (“Shinhan BNP Paribas Asset Management”). | |
(2) | In August 2003, we acquired 80.04% of common shares of Chohung Bank, a nationwide commercial bank in Korea. We subsequently acquired the remaining interest in Chohung Bank through a series of transactions and delisted Chohung Bank from the Korea Exchange in July 2004. We merged former Shinhan Bank and Chohung Bank in April 2006, with Chohung Bank becoming the legal surviving entity. The newly merged bank then changed its name to “Shinhan Bank.” | |
(3) | In June 2002, the credit card division of Shinhan Bank was split off and established as our wholly-owned subsidiary, Shinhan Card Co., Ltd. In April 2006, concurrently with the merger of former Shinhan Bank and Chohung Bank, we also split off Chohung Bank’s credit card business and merged it into the former Shinhan Card. In March 2007, we acquired from the creditor committee and other shareholders of LG Card the controlling equity interest in LG Card following a public tender offer. After our further acquisition of shares in July 2007 following a second public tender offer and a share swap with our shares in September 2007, LG Card became our wholly-owned subsidiary. On October 1, 2007, LG Card assumed all of the assets and liabilities of former Shinhan Card, and changed its name to Shinhan Card. On the same date, former Shinhan Card changed its name to SHC Management Co., Ltd. and currently survives under that name with no significant assets and liabilities. |
• | On May 29, 2008, Shinhan Bank acquired a 56.63% equity interest in AITAS Co., Ltd. For | |
• | On June 2, 2008, Shinhan Card established Shinhan KTF Mobile Card Co., Ltd. As a joint venture with KTF, a mobile telephone company in Korea, to promote joint marketing between its credit card operations and KTF’s mobile telephone services. The joint venture’s capital stock as of December 31, 2007 was |
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• | In August 2008, Shinhan Private Equity Inc., our wholly-owned subsidiary engaged primarily in private equity investments, established Shinhan Private Equity Fund II with a capital contribution of | |
• | In January 2009, Shinhan BNP Paribas Investment Trust Management Co., Ltd. and SH Asset Management, two of our asset management subsidiaries, were merged, with Shinhan BNP Paribas Investment Trust Management Co., Ltd. being the surviving legal entity and renamed as Shinhan BNP Paribas Asset Management Co., Ltd. Shinhan BNP Paribas Investment Trust Management was a 50:50 joint venture with BNP Paribas S.A., and SH Asset Management was our wholly-owned subsidiary. Following the merger, we and BNP own 65% and 35% equity interest in Shinhan BNP Paribas Asset Management, respectively. | |
• | In June 2009, we sold 3,290,002 common shares, or approximately 35%, of SH&C Life Insurance Co., Ltd., a 50:50 joint venture with BNP Paribas Assurance (formerly known as Cardif S.A.), to BNP Paribas Assurance for |
• | Shinhan Asia Limited (incorporated in Hong Kong); | |
• | Shinhan Bank America (incorporated in the United States); | |
• | Shinhan Bank Canada (incorporated in Canada); | |
• | Shinhan Bank (China) Limited (incorporated in the People’s Republic of China); | |
• | Shinhan Bank EuropeGmbH (incorporated in Germany); | |
• | Shinhan Bank Kazakhstan Limited (incorporated in Kazakhstan); | |
• | Shinhan Khmer Bank Limited (incorporated in Cambodia); | |
• | Shinhan Vina Bank (incorporated in Vietnam); | |
• | Shinhan Finance Ltd., Hong Kong (incorporated in Hong Kong); | |
• | Good Morning Shinhan Securities Europe Ltd. (incorporated in United Kingdom); | |
• | Good Morning Shinhan Securities USA, Inc. (incorporated in the United States); and | |
• | Good Morning Shinhan Securities Asia Limited (incorporated in Hong Kong). |
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(1) | Currently in liquidation proceedings. | |
(2) | On November 1, 2006, Shinhan Finance Limited, Shinhan Financial Group’s indirect subsidiary, was transferred to a branch of Shinhan Bank. The liquidation process is currently in process. | |
(3) | We and our subsidiaries currently own an additional 31.7%. | |
(4) | We and our subsidiaries currently own an additional 30.4%. |
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• | commercial banking services, consisting of the following: |
• | retail banking services; | |
• | corporate banking services, primarily consisting of: |
• | small- and medium-sized enterprises banking; and | |
• | large corporate banking; |
• | treasury and securities investment; | |
• | trust account management services provided by Shinhan Bank; | |
• | credit card services; | |
• | securities brokerage services; | |
• | insurance services, primarily consisting of: |
• | life insurance services; and | |
• | bancassurance; |
• | asset management services, including brokerage and trading of various securities, related margin lending and deposit and trust services, and other asset management services; and | |
• | other services, including leasing and equipment financing, investment trust management, regional banking, investment banking advisory and loan collection and credit reporting. |
• | Demand deposits. Demand deposits do not accrue interest or accrue interest at a lower rate than time or savings deposits and allow the customer to deposit and withdraw funds at any time, if interest-bearing, demand deposits have interest accruing at a fixed or variable rate depending on the period and the amount of deposit. Demand deposits constituted approximately 9.9% and 7.8% of our total deposits as of December 31, 2007 and 2008, respectively. Our demand deposits paid average interest of 0.41% and 0.78% in 2007 and 2008, respectively. | |
• | Savings deposits. Savings deposits which allow the customer to deposit and withdraw funds at any time and accrue interest at an adjustable interest rate, which is typically lower than applicable to time or installment deposits. Currently, the interest rate on savings deposits ranges from zero to 3.04%. Saving deposits constituted approximately 28.2% of our total deposits as of December 31, 2007 and paid average |
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interest of 2.05% in 2007, and approximately 25.6% of our total deposits as of December 31, 2008 and paid average interest of 2.32% in 2008. |
• | Certificates of deposit. Certificates of deposit typically have maturities from 30 days to 5 years. Interest rates on certificates of deposit are determined based on the length of the deposit and prevailing market interest rates. Certificates of deposit are sold on a discount to their face value, reflecting the interest payable on the certificates of deposit. Certificates of deposit constituted approximately 14.9% and 11.3% of our total deposits as of December 31, 2007 and 2008, respectively. Our certificates of deposit paid average interest of 5.22% and 5.94% in 2007 and 2008, respectively. | |
• | Time deposits. Time deposits generally require the customer to maintain a deposit for a fixed term during which the deposit accrues interest at a fixed rate or variable rate based on certain financial indexes, including the Korea Composite Stock Price Index (KOSPI). If the deposit is withdrawn prior to the end of the fixed term, the customer is paid a lower interest rate than that originally offered. The term typically ranges from one month to five years. Time deposits constituted approximately 46.6% and 55.1% of our total deposits as of December 31, 2007 and 2008, respectively, and paid average interest of 4.55% and 4.94% in 2007 and 2008, respectively. | |
• | Mutual installment deposits. Mutual installment deposits generally require the customer to make periodic deposits of a fixed amount over a fixed term (usually six months to five years) during which the deposit accrues interest at a fixed rate. If the deposit is withdrawn prior to the end of the fixed term, the customers are paid a lower interest rate than that originally offered. Mutual installment deposits constituted approximately 0.3% and 0.2% of our total deposits as of December 31, 2007 and 2008, respectively, and paid average interest of 3.88% and 3.78% in 2007 and 2008, respectively. |
• | Housing subscription time deposits. These deposit products are special purpose time deposits providing the customer with a preferential right to subscribe for new private apartment units under the Housing Construction Promotion Law. This law sets forth various measures supporting the purchase of houses and the supply of such houses by construction companies. If a potential home-buyer subscribes for these deposit products and holds them for a certain period of time set forth in the Housing Construction Promotion Law, such deposit customers obtain the right to subscribe for new private apartment units on a priority basis under this law. Such preferential rights are neither transferable nor marketable in the open market. These products accrue interest at a fixed rate for one year and at an adjustable rate after one year, which are consistent with other time deposits. Deposit amounts per account range from | |
• | Housing subscription installment savings deposits. These deposit products are monthly installment savings programs providing the customer with a preferential subscription right for new private apartment units under the Housing Construction Promotion Law. Such preferential rights are neither transferable nor marketable in the open market. These deposits require monthly installments of |
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• | Mortgage and home equity loans,mostly comprised of mortgage loans which are loans to finance home purchases and are generally secured by the home being purchased; and | |
• | Other retail loans,which are loans made to customers for any purpose other than mortgage and home equity loans and the terms of which vary based primarily upon the characteristics of the borrower and which are either unsecured or secured, or guaranteed by deposits or a third party. |
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As of December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Retail loans(1) | ||||||||||||
Mortgage and home-equity(2) | 30,097 | 31,495 | 36,183 | |||||||||
Other consumer(2) | 20,458 | 25,475 | 25,026 | |||||||||
Percentage of retail loans to total gross loans | 41.3 | % | 37.5 | % | 35.9 | % |
(1) | Before allowance for loan losses and excludes credit card accounts. | |
(2) | In Korea, construction companies typically require buyers of new homes (including apartment units) to make installment payments of the purchase price well in advance of the title transfer. Commercial banks, including Shinhan Bank, provide advance loans, on an unsecured basis for the time being, to retail borrowers where the use of proceeds is restricted to financing of home purchases. A significant portion of these loans are guaranteed by third parties, which may include the construction company receiving the installment payment, until construction of the home is completed. Once construction is completed and the titles to the homes are transferred to the borrowers, which may take several years, these loans become secured by the new homes purchased by these borrowers. Beginning in December 31, 2004, in recognition of the unsecured nature of such loans, we classified such loans as other retail loans. |
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As of December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Small- and medium-sized enterprises loans(1) | 47,159 | 38.5% | 62,296 | 41.0% | 71,212 | 41.8% | ||||||||||||||||||
Large corporate loans(2) | 20,808 | 17.0% | 17,871 | 11.8% | 23,483 | 13.7% | ||||||||||||||||||
Total corporate loans | 67,967 | 55.5% | 80,167 | 52.8% | 94,695 | 55.5% | ||||||||||||||||||
(1) | Represents the principal amount of loans extended to corporations meeting the definition of small- and medium-sized enterprises under the Basic Act on Small- and Medium-sized Enterprises and its Presidential Decree. | |
(2) | Includes loans to government-controlled companies. |
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• | has positioned itself based on accumulated expertise. We believe Shinhan Bank has a good understanding of the credit risks embedded in this market segment and to develop loan and other products specifically tailored to the needs of this market segment; | |
• | operates a relationship management system to provide targeted and tailored customer service to small-and medium-sized enterprises. Shinhan Bank currently has 144 corporate banking branches with relationship management teams. These relationship management teams market products and review and approve smaller loans that pose less credit risks; and | |
• | continues to focus on cross-selling loan products with other products. For example, when Shinhan Bank lends to small- and medium-sized enterprises, it also explores opportunities to cross-sell retail loans or deposit products to the employees of those companies or to provide financial advisory services. |
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Interest rate = | (Shinhan Bank’s periodic market floating rateorreference rate)plustransaction costplusa credit spreadplusrisk premiumplus or minusa discretionary adjustment rate. |
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• | treasury; | |
• | securities investment and trading; | |
• | derivatives trading; and | |
• | international business. |
• | interest rate swaps, options, and futures relating to Korean Won interest rate risks and LIBOR risks, respectively; | |
• | cross-currency swaps largely for Korean Won against U.S. dollars, Japanese Yen and Euros; | |
• | equity and equity-linked options; | |
• | foreign currency forwards, swaps and options; | |
• | commodity forwards, options and swaps; |
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• | credit derivatives; and | |
• | KOSPI 200 indexed equity options. |
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• | variable rate trust accounts. Variable rate trust accounts are not entitled to guaranteed return on the deposits, except in the limited cases of principal guaranteed variable rate trust accounts, for which the payment of the principal amount is guaranteed. As of December 31, 2007 and 2008, under Korean GAAP, Shinhan Bank’s variable rate trust accounts amounted to | |
• | guaranteed fixed rate trust accounts. Guaranteed fixed rate trust accounts are entitled to guaranteed return of the principal as well as a fixed rate of return. Upon termination of these trusts, Shinhan Bank is entitled to investment returns from the management of these trusts, net of the guaranteed returns paid to customers and any related expenses. In the past, Korean commercial banks, including Shinhan Bank, offered two types of guaranteed fixed rate trust products: general unspecified money trusts and development money trusts. However, since January 1999, banks in Korea have been prohibited from offering new guaranteed fixed rate trust products, and the guaranteed fixed rate trust products currently serviced by the banks are carryovers from the past and have been dwindling in volume as the products mature. As of December 31, 2007 and 2008, the guaranteed fixed rate trust products maintained by Shinhan Bank amounted to |
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• | credit card services, which involve providing cardholders with limited credit to purchase products and services. Cardholders can repay either (i) on a lump basis in full at the end of a monthly billing cycle or (ii) on a revolving basis subject to a minimum monthly payment which is the greater of (x) 5.0% of the amount outstanding or (y) | |
• | cash advances, for which cardholders can repay either on a lump-sum basis or a revolving basis. The lump-sum cash advances generally accrue interest at the effective annual rates of approximately 9.8% to 26.9% and the revolving cash advances generally charge the greater of (x) a lump sum transaction fee of | |
• | installment purchases, which provides customers with an option to purchase products and services from select merchants on an equal principal installment basis over a fixed term, which ranges from two months to two years. The outstanding installment purchase balances generally accrue interest at the effective annual rate of approximately 10.8% to 21.9%. | |
• | cash loans, which are generally unsecured (other than certain housing-related loans), and which cardholders must repay on an equal principal installment basis over an initial fixed term of two to 36 months or in full at maturity. The outstanding principal amount of card loans generally accrues interest at the effective annual rates of approximately 7.6% to 25.8% and upfront fees are charged at the effective annual rates of up to 4.0%. Cash loans also include loans to delinquent cardholders representing restructured outstanding credit card receivables. Such loans must be repaid on an installment basis over a maximum term of 60 months, generally accrue interest at the effective annual rate of approximately 15.0% to 27.8%. |
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As of December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(In thousands, except percentages) | ||||||||||||
Shinhan Card(1): | ||||||||||||
Number of credit card holders(2) | 4,852 | 13,458 | 13,741 | |||||||||
Personal accounts | 4,767 | 13,346 | 13,617 | |||||||||
Corporate accounts | 85 | 112 | 124 | |||||||||
Active ratio(3) | 66.6 | % | 74.9 | % | 75.2 | % | ||||||
Number of merchants | 3,107 | 2,154 | 2,268 | |||||||||
LG Card: | ||||||||||||
Number of credit card holders | 10,459 | N/A | N/A | |||||||||
Personal accounts | 10,438 | N/A | N/A | |||||||||
Corporate accounts | 21 | N/A | N/A | |||||||||
Active ratio(3) | 69.7 | % | N/A | N/A | ||||||||
Number of merchants | 4,350 | N/A | N/A |
(1) | Information as of December 31, 2006 is for former Shinhan Card (including that for the credit card division of Chohung Bank to reflect the split-merger in April 2006). Information as of December 31, 2007 is for LG Card (renamed as Shinhan Card on October 1, 2007), including the assets and liabilities of former Shinhan Card assumed by LG Card on October 1, 2007. | |
(2) | Represents the number of cardholders not subject to suspension or termination as of the relevant date. | |
(3) | Represents the ratio of accounts used at least once within the last six months to the total accounts as of year end. |
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As of or for the Year Ended December 31, | ||||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||
Former Shinhan Card(1) | Shinhan Card(1) | Shinhan Card(1) | ||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||
Interest income: | ||||||||||||||||
Installments | 72 | 260 | 326 | |||||||||||||
Cash advances | 189 | 547 | 639 | |||||||||||||
Card loans(2) | 62 | 488 | 548 | |||||||||||||
Annual membership | 9 | — | — | |||||||||||||
Revolving | 33 | 227 | 240 | |||||||||||||
Late payments | 14 | 8 | — | |||||||||||||
Total | 379 | 1,530 | 1,753 | |||||||||||||
Credit card fees: | ||||||||||||||||
Merchant fees(3) | 430 | 1,179 | 1,309 | |||||||||||||
Other fees | 12 | 2 | — | |||||||||||||
Total | 442 | 1,181 | 1,309 | |||||||||||||
Charge volume:(4) | ||||||||||||||||
General purchases | 15,365 | 45,912 | 45,624 | |||||||||||||
Installment purchases | 3,721 | 14,269 | 17,682 | |||||||||||||
Cash advances | 8,296 | 20,704 | 23,945 | |||||||||||||
Total | 27,382 | 80,885 | 87,251 | |||||||||||||
Outstanding balance (at year end)(5): | ||||||||||||||||
General purchases | 1,128 | 3,018 | 3,046 | |||||||||||||
Installment purchases | 869 | 3,833 | 4,037 | |||||||||||||
Cash advances | 860 | 3,086 | 3,111 | |||||||||||||
Revolving purchases | 294 | 1,361 | 1,410 | |||||||||||||
Card loans(2) | 525 | 2,556 | 2,524 | |||||||||||||
Others | 204 | 791 | 470 | |||||||||||||
Total | 3,880 | 14,645 | 14,598 | |||||||||||||
Average balance | 3,535 | 12,106 | 14,458 | |||||||||||||
Delinquent balances(6): | ||||||||||||||||
From 1 day to 1 month | 147 | 790 | 663 | |||||||||||||
Over 1 month: | ||||||||||||||||
From 1 month to 3 months | 36 | 244 | 244 | |||||||||||||
From 3 months to 6 months | 42 | 165 | 171 | |||||||||||||
Over 6 months | — | — | — | |||||||||||||
Sub-total | 78 | 409 | 415 | |||||||||||||
Total | 225 | 1,199 | 1,078 | |||||||||||||
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As of or for the Year Ended December 31, | ||||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||
Former Shinhan Card(1) | Shinhan Card(1) | Shinhan Card(1) | ||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||
Delinquency ratios(7): | ||||||||||||||||
From 1 day to 1 month | 3.79 | % | 5.4 | % | 4.5 | % | ||||||||||
Over 1 month: | ||||||||||||||||
From 1 month to 3 months | 0.93 | % | 1.7 | % | 1.7 | % | ||||||||||
From 3 months to 6 months | 1.08 | % | 1.1 | % | 1.2 | % | ||||||||||
Over 6 months(8) | — | — | — | |||||||||||||
Sub-total | 2.01 | % | 2.8 | % | 2.9 | % | ||||||||||
Total | 5.80 | % | 8.2 | % | 7.4 | % | ||||||||||
Rewritten loans(9) | 98 | 350 | 220 | |||||||||||||
Gross charge-offs | 209 | 436 | 706 | |||||||||||||
Recoveries | 69 | 459 | 697 | |||||||||||||
Net charge-offs | 140 | (23 | ) | 9 | ||||||||||||
Gross charge-off ratio(10) | 5.91 | % | 3.60 | % | 4.88 | % | ||||||||||
Net charge-off ratio(11) | 3.96 | % | (0.19 | )% | 0.06 | % | ||||||||||
Non-performing loan ratio(12) : | ||||||||||||||||
Reported | 3.50 | % | 3.71 | % | 2.91 | % | ||||||||||
Managed | 3.17 | % | 2.98 | % | 2.42 | % | ||||||||||
Asset securitization(13) | 710 | 5,762 | 5,666 | |||||||||||||
Ratio of total assets securitized to total managed assets | 17.9 | % | 29.4 | % | 29.4 | % |
As of or for the Year Ended | ||||
December 31, 2006 | ||||
(In billions of Won, except | ||||
percentages) | ||||
Interest income: | ||||
Installments | 331 | |||
Cash advances | 550 | |||
Card loans(2) | 277 | |||
Annual membership | — | |||
Revolving | — | |||
Late payments | 63 | |||
Total | 1,221 | |||
Credit card fees: | ||||
Merchant fees(3) | 750 | |||
Other fees | 1 | |||
Total | 751 | |||
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As of or for the Year Ended | ||||
December 31, 2006 | ||||
(In billions of Won, except | ||||
percentages) | ||||
Charge volume:(4) | ||||
General purchases | 23,125 | |||
Installment purchases | 9,446 | |||
Cash advances | 17,262 | |||
Total | 49,833 | |||
Outstanding balance (at year end)(5): | ||||
General purchases | 1,893 | |||
Installment purchases | 2,278 | |||
Cash advances | 2,650 | |||
Revolving purchases | 574 | |||
Card loans(2) | 1,573 | |||
Others | 1,050 | |||
Total | 10,018 | |||
Average balance | 10,295 | |||
Delinquent balances(6): | ||||
From 1 day to 1 month | 545 | |||
Over 1 month: | ||||
From 1 month to 3 months | 227 | |||
From 3 months to 6 months | 167 | |||
Over 6 months | — | |||
Sub-total | 394 | |||
Total | 939 | |||
Delinquency ratios(7): | ||||
From 1 day to 1 month | 5.4 | % | ||
Over 1 month: | ||||
From 1 month to 3 months | 2.3 | % | ||
From 3 months to 6 months | 1.7 | % | ||
Over 6 months(8) | — | |||
Sub-total | 4.0 | % | ||
Total | 9.4 | % | ||
Rewritten loans(9) | 1,005 | |||
Gross charge-offs | 515 | |||
Recoveries | 315 | |||
Net charge-offs | 200 | |||
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As of or for the Year Ended | ||||
December 31, 2006 | ||||
(In billions of Won, except | ||||
percentages) | ||||
Gross charge-off ratio(10) | 5.0 | % | ||
Net charge-off ratio(11) | 1.94 | % | ||
Non-performing loan ratio(12) : | ||||
Reported | 6.1 | % | ||
Managed | 4.8 | % | ||
Asset securitization(13) | 4,300 | |||
Ratio of total assets securitized to total managed assets | 34.9 | % |
(1) | The information of former Shinhan Card for 2006 includes that for the credit card division of Chohung Bank from April 1, 2006 to December 31, 2006 to reflect the split-merger in April 2006. The information of Shinhan Card for 2007 includes that of LG Card (renamed as Shinhan Card on October 1, 2007) for the period from March 1, 2007 through December 31, 2007 (including that for the assets and liabilities of former Shinhan Card assumed by LG Card on October 1, 2007) and that of former Shinhan Card for the period from January 1, 2007 through September 30, 2007, presented on an aggregated basis. | |
(2) | Card loans consist of loans that are provided on either a secured or unsecured basis to cardholders upon prior agreement. Payment of principal, fees and interest on such a loan can be due either in one payment or in installments after a fixed period. | |
(3) | Merchant fees consist of merchant membership and maintenance fees, charges associated with prepayment by Shinhan Card (on behalf of customers) of sales proceeds to merchants, processing fees relating to sales and membership applications. | |
(4) | Represents the aggregate cumulative amount charged during the year. | |
(5) | Represents amounts before allowance for loan losses. | |
(6) | Includes the unbilled balances of installment purchases. | |
(7) | Represents the ratio of delinquent balances to outstanding balances for the year. | |
(8) | The charge-off policy of former Shinhan Card, the credit card division of Chohung Bank, LG Card and Shinhan Card has been to charge off some of credit card balances which are 180 days past due. | |
(9) | Represents delinquent credit card balances for purchase and cash advance which have been rewritten as credit card loans, thereby reducing the balance of delinquent accounts before the application ofSOP 03-3 relating to the acquisition of LG Card, which reduced the outstanding balances by, | |
(10) | Represents the ratio of gross charge-offs for the year to average balance for the year. | |
(11) | Represents the ratio of net charge-offs for the year to average balances for the year. | |
(12) | The reported information is presented on the Korean GAAP basis. The difference of the delinquency ratio between Korean GAAP and U.S. GAAP is due to their respective charge-off policies. The managed information includes, subject to certain adjustments, financial receivables that Shinhan Card has sold in asset-backed securitizations. See “Explanatory Note.” | |
(13) | Represents credit card balances that were transferred in asset securitization transactions as presented on the Korean GAAP basis. Under U.S. GAAP, most of these transfers are not recognized as sales. |
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• | retail client services. These services include equity and bond brokerage, investment advisory and financial planning services to retail customers, with a focus on high net worth individuals. The fees generated include brokerage commissions for the purchase and sale of securities, asset management fees, interest income from credit extensions, including in the form of stock subscription loans, margin transaction loans and loans secured by deposited securities. | |
• | institutional client services: |
• | brokerage services. These services include brokerage of stocks, corporate bonds, futures and options provided to Good Morning Shinhan Securities’ institutional and international customers and sale of institutional financial products. These services are currently supported by a team of 57 research analysts that specialize in equity, bonds and derivatives research. | |
• | investment banking services. These services include a wide array of investment banking services to Good Morning Shinhan Securities’ corporate customers, such as domestic and international initial public offerings, M&A advisory services, bond issuances, underwriting, capital increase, asset-backed securitizations, issuance of convertible bonds and bonds with warrants, structured financing, issuance of asset-backed commercial papers, mergers and acquisitions advisory services and project financings involving infrastructure, real estate and shipbuilding. |
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Good Morning | Shinhan | |||||||||||||||||||||||||||||||
Shinhan Bank | Shinhan | Shinhan Securities | Life | |||||||||||||||||||||||||||||
Distribution Channels in Korea | Retail | Corporate | Jeju Bank | Card(1) | Branches | Others(2) | Insurance | Total | ||||||||||||||||||||||||
Seoul metropolitan | 403 | 70 | 2 | 16 | 41 | 22 | 56 | 610 | ||||||||||||||||||||||||
Kyunggi Province | 189 | 27 | — | 19 | 12 | 6 | 17 | 270 | ||||||||||||||||||||||||
Six major cities: | 172 | 23 | 1 | 22 | 19 | 3 | 38 | 278 | ||||||||||||||||||||||||
Incheon | 57 | 7 | — | 3 | 3 | — | 11 | 81 | ||||||||||||||||||||||||
Busan | 41 | 6 | 1 | 6 | 5 | 2 | 10 | 71 | ||||||||||||||||||||||||
Kwangju | 14 | 2 | — | 3 | 2 | 1 | 5 | 27 | ||||||||||||||||||||||||
Taegu | 25 | 4 | — | 4 | 4 | — | 7 | 44 | ||||||||||||||||||||||||
Ulsan | 12 | 2 | — | 3 | 2 | — | 1 | 20 | ||||||||||||||||||||||||
Taejon | 23 | 2 | — | 3 | 3 | — | 4 | 35 | ||||||||||||||||||||||||
Sub-total | 764 | 120 | 3 | 57 | 72 | 31 | 111 | 1,158 | ||||||||||||||||||||||||
Others | 144 | 24 | 35 | 33 | 15 | — | 42 | 293 | ||||||||||||||||||||||||
Total | 908 | 144 | 38 | 90 | 87 | 31 | 153 | 1,451 | ||||||||||||||||||||||||
(1) | Includes 30 card sales branches, 31 installment sales branches and 29 debt collection branches. | |
(2) | Includes “branches within a branch” and private banking centers. |
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Year Established or | ||||||
Business Unit | Location | Acquired | ||||
Subsidiaries | ||||||
Shinhan Asia Ltd. | Hong Kong SAR, China | 1982 | ||||
Shinhan Bank Europe GmbH | Germany | 1994 | ||||
Shinhan Bank America | New York, U.S.A. | 2003 | ||||
Shinhan Vina Bank | Vietnam | 2000 | ||||
Shinhan Bank (China) Limited | Beijing, China | 2008 | ||||
Shinhan Khmer Bank | Cambodia | 2007 | ||||
Shinhan Bank Kazakhstan | Kazakhstan | 2008 | ||||
Shinhan Bank Canada | Toronto, Canada | 2008 | ||||
Branches | ||||||
Tokyo | Japan | 1988 | ||||
Osaka | Japan | 1986 | ||||
Fukuoka | Japan | 1997 | ||||
New York | U.S.A. | 1989 | ||||
Singapore | Singapore | 1990 | ||||
London | United Kingdom | 1991 | ||||
Ho Chi Minh City | Vietnam | 1995 | ||||
Mumbai | India | 1996 | ||||
Hong Kong | China | 2006 | ||||
New Delhi | India | 2006 | ||||
Representative Office | ||||||
Mexico Representative Office | Mexico City, Mexico | 2008 |
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As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Corporate | ||||||||||||||||||||
Commercial and industrial(1) | 35,653 | 35,728 | 40,063 | 48,485 | 55,466 | |||||||||||||||
Other commercial(2) | 17,988 | 21,409 | 27,319 | 30,312 | 37,637 | |||||||||||||||
Lease financing | 981 | 754 | 585 | 1,370 | 1,592 | |||||||||||||||
Total — Corporate | 54,622 | 57,891 | 67,967 | 80,167 | 94,695 | |||||||||||||||
Consumer | ||||||||||||||||||||
Mortgages and home equity | 22,180 | 25,840 | 30,097 | 31,495 | 36,183 | |||||||||||||||
Other consumer(3) | 15,546 | 17,875 | 20,458 | 25,475 | 25,026 | |||||||||||||||
Credit cards | 4,732 | 4,242 | 3,924 | 14,681 | 14,637 | |||||||||||||||
Total — Consumer | 42,458 | 47,957 | 54,479 | 71,651 | 75,846 | |||||||||||||||
Total gross loans(4) | 97,080 | 105,848 | 122,446 | 151,818 | 170,541 | |||||||||||||||
(1) | Consists primarily of working capital loans, general purpose loans, bills purchased, trade-related notes and inter-bank loans. | |
(2) | Consists primarily of privately placed bonds, credit facility drawdowns and purchases of commercial paper or notes at a discount from its customers with recourse. | |
(3) | Consists of general unsecured loans and loans secured by collateral other than housing to retail customers. | |
(4) | As of December 31, 2006, 2007 and 2008, approximately 89.8%, 90.6% and 90.4% of our total gross loans, respectively, were Won-denominated. |
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Impaired | ||||||||||||||||||||||||||||
Loans and | ||||||||||||||||||||||||||||
Loans in | Guarantees | Guarantees | ||||||||||||||||||||||||||
Loans in | Foreign | Equity | Debt | and | Total | and | ||||||||||||||||||||||
Won | Currency | Securities | Securities | Acceptances | Exposure | Acceptances | ||||||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||||||
The Bank of Korea | — | — | — | 9,420 | — | 9,420 | — | |||||||||||||||||||||
Ministry of Strategy and Finance | — | — | — | 6,429 | 29 | 6,458 | — | |||||||||||||||||||||
Korea Development Bank | — | — | 40 | 3,033 | — | 3,073 | — | |||||||||||||||||||||
Industrial Bank of Korea | 29 | — | — | 2,390 | — | 2,419 | — | |||||||||||||||||||||
Hyundai Samho Heavy Industries Co., Ltd. | — | — | — | — | 1,794 | 1,794 | — | |||||||||||||||||||||
Kookmin Bank | 63 | — | — | 1,712 | — | 1,775 | — | |||||||||||||||||||||
Korea Deposit Insurance Corporation | 28 | — | — | 1,568 | — | 1,596 | — | |||||||||||||||||||||
Hyundai Heavy Industries Co., Ltd. | 3 | — | 13 | — | 1,442 | 1,458 | — | |||||||||||||||||||||
Hyundai Mipo Dockyard Co., Ltd. | — | — | 4 | — | 1,364 | 1,368 | — | |||||||||||||||||||||
Woori Bank | 1 | — | — | 1,270 | — | 1,271 | — | |||||||||||||||||||||
STX Offshore & Shipbuilding Co., Ltd. | 20 | 1 | — | — | 1,217 | 1,238 | — | |||||||||||||||||||||
Hana Bank | — | — | — | 1,225 | — | 1,225 | — | |||||||||||||||||||||
Samsung Heavy Industries Co., Ltd. | — | — | 3 | — | 1,171 | 1,174 | — | |||||||||||||||||||||
POSCO | — | 2 | 781 | 90 | 260 | 1,133 | — | |||||||||||||||||||||
Samsung Card Co., Ltd. | 550 | — | 5 | 429 | 4 | 988 | — | |||||||||||||||||||||
National Agricultural Cooperative Federation | 2 | — | — | 826 | 7 | 835 | — | |||||||||||||||||||||
Songdo Cosmopolitan City Development Inc. | 714 | — | — | — | — | 714 | — | |||||||||||||||||||||
Korea Exchange Bank | 146 | — | — | 560 | — | 706 | — | |||||||||||||||||||||
SH Corporation | 600 | — | — | 52 | — | 652 | — | |||||||||||||||||||||
SPP Plant & Shipbuilding Co. Ltd. | 94 | 31 | — | — | 477 | 602 | — | |||||||||||||||||||||
Total | 2,250 | 34 | 846 | 29,004 | 7,765 | 39,899 | — | |||||||||||||||||||||
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Amounts of | ||||||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||
Loans and | ||||||||||||||||||||||||||||
Loans in | Guarantees | Guarantees | ||||||||||||||||||||||||||
Loans in | Foreign | Equity | Debt | and | Total | and | ||||||||||||||||||||||
Main Debtor Groups | Won | Currency | Securities | Securities | Acceptances | Exposure | Acceptances | |||||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||||||
Hyundai Heavy Industries | 9 | — | 16 | — | 4,600 | 4,625 | — | |||||||||||||||||||||
Samsung | 943 | 343 | 305 | 473 | 1,472 | 3,536 | — | |||||||||||||||||||||
Hyundai Motors | 540 | 617 | 39 | 521 | 158 | 1,875 | — | |||||||||||||||||||||
STX | 180 | 18 | 32 | — | 1,328 | 1,558 | — | |||||||||||||||||||||
SK | 738 | 253 | 220 | 163 | 107 | 1,481 | — | |||||||||||||||||||||
POSCO | 79 | 4 | 783 | 90 | 329 | 1,285 | — | |||||||||||||||||||||
Kumho Asiana | 552 | 73 | 59 | 71 | 50 | 805 | — | |||||||||||||||||||||
LG | 165 | 349 | 29 | 46 | 102 | 691 | — | |||||||||||||||||||||
Lotte | 343 | 71 | 16 | 147 | 84 | 661 | — | |||||||||||||||||||||
Aju | 238 | — | — | 259 | 127 | 624 | — | |||||||||||||||||||||
Total | 3,787 | 1,728 | 1,499 | 1,770 | 8,357 | 17,141 | — | |||||||||||||||||||||
Percentage of Total | ||||||||
Aggregate Loan | Corporate Loan | |||||||
Industry | Balance | Balance | ||||||
(In billions of Won) | (Percentages) | |||||||
Manufacturing | 30,029 | 31.71 | % | |||||
Retail and wholesale | 12,140 | 12.82 | ||||||
Real estate, leasing and service | 18,712 | 19.76 | ||||||
Construction | 7,374 | 7.79 | ||||||
Hotel and leisure(1) | 3,454 | 3.65 | ||||||
Finance and insurance | 5,331 | 5.63 | ||||||
Transportation, storage and communication | 5,735 | 6.05 | ||||||
Other service | 11,163 | 11.79 | ||||||
Other | 757 | 0.80 | ||||||
Total | 94,695 | 100.00 | % | |||||
(1) | Consists principally of hotels, motels and restaurants. |
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Percentage of Total | ||||||||
Aggregate Loan | Corporate Loan | |||||||
Balance | Balance | |||||||
(In billions of Won) | (Percentages) | |||||||
Commercial and industrial | ||||||||
Up to | 59 | 0.03 | % | |||||
Over | 1,408 | 0.83 | ||||||
Over | 2,281 | 1.34 | ||||||
Over | 11,785 | 6.91 | ||||||
Over | 6,629 | 3.89 | ||||||
Over | 15,092 | 8.85 | ||||||
Over | 5,590 | 3.28 | ||||||
Over | 9,056 | 5.31 | ||||||
Over | 2,059 | 1.20 | ||||||
Over | 1,507 | 0.88 | ||||||
Sub-total | 55,466 | 32.52 | % | |||||
Other commercial | ||||||||
Up to | 83 | 0.05 | % | |||||
Over | 929 | 0.54 | ||||||
Over | 913 | 0.53 | ||||||
Over | 3,987 | 2.34 | ||||||
Over | 2,263 | 1.33 | ||||||
Over | 6,254 | 3.67 | ||||||
Over | 4,240 | 2.49 | ||||||
Over | 11,103 | 6.51 | ||||||
Over | 3,453 | 2.02 | ||||||
Over | 4,412 | 2.59 | ||||||
Sub-total | 37,637 | 22.07 | % | |||||
Lease financing | ||||||||
Up to | 4 | — | ||||||
Over | 365 | 0.21 | % | |||||
Over | 256 | 0.15 | ||||||
Over | 148 | 0.09 | ||||||
Over | 32 | 0.02 | ||||||
Over | 182 | 0.11 | ||||||
Over | 161 | 0.09 | ||||||
Over | 388 | 0.23 | ||||||
Over | 56 | 0.03 | ||||||
Over | — | — | ||||||
Sub-total | 1,592 | 0.93 | % | |||||
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Percentage of Total | ||||||||
Aggregate Loan | Corporate Loan | |||||||
Balance | Balance | |||||||
(In billions of Won) | (Percentages) | |||||||
Mortgage and home equity | ||||||||
Up to | 334 | 0.20 | % | |||||
Over | 6,299 | 3.69 | ||||||
Over | 8,859 | 5.19 | ||||||
Over | 19,181 | 11.25 | ||||||
Over | 1,330 | 0.78 | ||||||
Over | 180 | 0.11 | ||||||
Over | — | — | ||||||
Over | — | — | ||||||
Over | — | — | ||||||
Over | — | — | ||||||
Sub-total | 36,183 | 21.22 | % | |||||
Other consumer | ||||||||
Up to | 4,198 | 2.46 | % | |||||
Over | 8,150 | 4.78 | ||||||
Over | 3,418 | 2.00 | ||||||
Over | 7,447 | 4.37 | ||||||
Over | 904 | 0.53 | ||||||
Over | 748 | 0.44 | ||||||
Over | 100 | 0.06 | ||||||
Over | 61 | 0.04 | ||||||
Over | — | — | ||||||
Over | — | — | ||||||
Sub-total | 25,026 | 14.68 | % | |||||
Credit cards(1) | ||||||||
Up to | 12,993 | 7.62 | % | |||||
Over | 886 | 0.52 | ||||||
Over | 48 | 0.03 | ||||||
Over | 76 | 0.04 | ||||||
Over | 27 | 0.02 | ||||||
Over | 76 | 0.04 | ||||||
Over | 12 | 0.01 | ||||||
Over | 60 | 0.03 | ||||||
Over | — | — | ||||||
Over | 459 | 0.27 | ||||||
Sub-total | 14,637 | 8.58 | ||||||
Total | 170,541 | 100.00 | % | |||||
(1) | Includes corporate credit card purchases. |
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As of December 31, 2008 | ||||||||||||||||
Over 1 Year | ||||||||||||||||
but Not More | ||||||||||||||||
1 Year or Less | Than 5 Years | Over 5 Years | Total | |||||||||||||
(In billions of Won) | ||||||||||||||||
Corporate: | ||||||||||||||||
Commercial and industrial | 48,479 | 6,181 | 806 | 55,466 | ||||||||||||
Other commercial | 24,755 | 9,433 | 3,449 | 37,637 | ||||||||||||
Lease financing | 527 | 1,024 | 41 | 1,592 | ||||||||||||
Total corporate | 73,761 | 16,638 | 4,296 | 94,695 | ||||||||||||
Consumer: | ||||||||||||||||
Mortgage and home equity | 8,910 | 7,723 | 19,550 | 36,183 | ||||||||||||
Other consumer | 20,509 | 3,088 | 1,429 | 25,026 | ||||||||||||
Credit cards | 13,379 | 748 | 510 | 14,637 | ||||||||||||
Total consumer | 42,798 | 11,559 | 21,489 | 75,846 | ||||||||||||
Total gross loans | 116,559 | 28,197 | 25,785 | 170,541 | ||||||||||||
As of December 31, 2008 | ||||||||||||
Due Within 1 Year | Due After 1 Year | Total | ||||||||||
(In billions of Won) | ||||||||||||
Fixed rate loans(1) | 42,222 | 10,090 | 52,312 | |||||||||
Variable rate loans(2) | 74,338 | 43,891 | 118,229 | |||||||||
Total gross loans | 116,560 | 53,981 | 170,541 | |||||||||
(1) | Fixed rate loans are loans for which the interest rate is fixed for the entire term of the loan. Fixed rate loans include | |
(2) | Variable or adjustable rate loans are for which the interest rate is not fixed for the entire term of the loan. |
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As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006(3) | 2007(3) | 2008(3) | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Loans accounted for on a nonaccrual basis | ||||||||||||||||||||
Corporate | 1,681 | 1,475 | 1,187 | 1,181 | 1,457 | |||||||||||||||
Consumer | 479 | 367 | 241 | 174 | 148 | |||||||||||||||
Credit cards | 294 | 210 | 226 | 409 | 416 | |||||||||||||||
Sub-total | 2,454 | 2,052 | 1,654 | 1,764 | 2,021 | |||||||||||||||
Accruing loans which are contractually past due one day or more as to principal or interest | ||||||||||||||||||||
Corporate(1) | 55 | 32 | 56 | 98 | 122 | |||||||||||||||
Consumer(2) | 17 | 32 | 55 | 67 | 46 | |||||||||||||||
Credit cards | 76 | 3 | — | — | — | |||||||||||||||
Sub-total | 148 | 67 | 111 | 165 | 168 | |||||||||||||||
Total | 2,602 | 2,119 | 1,765 | 1,929 | 2,189 | |||||||||||||||
(1) | Excludes past due loans within the grace period in the amount of | |
(2) | Includes accruing loans which are contractually past due 90 days or more in the amount of | |
(3) | Includes accruing loans which are contractually past due 90 days or more in the amount of |
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As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won) | ||||||||||||||||||||
Loans not included in “nonaccrual and past due loans” but classified as “troubled debt restructurings” | 916 | 735 | 111 | 124 | 557 |
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Loan Classification | Loan Characteristics | |
Normal | Loans made to customers whose financial position, future cash flows and nature of business are deemed financially sound. No problems in recoverability are expected. | |
Precautionary | Loans made to customers whose financial position, future cash flows and nature of business show potential weakness, although there is no immediate risk of nonrepayment. | |
Substandard | Loans made to customers whose adverse financial position, future cash flows and nature of business have a direct effect on the repayment of the loan. | |
Doubtful | Loans made to customers whose financial position, future cash flows and nature of business are so weak that significant risk exists in the recoverability of the loan, to the extent the outstanding amount exceeds any collateral pledged. | |
Estimated loss | Loans where write-off is unavoidable. |
• | loans classified as “substandard” or below according to the asset classification guidelines of the Financial Services Commission; | |
• | loans that are more than 90 days past due; and | |
• | loans which are “troubled debt restructurings” as defined under U.S. GAAP. |
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• | Prevailing economic and business conditions within Korea and foreign jurisdictions in which we operate; | |
• | Industry concentrations; | |
• | Changes in the size and composition of the relevant underlying portfolios; and | |
• | Changes in lending policies and procedures, including underwriting standards and collection, charge-offs, and recovery practices. |
As of December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(Percentages) | ||||||||||||
Normal | 3.11 | % | 1.94 | % | 0.77 | % | ||||||
Precautionary | 32.12 | 31.36 | 11.66 | |||||||||
Substandard | 38.55 | 37.28 | 23.27 | |||||||||
Doubtful | 76.00 | 83.78 | 81.97 | |||||||||
Estimated loss | 90.60 | 88.81 | 89.19 |
• | Mortgage and home equity loans; and | |
• | Other retail loans (consisting of unsecured and secured retail loans). |
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• | Changes in economic and business conditions such as levels of unemployment and house prices; | |
• | Change in the nature and volume of the portfolio, including any concentrations of credits; and | |
• | The effect of external factors such as regulatory or government requirements. |
• | Delinquency levels of cardholders; | |
• | Current government involvement within the credit card industry (such as the 2001 Government Amnesty Program); and | |
• | Key retail performance indicators (such as ratios of household debt to disposable income and household liabilities to financial assets). |
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Past Due | Past Due | Past Due More | ||||||||||||||||||||||||||||||||||
Current | Up to 3 Months | 3-6 Months | Than 6 Months | Total | ||||||||||||||||||||||||||||||||
As of December 31, | Amount | % | Amount | % | Amount | % | Amount | % | Amount | |||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
2004 | 94,480 | 97.32 | 855 | 0.88 | 431 | 0.45 | 1,314 | 1.35 | 97,080 | |||||||||||||||||||||||||||
2005 | 103,601 | 97.87 | 652 | 0.62 | 243 | 0.23 | 1,352 | 1.28 | 105,848 | |||||||||||||||||||||||||||
2006 | 120,222 | 98.18 | 971 | 0.79 | 172 | 0.14 | 1,081 | 0.89 | 122,446 | |||||||||||||||||||||||||||
2007 | 148,597 | 97.88 | 1,899 | 1.25 | 315 | 0.21 | 1,007 | 0.66 | 151,818 | |||||||||||||||||||||||||||
2008 | 167,064 | 97.96 | 2,120 | 1.24 | 420 | 0.25 | 937 | 0.55 | 170,541 |
As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Total non-performing loans | 1,750 | 1,594 | 1,253 | 1,322 | 1,357 | |||||||||||||||
As a percentage of total loans | 1.80 | % | 1.51 | % | 1.02 | % | 0.87 | % | 0.80 | % |
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As of December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | Ratio of | Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non- | Non- | Non- | Non- | Non- | Non- | Non- | Non- | Non- | Non- | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total | Performing | Performing | Total | Performing | Performing | Total | Performing | Performing | Total | Performing | Performing | Total | Performing | Performing | ||||||||||||||||||||||||||||||||||||||||||||||
Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | Loans | ||||||||||||||||||||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 35,653 | 898 | 2.52 | % | 35,728 | 868 | 2.43 | % | 40,063 | 760 | 1.90 | % | 48,485 | 748 | 1.54 | % | 55,466 | 755 | 1.36 | % | ||||||||||||||||||||||||||||||||||||||||
Other commercial | 17,988 | 468 | 2.60 | 21,409 | 387 | 1.81 | 27,319 | 256 | 0.94 | 30,312 | 272 | 0.90 | 37,637 | 332 | 0.88 | |||||||||||||||||||||||||||||||||||||||||||||
Lease financing | 981 | 19 | 1.94 | 754 | 8 | 1.06 | 585 | 8 | 1.37 | 1,370 | 7 | 0.51 | 1,592 | 5 | 0.31 | |||||||||||||||||||||||||||||||||||||||||||||
Total corporate | 54,622 | 1,385 | 2.54 | 57,891 | 1,263 | 2.18 | 67,967 | 1.024 | 1.51 | 80,167 | 1,027 | 1.28 | 94,695 | 1,092 | 1.15 | |||||||||||||||||||||||||||||||||||||||||||||
Consumer Mortgage and home equity | 22,180 | 126 | 0.57 | 25,840 | 111 | 0.43 | 30,097 | 68 | 0.23 | 31,495 | 45 | 0.14 | 36,183 | 40 | 0.11 | |||||||||||||||||||||||||||||||||||||||||||||
Other consumer | 15,546 | 155 | 1.00 | 17,875 | 172 | 0.96 | 20,458 | 119 | 0.58 | 25,475 | 85 | 0.33 | 25,026 | 54 | 0.22 | |||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 4,732 | 84 | 1.78 | 4,242 | 48 | 1.13 | 3,924 | 42 | 1.07 | 14,681 | 165 | 1.12 | 14,637 | 171 | 1.17 | |||||||||||||||||||||||||||||||||||||||||||||
Total consumer | 42,458 | 365 | 0.86 | 47,957 | 331 | 0.69 | 54,479 | 229 | 0.42 | 71,651 | 295 | 0.41 | 75,846 | 265 | 0.35 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 97,080 | 1,750 | 1.80 | % | 105,848 | 1,594 | 1.51 | % | 122,446 | 1,253 | 1.02 | % | 151,818 | 1,322 | 0.87 | % | 170,541 | 1,357 | 0.80 | % | ||||||||||||||||||||||||||||||||||||||||
(A) As of December 31, 2008 | ||||||||||||
Gross Principal | Allowance for | |||||||||||
Industry | Outstanding | Loan Losses | ||||||||||
(In billions of Won) | ||||||||||||
1 | Borrower A | Manufacturing | 48 | 48 | ||||||||
2 | Borrower B | Manufacturing | 27 | 14 | ||||||||
3 | Borrower C | Manufacturing | 19 | 5 | ||||||||
4 | Borrower D | Other service | 16 | 6 | ||||||||
5 | Borrower E | Manufacturing | 15 | 15 | ||||||||
6 | Borrower F | Construction | 15 | 15 | ||||||||
7 | Borrower G | Manufacturing | 13 | 6 | ||||||||
8 | Borrower H | Real estate, leasing and service | 12 | 2 | ||||||||
9 | Borrower I | Construction | 12 | 12 | ||||||||
10 | Borrower J | Manufacturing | 11 | 7 | ||||||||
11 | Borrower K | Real estate, leasing and service | 11 | 0 | ||||||||
12 | Borrower L | Other service | 10 | 10 | ||||||||
13 | Borrower M | Finance and insurance | 10 | 7 | ||||||||
14 | Borrower N | Retail and wholesale | 10 | 2 | ||||||||
15 | Borrower O | Manufacturing | 9 | 9 | ||||||||
16 | Borrower P | Real estate, leasing, service | 9 | 0 | ||||||||
17 | Borrower Q | Retail and wholesale | 9 | 2 | ||||||||
18 | Borrower R | Manufacturing | 9 | 3 | ||||||||
19 | Borrower S | Real estate, leasing, and service | 8 | 8 | ||||||||
20 | Borrower T | Manufacturing | 8 | 8 | ||||||||
281 | 179 | |||||||||||
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• | identifying loans subject to a proposed sale by assessing the estimated losses from such sale based on the estimated recovery value of collateral, if any, for such non-performing loans; | |
• | identifying loans subject to charge-off based on the estimated recovery value of collateral, if any, for such non-performing loans and the estimated rate of recovery of unsecured loans; and | |
• | on a limited basis, identifying commercial loans subject to normalization efforts based on the cash-flow situation of the borrower. |
• | making phone calls and paying visits to the borrower to request payment; | |
• | continuing to assess and evaluate assets of our borrowers; and | |
• | if necessary, initiating legal action such as foreclosures, attachments and litigation. |
• | selling non-performing loans to third parties including the Korea Asset Management Corporation; | |
• | entering into asset-backed securitization transactions with respect to non-performing loans; | |
• | managing retail loans that are three months or more past due through Shinhan Credit Information under an agency agreement in the case of Shinhan Bank; and | |
• | using third-party collection agencies including the credit information companies. |
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As of December 31, | ||||||||||||||||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||||||||||||||||||||||
Loans% | Loans% | Loans% | Loans% | Loans% | ||||||||||||||||||||||||||||||||||||
of Total | of Total | of Total | of Total | of Total | ||||||||||||||||||||||||||||||||||||
Amt. | Loans | Amt. | Loans | Amt. | Loans | Amt. | Loans | Amt. | Loans | |||||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||||
Commercial and Industrial | 1,065 | 36.72 | % | 753 | 33.75 | % | 900 | 32.72 | % | 963 | 31.94 | % | 1,592 | 32.53 | % | |||||||||||||||||||||||||
Other commercial | 410 | 18.53 | 305 | 20.23 | 359 | 22.31 | 427 | 19.97 | 846 | 22.07 | ||||||||||||||||||||||||||||||
Lease financing | 24 | 1.01 | 16 | 0.71 | 10 | 0.48 | 16 | 0.90 | 11 | 0.93 | ||||||||||||||||||||||||||||||
Total corporate | 1,499 | 56.26 | 1,074 | 54.69 | 1,269 | 55.51 | 1,406 | 52.81 | 2,449 | 55.53 | ||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||
Mortgages and home equity | 36 | 22.85 | 19 | 24.41 | 4 | 24.58 | 4 | 20.75 | 8 | 21.22 | ||||||||||||||||||||||||||||||
Other consumer | 368 | 16.01 | 183 | 16.89 | 175 | 16.71 | 150 | 16.77 | 149 | 14.67 | ||||||||||||||||||||||||||||||
Credit cards | 408 | 4.88 | 236 | 4.01 | 127 | 3.20 | 539 | 9.67 | 595 | 8.58 | ||||||||||||||||||||||||||||||
Total consumer | 812 | 43.74 | 438 | 45.31 | 306 | 44.49 | 693 | 47.19 | 752 | 44.47 | ||||||||||||||||||||||||||||||
Total allowance for loan losses | 2,311 | 100.00 | % | 1,512 | 100.00 | % | 1,575 | 100.00 | % | 2,099 | 100.00 | % | 3,201 | 100.00 | % | |||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Balance at the beginning of the period | 3,631 | 2,311 | 1,512 | 1,575 | 2,099 | |||||||||||||||
Amounts charged against income | 195 | (255 | ) | 252 | 40 | 1,319 | ||||||||||||||
Allowance relating to loans repurchased from the Korea Asset Management Corporation | 2 | — | — | — | — |
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2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Gross charge-offs: | ||||||||||||||||||||
Corporate: | ||||||||||||||||||||
Commercial and industrial | 465 | 297 | 130 | 89 | 144 | |||||||||||||||
Other commercial | 26 | 18 | 76 | 64 | 142 | |||||||||||||||
Lease financing | — | — | — | 9 | 6 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Mortgage and home equity | 18 | 19 | — | (2 | ) | 6 | ||||||||||||||
Other consumer | 441 | 296 | 96 | 123 | 98 | |||||||||||||||
Credit cards | 872 | 316 | 211 | 418 | 521 | |||||||||||||||
Total gross charge-offs | (1,822 | ) | (946 | ) | (513 | ) | (701 | ) | (917 | ) | ||||||||||
Recoveries: | ||||||||||||||||||||
Corporate: | ||||||||||||||||||||
Commercial and industrial | 105 | 69 | 47 | 15 | 16 | |||||||||||||||
Other commercial | 121 | 217 | 154 | 104 | 27 | |||||||||||||||
Lease financing | 2 | 4 | 5 | — | — | |||||||||||||||
Consumer: | ||||||||||||||||||||
Mortgage and home equity | 1 | 3 | 5 | 3 | 2 | |||||||||||||||
Other consumer | 22 | 34 | 43 | 71 | 107 | |||||||||||||||
Credit cards | 56 | 72 | 70 | 451 | 548 | |||||||||||||||
Total recoveries | 307 | 399 | 324 | 644 | 700 | |||||||||||||||
Net charge-offs | (1,515 | ) | (547 | ) | (189 | ) | (57 | ) | (217 | ) | ||||||||||
Acquisition of Shinhan Life Insurance | — | 3 | — | — | — | |||||||||||||||
Acquisition of LG Card | — | — | — | 541 | — | |||||||||||||||
Balance at the end of the period | 2,311 | 1,512 | 1,575 | 2,099 | 3,201 | |||||||||||||||
Ratio of net charge-offs during the period to average loans outstanding during the period | 1.52 | % | 0.53 | % | 0.17 | % | 0.04 | % | 0.13 | % |
• | loans for which collection is not foreseeable due to insolvency or bankruptcy, dissolution or the shutting down of the business of the debtor; |
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• | loans for which collection is not foreseeable due to the death or disappearance of debtors; | |
• | loans for which expenses of collection exceed the collectable amount; | |
• | loans on which collection is not possible through legal or any other means; | |
• | payments in arrears in respect of credit cards, which are overdue for more than six months; | |
• | payments outstanding on unsecured retail loans, which have been overdue for more than six months; | |
• | payments in arrears in respect of leases, which have been overdue for more than 12 months; or | |
• | the portion of loans classified as “estimated loss,” net of any recovery from collateral, which is deemed to be uncollectible. |
• | maintain the stability and diversification of our assets; | |
• | maintain adequate sources ofback-up liquidity to match our funding requirements; and | |
• | supplement income from our core lending activities. |
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As of | As of | As of | ||||||||||||||||||||||
December 31, 2006 | December 31, 2007 | December 31, 2008 | ||||||||||||||||||||||
Book | Market | Book | Market | Book | Market | |||||||||||||||||||
Value | Value | Value | Value | Value | Value | |||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||
Marketable equity securities | 1,241 | 1,241 | 3,324 | 3,324 | 2,900 | 2,900 | ||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,397 | 4,397 | 4,206 | 4,206 | 6,254 | 6,254 | ||||||||||||||||||
Debt securities by financial institutions | 7,243 | 7,243 | 10,051 | 10,051 | 15,550 | 15,550 | ||||||||||||||||||
Corporate debt securities | 1,760 | 1,760 | 2,145 | 2,145 | 1,918 | 1,918 | ||||||||||||||||||
Debt securities issued by foreign government | 29 | 29 | 48 | 48 | 123 | 123 | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 2,269 | 2,269 | 3,075 | 3,075 | 3,001 | 3,001 | ||||||||||||||||||
Total — Available-for-sale | 16,939 | 16,939 | 22,849 | 22,849 | 29,746 | 29,746 | ||||||||||||||||||
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As of | As of | As of | ||||||||||||||||||||||
December 31, 2006 | December 31, 2007 | December 31, 2008 | ||||||||||||||||||||||
Book | Market | Book | Market | Book | Market | |||||||||||||||||||
Value | Value | Value | Value | Value | Value | |||||||||||||||||||
(In billions of Won) | ||||||||||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 2,505 | 2,555 | 3,071 | 3,036 | 4,009 | 4,126 | ||||||||||||||||||
Debt securities by financial institutions | 4,959 | 5,018 | 4,858 | 4,812 | 4,279 | 4,331 | ||||||||||||||||||
Corporate debt securities | 64 | 64 | 110 | 105 | 245 | 247 | ||||||||||||||||||
Debt securities issued by foreign government | 1 | 1 | 1 | 1 | 9 | 9 | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 52 | 52 | 184 | 212 | 154 | 160 | ||||||||||||||||||
Total — Held-to-maturity | 7,581 | 7,690 | 8,224 | 8,166 | 8,696 | 8,873 | ||||||||||||||||||
Trading Securities | ||||||||||||||||||||||||
Marketable equity securities | 507 | 507 | 655 | 655 | 705 | 705 | ||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 494 | 494 | 406 | 406 | 528 | 528 | ||||||||||||||||||
Financial institutions | 1,022 | 1,022 | 3,033 | 3,033 | 3,279 | 3,279 | ||||||||||||||||||
Corporations | 1,315 | 1,315 | 2,130 | 2,130 | 1,264 | 1,264 | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 74 | 74 | 1,966 | 1,966 | 889 | 889 | ||||||||||||||||||
Other trading assets(1) | 62 | 62 | 30 | 30 | 59 | 59 | ||||||||||||||||||
Total — Trading | 3,474 | 3,474 | 8,220 | 8,220 | 6,724 | 6,724 | ||||||||||||||||||
Total securities | 27,994 | 28,103 | 39,293 | 39,235 | 45,166 | 45,343 | ||||||||||||||||||
(1) | Consists of commodity-indexed deposits. |
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As of December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||
Over 5 but within | ||||||||||||||||||||||||||||||||||||||||
1 Year or Less | Over 1 but within 5 yrs | 10 yrs | Over 10 yrs | Total | ||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | |||||||||||||||||||||||||||||||
Amount | Yield(1) | Amount | Yield(1) | Amount | Yield(1 | Amount | Yield(1) | Amount | Yield(1 | |||||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||||||||||
Korean Treasury securities and government agencies | 866 | 4.35 | % | 4,701 | 5.36 | % | 676 | 5.73 | % | 11 | 5.30 | % | 6,254 | 5.26 | % | |||||||||||||||||||||||||
Debt securities issued by financial institutions | 8,109 | 4.73 | 6,174 | 5.68 | 1,057 | 6.32 | 210 | 6.24 | 15,550 | 5.23 | ||||||||||||||||||||||||||||||
Corporate debt securities | 347 | 5.06 | 1,486 | 5.10 | 85 | 4.82 | — | — | 1,918 | 5.08 | ||||||||||||||||||||||||||||||
Debt securities issued by foreign governments | 42 | 4.08 | 50 | 5.40 | 31 | 5.28 | — | — | 123 | 4.89 | ||||||||||||||||||||||||||||||
Mortgage Backed Securities and Asset Backed Securities | 1,096 | 1.15 | 1,846 | 3.76 | 58 | 3.74 | 1 | 3.20 | 3,001 | 2.81 | ||||||||||||||||||||||||||||||
Total | 10,460 | 4.32 | % | 14,257 | 5.26 | % | 1,907 | 5.95 | % | 222 | 6.18 | % | 26,846 | 4.95 | % | |||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||||||||||
Korean Treasury securities and government agencies | 959 | 5.22 | % | 2,551 | 5.53 | % | 386 | 5.76 | % | 113 | 5.33 | % | 4,009 | 5.47 | % | |||||||||||||||||||||||||
Debt securities issued by financial institutions | 1,196 | 5.49 | 2,456 | 5.90 | 417 | 6.65 | 210 | 5.68 | 4,279 | 5.85 | ||||||||||||||||||||||||||||||
Corporate debt securities | 30 | 4.58 | 165 | 6.35 | 50 | 6.80 | — | — | 245 | 6.22 | ||||||||||||||||||||||||||||||
Debt securities issued by foreign governments | 2 | 5.30 | 5 | 4.25 | 2 | 6.65 | — | — | 9 | 5.14 | ||||||||||||||||||||||||||||||
Mortgage Backed Securities and Asset Backed Securities | 30 | 5.21 | 83 | 5.52 | 31 | 5.29 | 10 | — | 154 | 5.39 | ||||||||||||||||||||||||||||||
Total | 2,217 | 5.36 | % | 5,260 | 5.73 | % | 886 | 6.22 | % | 333 | 5.55 | % | 8,696 | 5.68 | % | |||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||||||||||||||
Korean Treasury securities and government agencies | 136 | 3.67 | % | 383 | 4.16 | % | 6 | 4.28 | % | 3 | 5.44 | % | 528 | 4.04 | % | |||||||||||||||||||||||||
Debt securities issued by financial institutions | 2,771 | 3.77 | 482 | 4.26 | 26 | 8.26 | — | — | 3,279 | 3.88 | ||||||||||||||||||||||||||||||
Corporate debt securities | 1,013 | 5.83 | 251 | 5.70 | — | — | — | — | 1,264 | 5.80 | ||||||||||||||||||||||||||||||
Mortgage Backed Securities and Asset Backed Securities | 811 | 6.02 | 78 | 7.33 | — | — | — | — | 889 | 6.13 | ||||||||||||||||||||||||||||||
Total | 4,731 | 4.61 | % | 1,194 | 4.77 | % | 32 | 7.55 | % | 3 | 5.44 | % | 5,960 | 4.65 | % | |||||||||||||||||||||||||
Total Debt Securities | 17,408 | 20,711 | 2,825 | 558 | 41,502 | |||||||||||||||||||||||||||||||||||
(1) | The weighted-average yield for the portfolio represents the yield to maturity for each individual security, weighted using its amortized cost. |
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As of December 31, 2008 | ||||||||
Book Value | Market Value | |||||||
(In billions of Won) | ||||||||
Name of issuer: | ||||||||
Bank of Korea | 9,420 | 9,460 | ||||||
Korean Government | 6,429 | 6,515 | ||||||
Korea Development Bank | 3,073 | 3,079 | ||||||
Industrial Bank of Korea | 2,390 | 2,393 | ||||||
Total | 21,312 | 21,447 | ||||||
As of December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(In billions of Won) | ||||||||||||
Commitments to extend credit: | ||||||||||||
Corporate | 55,580 | 65,611 | 49,873 | |||||||||
Credit cards(1) | 13,938 | 46,079 | 52,577 | |||||||||
Consumer | 6,127 | 6,968 | 8,350 | |||||||||
Commercial letters of credit(2) | 2,963 | 3,518 | 3,006 | |||||||||
Standby letters of credit, other financial and performance guarantees and liquidity facilities to SPEs | 5,353 | 12,573 | 14,859 | |||||||||
Total | 83,961 | 134,749 | 128,665 | |||||||||
(1) | Relates to the unused portion of credit card limits that may be cancelled by us after notice to the borrower if we determine that the borrower’s repayment ability is significantly impaired. | |
(2) | These are generally short-term and collateralized by the underlying shipments of goods to which they relate. |
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As of December 31, 2008 | ||||||||||||
Underlying Notional | Estimated | Estimated | ||||||||||
Amount(1) | Fair Value Assets | Fair Value Liabilities | ||||||||||
(In billions of Won) | ||||||||||||
Trading: | ||||||||||||
Foreign exchange contracts: | ||||||||||||
Forward contracts | 34,462 | 4,097 | 1,781 | |||||||||
Options purchased | 11,546 | 1,719 | — | |||||||||
Options written | 11,310 | — | 964 | |||||||||
Sub-total | 57,318 | 5,816 | 2,745 | |||||||||
Interest rate contracts: | ||||||||||||
Swaps | 115,704 | 1,857 | 2,123 | |||||||||
Options purchased | 5,631 | 88 | — | |||||||||
Options written | 7,469 | — | 95 | |||||||||
Sub-total | 128,804 | 1,945 | 2,218 | |||||||||
Cross currency swaps | 55,551 | 3,626 | 5,958 | |||||||||
Equity contracts: | ||||||||||||
Swaps | 2,167 | 385 | 294 | |||||||||
Option purchased | 782 | 170 | — | |||||||||
Option written | 1,432 | — | 321 | |||||||||
Sub-total | 4,381 | 555 | 615 | |||||||||
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As of December 31, 2008 | ||||||||||||
Underlying Notional | Estimated | Estimated | ||||||||||
Amount(1) | Fair Value Assets | Fair Value Liabilities | ||||||||||
(In billions of Won) | ||||||||||||
Other derivatives: | ||||||||||||
Commodity swaps | — | — | — | |||||||||
Forward contracts | — | — | — | |||||||||
Options purchased | 265 | 35 | — | |||||||||
Options written | 299 | — | 36 | |||||||||
Sub-total | 564 | 35 | 36 | |||||||||
Credit derivatives: | ||||||||||||
Protection buy | — | — | — | |||||||||
Protection sell | 108 | — | 39 | |||||||||
Sub-total | 108 | — | 39 | |||||||||
Total | 246,726 | 11,977 | 11,611 | |||||||||
Nontrading: | ||||||||||||
Hedge accounting: | ||||||||||||
Interest rate swaps | 100 | 4 | — | |||||||||
Sub-total | 100 | 4 | — | |||||||||
Nontrading that do not qualify for hedge accounting(2): | ||||||||||||
Interest rate swaps | 12,554 | 550 | 52 | |||||||||
Forward contracts | 25 | — | 7 | |||||||||
Cross currency swaps | 2,146 | 158 | — | |||||||||
Total | 14,825 | 712 | 59 | |||||||||
(1) | Notional amounts in foreign currencies were converted into Won at prevailing exchange rates as of December 31, 2008. | |
(2) | While we engage in derivatives trading activities to hedge the interest rate risk exposure that arises from our own assets and liabilities, as these nontrading derivative contracts do not qualify for hedge accounting under U.S. GAAP, they are accounted for as trading derivatives in the financial statements. These contracts include interest rate swaps, forward contracts and cross-currency swaps held for nontrading that do not qualify for hedge accounting treatment. |
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2006 | 2007 | 2008 | ||||||||||||||||||||||
Average | Average Rate | Average | Average Rate | Average | Average Rate | |||||||||||||||||||
Balance(1) | Paid | Balance(1) | Paid | Balance(1) | Paid | |||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||
Interest-bearing demand deposits | 7,964 | 0.46 | % | 8,455 | 0.41 | % | 5,786 | 0.78 | % | |||||||||||||||
Savings deposits | 27,279 | 2.21 | 30,583 | 2.05 | 30,877 | 2.32 | ||||||||||||||||||
Certificates of deposit | 9,934 | 4.67 | 15,475 | 5.22 | 16,152 | 5.94 | ||||||||||||||||||
Other time deposits | 39,644 | 3.84 | 44,397 | 4.55 | 60,437 | 4.94 | ||||||||||||||||||
Mutual installment deposits(2) | 1,211 | 3.80 | 567 | 3.88 | 291 | 3.78 | ||||||||||||||||||
Total interest-bearing deposits(3) | 86,032 | 3.08 | % | 99,477 | 3.53 | % | 113,543 | 4.15 | % | |||||||||||||||
(1) | Average balances are based on daily balances for Shinhan Bank and Jeju Bank and quarterly balances for other subsidiaries. | |
(2) | Mutual installment deposits are interest-bearing deposits offered by Shinhan Bank which enable customers to become eligible for loans while they maintain an account with us. The customer’s account does not have to secure loan amounts once made but is a requirement for loan eligibility. Prior to qualifying for a loan a customer must make required periodic deposits to the mutual installment account for a contracted term of less than five years. A customer is not required to fulfill the deposit term prior to requesting a loan from Shinhan Bank, but loan amounts and terms are not as favorable in the event of a loan request prior to completing the deposit contract term. | |
(3) | Under U.S. GAAP, interest-bearing assets do not include cover bills sold or bonds sold under repurchase agreements, which are offered to our customers as deposit products. These are reflected as short-term borrowings and secured borrowings, respectively. |
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As of December 31, 2008 | ||||||||||||||||
Mutual | ||||||||||||||||
Certificates | Other Time | Installment | ||||||||||||||
of Deposit | Deposits | Deposits | Total | |||||||||||||
(In billions of Won) | ||||||||||||||||
Maturing within three months | 2,719 | 15,118 | 7 | 17,844 | ||||||||||||
After three but within six months | 3,264 | 3,034 | 4 | 6,302 | ||||||||||||
After six but within 12 months | 4,652 | 26,292 | 5 | 30,949 | ||||||||||||
After 12 months | 2,411 | 2,318 | 1 | 4,730 | ||||||||||||
Total | 13,046 | 46,762 | 17 | 59,825 | ||||||||||||
2006 | 2007 | 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Highest | Weighted | Highest | Weighted | Highest | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average | Balances | Average | Year-end | Average | Balances | Average | Year-end | Average | Balances | Average | Year-end | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance | Balance | at Any | Interest | Interest | Balance | Balance | at Any | Interest | Interest | Balance | Balance | at Any | Interest | Interest | ||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Outstanding(1) | Month-end | Rate(2) | Rate | Outstanding | Outstanding(1) | Month-end | Rate(2) | Rate | Outstanding | Outstanding(1) | Month-end | Rate(2) | Rate | ||||||||||||||||||||||||||||||||||||||||||||||
(in billions of Won, except for percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings from BOK(3) | 1,173 | 1,274 | 1,467 | 2.21 | % | 0.10~2.75 | % | 883 | 881 | 1,169 | 2.97 | % | 0.10~3.25 | % | 1,259 | 964 | 1,285 | 2.54 | % | 0.10 - 2.75 | % | |||||||||||||||||||||||||||||||||||||||
Call money | 1,686 | 3,070 | 4,055 | 4.77 | % | 0.35~5.44 | % | 1,673 | 3,173 | 4,615 | 5.49 | % | 0.75~10.25 | % | 4,878 | 2,875 | 4,878 | 5.41 | 0.40 - 6.93 | % | ||||||||||||||||||||||||||||||||||||||||
Other borrowings(4) | 8,136 | 9,344 | 15,992 | 3.03 | % | 0.07~5.86 | % | 13,245 | 12,756 | 13,245 | 3.93 | % | 0.98~7.83 | % | 17,088 | 17,874 | 19,839 | 4.12 | 1.08 - 8.10 | % | ||||||||||||||||||||||||||||||||||||||||
10,995 | 13,688 | 21,514 | 3.92 | % | 15,801 | 16,810 | 19,029 | 4.17 | % | 23,225 | 21,713 | 26,002 | 4.22 | % | ||||||||||||||||||||||||||||||||||||||||||||||
(1) | Average outstanding balances are calculated using daily balances for Shinhan Bank and Jeju Bank and quarterly balances for other subsidiaries. | |
(2) | Weighted-average interest rates during this year are calculated by dividing the total interest expenses by the average amount borrowed. | |
(3) | Borrowings from the Bank of Korea generally mature within one month for borrowings in Won and six months for borrowings in foreign currencies. | |
(4) | Other short-term borrowings included borrowings from trust accounts, bills sold, borrowings in domestic and foreign currencies and short-term debentures. |
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• | identifying and managing all inherent risks; | |
• | standardizing risk management process and methodology; | |
• | ensuring supervision and control of risk management independent of business activities; | |
• | continuously assessing risk preference; | |
• | preventing risk concentration; | |
• | operating a precise and comprehensive risk management system including statistical models; and | |
• | balancing profitability and risk management through risk-adjusted profit management. |
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• | establishing basic risk management policies consistent with business strategy; | |
• | establishing risk limits appropriate for the group and each subsidiary; |
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• | establishing and amending, as necessary, risk management regulations, which regulates risk management activities of the group as well as each subsidiary, establishes risk limits and provides risk management guidelines; and | |
• | other risk management-related issues the board of directors or the Group Risk Management Committee see fit to discuss. |
• | changes in risk management policies and strategies for each subsidiary; | |
• | matters warranting discussion of risk management at the group level and cooperation among the subsidiaries; | |
• | the effect of externalities on the group’s risk; and | |
• | other risk management-related matters. |
• | achieve profit level corresponding to the level of risks involved; | |
• | improve asset quality and achieve optimal industrial and rating loan portfolio; | |
• | focus on the small- and medium-sized enterprises and markets; | |
• | establish appropriate limits for investment securities; | |
• | avoid excessive loan concentration to a particular borrower or sector; | |
• | focus on borrower’s ability to repay the debt; and | |
• | financially support our select customers’ growth. |
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• | credit evaluation and approval; | |
• | credit review and monitoring; and | |
• | credit risk assessment and control. |
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• | achieve profit level corresponding to the level of risks involved; | |
• | improve asset quality and achieve optimal asset portfolio; and | |
• | focus on borrower’s ability to repay the debt. |
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• | when it receives a report of a card’s fraudulent use or loss; | |
• | at the request of a cardholder; | |
• | for cash advances, immediately upon recognition by the system that the relevant cardholder became delinquent; or | |
• | for other types of transactions, one day to three months (depending on the customer’s credit score) after recognition by the system that the relevant cardholder became delinquent. |
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• | trading activities to realize short-term trading profits in debt and stock markets and foreign exchange markets based on Shinhan Bank’s short-term forecast of changes in market situation and customer demand, for its own account as well as for the account of the trust accounts of Shinhan Bank’s customers; and | |
• | trading activities primarily to realize profits from arbitrage transactions in derivatives such as swap, forward, futures and option transactions, and, to a lesser extent, to sell derivative products to Shinhan Bank’s customers and to cover market risk incurred from those trading activities. |
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As of December 31, | ||||||||||||
Currency | 2006 | 2007 | 2008 | |||||||||
(In millions of US$) | ||||||||||||
U.S. dollars | US$ | 301.1 | US$ | 20.4 | US$ | (41.6 | ) | |||||
Japanese yen | (27.2 | ) | (21.0 | ) | (43.7 | ) | ||||||
Euro | 25.5 | 18.9 | (10.8 | ) | ||||||||
Others | 70.3 | 66.1 | 59.3 | |||||||||
Total | US$ | 369.7 | US$ | 84.4 | US$ | (36.8 | ) | |||||
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Trading Portfolio VaR for the Year 2008 | ||||||||||||||||
As of | ||||||||||||||||
December 31, | ||||||||||||||||
Average | Minimum | Maximum | 2008 | |||||||||||||
(In billions of Won) | ||||||||||||||||
Shinhan Bank:(1) | ||||||||||||||||
Interest rate | 43.3 | 28.6 | 58.7 | 30.1 | ||||||||||||
Foreign exchange(2) | 12.2 | 0.6 | 55.7 | 53.2 | ||||||||||||
Equities | 15.8 | 6.1 | 27.5 | 15.9 | ||||||||||||
Option volatility(3) | 9.5 | 1.2 | 72.7 | 1.8 | ||||||||||||
Less: portfolio diversification(4) | (26.1 | ) | 1.7 | (91.1 | ) | (54.2 | ) | |||||||||
Total VaR(5) | 54.7 | 38.2 | 123.5 | 46.8 | ||||||||||||
Good Morning Shinhan Securities:(6) | ||||||||||||||||
Interest rate | 8.1 | 3.7 | 14.0 | 7.3 | ||||||||||||
Equities | 17.8 | 15.0 | 26.8 | 12.1 | ||||||||||||
Option volatility(3) | 16.6 | 13.1 | 27.8 | 15.5 | ||||||||||||
Less: portfolio diversification(4) | (30.0 | ) | (26.7 | ) | (39.7 | ) | (26.2 | ) | ||||||||
�� | ||||||||||||||||
Total VaR | 12.5 | 5.1 | 28.9 | 8.7 | ||||||||||||
(1) | Ten-day VaR results with a 99.9% confidence level. | |
(2) | Includes both trading and non-trading accounts as Shinhan Bank manages foreign exchange risk on a total position basis. | |
(3) | Volatility implied from the option price using the Black-Scholes or a similar model. | |
(4) | Calculation of portfolio diversification effects may occur on different days for different risk components. The Total VaRs are less than the simple sum of the risk component VaRs due to offsets resulting from portfolio diversification. | |
(5) | Includes trading portfolio in Shinhan Bank’s bank accounts and assets in trust accounts for which it guarantees principal or fixed return. | |
(6) | The average change in market value of Good Morning Shinhan’s portfolio was |
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• | By its nature as a statistical approach, VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, particularly potential future events that are extreme in nature. | |
• | This model may underestimate the probability of extreme market movements. | |
• | The time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate the potential loss. | |
• | The use of a 99% confidence level, does not take account of, nor makes any statement about, any losses that might occur beyond this confidence level. | |
• | VaR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses. |
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• | arbitrage transactions to make profits from short-term discrepancies between the spot and derivative markets or within the derivative markets; | |
• | sales of tailor-made derivative products that meet various needs of our corporate customers, principally of Shinhan Bank and Good Morning Shinhan Securities, and related transactions to reduce its exposure resulting from those sales (in the case of Good Morning Shinhan Securities, these activities commenced from February 2003 when it acquired the relevant license); | |
• | taking positions in limited cases when we expect short-swing profits based on its market forecasts; and | |
• | trading to hedge our interest rate and foreign currency risk exposure as described above. |
• | computation of the dealing system market value (based on assessment by the quantitative analysis team of the adequacy of the formula and the model used to compute the market value as derived from the dealing system); | |
• | computation of the market value as obtained from an outside credit evaluation company; and | |
• | after comparison of the market value derived from the dealing system to the market value obtained from the outside credit evaluation company, determination as to whether to use the former market value based on inter-departmental agreement. |
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• | Earnings: interest rate fluctuations have an effect on Shinhan Bank’s net interest income by affecting its interest-sensitive operating income and expenses. | |
• | Economic value of net assets: interest rate fluctuations influence Shinhan Bank’s net worth by affecting the present value of cash flows from the assets, liabilities and other transactions of Shinhan Bank. |
• | Interest Rate Gap Analysis: Interest rate gap analysis measures the difference in the amounts of interest-earning assets and interest-bearing liabilities at each maturity and re-pricing date for a specific time frame. | |
• | Duration Gap Analysis: Duration gap analysis measures durations of Shinhan Bank’s interest-earning assets and interest-bearing liabilities, which are weighted average maturities of these assets and liabilities calculated based on discounted cash flows from these assets and liabilities using yield curves. | |
• | Market Value Analysis: Market value analysis measures changes in the market value of Shinhan Bank’s interest-earning assets and interest-bearing liabilities based on the assumption of parallel shifts in interest rates. | |
• | Net Interest Income Simulation Analysis: Net interest income simulation analysis uses deterministic analysis methodology to measure changes in Shinhan Bank’s annual net interest income (interest income less interest expenses) under the current maturity structure, using different scenarios for interest rates (assuming parallel shifts) and funding requirements. |
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• | With respect to the maturities and re-pricing dates of Shinhan Bank’s assets, we assume that the maturity of Shinhan Bank’s prime rate-linked loans is the same as that of its fixed-rate loans. We also assume that the debt securities in Shinhan Bank’s trading accounts have maturities of three months. Shinhan Bank excludes equity securities from interest-earning assets. | |
• | With respect to the maturities and re-pricing of Shinhan Bank’s liabilities, we assume that money market deposit accounts and “non-core” demand deposits under the Financial Services Commission guidelines have a maturity of three months or less. With respect to “core” demand deposits under the Financial Services Commission guidelines, we assume that they have maturities of eight different intervals ranging from one month to five years. |
As of December 31, 2008 | ||||||||||||||||||||||||||||
0-3 | 3-6 | 6-12 | 1-2 | 2-3 | Over 3 | |||||||||||||||||||||||
Months | Months | Months | Years | Years | Years | Total | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||
Interest-earning assets | 115,845 | 13,238 | 11,909 | 11,619 | 4,920 | 11,603 | 169,133 | |||||||||||||||||||||
Fixed rates | 28,173 | 8,000 | 9,354 | 10,134 | 3,263 | 6,976 | 65,900 | |||||||||||||||||||||
Floating rates | 85,312 | 4,528 | 1,050 | 1,005 | 355 | 653 | 92,903 | |||||||||||||||||||||
Interest rate swaps | 2,360 | 710 | 1,505 | 480 | 1,302 | 3,973 | 10,330 | |||||||||||||||||||||
Interest-bearing liabilities | 79,629 | 22,148 | 28,256 | 12,126 | 8,125 | 12,902 | 163,186 | |||||||||||||||||||||
Fixed liabilities | 37,341 | 14,555 | 26,793 | 11,758 | 7,991 | 12,731 | 111,169 | |||||||||||||||||||||
Floating liabilities | 31,958 | 7,593 | 1,463 | 368 | 134 | 172 | 41,686 | |||||||||||||||||||||
Interest rate swaps | 10,330 | — | — | — | — | — | 10,330 | |||||||||||||||||||||
Sensitivity gap | 36,216 | (8,910 | ) | (16,347 | ) | (507 | ) | (3,205 | ) | (1,300 | ) | 5,947 | ||||||||||||||||
Cumulative gap | 36,216 | 27,306 | 10,959 | 10,452 | 7,247 | 5,947 | ||||||||||||||||||||||
% of total assets | 21.4 | % | 16.1 | % | 6.5 | % | 6.2 | % | 4.3 | % | 3.5 | % |
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As of December 31, 2008 | ||||||||||||||||||||||||
0-3 | 3-6 | 6-12 | 1-3 | Over 3 | ||||||||||||||||||||
Months | Months | Months | Years | Years | Total | |||||||||||||||||||
(In millions of US$, except percentages) | ||||||||||||||||||||||||
Interest-earning assets | $ | 13,055 | $ | 2,580 | $ | 1,094 | $ | 1,153 | $ | 1,696 | $ | 19,578 | ||||||||||||
Interest-bearing Liabilities | 14,035 | 2,446 | 1,489 | 2,002 | 1,498 | 21,470 | ||||||||||||||||||
Sensitivity gap | (981 | ) | 134 | (396 | ) | (849 | ) | 198 | (1,893 | ) | ||||||||||||||
Cumulative gap | (981 | ) | (846 | ) | (1,242 | ) | (2,091 | ) | (1,893 | ) | ||||||||||||||
% of total assets | (5.0 | )% | (4.3 | )% | (6.3 | )% | (10.7 | )% | (9.7 | )% |
(1) | Includes merchant banking accounts |
Duration as of | ||||
December 31, | ||||
2008(1) | ||||
(In months) | ||||
Interest-earning assets | 8.4 | |||
Interest-bearing liabilities | 9.8 | |||
Gap | (1.4 | ) |
Market Value as of December 31, 2008(1) | ||||||||||||
1% Point | ||||||||||||
Actual | Increase | Changes | ||||||||||
(In billions of Won) | ||||||||||||
Interest-earning assets | 173,319 | 172,164 | (1,155 | ) | ||||||||
Interest-bearing liabilities | 168,332 | 167,043 | (1,289 | ) | ||||||||
Gap | 4,987 | 5,121 | 134 |
(1) | Includes merchant banking accounts and derivatives for the purpose of hedging. |
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Simulated Net Interest Income for 2009 | ||||||||||||||||||||||||||||
(For Non-trading Won-denominated Bank Accounts)(1) | ||||||||||||||||||||||||||||
Change in Net | Change in Net | |||||||||||||||||||||||||||
Assumed Interest Rates | Interest Income | Interest Income | ||||||||||||||||||||||||||
% | % | |||||||||||||||||||||||||||
Amount | Change | Amount | Change | |||||||||||||||||||||||||
1% | 1% | (1% | (1% | (1% | (1% | |||||||||||||||||||||||
No | Point | Point | Point | Point | Point | Point | ||||||||||||||||||||||
Change | Increase | Decrease | Increase) | Increase) | Decrease) | Decrease) | ||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||
Simulated interest income | 9,664 | 10,782 | 8,545 | 1,118 | 11.6% | (1,119 | ) | (11.6)% | ||||||||||||||||||||
Simulated interest expense | 7,606 | 8,325 | 6,885 | 719 | 9.5% | (721 | ) | (9.5)% | ||||||||||||||||||||
Net interest income | 2,058 | 2,457 | 1,660 | 399 | 19.4% | (398 | ) | (19.3)% |
(1) | Excludes Merchant Banking account and derivatives for the purpose of hedging. |
VaR for the Year 2008(1) | ||||||||||||||||
As of | ||||||||||||||||
Average | Minimum | Maximum | December 31 | |||||||||||||
(In billions of Won) | ||||||||||||||||
Interest rate mismatch — nontrading assets and liabilities | 296 | 152 | 402 | 234 |
(1) | One-year VaR results with a 99% confidence level. |
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VaR for the Year 2008(1) | ||||||||||||||||
As of | ||||||||||||||||
Average | Minimum | Maximum | December 31 | |||||||||||||
(In billions of Won) | ||||||||||||||||
Listed equities | 671 | 484 | 1,146 | 880 |
(1) | Ten-day VaR results with a 99.9% confidence level. |
• | maintain an appropriate level of liquidity risk through liquidity risk management based on liquidity gap or debt-to-equity ratio at each maturity date; | |
• | assess and monitor net cash flows by currency and by maturity and continuously evaluate available sources of funds and possibility of disposal of any liquid assets; | |
• | diversify sources and uses of funds by product and by maturity to prevent excessive concentration in certain periods or products; and | |
• | prepare contingency plans to cope with liquidity crisis. |
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As of December 31, 2008 | ||||||||||||||||||||||||||||||||
0-1 | 1-3 | 3-6 | 6-12 | 1-3 | Over 3 | Substandard | ||||||||||||||||||||||||||
Won-Denominated Accounts | Months | Months | Months | Month | Years | Years | or Below | Total | ||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||
Assets: | 53,056 | 25,379 | 28,282 | 39,541 | 29,080 | 58,082 | 1,261 | 234,683 | ||||||||||||||||||||||||
Liabilities: | 49,398 | 19,251 | 18,023 | 49,185 | 25,692 | 56,622 | — | 218,171 | ||||||||||||||||||||||||
For three months or less: | ||||||||||||||||||||||||||||||||
Liquidity gap | 3,658 | |||||||||||||||||||||||||||||||
Liquidity ratio(2) | 107.4 | % | ||||||||||||||||||||||||||||||
Limit | 100.0 | % |
As of December 31, 2008 | ||||||||||||||||||||||||||||||||
Sub- | ||||||||||||||||||||||||||||||||
Foreign Currencies | 7 Days | 7 Days- | 3 | 3-6 | 6-12 | Over 1 | Standard | |||||||||||||||||||||||||
Denominated Accounts: | or Less | 1 Months | Months | Months | Months | Year | or Below | Total | ||||||||||||||||||||||||
(In millions of US$, except percentages) | ||||||||||||||||||||||||||||||||
Assets: | $ | 8,935 | $ | 7,463 | $ | 10,331 | $ | 7,202 | $ | 6,819 | $ | 17,050 | $ | 87 | $ | 57,888 | ||||||||||||||||
Liabilities | 7,974 | 8,390 | 10,661 | 6,032 | 6,789 | 18,234 | — | 58,080 | ||||||||||||||||||||||||
For three months or less: | ||||||||||||||||||||||||||||||||
Assets | 26,729 | |||||||||||||||||||||||||||||||
Liabilities | 27,025 | |||||||||||||||||||||||||||||||
Liquidity ratio(2) | 98.9 | % | ||||||||||||||||||||||||||||||
Limit | 85.0 | % |
(1) | Includes merchant banking accounts. | |
(2) | In October 31, 2008, the criteria for Won-denominated liquidity ratio was changed from three months of residual maturity to one month of residual maturity. |
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• | indices that reflect the market movements such as interest rates and stock prices; | |
• | indices that reflect financial market psychology such as the size of money market funds; and | |
• | indices that reflect our internal financial condition. |
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• | general audits, including full-scale audits performed annually for the overall operations, sectional audits of selected operations performed when necessary, and periodic and irregular spot audits; | |
• | special audits, performed when the Audit Committee or standing auditor deems it necessary or pursuant to requests by the chief executive officer or supervisory authorities such as the Financial Supervisory Service; | |
• | day-to-day audits, performed by the standing auditor for material transactions or operations that are subject to approval by the heads of Shinhan Bank’s operational departments or senior executives; | |
• | real-time monitoring audits, performed by the computerized audit system to identify any irregular transactions and take any necessary actions; and | |
• | self-audits as a self-check by each operational department to ensure its compliance with our business regulations and policies, which include daily audits, monthly audits and special audits. |
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• | financially supporting its subsidiaries and the subsidiaries of its subsidiaries (the “direct and indirect subsidiaries”); | |
• | raising capital necessary for the investment in subsidiaries or providing financial support to its direct and indirect subsidiaries; | |
• | supporting the business of its direct and indirect subsidiaries for the joint development and marketing of new product and the joint utilization of facilities or IT systems; and | |
• | any other businesses exempted from authorization, permission or approval under the applicable laws and regulations. |
• | when there is a change of its officers; |
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• | when there is a change of its largest shareholder; | |
• | when there is a change of major shareholders of a bank holding company; | |
• | when the shareholding of the controlling shareholder (which means, the largest shareholder or a principal shareholder as prescribed under the Financial Holding Companies Act) or a person who is in a special relationship with such controlling shareholder (as defined under the Presidential Decree of the Financial Holding Companies Act) changes by 1% or more of the total issued and outstanding voting shares of the financial holding company; | |
• | when there is a change of its name; | |
• | when there is a cause for dissolution; and | |
• | when it or its subsidiary ceases to control any of its respective direct and indirect subsidiaries by disposing of the shares of such direct and indirect subsidiaries. |
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• | maintain a Won liquidity ratio (defined as Won assets due within three months, including marketable securities, divided by Won liabilities due within three months) of not less than 100%; | |
• | maintain a foreign currency liquidity ratio (defined as foreign currency liquid assets due within three months divided by foreign currency liabilities due within three months) of not less than 80% except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%; | |
• | maintain a ratio of foreign currency liquid assets due within seven days less foreign currency liabilities due within seven days divided by total foreign currency assets of not less than 0%, except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%; and | |
• | maintain a ratio of foreign currency liquid assets due within a month less foreign currency liabilities due within a month divided by total foreign currency assets of not less than negative 10% except for financial holding companies with a foreign currency liability to total assets ratio of less than 1%. |
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• | dealing (trading and underwriting of “financial investment products” (as defined below)); | |
• | brokerage (brokerage of financial investment products); | |
• | collective investment (establishment of collective investment schemes and the management thereof); | |
• | investment advice; | |
• | discretionary investment management; and | |
• | trusts (together with the five business set forth above, the “Financial Investment Businesses”). |
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• | capital increases or reductions; | |
• | stock cancellations or consolidations; | |
• | transfers of a part or all of business; | |
• | sale of assets; | |
• | closures of branch offices; | |
• | mergers or becoming a subsidiary under the Financial Holding Companies Act of a financial holding company; | |
• | acquisition of a bank by a third party; |
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• | suspensions of a part or all of business operation; or | |
• | assignments of contractual rights and obligations relating to financial transactions. |
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• | 0.85% of normal credits (or 0.9% in the case of normal credits comprising loans to certain industries including construction, retail and wholesale sales, accommodations, restaurant, real estate and lease, and 1.0% in the case of normal credits comprising loans to individuals and households and 1.5% in the case of normal credits comprising outstanding credit card receivables and card loans); | |
• | 7% of precautionary credits (or 10% in the case of precautionary credits comprising loans to individuals and households, and 15% in the case of precautionary credits comprising outstanding credit card receivables and card loans); | |
• | 20% of substandard credits; | |
• | 50% of doubtful credits (or 55% in the case of doubtful credits comprising loans to individuals and households, and 60% in the case of doubtful credits comprising outstanding credit card receivables and card loans); and | |
• | 100% of estimated loss credits. |
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• | a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) in excess of 10% (or in the case of regional banks, 15%) in the aggregate of the bank’s total issued and outstanding voting shares; or | |
• | a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) more than 4% in the aggregate of the total issued and outstanding voting shares of a bank (other than a regional bank), where such shareholder is the largest shareholder or is able to actually control the major business affairs of the bank, for example, through appointment and dismissal of the chief executive officer or of the majority of the executives. |
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• | loans bearing no profit made to a single business group in an amount exceeding 10% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month (where the loan exposure to such borrower is calculated as the sum of substandard credits, doubtful credits and estimated loss credits) except where the loan exposure to a single business group is not more than | |
• | occurrence of any financial event involving embezzlement, malfeasance or misappropriation of funds the amount of which exceeds 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions), unless the bank has lost or expects to lose not more than | |
• | any loss due to court judgments or similar decisions in civil proceedings in an amount exceeding 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month except where the loss is not more than | |
• | any event which can cause a material change in the financial status, such as resolutions for a capital increase or reduction, issuance of convertible bonds, bonds with warrants, exchangeable bonds, or depositary receipts or cancellation of shares with profit; | |
• | any event which can cause a material change in a bank’s management, such as knowledge of a proposal or confirmation of a litigation that can have a material effect on the management of the bank such as litigation regarding the effectiveness of securities issuance or amendments of rights thereunder, appointment or dismissal of an officer, or a change in bank’s largest shareholder, major shareholder, affiliate company, or a resolution for change of business objective; | |
• | any event which can cause a material change in the bank’s property, such as a natural disaster which causes damages in an amount exceeding 5% (or 2.5% in the case of a “Large Listed Company,” which refers to a company that has total assets as of the end of the most recent fiscal year of | |
• | any event which can cause a material change in the bank’s investment, such as investment in other companies in an amount exceeding 5% (or 2.5% in the case of a Large Listed Company) or more of the bank’s Tier I and Tier II capital; | |
• | any event which can cause a material change in the bank’s profit or loss, such as special profit or special loss of 10% (or 5% in the case of a Large Listed Company) or more of the bank’s Tier I and Tier II capital; and | |
• | any other events which can have material effects on the bank’s operation, including, among others, payment of cash dividend, acquisition or disposal of treasury shares, or distribution of stock option. |
• | loans made for the purpose of speculation in commodities or securities; |
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• | loans made directly or indirectly on the pledge of a bank’s own shares, or on the pledge of shares in excess of 20% of the issued and outstanding shares of any other corporation (subject to certain exceptions with respect to financing for infrastructure projects); | |
• | loans made directly or indirectly to enable a natural or legal person to buy the bank’s own shares; | |
• | loans made directly or indirectly to finance political campaigns and other related activities; and | |
• | loans made to any of the bank’s officers or employees other than de minimis loans of up to (1) |
• | the company issuing such shares is engaged in category of financial businesses set forth by the Financial Services Commission (including private equity funds); or | |
• | the acquisition of shares by the bank is necessary for corporate restructuring of such company and is approved by the Financial Services Commission. |
• | the total investment in companies in which the bank owns more than 15% of the outstanding shares with voting rights does not exceed 15% of the sum of Tier I and Tier II capital (less any capital deductions); or | |
• | the acquisition satisfies the requirements determined by the Financial Services Commission. |
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• | up to 10% of a national bank’s outstanding voting shares with the approval of the Financial Services Commission under the condition that such non-financial group companies will not exercise voting rights in respect of such shares in excess of the 4% limit; and | |
• | in the event that a foreigner, as defined in the Foreign Investment Promotion Act, owns in excess of 4% of a national bank’s outstanding voting shares, up to 10% of such bank’s outstanding voting shares without the approval of the Financial Services Commission, and in excess of 10%, 25% or 33% of such bank’s outstanding voting shares, with the approval of the Financial Services Commission, up to the number of shares owned by such foreigner. |
• | under the Banking Act, assets accepted in trust by a bank in Korea must be segregated from its other assets in the accounts of such bank; accordingly, banks engaged in the banking and trust businesses must maintain two separate accounts, the “banking accounts” and the “trust accounts,” and two separate sets of records which provide details of their banking and trust businesses, respectively; and | |
• | assets comprising the trust accounts are not available to depositors or other general creditors of such bank in the event the trustee is liquidated or is wound up. |
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• | prohibitions against officers, directors and employees of one particular business operation from serving as an officer, director and employee in another business operation, except where an officer or a director (1) serving in two or more business operations with no significant conflict of interest in accordance with the Presidential Decree on the Financial Investment Services and Capital Markets Act or (2) serving in a trustee business or a custodian business and simultaneously serving in a general office administrator business in accordance with the Financial Investment Services and Capital Markets Act; | |
• | prohibitions against the joint use or sharing of computer equipment or office equipment; and | |
• | prohibitions against the sharing of information by and among officers, directors and employees engaged in the different business operations. |
• | acting as trustee of an investment trust managed by such bank; | |
• | purchasing with such bank’s own funds beneficiary certificates of an investment trust managed by such bank; | |
• | using in its sales activities information relating to the trust property of an investment trust managed by such bank; | |
• | selling through a financial institution established under the Banking Act beneficiary certificates of an investment trust managed by such bank; | |
• | establishing a short-term financial indirect investment vehicle; and | |
• | establishing a mutual fund. |
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• | set maximum limits for cash advances on credit cards; | |
• | use restrictions on debit cards with respect to per day or per transaction usage; or | |
• | aggregate issuance limits and maximum limits on the amount per card on pre-paid cards. |
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• | exerting violence or threat of violence; | |
• | informing a Related Party (a guarantor of the debtor, blood relative or fiancée of the debtor, a person living in the same household as the debtor or a person working in the same workplace as the debtor) of the debtor’s liability without just cause; | |
• | providing false information relating to the debtor’s obligation to the debtor orhis/her Related Party; | |
• | threatening to sue or suing the debtor for fraud despite lack of affirmative evidence to establish that the debtor has submitted forged or false documentation with respect tohis/her capacity to make payment; | |
• | visiting or telephoning the debtor during late hours between 9:00 p.m. and 8:00 a.m.; and | |
• | utilizing other uncustomary methods to collect the receivables thereby invading the privacy or the peacefulness in the workplace of the debtor orhis/her Related Party. |
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• | restrictions on the holdings by a securities company of securities issued by another company which is the largest shareholder or the major shareholder (each as defined under the Financial Investment Services and Capital Markets Act) of such securities company; and | |
• | restrictions on providing money or credit to the largest shareholder (including specially-related persons of such shareholder), major shareholders, officers and specially-related persons of the securities company. |
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* | Insurance Risk, Interest Risk, Credit Risk, Market Risk and Operation Risk are defined under the Insurance Business Supervisory Regulation. |
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• | subject to certain exceptions, owning precious metals, antiques, paintings and writings; | |
• | owning any real estate (excluding any real estate owned as a result of enforcing their own security interest) other than real estate for the conduct of its business as designated by the Presidential Decree. In any case, the total amount of real estate owned by an insurance company must not exceed 15% of its Total Assets; | |
• | loans made for the purpose of speculation in commodities or securities; | |
• | loans made directly or indirectly to enable a natural or legal person to buy their own shares; | |
• | loans made directly or indirectly to finance political campaigns and other similar activities; and | |
• | loans made to any of the insurance company’s officers or employees other than loans based on insurance policy or de minimis loans of up to (1) |
• | with respect to holding unlisted stock, 10% of its Total Assets; |
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• | with respect to holding foreign currency under the Foreign Exchange Transaction Act or owning offshore real estate, 30% of its Total Assets; and | |
• | with respect to the sum of margins for a futures exchange designated by the Presidential Decree or a foreign futures exchange, 3% of its Total Assets. |
Area | ||||||||||||
(In square meters) | ||||||||||||
Site | ||||||||||||
Type of Facility | Location | Building | (If Different) | |||||||||
Registered office and corporate headquarters | 120, 2-Ga, Taepyung-Ro, Jung-Gu, Seoul 100-102, Korea | 59,519 | 5,418 | |||||||||
Good Morning Shinhan Securities | 23-2, Yoido-Dong, Youngdungpo-Gu, Seoul, Korea 150-312 | 70,170 | 4,765 | |||||||||
Shinhan Centennial Building | 117, Samgak-Dong, Jung-Gu, Seoul, Korea | 19,697 | 1,389 | |||||||||
Shinhan Bank Gwanggyo Branch | 14, 1-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea | 16,727 | 6,783 | |||||||||
Shinhan Myongdong Branch | 53-1, 1-Ga, Myong-Dong, Jung-Gu, Seoul, Korea | 8,936 | 1,014 | |||||||||
Shinhan Youngdungpo Branch | 57, 4-Ga, Youngdungpo-Dong, Youngdungpo-Gu, Seoul, Korea | 6,171 | 1,983 | |||||||||
Shinhan Back Office Support Center | 781, Janghang-Dong, Ilsan-Gu, Goyang-Si, Kyunggi Province, Korea | 24,496 | 5,856 | |||||||||
Shinhan Bank Back Office and Call Center | 731, Yoksam-Dong, Kangnam-Gu, Seoul, Korea | 23,374 | 7,964 | |||||||||
Shinhan Bank Back Office and Storage Center | 1704-Ga, Yongam-Dong, Sangdang-Gu, Cheongju-Si, Chungcheongbuk-Do, Korea | 5,756 | 6,398 | |||||||||
Shinhan Card Yoksam-Dong Building | 790-5, Yoksam-Dong, Kangnam-Gu, Seoul, Korea | 7,348 | 1,185 |
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ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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• | Banking. In recent years, commercial banks in Korea, including Shinhan Bank, have significantly expanded lending in the areas of home and mortgage loans to individuals and loans to small- to medium-enterprises. The global economic and financial crisis has significantly increased the credit risk of such loans, which have represented our core lending activities, as well as the market risks of our new product offerings such as structured derivative products. The global crisis has also increased the funding costs of foreign-denominated as well as Won-denominated borrowings, and has significantly affected liquidity in general, notwithstanding the active liquidity support provided by the Bank of Korea. Our deposit products increased in volume in the second half of 2008 due to the downturn in the Korean stock market, but the reduction in market interest rates may negatively impact the continuing popularity of our deposit products compared to other investment alternatives. We expect that the results of operation for our banking business will, at least in the short term, depend primarily on the strength of risk management, improvement of funding and the net interest margin and cost reduction, rather than the pricing and volume competition among the commercial banks as was the case in the recent past. | |
• | Credit cards. The credit card industry in Korea is showing signs of maturation while competition remains intense. Due to the ongoing global crisis as well as recent regulatory actions taken by the Korean government to strengthen asset quality, we expect that the results of operation of our credit card business will, at least in the short term, be negatively affected as a result of the expected deterioration of credit card asset quality and the expected increase in cost of funding. | |
• | Securities brokerage. The securities brokerage industry in Korea is likely to face intensified competition due to the lowered barriers of entry among different securities and investment businesses as the result of the Financial Investment Services and Capital Markets Act enacted in February 2009. If the Korean stock market further declines as a result of a deepening of the global economic and financial crisis, we expect that the results of operation of our securities brokerage business will be negatively impacted. | |
• | Life insurance. While the life insurance industry in Korea has grown substantially in recent years due to the popularity of variable rate insurance products whose payout was tied to the performance of the stock market, we believe that the downturn in the stock market as well as the reduction in disposable income as a result of the economic difficulties in Korea may lead to increased non-payment or delayed payments of insurance premiums or termination of existing insurance contracts. Further, if the low-interest environment continues, it may create difficulties for insurance companies, including our insurance subsidiaries, in finding alternative investment sources to operate the funds received in the form of insurance premiums. |
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Certificate | ||||||||||||
Corporate | Treasury | of Deposit | ||||||||||
Bond Rates(1) | Bond Rates(2) | Rates(3) | ||||||||||
December 31, 2004 | 3.72 | 3.28 | 3.43 | |||||||||
June 30, 2005 | 4.41 | 4.02 | 3.54 | |||||||||
December 31, 2005 | 5.52 | 5.08 | 4.09 | |||||||||
June 30, 2006 | 5.20 | 4.92 | 4.59 | |||||||||
December 31, 2006 | 5.29 | 4.92 | 4.86 | |||||||||
June 30, 2007 | 5.66 | 5.26 | 5.00 | |||||||||
December 31, 2007 | 6.77 | 5.74 | 5.82 | |||||||||
June 30, 2008 | 6.88 | 5.90 | 5.37 | |||||||||
December 31, 2008 | 7.72 | 3.41 | 3.93 |
(1) | Measured by the yield on three-year AA− rated corporate bonds. | |
(2) | Measured by the yield on three-year treasury bonds. | |
(3) | Measured by the yield on certificates of deposit (with maturity of 91 days). |
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2006 | ||||||||||||
As | Equity Method | |||||||||||
Previously | of Accounting | |||||||||||
Reported | Adjustments | As Adjusted | ||||||||||
Available-for-sale securities | 17,458 | (519 | ) | 16,939 | ||||||||
Other assets | 6,843 | 275 | 7,118 | |||||||||
Assets adjusted | 24,301 | (244 | ) | 24,057 | ||||||||
Accrued expenses and other liabilities | 9,311 | (67 | ) | 9,244 | ||||||||
Retained earnings | 5,146 | 59 | 5,205 | |||||||||
Accumulated other comprehensive income, net of taxes | 377 | (236 | ) | 141 | ||||||||
Liabilities and stockholders’ equity adjusted | 14,834 | (244 | ) | 14,590 | ||||||||
Gain on other investment | 207 | 117 | 324 | |||||||||
Income tax expense | 617 | 32 | 649 | |||||||||
Net income | 1,470 | 85 | 1,555 | |||||||||
Basic net income per share | 3,951 | 229 | 4,180 | |||||||||
Diluted net income per share | 3,951 | 229 | 4,180 |
2005 | ||||||||||||
Equity Method of | ||||||||||||
As Previously | Accounting | |||||||||||
Reported | Adjustments | As Adjusted | ||||||||||
Gain on other investment | 284 | 248 | 532 | |||||||||
Non-interest expense (Other) | 331 | (15 | ) | 316 | ||||||||
Income tax expense | 942 | 72 | 1,014 | |||||||||
Net income | 1,739 | 191 | 1,930 | |||||||||
Basic net income per share | 5,190 | 573 | 5,763 | |||||||||
Diluted net income per share | 4,882 | 537 | 5,419 |
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2007 | ||||
(In billions of Korean Won) | ||||
Cash and cash equivalents | 315 | |||
Deposits | 256 | |||
Call loans | 512 | |||
Trading assets | 2 | |||
Securities | 44 | |||
Loans, net of allowance for loan losses | 9,902 | |||
Premises and equipment, net | 129 | |||
Other assets | 719 | |||
Total assets | 11,879 | |||
Borrowings and debentures | 6,970 | |||
Other liabilities | 1,381 | |||
Total liabilities | 8,351 | |||
Fair value of net assets of LG Card | 3,528 | |||
2007 | ||||
(in billions of Korean Won) | ||||
Cash paid | 6,707 | |||
Stock exchanged | 815 | |||
Direct acquisition costs | 8 | |||
Total purchase price | 7,530 | |||
Allocation of purchase price: | ||||
Fair value of net assets of LG Card (excluding effect of CCI and deferred taxes) | 3,831 | |||
Credit card relationship intangible asset(1) | 1,064 | |||
Deferred tax | (303 | ) | ||
Goodwill | 2,938 | |||
Total purchase price | 7,530 | |||
(1) | Credit card relationship intangible reflects the estimated fair value of the credit card relationships acquired from LG Card from which we expect to derive future benefits over the estimated life of such relationships. The customer relationship intangible is amortized over its estimated useful life on a sum-of-the years’-digits basis. The estimated weighted average life of the customer relationship intangible is approximately six years. The fair value of this asset was based principally upon the estimates of (i) the profitability of the acquired accounts and (ii) the projected run-off of the acquired accounts. |
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• | loans classified as “substandard” or below according to the asset classification guidelines of the Financial Services Commission; | |
• | loans that are more than 90 days past due; and | |
• | loans which are “troubled debt restructuring” as defined under U.S. GAAP. |
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• | Level 1 — Quoted prices for identical instruments in active markets. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain securities that are highly liquid and are actively traded in over-the-counter markets. | |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. | |
• | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurements. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques based on significant unobservable inputs, as well as management judgments or estimates that are significant to valuation. |
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
Average | Income/ | Yield / | Average | Income/ | Yield / | Average | Income/ | Yield / | ||||||||||||||||||||||||||||
Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | ||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | 2,607 | 93 | 3.57 | % | 3,412 | 150 | 4.40 | % | 5,458 | 282 | 5.17 | % | ||||||||||||||||||||||||
Call loans and securities purchased under resale agreements | 1,674 | 73 | 4.36 | 2,506 | 111 | 4.43 | 2,862 | 99 | 3.46 | |||||||||||||||||||||||||||
Trading assets | 4,152 | 147 | 3.54 | 7,432 | 300 | 4.04 | 8,726 | 469 | 5.37 | |||||||||||||||||||||||||||
Securities(2) | 26,526 | 1,199 | 4.52 | 28,388 | 1,403 | 4.94 | 32,837 | 1,775 | 5.41 |
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
Average | Income/ | Yield / | Average | Income/ | Yield / | Average | Income/ | Yield / | ||||||||||||||||||||||||||||
Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | ||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
Loans(3): | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 36,663 | 2,349 | 6.41 | 47,492 | 3,071 | 6.47 | 56,002 | 3,778 | 6.75 | |||||||||||||||||||||||||||
Other commercial | 21,054 | 1,433 | 6.81 | 27,436 | 1,909 | 6.96 | 29,929 | 2,236 | 7.47 | |||||||||||||||||||||||||||
Lease financing | 656 | 37 | 5.64 | 1,201 | 69 | 5.66 | 1,487 | 94 | 6.32 | |||||||||||||||||||||||||||
Total corporate | 58,373 | 3,819 | 6.54 | 76,129 | 5,049 | 6.63 | 87,418 | 6,108 | 6.99 | |||||||||||||||||||||||||||
Mortgage and home equity | 27,212 | 1,665 | 6.12 | 30,605 | 1,938 | 6.33 | 33,579 | 2,314 | 6.89 | |||||||||||||||||||||||||||
Credit cards | 4,877 | 508 | 10.42 | 12,555 | 1,517 | 12.08 | 14,458 | 1,765 | 12.21 | |||||||||||||||||||||||||||
Other consumer | 19,357 | 1,389 | 7.18 | 22,625 | 1,681 | 7.43 | 25,803 | 1,922 | 7.45 | |||||||||||||||||||||||||||
Total consumer | 51,446 | 3,562 | 6.92 | 65,785 | 5,136 | 7.81 | 73,840 | 6,001 | 8.13 | |||||||||||||||||||||||||||
Total loans | 109,819 | 7,381 | 6.72 | 141,914 | 10,185 | 7.18 | 161,258 | 12,109 | 7.51 | |||||||||||||||||||||||||||
Other interest-earning assets | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Total interest-earning assets | 144,778 | 8,893 | 6.14 | % | 183,652 | 12,149 | 6.62 | % | 211,141 | 14,734 | 6.98 | % | ||||||||||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 3,910 | — | 4,585 | — | 4,546 | — | ||||||||||||||||||||||||||||||
Other assets | 18,209 | — | 24,716 | — | 32,514 | — | ||||||||||||||||||||||||||||||
Total assets | 166,897 | 8,893 | 212,953 | 12,149 | 248,201 | 14,734 | ||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||
Interest-bearing demand deposits | 7,964 | 37 | 0.46 | % | 8,455 | 35 | 0.41 | % | 5,786 | 45 | 0.78 | % | ||||||||||||||||||||||||
Savings deposits | 27,279 | 577 | 2.12 | 30,583 | 626 | 2.05 | 30,877 | 716 | 2.32 | |||||||||||||||||||||||||||
Certificates of deposit | 9,934 | 464 | 4.67 | 15,475 | 808 | 5.22 | 16,152 | 959 | 5.94 | |||||||||||||||||||||||||||
Other time deposits | 39,644 | 1,524 | 3.84 | 44,397 | 2,020 | 4.55 | 60,437 | 2,983 | 4.94 | |||||||||||||||||||||||||||
Mutual installment deposits | 1,211 | 46 | 3.80 | 567 | 22 | 3.88 | 291 | 11 | 3.78 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 86,032 | 2,648 | 3.08 | 99,477 | 3,511 | 3.53 | 113,543 | 4,714 | 4.15 | |||||||||||||||||||||||||||
Short-term borrowings | 13,688 | 536 | 3.92 | 16,810 | 702 | 4.18 | 21,713 | 916 | 4.22 | |||||||||||||||||||||||||||
Secured borrowings | 8,132 | 334 | 4.11 | 10,635 | 510 | 4.80 | 9,473 | 563 | 5.94 | |||||||||||||||||||||||||||
Long-term debt | 28,839 | 1,394 | 4.83 | 42,316 | 2,256 | 5.33 | 49,876 | 2,762 | 5.54 | |||||||||||||||||||||||||||
Other interest-bearing liabilities | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Total interest bearing liabilities | 136,691 | 4,912 | 3.59 | % | 169,238 | 6,979 | 4.12 | % | 194,605 | 8,955 | 4.60 | % | ||||||||||||||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Non-interest-bearing deposits | 2,166 | — | 2,736 | — | 2,615 | — | ||||||||||||||||||||||||||||||
Trading liabilities | 1,635 | — | 1,671 | — | 6,710 | — | ||||||||||||||||||||||||||||||
Acceptance outstanding | 1,189 | — | 339 | — | 401 | — | ||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 16,038 | — | 18,939 | — | 22,847 | — | ||||||||||||||||||||||||||||||
Minority interest | 121 | — | 188 | — | 262 | — | ||||||||||||||||||||||||||||||
Redeemable convertible preferred stock | 195 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Stockholders’ equity | 8,862 | — | 19,842 | — | 20,761 | — | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | 166,897 | 4,912 | 212,953 | 6,979 | 248,201 | 8,955 | ||||||||||||||||||||||||||||||
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | ||||||||||||||||||||||||||||||||||
Interest | Interest | Interest | ||||||||||||||||||||||||||||||||||
Average | Income/ | Yield / | Average | Income/ | Yield / | Average | Income/ | Yield / | ||||||||||||||||||||||||||||
Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | Balance(1) | Expense | Rate | ||||||||||||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||||||||||||||
Net interest spread(4) | 2.55 | % | 2.49 | % | 2.38 | % | ||||||||||||||||||||||||||||||
Net interest margin(5) | 2.75 | % | 2.82 | % | 2.74 | % | ||||||||||||||||||||||||||||||
Average asset liability ratio(6) | 105.92 | % | 108.52 | % | 108.50 | % |
(1) | Average balances are based on (a) daily balances for Shinhan Bank and Jeju Bank and (b) quarterly balances for other subsidiaries. | |
(2) | Represents the average balance and yield on securities are based on amortized cost. The yield on the available-for-sale portfolio is based on average historical cost balances, therefore, the yield information does not give effect to changes in fair value that are reflected as a component of stockholders’ equity. | |
(3) | Non-accruing loans are included in the respective average loan balances. Income on such non-accruing loans is no longer recognized from the date the loan is placed on nonaccrual status. We reclassify loans as accruing when interest (including default interest) and principal payments are current. | |
(4) | Represents the difference between the average rate of interest earned on interest-earning assets and the average rate of interest paid on interest-bearing liabilities. | |
(5) | Represents the ratio of net interest income to average interest-earning assets. | |
(6) | Represents the ratio of average interest-earning assets to average interest-bearing liabilities. |
From 2006 to 2007 | ||||||||||||
Interest Increase (Decrease) | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In billions of Won) | ||||||||||||
Increase in interest income | ||||||||||||
Interest-bearing deposits | 33 | 24 | 57 | |||||||||
Call loans and securities purchased under resale agreements | 37 | 1 | 38 | |||||||||
Trading assets | 130 | 23 | 153 | |||||||||
Securities | 88 | 116 | 204 | |||||||||
Loans: | ||||||||||||
Commercial and industrial | 700 | 22 | 722 | |||||||||
Other commercial | 443 | 33 | 476 | |||||||||
Lease financing | 32 | — | 32 | |||||||||
Total corporate | 1,175 | 55 | 1,230 | |||||||||
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From 2006 to 2007 | ||||||||||||
Interest Increase (Decrease) | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In billions of Won) | ||||||||||||
Mortgage and home equity | 213 | 60 | 273 | |||||||||
Credit cards | 916 | 93 | 1,009 | |||||||||
Other consumer | 241 | 51 | 292 | |||||||||
Total consumer | 1,370 | 204 | 1,574 | |||||||||
Total loans | 2,545 | 259 | 2,804 | |||||||||
Other interest-earning assets | — | — | — | |||||||||
Total interest income | 2,833 | 423 | 3,256 | |||||||||
Increase (decrease) in interest expense | ||||||||||||
Interest bearing deposits: | ||||||||||||
Demand deposits | 2 | (4 | ) | (2 | ) | |||||||
Savings deposits | 68 | (19 | ) | 49 | ||||||||
Certificates of deposit | 284 | 60 | 344 | |||||||||
Other time deposits | 196 | 300 | 496 | |||||||||
Mutual installment deposits | (25 | ) | 1 | (24 | ) | |||||||
Total interest-bearing deposits | 525 | 338 | 863 | |||||||||
Short-term borrowings | 128 | 38 | 166 | |||||||||
Secured borrowings | 114 | 62 | 176 | |||||||||
Long-term debt | 706 | 156 | 862 | |||||||||
Other interest-bearing liabilities | — | — | — | |||||||||
Total interest expense | 1,473 | 594 | 2,067 | |||||||||
Net increase (decrease) in net interest income | 1,360 | (171 | ) | 1,189 | ||||||||
From 2007 to 2008 | ||||||||||||
Interest Increase (Decrease) | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In billions of Won) | ||||||||||||
Increase (decrease) in interest income | ||||||||||||
Interest-bearing deposits | 102 | 30 | 132 | |||||||||
Call loans and securities purchased under resale agreements | 14 | (26 | ) | (12 | ) | |||||||
Trading assets | 58 | 111 | 169 | |||||||||
Securities | 233 | 139 | 372 | |||||||||
Loans: | ||||||||||||
Commercial and industrial | 569 | 138 | 707 | |||||||||
Other commercial | 181 | 146 | 327 | |||||||||
Lease financing | 17 | 8 | 25 | |||||||||
Total corporate | 767 | 292 | 1,059 | |||||||||
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From 2007 to 2008 | ||||||||||||
Interest Increase (Decrease) | ||||||||||||
Due to Change in | ||||||||||||
Volume | Rate | Change | ||||||||||
(In billions of Won) | ||||||||||||
Mortgage and home equity | 197 | 179 | 376 | |||||||||
Credit cards | 232 | 16 | 248 | |||||||||
Other consumer | 237 | 4 | 241 | |||||||||
Total consumer | 666 | 199 | 865 | |||||||||
Total loans | 1,433 | 491 | 1,924 | |||||||||
Other interest-earning assets | — | — | — | |||||||||
Total interest income | 1,840 | 745 | 2,585 | |||||||||
Increase (decrease) in interest expense | ||||||||||||
Interest bearing deposits: | ||||||||||||
Demand deposits | (14 | ) | 24 | 10 | ||||||||
Savings deposits | 6 | 84 | 90 | |||||||||
Certificates of deposit | 37 | 114 | 151 | |||||||||
Other time deposits | 780 | 183 | 963 | |||||||||
Mutual installment deposits | (10 | ) | (1 | ) | (11 | ) | ||||||
Total interest-bearing deposits | 799 | 404 | 1,203 | |||||||||
Short-term borrowings | 207 | 7 | 214 | |||||||||
Secured borrowings | (60 | ) | 113 | 53 | ||||||||
Long-term debt | 416 | 90 | 506 | |||||||||
Other interest-bearing liabilities | — | — | — | |||||||||
Total interest expense | 1,362 | 614 | 1,976 | |||||||||
Net increase (decrease) in net interest income | 478 | 131 | 609 | |||||||||
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Year Ended December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Interest and dividend income: | ||||||||||||
Interest and fees on loans | 10,185 | 12,109 | 18.9 | % | ||||||||
Interest and dividends on securities | 1,403 | 1,775 | 26.5 | |||||||||
Trading assets | 300 | 469 | 56.3 | |||||||||
Other interest income | 261 | 381 | 46.0 | |||||||||
Total interest and dividend income | 12,149 | 14,734 | 21.3 | % | ||||||||
Interest expense: | ||||||||||||
Interest on deposits | 3,511 | 4,714 | 34.3 | % | ||||||||
Interest on short-term borrowings | 660 | 866 | 31.2 | |||||||||
Interest on secured borrowings | 510 | 563 | 10.4 | |||||||||
Interest on long-term debt | 2,256 | 2,762 | 22.4 | |||||||||
Other interest expense | 42 | 50 | 19.0 | |||||||||
Total interest expense | 6,979 | 8,955 | 28.3 | |||||||||
Net interest income | 5,170 | 5,779 | 11.8 | % | ||||||||
Net interest margin(1) | 2.82 | % | 2.74 | % |
(1) | Represents the ratio of net interest income to average interest-earning assets. See “— Average Balance Sheet and Volume and Rate Analysis — Average Balance Sheet and Related Interest.” |
• | a 23.0% increase in interest and fees on commercial and industrial loans from | |
• | a 17.1% increase in interest and fees on other commercial loans from | |
• | a 19.4% increase in interest and fees on mortgage and home equity loans from | |
• | a 14.3% increase in interest and fees on other retail loans from |
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• | the increase in issuance of Won-denominated corporate debentures by Shinhan Financial Group to support the operations of Shinhan Bank and Shinhan Card; and |
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• | the increase in the use of corporate debentures (which generally bear higher interests but provide longer-term funding relative to deposit products) as Shinhan Bank’s funding source due to the faster growth in the volume of loans compared to deposits. |
As of December 31, | ||||||||||||||||
2007 | 2008 | % Change | ||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||
Total (reversal of) provision for loan losses (A): | ||||||||||||||||
Corporate | 182 | 1,288 | N/M | % | ||||||||||||
Mortgages and home equity | (4 | ) | 8 | N/M | ||||||||||||
Other consumer | 14 | (3 | ) | N/M | ||||||||||||
Credit cards | (152 | ) | 26 | N/M | ||||||||||||
40 | 1,319 | N/M | % | |||||||||||||
Total (reversal of) provision for off-balance sheet credit instruments (B): | ||||||||||||||||
Guarantees and acceptances | (12 | ) | 170 | N/M | % | |||||||||||
Unused portions of credit line | 52 | (52 | ) | N/M | ||||||||||||
40 | 118 | N/M | ||||||||||||||
Total provision for credit losses (A+B) | 80 | 1,437 | N/M | % | ||||||||||||
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As of December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Commissions and fees from non-trust management: | ||||||||||||
Brokerage fees and commissions(1) | 858 | 626 | (27.0 | )% | ||||||||
Other fees and commissions(2) | 1,754 | 1,969 | 12.3 | |||||||||
Net trust management fees(3) | 73 | 69 | (5.5 | ) | ||||||||
Net trading profits | (210 | ) | 584 | N/M | ||||||||
Net gains (losses) on securities | 169 | (135 | ) | N/M | ||||||||
Gain on other investment | 181 | 317 | 75.1 | |||||||||
Net gain (loss) on foreign exchange | 146 | (566 | ) | N/M | ||||||||
Insurance income | 1,119 | 1,329 | 18.8 | |||||||||
Other | 648 | 379 | (41.5 | ) | ||||||||
Total noninterest income | 4,738 | 4,572 | (3.5 | )% | ||||||||
(1) | Consists of commissions, fees and markup on securities brokerage activities. | |
(2) | Includes commissions received on remittance, commissions received on imports and export letters of credit and commissions received from foreign exchange transactions. | |
(3) | Consists principally of fees from management of trust accounts in our banking operations. |
Year Ended December 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Employee compensation and other benefits | 2,056 | 1,817 | (11.6 | )% | ||||||||
Depreciation and amortization | 812 | 871 | 7.3 | |||||||||
General and administrative expenses | 878 | 882 | 0.5 | |||||||||
Credit card fees | 665 | 700 | 5.3 | |||||||||
Provision (reversal) for other losses | 72 | (18 | ) | N/M | ||||||||
Insurance fees on deposits | 131 | 133 | 1.5 | |||||||||
Other fees and commission expenses | 446 | 422 | (5.4 | ) | ||||||||
Taxes (except income taxes) | 128 | 179 | 39.8 | |||||||||
Insurance operating expense | 1,351 | 1,038 | (23.2 | ) | ||||||||
Other | 301 | 714 | N/M | |||||||||
Total noninterest expenses | 6,840 | 6,738 | (1.5 | )% | ||||||||
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Year Ended December 31, | ||||||||||||
2006 | 2007 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Interest and dividend income: | ||||||||||||
Interest and fees on loans | 7,381 | 10,185 | 38.0 | % | ||||||||
Interest and dividends on securities | 1,199 | 1,403 | 17.0 | |||||||||
Trading assets | 147 | 300 | N/M | |||||||||
Other interest income | 166 | 261 | 57.2 | |||||||||
Total interest and dividend income | 8,893 | 12,149 | 36.6 | |||||||||
Interest expense: | ||||||||||||
Interest on deposits | 2,648 | 3,511 | 32.6 | % | ||||||||
Interest on short-term borrowings | 524 | 660 | 26.0 | |||||||||
Interest on secured borrowings | 334 | 510 | 52.7 | |||||||||
Interest on long-term debt | 1,394 | 2,256 | 61.8 | |||||||||
Other interest expense | 12 | 42 | N/M | |||||||||
Total interest expense | 4,912 | 6,979 | 42.1 | |||||||||
Net interest income | 3,981 | 5,170 | 29.9 | % | ||||||||
Net interest margin(1) | 2.75 | % | 2.82 | % |
(1) | The ratio of net interest income to average interest-earning assets. See “— Average Balance Sheet and Volume and Rate Analysis — Average Balance Sheet and Related Interest.” |
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• | a significant increase in interest and fees on credit card loans from | |
• | a 30.7% increase in interest and fees on commercial and industrial loans from | |
• | a 33.2% increase in interest and fees on other commercial loans from | |
• | a 16.4% increase in interest and fees on mortgage and home equity loans from |
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• | the increased issuance of foreign long-term debt by Shinhan Bank to take advantage of lower funding costs in the low exchange rate environment in 2007; | |
• | the increased issuance of financial debentures by Shinhan bank to secure long-term funding for operations in light of the increased outflow of customer funds to other higher-yielding accounts, such as cash management accounts (CMA) offered by securities companies; | |
• | the increased issuance of corporate debentures by our holding company to fund the operations of its non-banking subsidiaries and secure funding for the LG Card acquisition; and | |
• | an increase by 50 basis points in the average interest rates paid on our long-term debt from 4.83% in 2006 to 5.33% in 2007, primarily as a result of the general increase in the average market interest in 2007. |
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As of December 31, | ||||||||||||
2006 | 2007 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Total (reversal of) provision for loan losses (A): | ||||||||||||
Corporate | 194 | 182 | (6.2 | )% | ||||||||
Mortgages and home equity | (18 | ) | (4 | ) | 77.8 | |||||||
Other consumer | 44 | 14 | (68.2 | ) | ||||||||
Credit cards | 32 | (152 | ) | N/M | ||||||||
252 | 40 | (84.1 | )% | |||||||||
Total (reversal of) provision for off-balance sheet credit instruments (B): | ||||||||||||
Guarantees and acceptances | (15 | ) | (12 | ) | (20.0 | )% | ||||||
Unused portions of credit line | (11 | ) | 52 | N/M | ||||||||
(26 | ) | 40 | N/M | |||||||||
Total (reversal of) provision for credit losses (A+B) | 226 | 80 | (64.6 | )% | ||||||||
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As of December 31, | ||||||||||||
2006 | 2007 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Commissions and fees from non-trust management: | ||||||||||||
Brokerage fees and commissions(1) | 479 | 858 | 79.1 | % | ||||||||
Other fees and commissions(2) | 1,032 | 1,754 | 70.0 | |||||||||
Net trust management fees(3) | 106 | 73 | (31.1 | ) | ||||||||
Net trading profits | 141 | (210 | ) | N/M | ||||||||
Net gains (losses) on securities | 31 | 169 | N/M | |||||||||
Gain on other investment | 324 | 181 | (44.1 | ) | ||||||||
Net gain on foreign exchange | 229 | 146 | (36.2 | ) | ||||||||
Insurance income | 1,109 | 1,119 | 0.9 | |||||||||
Other | 336 | 648 | 92.9 | |||||||||
Total noninterest income | 3,787 | 4,738 | 25.1 | % | ||||||||
(1) | Consists of commissions, fees and markup on securities brokerage activities. | |
(2) | Includes commissions received on remittance, commissions received on imports and export letters of credit and commissions received from foreign exchange transactions. | |
(3) | Consists principally of fees from management of trust accounts in our banking operations. |
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Year Ended December 31, | ||||||||||||
2006 | 2007 | % Change | ||||||||||
(In billions of Won, except percentages) | ||||||||||||
Employee compensation and other benefits | 1,789 | 2,056 | 14.9 | % | ||||||||
Depreciation and amortization | 471 | 812 | 72.4 | |||||||||
General and administrative expenses | 666 | 878 | 31.8 | |||||||||
Credit card fees | 205 | 665 | N/M | |||||||||
Provision (reversal) for other losses | (16 | ) | 72 | N/M | ||||||||
Insurance fees on deposits | 128 | 131 | 2.3 | |||||||||
Other fees and commission expenses | 358 | 446 | 24.6 | |||||||||
Taxes (except income taxes) | 96 | 128 | 33.3 | |||||||||
Insurance operating expense | 1,147 | 1,351 | 17.8 | |||||||||
Other | 482 | 301 | (37.6 | ) | ||||||||
Total noninterest expenses | 5,326 | 6,840 | 28.4 | % | ||||||||
• | the following banking services, which are principally provided by Shinhan Bank: | |
• | retail banking; | |
• | corporate banking; | |
• | treasury and international banking; and | |
• | other banking services; | |
• | credit card services, which are provided by Shinhan Card; | |
• | securities brokerage services, which are provided by Good Morning Shinhan Securities; |
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• | life insurance services, which are provided by Shinhan Life Insurance; and | |
• | other. |
Segment Results(1) | Total Revenues(2) | |||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||
2006 | 2007 | 2008 | 2006 | 2007 | 2008 | |||||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||||||
Shinhan Bank(3): | ||||||||||||||||||||||||
Retail banking | 1,163 | 1,681 | 1,124 | 2,871 | 3,296 | 4,310 | ||||||||||||||||||
Corporate banking | 472 | 525 | 2,058 | 1,056 | 1,130 | 7,815 | ||||||||||||||||||
Treasury and international business | 371 | (696 | ) | (556 | ) | 5,938 | 5,199 | 27,383 | ||||||||||||||||
Other banking services | 317 | 1,345 | (723 | ) | 1,646 | 2,581 | 2,907 | |||||||||||||||||
Good Morning Shinhan Securities | 134 | 252 | 209 | 1,326 | 1,940 | 1,716 | ||||||||||||||||||
Shinhan Card(4) | 184 | 1,082 | 1,324 | 719 | 3,001 | 3,590 | ||||||||||||||||||
Shinhan Life Insurance | 166 | 184 | 186 | 2,362 | 2,694 | 2,862 | ||||||||||||||||||
Other subsidiaries | 23 | (115 | ) | (3 | ) | 372 | 249 | 657 | ||||||||||||||||
Total(5) | 2,830 | 4,258 | 3,619 | 16,290 | 20,090 | 51,240 | ||||||||||||||||||
(1) | Represents income per segment before income taxes. | |
(2) | Represents net interest income plus non-interest income. | |
(3) | Includes information for Chohung Bank, which became our consolidated subsidiary in August 2003 following our acquisition of its controlling equity interest and merged with former Shinhan Bank in April 2006. | |
(4) | Information for 2006 represents that of former Shinhan Card for the period from January 1, 2006 through December 31, 2006 and that of the credit card division of Chohung Bank for the period from April 3, 2006, the date of the split-merger, through December 31, 2006, presented on a combined basis. Information for 2007 represents that of LG Card for the period from March 1, 2007 (the deemed acquisition date) through December 31, 2007 (including corresponding information for the assets and liabilities of former Shinhan Card (assumed by LG Card on October 1, 2007) for the period from October 1, 2007 through December 31, 2007), and corresponding information for former Shinhan Card from January 1, 2007 through September 30, 2007. Information for 2008 represents that of Shinhan Card. | |
(5) | Presented on a reported basis before elimination or adjustments. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 2,274 | 2,328 | 2,311 | 2.4 | % | (0.7 | )% | |||||||||||||
Non-interest income | 597 | 968 | 1,999 | 62.1 | 106.5 | |||||||||||||||
Total revenues | 2,871 | 3,296 | 4,310 | 14.8 | 30.8 | |||||||||||||||
Provision (reversal) for loan losses | 291 | 222 | 362 | (23.7 | ) | 63.1 | ||||||||||||||
Non-interest expense including depreciation and amortization | 1,417 | 1,393 | 2,824 | (1.7 | ) | 102.7 | ||||||||||||||
Segment results(1) | 1,163 | 1,681 | 1,124 | 44.5 | % | (33.1 | )% | |||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 833 | 864 | 2,476 | 3.7 | % | 186.6 | % | |||||||||||||
Non-interest income | 223 | 266 | 5,339 | 19.3 | N/M | |||||||||||||||
Total revenues | 1,056 | 1,130 | 7,815 | 7.0 | N/M | |||||||||||||||
Provision (reversal) for loan losses | 142 | 137 | 326 | (3.5 | ) | 138.0 | ||||||||||||||
Non-interest expense including depreciation and amortization | 442 | 468 | 5,431 | 5.9 | N/M | |||||||||||||||
Segment results(1) | 472 | 525 | 2,058 | 11.2 | % | N/M | ||||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income (expense) | (172 | ) | (265 | ) | (578 | ) | 54.1 | % | 118.1 | % | ||||||||||
Non-interest income | 6,110 | 5,464 | 27,961 | (10.6 | ) | N/M | ||||||||||||||
Total revenues | 5,938 | 5,199 | 27,383 | (12.4 | ) | N/M | ||||||||||||||
Provision (reversal) for loan losses | (13 | ) | 38 | (4 | ) | N/M | (110.5 | ) | ||||||||||||
Non-interest expense including depreciation and amortization | 5,580 | 5,857 | 27,943 | 5.0 | % | N/M | ||||||||||||||
Segment results(1) | 371 | (696 | ) | (556 | ) | N/M | (20.1 | )% | ||||||||||||
(1) | Net income (or loss) per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 612 | 815 | 135 | 33.2 | % | (83.4 | )% | |||||||||||||
Non-interest income | 1,034 | 1,766 | 2,772 | 70.8 | 57.0 | |||||||||||||||
Total revenues | 1,646 | 2,581 | 2,907 | 56.8 | 12.6 | |||||||||||||||
Provision (reversal) for loan losses | 45 | 62 | 245 | 37.8 | N/M | |||||||||||||||
Non-interest expense including depreciation and amortization | 1,284 | 1,174 | 3,385 | (8.6 | ) | N/M | ||||||||||||||
Segment results(1) | 317 | 1,345 | (723 | ) | N/M | N/M | ||||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006(1) | 2007(1) | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 718 | 2,804 | 2,958 | N/M | 5.5 | % | ||||||||||||||
Non-interest income | 1 | 197 | 632 | N/M | N/M | |||||||||||||||
Total revenues | 719 | 3,001 | 3,590 | N/M | 19.6 | |||||||||||||||
Provision (reversal) for credit losses | 92 | 301 | 43 | N/M | (85.7 | ) | ||||||||||||||
Non-interest expense including depreciation and amortization | 443 | 1,618 | 2,223 | N/M | 37.4 | |||||||||||||||
Segment results(2) | 184 | 1,082 | 1,324 | N/M | 22.4 | % | ||||||||||||||
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(1) | The information of former Shinhan Card for 2006 includes that for the credit card division of Chohung Bank from April 1, 2006 to December 31, 2006 to reflect the split-merger in April 2006. The information of Shinhan Card for 2007 includes that of LG Card (renamed as Shinhan Card on October 1, 2007) for the period from March 1, 2007 through December 31, 2007 (including that for the assets and liabilities of former Shinhan Card assumed by LG Card on October 1, 2007) and that of former Shinhan Card for the period from January 1, 2007 through September 30, 2007, presented on an aggregated basis. | |
(2) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 67 | 137 | 184 | 104.5 | % | 34.3 | % | |||||||||||||
Non-interest income | 1,259 | 1,803 | 1,532 | 43.2 | (15.0 | ) | ||||||||||||||
Total revenues | 1,326 | 1,940 | 1,716 | 46.3 | (11.5 | ) | ||||||||||||||
Provision (reversal) for credit losses | 3 | 7 | 29 | N/M | N/M | |||||||||||||||
Non-interest expense including depreciation and amortization | 1,189 | 1,681 | 1,478 | 41.4 | (12.1 | ) | ||||||||||||||
Segment results(1) | 134 | 252 | 209 | 88.1 | % | (17.1 | )% | |||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income | 228 | 293 | 357 | 28.5 | % | 21.8 | % | |||||||||||||
Non-interest income | 2,134 | 2,401 | 2,505 | 12.5 | 4.3 | |||||||||||||||
Total revenues | 2,362 | 2,694 | 2,862 | 14.1 | 6.2 | |||||||||||||||
Provision (reversal) for loan losses | 2 | 1 | 9 | (50.0 | ) | N/M | ||||||||||||||
Non-interest expense including depreciation and amortization | 2,194 | 2,509 | 2,667 | 14.4 | 6.3 | |||||||||||||||
Segment results(1) | 166 | 184 | 186 | 10.8 | % | 1.1 | % | |||||||||||||
(1) | Net income per segment before income taxes. |
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Year Ended December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Income statement data | ||||||||||||||||||||
Net interest income (loss) | 109 | (23 | ) | (48 | ) | N/M | 108.7 | % | ||||||||||||
Non-interest income | 263 | 272 | 705 | 3.4 | % | 159.2 | ||||||||||||||
Total revenues | 372 | 249 | 657 | (33.1 | ) | 163.9 | ||||||||||||||
Provision (reversal) for loan losses | 15 | 27 | 26 | 80.0 | (3.7 | ) | ||||||||||||||
Non-interest expense including depreciation and amortization | 334 | 337 | 634 | 0.9 | 88.1 | |||||||||||||||
Segment results(1) | 23 | (115 | ) | (3 | ) | N/M | (97.4 | )% | ||||||||||||
(1) | Net income (or loss) per segment before income taxes. |
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As of December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Cash and cash equivalents | 1,691 | 3,580 | 1,365 | 111.7 | % | (61.9 | )% | |||||||||||||
Restricted cash | 6,758 | 4,745 | 7,049 | (29.8 | ) | 48.6 | ||||||||||||||
Interest-bearing deposits | 725 | 1,094 | 1,627 | 50.9 | 48.7 | |||||||||||||||
Call loans and securities purchased under resale agreements | 1,243 | 802 | 3,066 | (35.5 | ) | 282.3 | ||||||||||||||
Trading assets: | ||||||||||||||||||||
Trading securities | 3,474 | 8,220 | 6,724 | 136.6 | (18.2 | ) | ||||||||||||||
Derivative assets | 1,363 | 1,962 | 11,977 | 43.9 | 510.4 | |||||||||||||||
Securities: | ||||||||||||||||||||
Available-for-sale securities | 16,939 | 22,849 | 29,746 | 34.9 | 30.2 | |||||||||||||||
Held-to-maturity securities | 7,581 | 8,224 | 8,696 | 8.5 | 5.7 | |||||||||||||||
Loans: | ||||||||||||||||||||
Corporate | 67,967 | 71,651 | 94,695 | 5.4 | 32.2 | |||||||||||||||
Consumer | 54,479 | 80,167 | 75,846 | 47.2 | (5.4 | ) | ||||||||||||||
Total loans, gross | 122,446 | 151,818 | 170,541 | 24.0 | 12.3 | |||||||||||||||
Deferred origination costs (fees) | 118 | 4 | (32 | ) | (96.6 | ) | (900.0 | ) | ||||||||||||
Less: allowance for loan losses | 1,575 | 2,099 | 3,201 | 33.3 | 52.5 | |||||||||||||||
Total loans, net | 120,989 | 149,723 | 167,308 | 23.7 | 11.7 | |||||||||||||||
Customers’ liability on acceptances | 1,417 | 1,701 | 2,433 | 20.0 | 43.0 | |||||||||||||||
Premises and equipment, net | 2,097 | 2,455 | 2,412 | 17.1 | (1.8 | ) | ||||||||||||||
Goodwill and intangible assets | 2,584 | 6,160 | 5,571 | 138.4 | (9.6 | ) | ||||||||||||||
Security deposits | 1,108 | 1,294 | 1,334 | 16.8 | 3.1 | |||||||||||||||
Other assets | 7,118 | 8,813 | 11,665 | 23.8 | 32.4 | |||||||||||||||
Total assets | 175,087 | 221,622 | 260,973 | 26.6 | % | 17.8 | % | |||||||||||||
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As of December 31, | % Change | |||||||||||||||||||
2006 | 2007 | 2008 | 2006/2007 | 2007/2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Interest bearing | 91,578 | 103,241 | 119,762 | 12.7 | % | 16.0 | % | |||||||||||||
Noninterest bearing | 3,918 | 3,162 | 2,942 | (19.3 | ) | (7.0 | ) | |||||||||||||
Trading liabilities | 1,611 | 2,509 | 11,831 | 55.7 | N/M | |||||||||||||||
Acceptances outstanding | 1,417 | 1,701 | 2,433 | 20.0 | 43.0 | |||||||||||||||
Short-term borrowings | 10,995 | 15,801 | 23,225 | 43.7 | 47.0 | |||||||||||||||
Secured borrowings | 8,103 | 11,452 | 10,226 | 41.3 | (10.7 | ) | ||||||||||||||
Long-term debt | 32,574 | 46,496 | 49,652 | 42.7 | 6.8 | |||||||||||||||
Future policy benefit | 5,683 | 6,769 | 7,260 | 19.1 | 7.3 | |||||||||||||||
Accrued expenses and other liabilities | 9,244 | 13,369 | 15,678 | 44.6 | 17.3 | |||||||||||||||
Total liabilities | 165,123 | 204,500 | 243,009 | 23.8 | 18.8 | |||||||||||||||
Minority interest | 162 | 212 | 312 | 30.9 | 47.2 | |||||||||||||||
Redeemable convertible preferred stock | — | — | — | — | — | |||||||||||||||
Stockholders’ equity | 9,802 | 16,910 | 17,652 | 72.5 | 4.4 | |||||||||||||||
Total liabilities, minority interest and stockholders’ equity | 175,087 | 221,622 | 260,973 | 26.6 | % | 17.8 | % | |||||||||||||
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As of December 31, 2008 | ||||
(In billions of Won) | ||||
Deposits | 122,704 | |||
Long-term debt | 49,652 | |||
Call money | 4,878 | |||
Borrowings from the Bank of Korea | 1,259 | |||
Other short-term borrowings | 17,088 | |||
Asset securitizations | 10,226 | |||
Stockholders’ equity(1) | 2,200 | |||
Total | 208,007 | |||
(1) | Includes redeemable preferred stock and redeemable convertible preferred stock. See Note 21 in the notes to our consolidated financial statements included in this annual report |
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As of June 10, 2009 | ||||||||||||
S&P | Moody’s | Fitch | ||||||||||
Shinhan Bank | A− | A2 | A | |||||||||
Shinhan Card | BBB+ | — | BBB+ |
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Less Than | 1-3 | 3-5 | More Than | |||||||||||||||||
1 Year | Years | Years | 5 Years | Total | ||||||||||||||||
Long-term debt | 12,711 | 20,837 | 5,806 | 13,049 | 52,403 | |||||||||||||||
Secured borrowings | 7,192 | 1,662 | 1,135 | 844 | 10,833 | |||||||||||||||
Provisions for accrued severance indemnities | 10 | 5 | 10 | 104 | 129 | |||||||||||||||
Deposits | 76,790 | 7,449 | 362 | 485 | 85,086 | |||||||||||||||
Total | 96,703 | 29,953 | 7,313 | 14,483 | 148,452 | |||||||||||||||
(1) | Includes estimated future interest payments. The future interest payment have been estimated using the weighted average interest rates paid for 2008 for each category and their scheduled contractual maturities. | |
(2) | Long-term debt includes senior debt, subordinated debt and Redeemable Preferred Stock, as contained in Note 15 to our consolidated financial statements. | |
(3) | See Note 14 to our consolidated financial statements included in this annual report. | |
(4) | This amount represents the amount of severance payment we are obligated to pay to the employees who are scheduled to retire during the indicated periods, as determined based on the employees’ current salary rates and the number of service years that will be accumulated upon their retirement date. In accordance with our policy and the Korean Labor Standard Law, employees with one year or more of service are entitled, upon termination of employment, to receive a lump sum severance payment based upon the length of their service and the average of the last three months’ wages. | |
(5) | Deposits include certificate of deposits, other time deposits and mutual installment deposits, as contained in Note 12 to our consolidated financial statements. | |
(6) | This amount represents provisions for accrued severance indemnities for a period of 10 years or less. |
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As of December 31, 2008 | ||||||||||||||||
Commitment Expiration by Period | ||||||||||||||||
Less Than | 1-5 | More Than | ||||||||||||||
1 Year | Years | 5 Years | Total | |||||||||||||
(In billions of Won) | ||||||||||||||||
Commitments to extend credit(1): | ||||||||||||||||
Corporate | 42,718 | 4,000 | 3,155 | 49,873 | ||||||||||||
Credit card lines(2) | 1,435 | 31,240 | 19,902 | 52,577 | ||||||||||||
Consumer(3) | 8,055 | 294 | 1 | 8,350 | ||||||||||||
Commercial letters of credit(4) | 3,003 | 3 | — | 3,006 | ||||||||||||
Financial standby letters of credit(5) | 332 | 74 | — | 406 | ||||||||||||
Other financial guarantees(6) | 755 | 32 | 25 | 812 | ||||||||||||
Performance letters of credit and guarantees(7) | 7,831 | 3,653 | 66 | 11,550 | ||||||||||||
Liquidity facilities to SPEs(8) | 337 | 1,248 | 506 | 2,091 | ||||||||||||
Acceptances(9) | 2,408 | 25 | — | 2,433 | ||||||||||||
Loans sold with recourse(10) | — | 1 | — | 1 | ||||||||||||
Guarantee on trust accounts(11) | 428 | 449 | 2,649 | 3,526 | ||||||||||||
Total | 67,302 | 41,019 | 26,304 | 134,625 | ||||||||||||
(1) | Commitments to extend credit represent unfunded portions of authorizations to extend credit in the form of loans. The commitments expire on fixed dates and a customer is required to comply with predetermined conditions to draw funds under the commitments. | |
(2) | Relates to the unused portion of credit card limits that may be cancelled by us after notice to the borrower if we determine that the borrower’s repayment ability is significantly impaired. | |
(3) | Excludes credit cards. | |
(4) | Commercial letters of credit are undertakings on behalf of customers authorizing third parties to draw drafts on us up to a stipulated amount under specific terms and conditions. These are generally short-term and collateralized by the underlying shipments of goods to which they relate. Commitments to extend credit, including credit lines, are in general subject to provisions that allow us to withdraw such commitments in the event there are material adverse changes affecting an obligor. | |
(5) | Financial standby letters of credit are irrevocable obligations to pay third party beneficiaries when our customers fail to repay loans or debt instruments, which are generally in foreign currencies. A substantial portion of these standby letters of credit are secured by underlying assets, including trade-related documents. | |
(6) | Other financial guarantees are used in various transactions to enhance the credit standing of our customers. They provide irrevocable assurance, subject to satisfaction of certain conditions, that we will make payment in the event that our customers fail to fulfill their obligations to third parties. These financial obligations include a return of security deposits and the payment of service fees. |
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(7) | Performance letters of credit and guarantees are issued to guarantee customers’ tender bids on construction or similar projects or to guarantee completion of such projects in accordance with contractual terms. They are also issued to support a customer’s obligation to supply products, commodities, maintenance or other services to third parties | |
(8) | Liquidity facilities to SPEs represent irrevocable commitments to provide contingent credit lines including commercial paper purchase agreements to special purpose entities for which we serve as the administrator. | |
(9) | Acceptances represent guarantees by us to pay a bill of exchange drawn on a customer. We expect most acceptances to be presented, but reimbursement by the customer is normally immediate. | |
(10) | Loans sold with recourse represent certain non-performing loans we sold to Korea Asset Management Corporation prior to 1999. The sales agreements contain a recourse obligation under which Korea Asset Management Corporation can obligate us to repurchase the related loans. The recourse obligation has no expiration date. | |
(11) | Guarantees on trust accounts represent guarantee of principal issued to trust fund investors. |
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• | Allowance for loan losses; | |
• | Allowance for unused loan commitments; | |
• | Allowance for guarantees and acceptances; and | |
• | Deferred taxation. |
Year Ended December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008(1) | |||||||||||||||||||
(In billions of Won and millions of US$, except per share data) | ||||||||||||||||||||||||
Interest income and dividends | 8,217 | 8,090 | 9,473 | 13,958 | 16,681 | $ | 13,218 | |||||||||||||||||
Interest expense | 3,986 | 3,842 | 4,782 | 6,868 | 8,865 | 7,025 | ||||||||||||||||||
Net interest income | 4,231 | 4,248 | 4,691 | 7,090 | 7,816 | 6,193 | ||||||||||||||||||
Provision for loan losses | 1,402 | 649 | 575 | 739 | 1,044 | 827 | ||||||||||||||||||
Non-interest income | 6,412 | 7,917 | 11,316 | 12,886 | 43,277 | 34,292 | ||||||||||||||||||
Non-interest expense | 7,907 | 9,676 | 12,924 | 15,324 | 47,055 | 37,286 | ||||||||||||||||||
Income tax expenses | 213 | 264 | 670 | 549 | 968 | 767 | ||||||||||||||||||
Pre-acquisition income in subsidiaries(2) | — | — | — | (874 | ) | — | — | |||||||||||||||||
Net income in minority interest | 71 | 15 | 16 | 94 | 7 | 6 | ||||||||||||||||||
Net income in majority interest | 1,050 | 1,561 | 1,822 | 2,396 | 2,019 | $ | 1,599 | |||||||||||||||||
Earnings per share, basic | 3,197 | 4,360 | 4,746 | 5,562 | 4,466 | $ | 3.54 | |||||||||||||||||
Earnings per share, diluted | 2,820 | 4,109 | 4,746 | 5,424 | 4,369 | 3.46 | ||||||||||||||||||
Cash dividends per common share | 750 | 800 | 900 | 900 | — | (3) | — | (3) |
(1) | Won amounts are expressed in U.S. dollars at the rate of | |
(2) | Noninterest revenue includes fees and commissions income, dividends on securities, gains on security valuations and disposals, gains on foreign currency transaction and gains from derivative transactions. | |
(3) | Noninterest expense is composed of fees & commissions paid or payable, general and administrative expenses, losses on securities valuations and disposals, losses on foreign currency transactions and losses from derivative transactions. |
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As of December 31, | ||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008(1) | |||||||||||||||||||
(In billions of Won and millions of US$) | ||||||||||||||||||||||||
Cash and due from banks | 6,713 | 8,476 | �� | 11,347 | 9,677 | 13,079 | $ | 10,364 | ||||||||||||||||
Trading securities | 7,065 | 5,496 | 5,513 | 11,740 | 8,838 | 7,003 | ||||||||||||||||||
Investment securities | 20,786 | 24,746 | 25,658 | 31,638 | 38,647 | 30,624 | ||||||||||||||||||
Loans | 99,116 | 108,390 | 124,264 | 150,926 | 173,662 | 137,608 | ||||||||||||||||||
Less allowance for doubtful accounts | (1,917 | ) | (1,741 | ) | (1,881 | ) | (2,953 | ) | (3,317 | ) | (2,628 | ) | ||||||||||||
Property and equipment, net | 1,859 | 1,887 | 2,214 | 2,407 | 2,411 | 1,911 | ||||||||||||||||||
Goodwill, net | 1,045 | 1,587 | 1,437 | 4,986 | 4,528 | 3,588 | ||||||||||||||||||
Other assets | 12,164 | 12,097 | 10,168 | 13,816 | 26,167 | 20,734 | ||||||||||||||||||
Total assets | 146,831 | 160,938 | 178,720 | 222,237 | 264,015 | 209,204 | ||||||||||||||||||
Deposits | 87,528 | 91,521 | 99,744 | 110,582 | 126,764 | 100,447 | ||||||||||||||||||
Borrowings | 14,895 | 15,917 | 18,173 | 24,205 | 27,731 | 21,974 | ||||||||||||||||||
Debentures, net | 20,114 | 22,840 | 29,485 | 42,586 | 49,181 | 38,971 | ||||||||||||||||||
Retirement and severance benefits, net | 79 | 178 | 243 | 335 | 381 | 302 | ||||||||||||||||||
Other liabilities | 16,380 | 20,230 | 19,520 | 26,303 | 42,006 | 33,285 | ||||||||||||||||||
Total liabilities | 138,996 | 150,686 | 167,165 | 204,011 | 246,063 | 194,979 | ||||||||||||||||||
Stockholders’ equity | 7,835 | 10,252 | 11,555 | 18,226 | 17,952 | 14,225 | ||||||||||||||||||
Total liabilities and stockholders’ equity | 146,831 | 160,938 | 178,720 | 222,237 | 264,015 | $ | 209,204 | |||||||||||||||||
(1) | Won amounts are expressed in U.S. dollars at the rate of |
Year Ended December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Net income as a percentage of: | ||||||||||||||||||||
Average total assets(1) | 0.72 | % | 0.93 | % | 1.09 | % | 1.14 | % | 0.81 | % | ||||||||||
Average stockholders’ equity(1)(2) | 14.08 | 17.96 | 15.53 | 11.61 | 9.40 | |||||||||||||||
Dividend payout ratio(3) | 24.89 | 17.11 | 18.96 | 16.75 | — | |||||||||||||||
Net interest spread(4) | 2.09 | 2.60 | 2.94 | 3.60 | 3.29 | |||||||||||||||
Net interest margin(5) | 2.28 | 2.74 | 3.20 | 3.93 | 3.69 | |||||||||||||||
Efficiency ratio(6) | 74.29 | 79.54 | 80.74 | 76.71 | 92.10 | |||||||||||||||
Cost-to average assets ratio(7) | 5.18 | 5.50 | 7.74 | 7.27 | 18.89 | |||||||||||||||
Equity to average asset ratio(8) | 5.10 | 5.20 | 6.99 | 9.79 | 8.62 |
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(1) | Average balances are based on (a) daily balances for Shinhan Bank and Jeju Bank and (b) quarterly balances for other subsidiaries. | |
(2) | Includes redeemable preferred shares and redeemable convertible preferred shares issued by us (i) in August 2003 as part of funding for the acquisition of Chohung Bank and (ii) in January 2007 as part of funding for the acquisition of LG Card. These preferred shares are treated as stockholders’ equity. For a more detailed description of the preferred shares issued by us, see “Item 10. Additional Information — Articles of Incorporation — Description of Capital Stock — Description of Redeemable Convertible Preferred Stock.” | |
(3) | The dividend payout ratio represents the ratio of total dividends paid on common stock as a percentage of net income attributable to common stock. | |
(4) | Net interest spread represents the difference between the yield on average interest earning assets and cost of average interest bearing liabilities. | |
(5) | Net interest margin represents the ratio of net interest income to average interest earning assets. | |
(6) | Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income, a measure of efficiency for banks and financial institutions. Efficiency ratio may be reconciled to comparable line-items in our income statement for the periods indicated as follows: |
Year Ended December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Non-interest expense (A) | 7,907 | 9,676 | 12,924 | 15,324 | 47,055 | |||||||||||||||
Divided by | ||||||||||||||||||||
The sum of net interest income and non-interest income (B) | 10,643 | 12,165 | 16,007 | 19,976 | 51,093 | |||||||||||||||
Net interest income | 4,231 | 4,248 | 4,691 | 7,090 | 7,816 | |||||||||||||||
Non-interest income | 6,412 | 7,917 | 11,316 | 12,886 | 43,277 | |||||||||||||||
Efficiency ratio ((A) as a percentage of (B)) | 74.29 | % | 79.54 | % | 80.74 | % | 76.71 | % | 92.10 | % |
(7) | Cost-to-average-assets ratio, a measure of cost of funding used by banks and financial institutions, represents the ratio of non-interest expense to average total assets. | |
(8) | Equity to average asset ratio represents the ratio of average stockholders’ equity to average total assets. |
As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(Percentages) | ||||||||||||||||||||
Requisite capital ratio(1) | 129.41 | 132.81 | 139.28 | N/A | N/A | |||||||||||||||
BIS ratio(1) | N/A | N/A | N/A | 9.85 | 10.19 | |||||||||||||||
Total capital adequacy ratio for Shinhan Bank(2) | 11.94 | 12.23 | 12.01 | 12.09 | 13.43 | |||||||||||||||
Tier I capital adequacy ratio | 7.45 | 8.16 | 7.81 | 7.64 | 9.30 | |||||||||||||||
Tier II capital adequacy ratio | 4.49 | 4.07 | 4.20 | 4.45 | 4.13 | |||||||||||||||
Total capital adequacy ratio for Chohung Bank(2) | 9.40 | 10.94 | N/A | N/A | N/A | |||||||||||||||
Tier I capital adequacy ratio | 4.99 | 6.52 | N/A | N/A | N/A | |||||||||||||||
Tier II capital adequacy ratio | 4.41 | 4.42 | N/A | N/A | N/A | |||||||||||||||
Adjusted equity capital ratio of Shinhan Card(3) | 16.48 | 17.68 | 17.47 | 25.31 | 20.32 | |||||||||||||||
Solvency ratio for Shinhan Life Insurance(4) | 265.69 | 232.12 | 232.60 | 226.05 | 209.47 |
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(1) | We were restructured as a financial holding company on September 1, 2001, and until 2006, under the guidelines issued by the Financial Services Commission applicable to financial holding companies, were required to maintain minimum capital as measured by the requisite capital ratio. For 2004, 2005 and 2006, the minimum requisite capital ratio applicable to us as a holding company was 100%. Starting 2007, under the revised guidelines, the minimum requisite capital ratio applicable to us changed to the BIS ratio of 8%. Requisite capital ratio is computed as the ratio of net aggregate amount of our equity capital to aggregate amounts of requisite capital. This computation is based on our consolidated financial statement in accordance with Korean GAAP. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” | |
(2) | Chohung Bank was merged with Shinhan Bank in April 2006. Accordingly, the capital adequacy ratio information for 2006 and afterwards is not available for Chohung Bank. | |
(3) | Adjusted equity capital ratio is the ratio of total adjusted stockholders’ equity to total adjusted assets and is computed in accordance with the guidelines issued by the Financial Services Commission for credit card companies. Under these regulations, a credit card company is required to maintain a minimum adjusted equity capital ratio of 8%. This computation is based on the non-consolidated financial statements of the credit card company prepared in accordance with Korean GAAP. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” |
(4) | Solvency ratio is the ratio of the solvency margin to the standard amount of solvency margin as defined and computed in accordance with the regulations issued by the Financial Services Commission for life insurance companies. Under these regulations Shinhan Life Insurance is required to maintain a minimum solvency ratio of 100%. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy.” |
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As of December 31, | ||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | ||||||||||||||||
(In billions of Won, except percentages) | ||||||||||||||||||||
Substandard and below loans(1) | 1,686 | 1,195 | 1,064 | 1,513 | 1,979 | |||||||||||||||
Substandard and below loans as a percentage of total loans | 1.72 | % | 1.09 | % | 0.87 | % | 1.03 | % | 1.18 | % | ||||||||||
Substandard and below loans as a percentage of total assets | 1.15 | 0.74 | 0.60 | 0.68 | 0.75 | |||||||||||||||
Precautionary loans as a percentage of total loans(2) | 2.98 | 2.57 | 1.16 | 1.16 | 1.29 | |||||||||||||||
Precautionary and below loans as a percentage of total loans(2) | 4.70 | 3.66 | 2.03 | 2.19 | 2.47 | |||||||||||||||
Precautionary and below loans as a percentage of total assets(2) | 3.13 | 2.49 | 1.40 | 1.46 | 1.57 | |||||||||||||||
Allowance for loan losses as a percentage of substandard and below loans | 110.86 | 143.43 | 172.98 | 184.63 | 165.22 | |||||||||||||||
Allowance for loan losses as a percentage of precautionary and below loans(2) | 40.67 | 42.76 | 73.88 | 86.50 | 79.08 | |||||||||||||||
Allowance for loan losses as a percentage of total loans | 1.91 | 1.57 | 1.50 | 1.89 | 1.95 | |||||||||||||||
Substandard and below credits as a percentage of total credits(3) | 1.69 | 1.07 | 0.84 | 0.98 | 1.15 | |||||||||||||||
Loans in Korean Won as a percentage of deposits in Korean Won(4) | 99.30 | 107.79 | 115.05 | 126.58 | 125.43 |
(1) | Substandard and below loans (other than loans provided from our trust accounts and confirmed guarantees and acceptances) are defined in accordance with the regulatory guidance in Korea. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Banks.” | |
(2) | As defined by the Financial Services Commission. | |
(3) | Credits include loans provided from our trust accounts (including bills purchased and privately placed debentures) and confirmed guarantees and acceptances, as well as the total loan portfolio of the banking accounts. | |
(4) | Loans in Korean Won do not include bills bought in Won, advances for customers, credit card accounts, bonds purchased under resale agreements, call loans, private placement corporate bonds and loans in restructurings that have been swapped for equity in the restructured borrower. |
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2008 | ||||
(In millions of Won) | ||||
U.S. GAAP net income | 1,480,699 | |||
1. Provision for credit losses | 633,546 | |||
2. Sale of loans to the Korea Asset Management Corporation | (839 | ) | ||
3. Deferred loan fees and costs | 48,335 | |||
4. Securities and derivatives for hedging purposes | ||||
a. Impairment loss and reclassification of securities | 28,919 | |||
b. Reversal of hedge accounting treatment for derivatives | (666,440 | ) | ||
c. Changes in foreign exchange rates on available-for-sale securities | 488,368 | |||
d. Credit risk adjustments on derivatives | 258,021 | |||
5. Stock-based compensation | (589 | ) | ||
6. Difference related to the accounting treatment of goodwill and intangible assets | 139,403 | |||
7. Recognition of minority interest | 4,667 | |||
8. Reversal of asset revaluation | (2,845 | ) | ||
9. Adjustments for redeemable (convertible) preferred shares | 54,631 | |||
10. Consolidation Scope | 50,399 | |||
11. Measurement of common stock issued for acquisition of subsidiaries | — | |||
12. Adoption of FIN No. 48 | 39,724 | |||
13. Difference related to the accounting treatment of the LG Card acquisition | — | |||
14. Shinhan Life Insurance deferred policy acquisition costs | (172,566 | ) | ||
15. Others | (28,811 | ) | ||
Total adjustments | 873,923 | |||
Tax effect of adjustments | (335,995 | ) | ||
Korean GAAP net income | 2,018,627 | |||
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2008 | ||||
(In millions of Won) | ||||
U.S. GAAP stockholders’ equity | 17,652,068 | |||
1. Provision for credit losses | (1,056,756 | ) | ||
2. Sale of loans to the Korea Asset Management Corporation | (39,142 | ) | ||
3. Deferred loan fees and costs | (11,913 | ) | ||
4. Securities and derivatives for hedging purposes | ||||
a. Impairment loss and reclassification of securities | 371,719 | |||
b. Reversal of hedge accounting treatment for derivatives | (483,687 | ) | ||
c. Changes in foreign exchange rates on available-for-sale securities | — | |||
d. Credit risk adjustments on derivatives | 258,021 | |||
5. Stock-based compensation | 15,898 | |||
6. Difference related to the accounting treatment of goodwill and intangible assets | 808,406 | |||
7. Minority interest | 312,075 | |||
8. Reversal of asset revaluation | 60,704 | |||
9. Adjustments for Redeemable (Convertible) Preferred Stock | (145,479 | ) | ||
10. Consolidation Scope | (456,705 | ) | ||
11. Measurement of common stock issued for acquisition of subsidiaries | 137,738 | |||
12. Adoption of FIN No. 48 | 60,933 | |||
13. Difference related to the accounting treatment of the LG Card acquisition | 202,552 | |||
14. Shinhan Life Insurance’s deferred policy acquisition costs | (428,248 | ) | ||
15. Others | 42,972 | |||
Total of adjustments | (350,912 | ) | ||
Tax effect of adjustments | 650,997 | |||
Korean GAAP stockholders’ equity | 17,952,153 | |||
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Corporate Loans | Retail Loans | Credit Card Balances | ||||
Normal(1)(2) | 0.85% or more | 1.00% or more | 1.50% or more | |||
Precautionary(2) | 7.00% or more | 10.00% or more | 15.00% or more | |||
Substandard | 20.00% or more | 20.00% or more | 20.00% or more | |||
Doubtful | 50.00% or more | 55.00% or more | 60.00% or more | |||
Estimated Loss | 100.00% | 100.00% | 100.00% |
(1) | In the case of normal credits comprising loans to borrowers in the construction, wholesale and retail, accommodation and restaurant or real estate and housing industries (as classified under the Korean Industry Classification Standard), the applicable figure is 0.90% or more. | |
(2) | In the case of credit card assets classified as normal and precautionary, the amount of provisions set aside is based on the revised provisioning rates under the Regulation on Specialized Credit Financial Business Act, which, effective as of February 11, 2008, increased the minimum provisioning requirements from 1.00% to 1.50% in respect of credit card assets classified as “normal” and from 12.00% to 15.00% in respect of credit card assets classified as “precautionary.” |
186
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Name | Age | Position | Director Since | Date Term Ends(1) | ||||||
Eung Chan Ra | 70 | Chairman of the Board of | September 1, 2001 | March 2010 | ||||||
Directors and Head of Board | ||||||||||
Steering Committee | ||||||||||
Sang Hoon Shin | 60 | President and Chief Executive | March 17, 2009 | March 2011 | ||||||
Officer and a member of the | ||||||||||
Board Steering Committee |
(1) | The date on which each term will end will be the date of the general stockholders’ meeting in the relevant year. |
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Name | Age | Position | Director Since | Date Term Ends(1) | ||||||
Baek Soon Lee | 56 | Non-Executive Director | March 17, 2009 | March 2012 | ||||||
Boo In Go | 67 | Outside Director | March 17, 2009 | March 2010 | ||||||
Young Woo Kim | 57 | Outside Director | March 20, 2007 | March 2010 | ||||||
Yo Koo Kim | 59 | Outside Director | March 17, 2009 | March 2010 | ||||||
Shee Yul Ryoo | 70 | Outside Director | March 30, 2005 | March 2010 | ||||||
Ke Sup Yun | 64 | Outside Director | March 17, 2009 | March 2010 | ||||||
Jung Il Lee | 56 | Outside Director | March 17, 2009 | March 2010 | ||||||
Sung Bin Chun | 56 | Outside Director | March 20, 2007 | March 2010 | ||||||
Kap Young Jeong | 57 | Outside Director | March 17, 2009 | March 2010 | ||||||
Haeng Nam Chung | 68 | Outside Director | March 21, 2006 | March 2010 | ||||||
Bong Youn Cho | 61 | Outside Director | March 19, 2008 | March 2010 | ||||||
Young Seok Choi | 79 | Outside Director | March 17, 2009 | March 2010 | ||||||
Philippe Reynieix | 60 | Outside Director | March 25, 2004 | March 2010 |
(1) | The date on which each term will end will be the date of the general stockholders’ meeting in the relevant year. |
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Name | Age | Position | In charge of | |||||
Buhmsoo Choi | 52 | Deputy President | — Finance Management Team | |||||
and Chief Financial | — Investor Relations Team | |||||||
Officer | — Strategic Planning Team | |||||||
— Global Business Strategy Team | ||||||||
Sung Ho Wi | 51 | Deputy President | — General Affairs Team | |||||
— Business Management Team | ||||||||
— Public Relations Team | ||||||||
Chan Hee Jin | 54 | Deputy President | — Synergy Management Team | |||||
— Information and Technology Planning Team | ||||||||
— Risk Management Team | ||||||||
— Audit and Compliance Team |
190
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191
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• | the Board Steering Committee; | |
• | the Risk Management Committee; | |
• | the Audit Committee | |
• | the Outside Director Recommendation Committee; | |
• | the Compensation Committee; and | |
• | the Audit Committee Member Recommendation Committee. |
192
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193
Table of Contents
Number of | Number of | |||||||||||||||||||||||
Exercise Period | Exercise | Granted | Options | |||||||||||||||||||||
Grant Date | From | To | Period | Options | Outstanding | |||||||||||||||||||
(In Won) | ||||||||||||||||||||||||
Shinhan Financial Group | ||||||||||||||||||||||||
Eung Chan Ra | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 94,416 | |||||||||||||||||||
(Chairman of the Board of Directors) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 95,390 100,000 99,447 120,000 60,000 55,000 35,000 | — — 99,447 112,794 60,000 38,500 — | ||||||||||||||||||
Sang Hoon Shin | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 28,325 | — | ||||||||||||||||||
(President and Chief Executive Officer) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 77,160 80,000 80,000 88,000 48,000 44,000 31,500 | — — 80,000 83,173 48,000 30,800 — | ||||||||||||||||||
Shee Yul Ryoo | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 9,944 | — | ||||||||||||||||||
(Outside Director) | 3/21/2006 3/20/2007 | 3/21/2009 3/20/2010 | 3/20/2013 3/19/2014 | 38,829 54,560 | 10,000 10,000 | 9,399 10,000 | ||||||||||||||||||
Sung Bin Chun | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 10,000 | 10,000 | ||||||||||||||||||
(Outside Director) | ||||||||||||||||||||||||
Buhmsoo Choi | 3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 11,000 | 9,900 | ||||||||||||||||||
(Deputy President) | 3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 9,000 | — | ||||||||||||||||||
Sung Ho Wi | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 1,700 2,000 1,800 2,500 3,000 8,250 9,000 | — — 1,800 2,500 3,000 7,425 — | ||||||||||||||||||
Chan-Hee Jin | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,000 | 2,000 | ||||||||||||||||||
(Deputy President) | 3/21/2006 3/19/2008 3/17/2009 | 3/21/2009 3/19/2011 3/17/2012 | 3/20/2013 3/18/2015 3/16/2016 | 38,829 49,053 23,405 | 1,800 8,250 9,000 | 1,800 7,425 — |
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Number of | Number of | |||||||||||||||||||||||
Exercise Period | Exercise | Granted | Options | |||||||||||||||||||||
Grant Date | From | To | Period | Options | Outstanding | |||||||||||||||||||
(In Won) | ||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||
Baek Soon Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 2,200 20,000 19,889 24,000 11,000 11,000 28,000 | — — 19,889 22,683 11,000 9,900 — | ||||||||||||||||||
Jeum Joo Gweon | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 1,700 1,800 2,500 7,000 7,500 11,000 9,000 | — — 2,500 6,616 7,500 9,900 — | ||||||||||||||||||
Joo Won Park | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,000 | 2,000 | ||||||||||||||||||
(Deputy President) | 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 38,829 54,560 49,053 23,405 | 2,100 7,000 10,000 9,000 | 2,100 7,000 9,000 — | ||||||||||||||||||
Chan Park | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,800 | 1,800 | ||||||||||||||||||
(Deputy President) | 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 38,829 54,560 49,053 23,405 | 7,000 7,000 8,250 9,000 | 6,616 7,000 7,425 — | ||||||||||||||||||
Jung Won Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 1,700 2,000 2,500 2,500 3,000 8,250 9,000 | — — 2,500 2,500 3,000 7,425 — | ||||||||||||||||||
Hyung Jin Kim | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
(Deputy President) | 3/25/2004 3/30/2005 3/21/2006 | 3/25/2006 3/30/2008 3/21/2009 | 3/25/2009 3/29/2012 3/20/2013 | 21,595 28,006 38,829 | 2,000 1,800 2,500 | — 1,800 2,500 | ||||||||||||||||||
3/20/2007 3/19/2008 3/17/2009 | 3/20/2010 3/19/2011 3/17/2012 | 3/19/2014 3/18/2015 3/16/2016 | 54,560 49,053 23,405 | 3,000 7,500 9,000 | 3,000 6,750 — | |||||||||||||||||||
Young Hoon Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 1,200 2,000 2,500 7,000 3,000 7,500 9,000 | — — 2,500 6,616 3,000 6,750 — |
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Number of | Number of | |||||||||||||||||||||||
Exercise Period | Exercise | Granted | Options | |||||||||||||||||||||
Grant Date | From | To | Period | Options | Outstanding | |||||||||||||||||||
(In Won) | ||||||||||||||||||||||||
Sung Rack Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,000 | — | ||||||||||||||||||
(Deputy President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 54,560 49,053 23,405 | 1,200 2,000 2,500 2,500 3,000 7,000 8,250 9,000 | — — 2,500 2,500 3,000 7,000 7,425 — | ||||||||||||||||||
Dong Dae Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 1,700 2,000 2,500 2,500 3,000 8,250 6,750 | — — 2,500 2,500 3,000 7,425 — | ||||||||||||||||||
Se Il Oh | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 2,000 | 2,000 | ||||||||||||||||||
(Executive Vice President) | 3/21/2006 3/19/2008 3/17/2009 | 3/21/2009 3/19/2011 3/17/2012 | 3/20/2013 3/18/2015 3/16/2016 | 38,829 49,053 23,405 | 1,800 8,250 6,750 | 1,800 7,425 — | ||||||||||||||||||
Yong Byoung Cho | 5/15/2003 | 5/16/2005 | 5/15/2009 | 11,800 | 1,200 | — | ||||||||||||||||||
(Executive Vice President) | 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 21,595 28,006 38,829 54,560 49,053 23,405 | 2,000 1,800 2,500 3,000 7,500 6,750 | — 1,800 2,500 3,000 6,750 — | ||||||||||||||||||
Jong Bok Moon | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,500 | 1,500 | ||||||||||||||||||
(Executive Vice President) | 3/21/2006 3/20/2007 3/17/2009 | 3/21/2009 3/20/2010 3/17/2012 | 3/20/2013 3/19/2014 3/16/2016 | 38,829 54,560 23,405 | 1,800 3,000 6,750 | 1,800 3,000 — | ||||||||||||||||||
Sung Rack Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,000 | — | ||||||||||||||||||
(Executive Vice President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 23,405 | 1,200 2,000 2,500 2,500 3,000 9,000 | — — 2,500 2,500 3,000 — | ||||||||||||||||||
Shinhan Card | ||||||||||||||||||||||||
Jae Woo Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 18,873 | — | ||||||||||||||||||
(President) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 19,290 20,000 19,889 24,000 11,000 22,000 17,600 | — — 19,889 22,559 11,000 17,600 — | ||||||||||||||||||
Ihn Nam | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 8,250 | 8,250 | ||||||||||||||||||
(Statutory Auditor) |
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Number of | Number of | |||||||||||||||||||||||
Exercise Period | Exercise | Granted | Options | |||||||||||||||||||||
Grant Date | From | To | Period | Options | Outstanding | |||||||||||||||||||
(In Won) | ||||||||||||||||||||||||
Hong Kyu Kang | 3/19/2008 | 3/19/2011 | 3/18/2015 | 49,053 | 8,250 | 7,425 | ||||||||||||||||||
(Deputy CEO) | 3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 7,425 | — | ||||||||||||||||||
Soo Ik Park | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(Deputy CEO) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 2,200 1,800 2,500 7,000 7,000 7,500 7,425 | — — — 4,906 7,000 6,750 — | ||||||||||||||||||
Hee Geon Kim | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 15,000 | 14,937 | ||||||||||||||||||
(Deputy CEO) | 3/20/2007 3/19/2008 3/17/2009 | 3/20/2010 3/19/2011 3/17/2012 | 3/19/2014 3/18/2015 3/16/2016 | 54,560 49,053 23,405 | 8,250 8,250 7,425 | 8,250 7,425 — | ||||||||||||||||||
Chun Kuk Lee | 3/25/2004 | 3/25/2006 | 3/25/2009 | 21,595 | 1,000 | — | ||||||||||||||||||
(Deputy CEO) | 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 28,006 38,829 54,560 49,053 23,405 | 1,200 1,400 7,500 6,600 6,750 | 1,200 1,400 7,500 6,600 — | ||||||||||||||||||
Jeong Cheol Kim | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Deputy CEO) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 1,700 1,400 2,500 2,500 7,000 3,850 6,750 | — — 2,500 2,500 7,000 3,850 — | ||||||||||||||||||
Good Morning Shinhan Securities | ||||||||||||||||||||||||
Hyu Won Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(President & CEO) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 | 11,800 21,595 28,006 38,829 54,560 | 2,200 1,800 20,000 22,000 11,000 | — — 20,000 20,793 11,000 | ||||||||||||||||||
3/19/2008 3/17/2009 | 3/19/2011 3/17/2012 | 3/18/2015 3/16/2016 | 49,053 23,405 | 11,000 16,000 | 9,900 — | |||||||||||||||||||
Ki Seung Jung | 3/20/2007 | 3/20/2010 | 3/19/2014 | 54,560 | 7,500 | 7,500 | ||||||||||||||||||
(Chief Auditor) | ||||||||||||||||||||||||
Jin Kook Lee | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 14,080 | 14,080 | ||||||||||||||||||
(Vice President) | 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 38,829 54,560 49,053 23,405 | 15,000 7,500 8,250 6,750 | 13,190 7,500 7,425 — | ||||||||||||||||||
Seung Hee Hyun | 3/30/2005 | 3/30/2008 | 3/29/2012 | 28,006 | 1,600 | 1,600 | ||||||||||||||||||
(Vice President) | 3/21/2006 3/20/2007 3/19/2008 | 3/21/2009 3/20/2010 3/19/2011 | 3/20/2013 3/19/2014 3/18/2015 | 38,829 54,560 49,053 | 5,000 7,500 7,500 | 4,397 7,500 6,750 |
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Number of | Number of | |||||||||||||||||||||||
Exercise Period | Exercise | Granted | Options | |||||||||||||||||||||
Grant Date | From | To | Period | Options | Outstanding | |||||||||||||||||||
(In Won) | ||||||||||||||||||||||||
Shinhan Life Insurance | ||||||||||||||||||||||||
Jin Won Suh | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 2,500 | — | ||||||||||||||||||
(CEO) | 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 11,800 21,595 28,006 38,829 54,560 49,053 23,405 | 2,200 20,000 20,000 22,000 11,000 22,000 16,000 | — — 20,000 20,679 11,000 17,600 — | ||||||||||||||||||
Byung Chan Lee | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 15,000 | 14,939 | ||||||||||||||||||
(Vice President) | 3/20/2007 3/19/2008 3/17/2009 | 3/20/2010 3/19/2011 3/17/2012 | 3/19/2014 3/18/2015 3/16/2016 | 54,560 49,053 23,405 | 8,250 8,250 6,750 | 8,250 7,425 — | ||||||||||||||||||
Keun Jong Lee | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 15,000 | 14,939 | ||||||||||||||||||
(Vice President) | 3/20/2007 3/19/2008 3/17/2009 | 3/20/2010 3/19/2011 3/17/2012 | 3/19/2014 3/18/2015 3/16/2016 | 54,560 49,053 23,405 | 8,250 8,250 6,750 | 8,250 7,425 — | ||||||||||||||||||
Jung Kun Lee | 5/22/2002 | 5/23/2004 | 5/22/2008 | 18,910 | 1,500 | — | ||||||||||||||||||
(Vice President) | 5/15/2003 3/25/2004 | 5/16/2005 3/25/2006 | 5/15/2009 3/25/2009 | 11,800 21,595 | 1,200 1,800 | — — | ||||||||||||||||||
3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/17/2009 | 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/17/2012 | 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/16/2016 | 28,006 38,829 54,560 49,053 23,405 | 2,500 7,000 7,500 7,500 6,750 | 2,500 6,616 7,500 6,750 — | |||||||||||||||||||
Ki Won Kim | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 12,000 | 11,952 | ||||||||||||||||||
(Vice President) | 3/20/2007 3/19/2008 3/17/2009 | �� | 3/20/2010 3/19/2011 3/17/2012 | 3/19/2014 3/18/2015 3/16/2016 | 54,560 49,053 23,405 | 6,000 6,600 6,750 | 6,000 5,940 — | |||||||||||||||||
Jae Gun Bae | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,200 | 1,200 | ||||||||||||||||||
(Vice President) | 3/20/2007 3/17/2009 | 3/20/2010 3/17/2012 | 3/19/2014 3/16/2016 | 54,560 23,405 | 1,800 5,400 | 1,800 — | ||||||||||||||||||
Ho Kyung Bae | 3/21/2006 | 3/21/2009 | 3/20/2013 | 38,829 | 1,000 | 1,000 | ||||||||||||||||||
(Vice President) | 3/17/2009 | 3/17/2012 | 3/16/2016 | 23,405 | 5,400 | — | ||||||||||||||||||
Total | 2,452,678 | 1,358,599 | ||||||||||||||||||||||
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ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
Number of Common | ||||||||
Name of Shareholder | Shares Beneficially Owned | Ownership% | ||||||
BNP Paribas(1) | 33,682,104 | 8.50 | % | |||||
Korea National Pension Fund | 26,181,238 | 6.61 | % | |||||
Citibank, N.A. (ADR Department) | 18,740,162 | 4.73 | % | |||||
Mirae Asset Management | 10,776,145 | 2.72 | % | |||||
Shinhan Financial Group Employee Stock Ownership Association | 6,453,801 | 1.63 | % | |||||
NTC-GOV SPORE | 6,103,884 | 1.54 | % | |||||
Mizuho | 5,955,000 | 1.50 | % | |||||
Samsung Life Insurance | 5,596,606 | 1.41 | % | |||||
DaeGyoo | 5,234,402 | 1.32 | % | |||||
Samsung Investment Trust Management | 5,012,360 | 1.27 | % | |||||
Norges Bank | 4,178,065 | 1.05 | % | |||||
Others | 268,285,820 | 67.72 | % | |||||
Total(2) | 396,199,587 | 100.00 | % | |||||
(1) | Includes 26,288,081 common shares held by BNP Paribas S.A. and 7,394,023 common shares held by BNP Paribas Luxembourg. Following the rights offering in March 2009, and as of March 25, 2009, the BNP Paribas Group held 38,574,239 shares, or 8.13% of our total common stock. | |
(2) | Does not include 14,721,000 Series 11 non-voting redeemable convertible preferred shares issued on January 25, 2007, which may be converted at the option of the holders thereof at any time from the day after the first anniversary of the issuance date until the fifth anniversary of the issuance date at a conversion rate of one-to-one at the conversion price |
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ITEM 8. | FINANCIAL INFORMATION |
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ITEM 9. | THE OFFER AND LISTING |
Korea Exchange | ||||||||||||||||||||||||
Closing Price per | New York Stock Exchange | |||||||||||||||||||||||
Common Stock | Average Daily | Closing Price per ADS | Average Daily | |||||||||||||||||||||
High | Low | Trading Volume | High | Low | Trading Volume | |||||||||||||||||||
(Shares) | (ADSs) | |||||||||||||||||||||||
2004 | 23,400 | 15,200 | 1,372,443 | 45.65 | 26.50 | 6,039 | ||||||||||||||||||
2005 | 43,100 | 24,100 | 1,210,054 | 74.31 | 51.78 | 14,419 | ||||||||||||||||||
2006 | 49,500 | 36,800 | 1,385,417 | 106.08 | 74.05 | 26,422 | ||||||||||||||||||
2007 | 66,200 | 45,450 | 1,696,165 | 148.29 | 96.75 | 36,042 | ||||||||||||||||||
First Quarter | 57,800 | 45,450 | 1,545,883 | 123.65 | 96.75 | 35,510 | ||||||||||||||||||
Second Quarter | 59,200 | 50,600 | 1,733,756 | 129.90 | 110.08 | 25,733 | ||||||||||||||||||
Third Quarter | 66,200 | 52,800 | 1,513,898 | 148.29 | 113.10 | 40,386 | ||||||||||||||||||
Fourth Quarter | 64,700 | 46,850 | 1,991,125 | 143.43 | 99.25 | 42,541 | ||||||||||||||||||
2008 | 58,900 | 25,600 | 2,206,295 | 118.35 | 32.68 | 79,215 | ||||||||||||||||||
First Quarter | 52,500 | 45,150 | 1,567,340 | 113.45 | 90.97 | 66,619 | ||||||||||||||||||
Second Quarter | 58,900 | 44,550 | 1,867,102 | 118.35 | 86.79 | 52,614 | ||||||||||||||||||
Third Quarter | 50,300 | 41,500 | 2,021,075 | 98.07 | 68.47 | 74,154 | ||||||||||||||||||
Fourth Quarter | 42,000 | 25,600 | 3,369,664 | 71.00 | 32.68 | 122,474 | ||||||||||||||||||
2009(through June 24) | 34,000 | 20,500 | 4,162,373 | 56.66 | 26.25 | 148,667 | ||||||||||||||||||
January | 32,950 | 25,500 | 3,429,165 | 50.34 | 36.82 | 129,161 | ||||||||||||||||||
February | 29,700 | 21,250 | 4,341,276 | 43.62 | 28.00 | 147,648 | ||||||||||||||||||
March | 27,700 | 20,500 | 5,185,209 | 41.46 | 26.25 | 216,671 | ||||||||||||||||||
April | 31,700 | 25,750 | 4,424,488 | 49.35 | 38.24 | 166,260 | ||||||||||||||||||
May | 34,000 | 30,300 | 4,949,595 | 56.66 | 48.06 | 140,963 | ||||||||||||||||||
June (through June 24) | 32,650 | 29,250 | 2,644,507 | 53.99 | 46.81 | 91,296 |
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• | Any person’s ownership of shares in the Korea Exchange is limited to 5% or less except for an investment trust company or investment company established under the Indirect Investment Asset Management Business Acts, or the Korean government. However, upon prior approval from the Financial Services Commission, more than 5% ownership in Korea Exchange is permitted if necessary for forming strategic alliance with a foreign stock or futures exchange; | |
• | The number of outside directors on the board of directors of the Korea Exchange shall be more than half of the total number of directors; | |
• | Any amendment to the Articles of Incorporation, transfer or consolidation of business, spin off, stock swap in its entirety or transfer of shares in its entirety of the Korea Exchange will receive prior approval from the Minister of the Ministry of Strategy and Finance; and | |
• | In the event the Minister of the Ministry of Strategy and Finance determines that the chief executive officer of the Korea Exchange is not appropriate for the position, the Minister of the Ministry of Strategy and Finance can request the Korea Exchange upon reasonable cause, within one month from the chief executive officer’s election, to dismiss the chief executive officer. Subsequently, the chief executive officer will be suspended from performing his duties and the Korea Exchange will elect a new chief executive officer within two months from the request. |
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Opening(1) | High | Low | Closing | |||||||||||||
2000 | 1,028.33 | 1,066.18 | 483.58 | 504.62 | ||||||||||||
2001 | 503.31 | 715.93 | 463.54 | 693.70 | ||||||||||||
2002 | 698.00 | 943.54 | 576.49 | 627.55 | ||||||||||||
2003 | 633.03 | 824.26 | 512.30 | 810.71 | ||||||||||||
2004 | 821.26 | 939.52 | 713.99 | 895.92 | ||||||||||||
2005 | 893.71 | 1383.14 | 866.17 | 1,379.37 | ||||||||||||
2006 | 1,389.27 | 1,464.70 | 1,192.09 | 1,434.46 | ||||||||||||
2007 | 1,435.26 | 2,085.45 | 1,345.08 | 1,897.13 | ||||||||||||
2008 | 1,853.45 | 1,901.13 | 892.16 | 1,124.47 | ||||||||||||
2009 (through June 24) | 1,157.40 | 1,435.70 | 1,018.81 | 1,363.79 |
(1) | The figures represent the daily closing price of the first trading day of the respective year. |
Previous Day’s Closing Price | Rounded Down to Won | |||
Less than 5,000 | 5 | |||
5,000 to less than 10,000 | 10 | |||
10,000 to less than 50,000 | 50 | |||
50,000 to less than 100,000 | 100 | |||
100,000 to less than 500,000 | 500 | |||
500,000 or more | 1,000 |
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Number of | Total Market Capitalization | Average Daily Trading Volume, Value | ||||||||||||||||||||||
Listed | (Thousands of | Thousands of | (Millions of | (Thousands of | ||||||||||||||||||||
Year | Companies | (Millions of Won) | Dollars)(1) | Shares | Won) | Dollars)(1) | ||||||||||||||||||
2000 | 704 | 188,041,490 | 148,393,204 | 306,163 | 2,602,211 | 2,053,796 | ||||||||||||||||||
2001 | 689 | 255,850,070 | 192,934,221 | 473,241 | 1,997,420 | 1,506,236 | ||||||||||||||||||
2002 | 683 | 258,680,756 | 215,445,465 | 857,245 | 3,041,598 | 2,533,820 | ||||||||||||||||||
2003 | 684 | 355,362,626 | 298,121,331 | 542,010 | 2,216,636 | 1,859,594 | ||||||||||||||||||
2004 | 683 | 412,588,139 | 398,597,371 | 372,895 | 2,232,109 | 2,156,419 | ||||||||||||||||||
2005 | 702 | 655,074,595 | 648,588,628 | 467,629 | 3,157,662 | 3,126,398 | ||||||||||||||||||
2006 | 731 | 704,587,508 | 757,620,976 | 279,096 | 3,435,180 | 3,693,742 | ||||||||||||||||||
2007 | 745 | 951,900,447 | 1,016,010,724 | 363,732 | 5,539,588 | 5,912,677 | ||||||||||||||||||
2008 | 763 | 576,887,540 | 457,121,664 | 355,205 | 5,189,644 | 4,112,238 | ||||||||||||||||||
2009 (through June 19) | 757 | 719,468,026 | 569,109,339 | 564,750 | 5,820,460 | 4,604,066 |
(1) | Converted at the Noon Buying Rate at the end of the periods indicated. |
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ITEM 10. | ADDITIONAL INFORMATION |
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• | odd-lot trading of shares; | |
• | acquisition of shares by foreign companies as a result of a merger; | |
• | acquisition of shares (which we refer to as “Converted Shares”) by exercise of warrants, conversion rights, exchange rights or options under bonds with warrants, convertible bonds, exchangeable bonds, stock options or withdrawal rights under depositary receipts issued by a Korean company outside of Korea; | |
• | acquisition of shares by exercise of rights as a shareholder; | |
• | acquisition of shares as a result of inheritance, donation, bequest or exercise of stockholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends; | |
• | sale or purchase of securities through a public bidding among large number of bidders; | |
• | acquisition of shares by exercising rights granted under a covered warrant; | |
• | over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded subject to certain exceptions; and | |
• | acquisition or disposition of shares in connection with a tender offer. |
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• | a resident of Korea; | |
• | a corporation having its head office, principal place of business, or place of effective management in Korea (a Korean corporation); or | |
• | engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected. |
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• | a bank; | |
• | a dealer in securities or currencies; |
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• | an insurance company or one of certain financial institutions; | |
• | a regulated investment company; | |
• | a real estate investment trust; | |
• | a tax-exempt entity; | |
• | a trader in securities that has elected to use a mark-to-market method of accounting for your securities holdings; | |
• | a person holding common shares or ADSs as part of a hedging, conversion, constructive sale or integrated transaction or a straddle; | |
• | a person liable for the alternative minimum tax; | |
• | a partnership or other pass-through entity for United States federal income tax purposes; | |
• | a person who owns 10% or more of our voting stock; or | |
• | a person whose functional currency is not the U.S. dollar. |
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• | at least 75% of our gross income is passive income; or | |
• | at least 50% of the value of our assets is attributable to assets that produce or are held for the production of passive income. |
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• | the excess distribution or gain will be allocated ratably over your holding period for our common shares or ADSs; | |
• | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we are a PFIC, will be treated as ordinary income; and | |
• | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
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ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. | CONTROLS AND PROCEDURES |
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ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
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ITEM 16B. | CODE OF ETHICS |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Aggregate Fees Billed During the Year Ended December 31, | ||||||||||||||
Type of Services | 2006 | 2007 | 2008 | Nature of Services | ||||||||||
(In millions of Won) | ||||||||||||||
Audit fees | 6,071 | 7,072 | 6,381 | Audit service for Shinhan Financial Group and its subsidiaries. | ||||||||||
Tax fees | 191 | 285 | 259 | Tax return and consulting advisory service. | ||||||||||
All other fees | 8 | 369 | 443 | All other services which do not meet the three categories above. | ||||||||||
Total | 6,270 | 7,726 | 7,083 | |||||||||||
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
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ITEM 16E. | PURCHASE OF EQUITY SECURITIES BY SHINHAN CARD AND AFFILIATED PURCHASERS |
ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS |
ITEM 16G. | CORPORATE GOVERNANCE |
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ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
ITEM 19. | EXHIBITS |
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By: | /s/ Sang Hoon Shin |
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Index to consolidated financial statements | F-1 | |||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-9 |
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CONSOLIDATED FINANCIAL STATEMENTS
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INTERNAL CONTROL OVER FINANCIAL REPORTING
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As of December 31, 2007 and 2008
2007 | 2008 | 2008 | ||||||||||
(In millions of Korean Won, | (See Note 1) | |||||||||||
except share data) | (In thousands | |||||||||||
of US$, except | ||||||||||||
share data) | ||||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | 3,579,806 | 1,364,777 | $ | 1,081,440 | ||||||||
Restricted cash (Note 4) | 4,744,801 | 7,049,312 | 5,585,825 | |||||||||
Interest-bearing deposits | 1,093,830 | 1,626,880 | 1,289,128 | |||||||||
Call loans and securities purchased under resale agreements (Note 5) | 802,544 | 3,065,870 | 2,429,374 | |||||||||
Trading assets (Note 6) | 10,182,525 | 18,700,942 | 14,818,496 | |||||||||
Securities: | ||||||||||||
Available-for-sale securities (Note 7) | 22,848,619 | 29,746,104 | 23,570,605 | |||||||||
Held-to-maturity securities (Note 7) | 8,224,279 | 8,696,144 | 6,890,764 | |||||||||
Loans (net of allowance for loan losses of | 149,722,605 | 167,308,055 | 132,573,736 | |||||||||
Customers’ liability on acceptances | 1,700,637 | 2,433,097 | 1,927,969 | |||||||||
Premises and equipment, net (Note 9) | 2,454,970 | 2,412,464 | 1,911,620 | |||||||||
Intangible assets (Note 10) | 2,181,588 | 1,678,278 | 1,329,856 | |||||||||
Goodwill (Note 10) | 3,978,094 | 3,892,393 | 3,084,305 | |||||||||
Security deposits | 1,294,222 | 1,333,783 | 1,056,881 | |||||||||
Other assets (Notes 11 and 24) | 8,813,384 | 11,665,034 | 9,243,292 | |||||||||
Total Assets | 221,621,904 | 260,973,133 | $ | 206,793,291 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Liabilities | ||||||||||||
Deposits: | ||||||||||||
Interest-bearing (Note 12) | 103,241,337 | 119,762,461 | $ | 94,898,939 | ||||||||
Non-interest-bearing (Note 12) | 3,162,310 | 2,942,034 | 2,331,248 | |||||||||
Trading liabilities (Note 6) | 2,508,643 | 11,830,665 | 9,374,536 | |||||||||
Acceptances outstanding | 1,700,637 | 2,433,097 | 1,927,969 | |||||||||
Short-term borrowings (Note 13) | 15,801,426 | 23,224,991 | 18,403,321 | |||||||||
Secured borrowings (Note 14) | 11,451,665 | 10,225,777 | 8,102,834 | |||||||||
Long-term debt (Notes 15 and 21) | 46,496,307 | 49,651,706 | 39,343,665 | |||||||||
Future policy benefits (Note 16) | 6,769,022 | 7,260,333 | 5,753,038 | |||||||||
Accrued expenses and other liabilities (Notes 17 and 24) | 13,369,015 | 15,677,926 | 12,423,079 | |||||||||
Total Liabilities | 204,500,362 | 243,008,990 | $ | 192,558,629 | ||||||||
Commitments and contingencies (Note 31) | — | — | — | |||||||||
Minority interest | 211,450 | 312,075 | 247,286 | |||||||||
Stockholders’ equity | ||||||||||||
Common stock, | 1,980,998 | 1,980,998 | $ | 1,569,729 | ||||||||
Redeemable convertible preferred stock, | 73,605 | 73,605 | 58,324 | |||||||||
Redeemable preferred stock, | 144,950 | 144,950 | 114,857 | |||||||||
Additional paid-in capital | 7,147,165 | 7,147,165 | 5,663,364 | |||||||||
Retained earnings (Note 22) | 6,801,202 | 7,709,897 | 6,109,269 | |||||||||
Accumulated other comprehensive income, net of taxes (Note 37) | 762,200 | 595,481 | 471,855 | |||||||||
Less: Treasury stock, at cost, 529 shares in 2007 and 2008 (Note 20) | (28 | ) | (28 | ) | (22 | ) | ||||||
Total stockholders’ equity | 16,910,092 | 17,652,068 | $ | 13,987,376 | ||||||||
Total liabilities, minority interest, and stockholders’ equity | 221,621,904 | 260,973,133 | $ | 206,793,291 | ||||||||
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2006 | 2007 | 2008 | 2008 | |||||||||||||
(In millions of Korean Won, | (See Note 1) | |||||||||||||||
except per share data) | (In thousands | |||||||||||||||
of US$, except | ||||||||||||||||
per share data) | ||||||||||||||||
Interest and dividend income | ||||||||||||||||
Interest and fees on loans | 7,380,474 | 10,185,349 | 12,109,332 | $ | 9,595,351 | |||||||||||
Interest and dividends on securities (Note 7) | 1,199,137 | 1,402,712 | 1,775,081 | 1,406,562 | ||||||||||||
Interest and dividends on trading assets | 146,747 | 299,759 | 468,656 | 371,359 | ||||||||||||
Other interest income | 166,281 | 261,432 | 380,871 | 301,800 | ||||||||||||
Total interest income | 8,892,639 | 12,149,252 | 14,733,940 | 11,675,072 | ||||||||||||
Interest expense | ||||||||||||||||
Interest on deposits | 2,648,257 | 3,510,653 | 4,714,252 | 3,735,541 | ||||||||||||
Interest on short-term borrowings (Note 13) | 524,776 | 659,836 | 865,695 | 685,970 | ||||||||||||
Interest on secured borrowings | 333,516 | 510,470 | 562,735 | 445,907 | ||||||||||||
Interest on long-term debt | 1,393,701 | 2,256,293 | 2,761,858 | 2,188,477 | ||||||||||||
Other interest expense | 11,591 | 41,644 | 50,028 | 39,642 | ||||||||||||
Total interest expense | 4,911,841 | 6,978,896 | 8,954,568 | 7,095,537 | ||||||||||||
Net interest income | 3,980,798 | 5,170,356 | 5,779,372 | 4,579,535 | ||||||||||||
Provision for credit losses (Note 8) | 225,846 | 80,559 | 1,436,598 | 1,138,350 | ||||||||||||
Net interest income after provision for credit losses | 3,754,952 | 5,089,797 | 4,342,774 | 3,441,185 | ||||||||||||
Non-interest income | ||||||||||||||||
Commissions and fees (Note 18) | 1,511,384 | 2,611,641 | 2,595,215 | 2,056,430 | ||||||||||||
Net trust management fees | 105,605 | 72,772 | 69,163 | 54,804 | ||||||||||||
Net trading profits (losses) (Note 6) | 141,046 | (209,721 | ) | 584,330 | 463,019 | |||||||||||
Net gains (losses) on securities (Note 7) | 30,548 | 169,322 | (135,802 | ) | (107,609 | ) | ||||||||||
Gain on other investment | 324,457 | 180,880 | 317,211 | 251,355 | ||||||||||||
Net gain (losses) on foreign exchange | 229,448 | 146,351 | (566,751 | ) | (449,089 | ) | ||||||||||
Insurance income | 1,108,918 | 1,119,388 | 1,329,274 | 1,053,308 | ||||||||||||
Other (Note 19) | 335,247 | 647,573 | 378,777 | 300,140 | ||||||||||||
Total non-interest income | 3,786,653 | 4,738,206 | 4,571,417 | 3,622,358 | ||||||||||||
Non-interest expense | ||||||||||||||||
Employee compensation and other benefits (Note 27) | 1,788,758 | 2,056,348 | 1,817,473 | 1,440,153 | ||||||||||||
Depreciation and amortization (Notes 9 and 10) | 470,807 | 812,345 | 871,416 | 690,504 | ||||||||||||
General and administrative expenses | 666,439 | 877,860 | 882,135 | 698,997 | ||||||||||||
Credit card fees | 204,594 | 665,908 | 700,403 | 554,994 | ||||||||||||
Provision (reversal) for other losses | (16,217 | ) | 72,371 | (18,467 | ) | (14,633 | ) | |||||||||
Insurance fees on deposits | 127,518 | 130,560 | 132,705 | 105,155 | ||||||||||||
Other fees and commission expense | 357,882 | 445,711 | 422,146 | 334,506 | ||||||||||||
Taxes (except income taxes) | 95,868 | 128,172 | 179,009 | 141,845 | ||||||||||||
Insurance operating expense | 1,147,450 | 1,350,468 | 1,037,797 | 822,344 | ||||||||||||
Minority interest | 17,860 | 94,956 | 11,701 | 9,272 | ||||||||||||
Other (Note 19) | 465,172 | 205,248 | 702,243 | 556,453 | ||||||||||||
Total non-interest expense | 5,326,131 | 6,839,947 | 6,738,561 | 5,339,590 | ||||||||||||
Income before income tax expense and cumulative effect of change in accounting principle | 2,215,474 | 2,988,056 | 2,175,630 | 1,723,953 | ||||||||||||
Income tax expense (Note 24) | 649,806 | 1,058,444 | 694,931 | 550,658 | ||||||||||||
Income before cumulative effect of change in accounting principle | 1,565,668 | 1,929,612 | 1,480,699 | 1,173,295 | ||||||||||||
Cumulative effect of change in accounting principle, net of taxes (Notes 2 and 27) | (10,184 | ) | — | — | — | |||||||||||
Net income | 1,555,484 | 1,929,612 | 1,480,699 | $ | 1,173,295 | |||||||||||
Net income per share of common stock(Note 25) | ||||||||||||||||
Basic | ||||||||||||||||
Income before cumulative effect of change in accounting principle | 4,207 | 4,480 | 3,155 | $ | 2.50 | |||||||||||
Cumulative effect of change in accounting principle, net of taxes | (27 | ) | — | — | — | |||||||||||
Net income per share | 4,180 | 4,480 | 3,155 | $ | 2.50 | |||||||||||
Diluted | ||||||||||||||||
Income before cumulative effect of change in accounting principle | 4,207 | 4,390 | 3,110 | $ | 2.46 | |||||||||||
Cumulative effect of change in accounting principle, net of taxes | (27 | ) | — | — | — | |||||||||||
Net income per share | 4,180 | 4,390 | 3,110 | $ | 2.46 | |||||||||||
Average common shares issued and outstanding | 372,172,814 | 382,730,606 | 396,199,058 | |||||||||||||
Average diluted common shares issued and outstanding | 372,172,814 | 396,483,650 | 410,920,058 |
F-5
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||
Additional | Comprehensive | Total | ||||||||||||||||||||||||||||||||||
Common Stock | Preferred Stock | Paid-in | Retained | Income (Loss), | Treasury | Stockholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Net of Taxes | Stock | Equity | ||||||||||||||||||||||||||||
(In millions of Korean Won and in thousands of US$, except share and per share data) | ||||||||||||||||||||||||||||||||||||
Balance at January 1, 2006 | 359,207,312 | 1,796,037 | — | — | 2,406,665 | 3,927,636 | (100,197 | ) | (245,458 | ) | 7,784,683 | |||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,555,484 | — | — | 1,555,484 | |||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | (13,315 | ) | — | (13,315 | ) | |||||||||||||||||||||||||
Net unrealized gains (losses) on available-for-sale securities | — | — | — | — | — | — | 254,395 | — | 254,395 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,555,484 | 241,080 | — | 1,796,564 | |||||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock into common stock | 22,360,302 | 111,801 | — | — | 256,040 | — | — | — | 367,841 | |||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (278,077 | ) | — | — | (278,077 | ) | |||||||||||||||||||||||||
Sale of treasury stock | — | — | — | — | 82,773 | — | — | 83,947 | 166,720 | |||||||||||||||||||||||||||
Reclassification to accrued expense | — | — | — | — | (35,385 | ) | — | — | — | (35,385 | ) | |||||||||||||||||||||||||
Balance at December 31, 2006 | 381,567,614 | 1,907,838 | — | — | 2,710,093 | 5,205,043 | 140,883 | (161,511 | ) | 9,802,346 | ||||||||||||||||||||||||||
Cumulative effect of change — adoption of SFAS 155 | — | — | — | — | — | (274 | ) | 274 | — | — | ||||||||||||||||||||||||||
Cumulative effect of change — adoption of FIN 48 | — | — | — | — | — | 3,815 | — | — | 3,815 | |||||||||||||||||||||||||||
Balance at January 1, 2007 | 381,567,614 | 1,907,838 | — | — | 2,710,093 | 5,208,584 | 141,157 | (161,511 | ) | 9,806,161 | ||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,929,612 | — | — | 1,929,612 | |||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 7,958 | — | 7,958 | |||||||||||||||||||||||||||
Net unrealized gains (losses) on available-for-sale securities | — | — | — | — | — | — | 613,085 | — | 613,085 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,929,612 | 621,043 | — | 2,550,655 | |||||||||||||||||||||||||||
Issuance of common stock | 14,631,973 | 73,160 | — | — | 741,817 | — | — | — | 814,977 | |||||||||||||||||||||||||||
Issuance of redeemable convertible preferred stock | — | — | 14,721,000 | 73,605 | 777,357 | — | — | — | 850,962 | |||||||||||||||||||||||||||
Issuance of redeemable preferred stock | — | — | 28,990,000 | 144,950 | 2,740,326 | — | — | — | 2,885,276 | |||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (336,994 | ) | — | — | (336,994 | ) | |||||||||||||||||||||||||
Acquisition of treasury stock | — | — | — | — | — | — | — | (372 | ) | (372 | ) | |||||||||||||||||||||||||
Sale of treasury stock | — | — | — | — | 177,572 | — | — | 161,855 | 339,427 | |||||||||||||||||||||||||||
Balance at December 31, 2007 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 6,801,202 | 762,200 | (28 | ) | 16,910,092 | ||||||||||||||||||||||||||
Balance at January 1, 2008 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 6,801,202 | 762,200 | (28 | ) | 16,910,092 | ||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,480,699 | — | — | 1,480,699 | |||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 142,257 | — | 142,257 | |||||||||||||||||||||||||||
Net unrealized gains (losses) on available-for-sale securities | — | — | — | — | — | — | (308,976 | ) | — | (308,976 | ) | |||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,480,699 | (166,719 | ) | �� | 1,313,980 | ||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (572,004 | ) | — | — | (572,004 | ) | |||||||||||||||||||||||||
Balance at December 31, 2008 | 396,199,587 | 1,980,998 | 43,711,000 | 218,555 | 7,147,165 | 7,709,897 | 595,481 | (28 | ) | 17,652,068 | ||||||||||||||||||||||||||
Balance at January 1, 2008 | 396,199,587 | $ | 1,569,729 | 43,711,000 | $ | 173,181 | $ | 5,663,364 | $ | 5,389,226 | $ | 603,962 | $ | (22 | ) | $ | 13,399,440 | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,173,295 | — | — | 1,173,295 | |||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 112,723 | — | 112,723 | |||||||||||||||||||||||||||
Net unrealized gains (losses) on available-for-sale securities | — | — | — | — | — | — | (244,830 | ) | — | (244,830 | ) | |||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,173,295 | (132,107 | ) | — | 1,041,188 | ||||||||||||||||||||||||||
Cash dividends ( | — | — | — | — | — | (453,252 | ) | — | — | (453,252 | ) | |||||||||||||||||||||||||
Balance at December 31, 2008 | 396,199,587 | $ | 1,569,729 | 43,711,000 | $ | 173,181 | $ | 5,663,364 | $ | 6,109,269 | $ | 471,855 | $ | (22 | ) | $ | 13,987,376 | |||||||||||||||||||
F-6
Table of Contents
2006 | 2007 | 2008 | 2008 | |||||||||||||
(In millions of Korean Won) | (See Note 1) | |||||||||||||||
(In thousands | ||||||||||||||||
of US$) | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income | 1,555,484 | 1,929,612 | 1,480,699 | $ | 1,173,295 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Provision for credit losses | 225,846 | 80,559 | 1,436,598 | 1,138,350 | ||||||||||||
Provision for future policy benefit | 457,761 | 618,977 | (71,059 | ) | (56,307 | ) | ||||||||||
Depreciation and amortization | 470,807 | 812,345 | 871,416 | 690,504 | ||||||||||||
Accretion of discounts on long-term debt | 100,719 | 148,826 | 140,635 | 111,438 | ||||||||||||
Amortization on deferred loan origination fees and costs | 36,332 | 234,059 | 151,073 | 119,709 | ||||||||||||
Amortization on investment debt securities | 33,680 | 4,347 | (32,279 | ) | (25,578 | ) | ||||||||||
Net gain on equity investments | (193,811 | ) | (79,863 | ) | (53,067 | ) | (42,050 | ) | ||||||||
Net trading (profits) losses | (141,046 | ) | 209,721 | (584,330 | ) | (463,019 | ) | |||||||||
Net gain on sale of available-for-sale securities | (106,904 | ) | (246,102 | ) | (110,463 | ) | (87,530 | ) | ||||||||
Impairment loss on securities | 76,357 | 76,780 | 246,265 | 195,139 | ||||||||||||
Net (gain) loss on sale of premises and equipment | 2,331 | (7,131 | ) | (1,604 | ) | (1,271 | ) | |||||||||
Provision (reversal) for other losses | (16,217 | ) | 72,731 | (18,467 | ) | (14,633 | ) | |||||||||
Net gain on sales of other assets | (85,273 | ) | (61,220 | ) | (99,821 | ) | (79,097 | ) | ||||||||
Net unrealized foreign exchange (gain) loss | (4,977 | ) | 14,267 | 805,429 | 638,216 | |||||||||||
Minority interest in net income of subsidiaries | 17,860 | 94,956 | 11,701 | 9,272 | ||||||||||||
Expense (reversal) on stock option | 46,233 | 104,042 | (114,058 | ) | (90,379 | ) | ||||||||||
Impairment loss on goodwill | 129,285 | — | 128,394 | 101,739 | ||||||||||||
Impairment loss on other investments | 31,351 | 11,741 | 33,206 | 26,312 | ||||||||||||
Cumulative effect of change in accounting principle | 10,184 | — | — | — | ||||||||||||
Net (gain) loss on sale of loans | 5,018 | (5,301 | ) | (1,196 | ) | (948 | ) | |||||||||
Net changes in: | ||||||||||||||||
Restricted cash | (3,114,207 | ) | 2,120,453 | (2,304,511 | ) | (1,826,078 | ) | |||||||||
Trading assets | (202,813 | ) | (5,535,274 | ) | (7,934,088 | ) | (6,286,916 | ) | ||||||||
Other assets (excluding assets for pending LG Card acquisition in 2007) | (2,061,943 | ) | (1,496,233 | ) | (1,714,095 | ) | (1,358,237 | ) | ||||||||
Trading liabilities | 569,311 | 895,288 | 9,322,022 | 7,386,705 | ||||||||||||
Accrued expenses and other liabilities | 2,744,668 | 2,770,178 | 2,315,268 | 1,834,603 | ||||||||||||
Net cash provided by operating activities | 586,036 | 2,767,398 | 3,903,668 | 3,093,239 | ||||||||||||
Cash flows from investing activities | ||||||||||||||||
Net change in interest-bearing deposit assets | (98,420 | ) | (365,226 | ) | (533,050 | ) | (422,385 | ) | ||||||||
Net change in call loans and securities purchased under resale agreements | 239,270 | 1,063,677 | (2,158,154 | ) | (1,710,107 | ) | ||||||||||
Proceeds from sales of available-for-sale securities | 9,284,185 | 4,330,853 | 2,502,970 | 1,983,336 | ||||||||||||
Proceeds from maturities of available-for-sale securities | 7,407,115 | 7,269,091 | 7,274,598 | 5,764,341 | ||||||||||||
Purchases of available-for-sale securities | (10,514,671 | ) | (16,405,652 | ) | (16,861,591 | ) | (13,361,007 | ) | ||||||||
Proceeds from maturities of held-to-maturity securities | 2,588,671 | 1,953,059 | 6,237,970 | 4,942,924 | ||||||||||||
Purchases of held-to-maturity securities | (7,216,116 | ) | (2,547,434 | ) | (6,680,646 | ) | (5,293,697 | ) | ||||||||
Loan originations and principal collections, net | (17,547,650 | ) | (17,620,125 | ) | (16,141,642 | ) | (12,790,525 | ) | ||||||||
Proceeds from sales of premises and equipment | 145,324 | 11,263 | 92,158 | 73,025 | ||||||||||||
Purchases of premises and equipment | (594,429 | ) | (453,706 | ) | (411,017 | ) | (325,687 | ) | ||||||||
Net change in security deposits | (29,945 | ) | (141,982 | ) | (38,904 | ) | (30,827 | ) | ||||||||
Acquisition of subsidiaries, net of cash acquired | — | (5,960,417 | ) | (46,278 | ) | �� | (36,669 | ) | ||||||||
Proceeds from sales of equity method investments | 42,041 | 12,291 | 8,613 | 6,825 | ||||||||||||
Acquisition of equity method investments | (26,050 | ) | (58,196 | ) | (264,136 | ) | (209,300 | ) | ||||||||
Increase in other assets (relating to pending LG Card acquisition in 2007) | (519,318 | ) | — | — | — | |||||||||||
Net change in other investments | 438,015 | (302,403 | ) | 110,854 | 87,840 | |||||||||||
Net cash used in investing activities | (16,401,978 | ) | (29,214,907 | ) | (26,908,255 | ) | (21,321,913 | ) | ||||||||
F-7
Table of Contents
2006 | 2007 | 2008 | 2008 | |||||||||||||
(In millions of Korean Won) | (See Note 1) | |||||||||||||||
(In thousands | ||||||||||||||||
of US$) | ||||||||||||||||
Cash flows from financing activities | ||||||||||||||||
Net increase in interest-bearing deposit liabilities | 8,535,560 | 11,286,195 | 14,955,203 | $ | 11,850,399 | |||||||||||
Net increase (decrease) in non-interest-bearing deposits | 774,983 | (755,843 | ) | (220,276 | ) | (174,545 | ) | |||||||||
Net increase (decrease) in short-term borrowings | (938,879 | ) | 4,345,085 | 7,079,775 | 5,609,964 | |||||||||||
Proceeds from issuance of secured borrowings | 1,237,050 | 5,356,410 | 4,503,126 | 3,568,246 | ||||||||||||
Repayment of secured borrowings | (1,213,438 | ) | (4,769,939 | ) | (5,826,397 | ) | (4,616,796 | ) | ||||||||
Proceeds from issuance of long-term debt | 44,616,738 | 20,165,044 | 13,097,327 | 10,378,231 | ||||||||||||
Repayment of long-term debt | (37,877,713 | ) | (11,225,192 | ) | (12,673,038 | ) | (10,042,027 | ) | ||||||||
Issuance of redeemable convertible preferred stock | — | 850,962 | — | — | ||||||||||||
Issuance of redeemable preferred stock | — | 2,885,276 | — | — | ||||||||||||
Purchases of treasury stock | (315 | ) | (372 | ) | — | — | ||||||||||
Sale of treasury stock | 198,430 | 406,795 | — | — | ||||||||||||
Cash dividends paid | (278,077 | ) | (336,994 | ) | (572,004 | ) | (453,252 | ) | ||||||||
Increase (decrease) of minority interest | 63,597 | 54,981 | 2,328 | 1,845 | ||||||||||||
Net cash provided by financing activities | 15,117,936 | 28,262,408 | 20,346,044 | 16,122,065 | ||||||||||||
Effect of exchange rate changes on cash | (45,073 | ) | 73,604 | 443,514 | 351,437 | |||||||||||
Net increase (decrease) in cash and cash equivalents | (743,079 | ) | 1,888,503 | (2,215,029 | ) | (1,755,173 | ) | |||||||||
Cash and cash equivalents | ||||||||||||||||
Beginning of year | 2,434,382 | 1,691,303 | 3,579,806 | 2,836,613 | ||||||||||||
End of year | 1,691,303 | 3,579,806 | 1,364,777 | $ | 1,081,440 | |||||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Cash paid for interest | 4,746,165 | 6,514,034 | 8,297,836 | 6,575,147 | ||||||||||||
Cash paid for income taxes | 563,980 | �� | 676,764 | 985,904 | 781,223 | |||||||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||||||
Acquisitions: | ||||||||||||||||
Fair value of net assets acquired | — | 765,123 | — | — | ||||||||||||
Goodwill | — | 81,153 | — | — | ||||||||||||
Consideration other than cash | — | 814,971 | — | — | ||||||||||||
Conversion of redeemable convertible preferred stock into common stock: | ||||||||||||||||
Common stock | 111,801 | — | — | — | ||||||||||||
Additionalpaid-in-capital | 256,040 | — | — | — | ||||||||||||
Securities and other investments received in connection with loan restructuring | 32,384 | 2,783 | — | — | ||||||||||||
Increase(decrease) in cumulative translation adjustments, net of taxes | (13,315 | ) | 7,958 | 142,257 | 112,723 | |||||||||||
Increase (decrease) in unrealized gains (losses) on available-for-sale securities, net of taxes | 254,395 | 613,085 | (308,976 | ) | (244,830 | ) | ||||||||||
Increase in premises and equipment transferred from other receivables | — | 107,466 | — | — |
F-8
Table of Contents
1. | General Information and Summary of Significant Accounting Policies |
Country of | Percentage of Ownership(1) | |||||||||||||||
Incorporation | 2006 | 2007 | 2008 | |||||||||||||
Shinhan Bank(2) | Korea | 100 | % | 100 | % | 100 | % | |||||||||
Good Morning Shinhan Securities Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||||
Shinhan Card Co., Ltd. (Formerly LG Card Co., Ltd.)(3) | Korea | 7.15 | % | 100 | % | 100 | % | |||||||||
Shinhan Capital Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||||
Jeju Bank | Korea | 62.42 | % | 62.42 | % | 62.42 | % | |||||||||
Shinhan Credit Information Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||||
Shinhan Private Equity Inc. | Korea | 100 | % | 100 | % | 100 | % | |||||||||
Shinhan Life Insurance Co., Ltd. | Korea | 100 | % | 100 | % | 100 | % | |||||||||
SHC Management Co., Ltd. (Formerly Shinhan Card Co., Ltd.)(4) | Korea | 100 | % | 100 | % | 100 | % |
(1) | Direct and indirect ownership are combined. All holdings are in common stock of the respective subsidiaries. | |
(2) | On April 3, 2006, former Shinhan Bank was merged into Chohung Bank with Chohung Bank being the surviving legal entity and Chohung Bank changed its name to Shinhan Bank. In addition, Chohung Bank’s credit card business was spun off and merged into Shinhan Card Co., Ltd. | |
(3) | On March 23, 2007, the Group acquired 78.58% of the issued and outstanding common stock of LG Card Co., Ltd. (LG Card) where the Group had owned 7.15% interest through a tender offer. On September 21, 2007, the Group completed the acquisition of the remaining LG Card shares through a tender offer and share exchange, and the Group’s ownership increased to 100%. | |
(4) | On October 1, 2007, LG Card acquired and assumed all assets, liabilities and contracts of the former Shinhan Card and changed its name to “Shinhan Card”. Also, the former Shinhan Card changed its name to “SHC Management Co., Ltd.”. |
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
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F-14
Table of Contents
• | Loans classified as “substandard” or below according to asset classification guidelines of the Financial Services Commission (FSC) of the Republic of Korea. | |
• | Loans that are more than 90 days past due; and | |
• | Loans which are “troubled debt restructurings” under US GAAP |
F-15
Table of Contents
F-16
Table of Contents
Buildings | 40 years | |||
Equipment and furniture | 4 ~ 5 years | |||
Leasehold improvements | 5 years | |||
Operating lease assets | 3 ~ 5 years | |||
Capitalized software costs | 4 ~ 5 years |
F-17
Table of Contents
F-18
Table of Contents
F-19
Table of Contents
F-20
Table of Contents
F-21
Table of Contents
2. | Accounting Changes and Future Application of Accounting Standards |
• | Level 1 —Quoted prices for identical instruments in active markets. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain securities that are highly liquid and are actively traded in over-the-counter markets. | |
• | Level 2 —Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. | |
• | Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurements. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques based on significant unobservable inputs, as well as management judgements or estimates that are significant to valuation. |
F-22
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F-23
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F-24
Table of Contents
F-25
Table of Contents
F-26
Table of Contents
3. | Business Changes and Developments |
F-27
Table of Contents
�� | ||||||||||||
2006 | ||||||||||||
Equity Method of | ||||||||||||
As Previously | Accounting | |||||||||||
Reported | Adjustments | As Adjusted | ||||||||||
(In millions of Won) | ||||||||||||
Available-for-sale securities | 17,458,399 | (518,936 | ) | 16,939,463 | ||||||||
Other assets | 6,842,830 | 274,810 | 7,117,640 | |||||||||
Assets adjusted | 24,301,229 | (244,126 | ) | 24,057,103 | ||||||||
Accrued expenses and other liabilities | 9,310,900 | (67,134 | ) | 9,243,766 | ||||||||
Retained earnings | 5,145,966 | 59,077 | 5,205,043 | |||||||||
Accumulated other comprehensive income, net of taxes | 376,952 | (236,069 | ) | 140,883 | ||||||||
Liabilities and stockholders’ equity adjusted | 14,833,818 | (244,126 | ) | 14,589,692 | ||||||||
Gain on other investment | 206,963 | 117,494 | 324,457 | |||||||||
Income tax expense | 617,495 | 32,311 | 649,806 | |||||||||
Net income | 1,470,301 | 85,183 | 1,555,484 | |||||||||
Basic net income per share | 3,951 | 229 | 4,180 | |||||||||
Diluted net income per share | 3,951 | 229 | 4,180 |
F-28
Table of Contents
2007 | ||||
(In millions of Won) | ||||
Cash and cash equivalents | 315,549 | |||
Deposits | 256,207 | |||
Call loans | 511,670 | |||
Trading assets | 1,729 | |||
Securities | 43,649 | |||
Loans, net of allowance for loan losses | 9,902,214 | |||
Premises and equipment, net | 128,637 | |||
Other assets | 719,014 | |||
Total assets | 11,878,669 | |||
Borrowings and debentures | 6,970,133 | |||
Other liabilities | 1,380,991 | |||
Total liabilities | 8,351,124 | |||
Fair value of net assets of LG Card | 3,527,545 | |||
2007 | ||||
(In millions of Won) | ||||
Cash paid | 6,707,361 | |||
Stock exchanged | 814,971 | |||
Direct acquisition costs | 7,688 | |||
Total purchase price | 7,530,020 | |||
Allocation of purchase price: | ||||
Fair value of net assets of LG Card (excluding effect of CCI and deferred taxes) | 3,831,102 | |||
Credit card relationship intangible asset(1) | 1,064,046 | |||
Deferred tax on fair value adjustment | (303,558 | ) | ||
Goodwill | 2,938,430 | |||
Total purchase price | 7,530,020 | |||
(1) | Credit card relationship intangible reflects the estimated fair value of the credit card relationships acquired from LG Card from which the Group expects to derive future benefits over the estimated life of such relationships. The customer relationship intangible is amortized over its estimated useful life on a sum-of-the years’-digits basis. The estimated weighted average life of the customer relationship intangible is approximately 6 years. The fair value of this asset was based principally upon the estimates of (i) the profitability of the acquired accounts and (ii) the projected run-off of the acquired accounts. |
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Table of Contents
2006 | 2007 | |||||||
(Unaudited) | (Unaudited) | |||||||
(In millions of Won, | ||||||||
except per share data) | ||||||||
Total interest and dividend income | 9,923,082 | 12,412,978 | ||||||
Net income | 2,613,270 | 2,088,697 | ||||||
Basic earnings per share | 7,022 | 4,776 | ||||||
Diluted earnings per share | 7,022 | 4,744 |
F-30
Table of Contents
4. | Restricted Cash |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Reserve deposits with the Bank of Korea (BOK) | 3,577,490 | 5,662,362 | ||||||
Cash restricted for investment activities | 812,194 | 1,158,978 | ||||||
Other | 355,117 | 227,972 | ||||||
4,744,801 | 7,049,312 | |||||||
5. | Call Loans and Securities Purchased under Resale Agreements |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Call loans | 655,569 | 733,238 | ||||||
Securities purchased under resale agreements | 146,975 | 2,332,632 | ||||||
802,544 | 3,065,870 | |||||||
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6. | Trading Activities |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Debt securities: | ||||||||
Korean treasury and governmental agencies | 406,251 | 527,778 | ||||||
Corporations | 2,130,180 | 1,264,303 | ||||||
Mortgage-backed and asset-backed securities | 1,965,831 | 888,867 | ||||||
Financial institutions | 3,033,219 | 3,279,613 | ||||||
Equity securities | 655,420 | 704,850 | ||||||
Derivative instruments: | ||||||||
Foreign exchange derivatives | 1,134,036 | 9,442,225 | ||||||
Interest rate derivatives | 646,547 | 1,944,530 | ||||||
Equity derivatives | 163,257 | 555,322 | ||||||
Credit derivatives | 3,432 | — | ||||||
Commodity derivatives | 14,844 | 34,717 | ||||||
Other trading assets — commodity indexed deposits | 29,508 | 58,737 | ||||||
10,182,525 | 18,700,942 | |||||||
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Derivative instruments: | ||||||||
Foreign exchange derivatives | 978,470 | 8,703,168 | ||||||
Interest rate derivatives | 1,215,497 | 2,217,664 | ||||||
Equity derivatives | 152,119 | 615,175 | ||||||
Credit derivatives | 5,703 | 39,077 | ||||||
Commodity derivatives | 6,611 | 35,565 | ||||||
Other trading liabilities — commodity indexed deposits | 150,243 | 220,016 | ||||||
2,508,643 | 11,830,665 | |||||||
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Debt securities | 1,550 | (51,844 | ) | 128,385 | ||||||||
Equity securities | (11,961 | ) | 130,559 | (108,652 | ) | |||||||
Derivative instruments | 151,314 | (275,297 | ) | 590,779 | ||||||||
Other trading activities — commodity indexed deposits | 143 | (13,139 | ) | (26,182 | ) | |||||||
Net trading profits (losses) | 141,046 | (209,721 | ) | 584,330 | ||||||||
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Table of Contents
7. | Securities |
2007 | 2008 | |||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||
Cost(1) | Gains | Losses | Value | Cost(1) | Gains | Losses | Value | |||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,278,903 | 607 | 73,336 | 4,206,174 | 6,065,193 | 190,809 | 1,837 | 6,254,165 | ||||||||||||||||||||||||
Corporations | 2,156,641 | 17,187 | 28,643 | 2,145,185 | 1,818,262 | 125,761 | 25,623 | 1,918,400 | ||||||||||||||||||||||||
Financial institutions | 10,168,503 | 7,351 | 124,714 | 10,051,140 | 15,284,829 | 301,457 | 36,446 | 15,549,840 | ||||||||||||||||||||||||
Foreign governments | 47,096 | 1,487 | 392 | 48,191 | 106,616 | 17,477 | 564 | 123,529 | ||||||||||||||||||||||||
Mortgage-backed and asset-backed securities | 3,087,022 | 4,549 | 17,178 | 3,074,393 | 3,009,519 | 11,850 | 20,828 | 3,000,541 | ||||||||||||||||||||||||
Marketable equity securities | 1,984,173 | 1,352,638 | 13,275 | 3,323,536 | 2,746,471 | 287,342 | 134,184 | 2,899,629 | ||||||||||||||||||||||||
21,722,338 | 1,383,819 | 257,538 | 22,848,619 | 29,030,890 | 934,696 | 219,482 | 29,746,104 | |||||||||||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||||||||||
Korean treasury and governmental agencies | 3,071,118 | 5,438 | 40,366 | 3,036,190 | 4,008,480 | 118,984 | 1,333 | 4,126,131 | ||||||||||||||||||||||||
Corporations | 109,706 | — | 4,654 | 105,052 | 244,988 | 3,606 | 1,312 | 247,282 | ||||||||||||||||||||||||
Financial institutions | 4,858,539 | 2,538 | 48,774 | 4,812,303 | 4,279,235 | 60,889 | 9,252 | 4,330,872 | ||||||||||||||||||||||||
Foreign governments | 941 | — | — | 941 | 9,148 | 84 | 54 | 9,178 | ||||||||||||||||||||||||
Mortgage-backed and asset-backed securities | 183,975 | 29,629 | 2,073 | 211,531 | 154,293 | 5,195 | — | 159,488 | ||||||||||||||||||||||||
8,224,279 | 37,605 | 95,867 | 8,166,017 | 8,696,144 | 188,758 | 11,951 | 8,872,951 | |||||||||||||||||||||||||
(1) | On January 1, 2007, the Group adopted fair value election under SFAS 155 on certain hybrid financial instruments. The fair values of those instruments were |
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Table of Contents
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Available-for-sale securities | ||||||||||||
Debt securities | 68,175 | 43,741 | 147,695 | |||||||||
Equity securities | 8,181 | 33,039 | 97,371 | |||||||||
76,356 | 76,780 | 245,066 | ||||||||||
Held-to-maturity securities | ||||||||||||
Debt securities | — | — | 1,199 | |||||||||
Total other-than-temporary impairment losses | 76,356 | 76,780 | 246,265 | |||||||||
2007 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 2,097,843 | (34,665 | ) | 1,749,665 | (38,671 | ) | 3,847,508 | (73,336 | ) | |||||||||||||||
Corporations | 909,572 | (19,902 | ) | 348,953 | (8,741 | ) | 1,258,525 | (28,643 | ) | |||||||||||||||
Financial institutions | 6,816,400 | (116,070 | ) | 933,181 | (8,644 | ) | 7,749,581 | (124,714 | ) | |||||||||||||||
Foreign governments | — | — | 8,645 | (392 | ) | 8,645 | (392 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | 722,011 | (10,687 | ) | 208,841 | (6,491 | ) | 930,852 | (17,178 | ) | |||||||||||||||
Marketable equity securities | 283,449 | (13,275 | ) | — | — | 283,449 | (13,275 | ) | ||||||||||||||||
10,829,275 | (194,599 | ) | 3,249,285 | (62,939 | ) | 14,078,560 | (257,538 | ) | ||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 2,368,996 | (36,448 | ) | 96,532 | (3,918 | ) | 2,465,528 | (40,366 | ) | |||||||||||||||
Corporations | 92,138 | (4,214 | ) | 9,735 | (440 | ) | 101,873 | (4,654 | ) | |||||||||||||||
Financial institutions | 3,877,418 | (45,747 | ) | 167,009 | (3,027 | ) | 4,044,427 | (48,774 | ) | |||||||||||||||
Foreign governments | — | — | — | — | — | — | ||||||||||||||||||
Mortgage-backed and asset-backed securities | 108,178 | (1,756 | ) | 9,683 | (317 | ) | 117,861 | (2,073 | ) | |||||||||||||||
6,446,730 | (88,165 | ) | 282,959 | (7,702 | ) | 6,729,689 | (95,867 | ) | ||||||||||||||||
Total temporarily impaired securities | 17,276,005 | (282,764 | ) | 3,532,244 | (70,641 | ) | 20,808,249 | (353,405 | ) | |||||||||||||||
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Table of Contents
2008 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 232,197 | (1,039 | ) | 141,152 | (798 | ) | 373,349 | (1,837 | ) | |||||||||||||||
Corporations | 280,811 | (8,590 | ) | 641,545 | (17,032 | ) | 922,356 | (25,622 | ) | |||||||||||||||
Financial institutions | 1,056,421 | (18,908 | ) | 609,060 | (17,538 | ) | 1,665,481 | (36,446 | ) | |||||||||||||||
Foreign governments | 14,001 | (564 | ) | — | — | 14,001 | (564 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | 925,321 | (18,398 | ) | 109,626 | (2,430 | ) | 1,034,947 | (20,828 | ) | |||||||||||||||
Marketable equity securities | 493,515 | (118,238 | ) | 106,465 | (15,947 | ) | 599,980 | (134,185 | ) | |||||||||||||||
3,002,266 | (165,737 | ) | 1,607,848 | (53,745 | ) | 4,610,114 | (219,482 | ) | ||||||||||||||||
Held-to-maturity securities | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Korean treasury and governmental agencies | 4,974 | (26 | ) | 58,750 | (1,307 | ) | 63,724 | (1,333 | ) | |||||||||||||||
Corporations | 12,808 | (404 | ) | 80,899 | (908 | ) | 93,707 | (1,312 | ) | |||||||||||||||
Financial institutions | 74,843 | (3,070 | ) | 265,548 | (6,182 | ) | 340,391 | (9,252 | ) | |||||||||||||||
Foreign governments | 2,227 | (54 | ) | — | — | 2,227 | (54 | ) | ||||||||||||||||
Mortgage-backed and asset-backed securities | — | — | — | — | — | — | ||||||||||||||||||
94,852 | (3,554 | ) | 405,197 | (8,397 | ) | 500,049 | (11,951 | ) | ||||||||||||||||
Total temporarily impaired securities | 3,097,118 | (169,291 | ) | 2,013,045 | (62,142 | ) | 5,110,163 | (231,433 | ) | |||||||||||||||
• | Identification and evaluation of investments that have indications of possible impairment | |
• | Analysis of individual investments that have fair values less than 80% of amortized cost, including consideration of the length of time the investment has been in an unrealized loss position | |
• | Discussion of evidential matter, including an evaluation of factors or triggers that would or could cause individual investments to qualify as having other-than-temporary impairments and those that would not support other-than-temporary impairment | |
• | Documentation of the results of these analyses as required under business policies |
F-35
Table of Contents
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Interest income | 1,142,329 | 1,350,528 | 1,711,604 | |||||||||
Dividends | 56,808 | 52,184 | 63,477 | |||||||||
1,199,137 | 1,402,712 | 1,775,081 | ||||||||||
Available-for-Sale | Held-to-Maturity | |||||||||||||||
Debt Securities | Debt Securities | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In millions of Won) | ||||||||||||||||
Within 1 year | 10,404,682 | 10,460,377 | 2,216,793 | 2,236,544 | ||||||||||||
Over 1 year through 5 years | 13,856,995 | 14,257,350 | 5,260,245 | 5,405,019 | ||||||||||||
Over 5 years through 10 years | 1,791,920 | 1,907,105 | 885,748 | 898,991 | ||||||||||||
Over 10 years | 230,822 | 221,643 | 333,358 | 332,397 | ||||||||||||
26,284,419 | 26,846,475 | 8,696,144 | 8,872,951 | |||||||||||||
8. | Loans |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Commercial: | ||||||||
Commercial and industrial | 48,485,436 | 55,466,168 | ||||||
Other commercial | 30,311,497 | 37,637,026 | ||||||
Lease financing | 1,370,092 | 1,591,437 | ||||||
Consumer: | ||||||||
Mortgage and home equity | 31,495,258 | 36,182,970 | ||||||
Credit cards | 14,680,802 | 14,637,084 | ||||||
Other consumer | 25,474,788 | 25,026,774 | ||||||
Total loans, gross | 151,817,873 | 170,541,459 | ||||||
Deferred loan origination costs (fees) | 3,854 | (32,771 | ) | |||||
151,821,727 | 170,508,688 | |||||||
Less: Allowance for loan losses | (2,099,122 | ) | (3,200,633 | ) | ||||
Total loans, net | 149,722,605 | 167,308,055 | ||||||
F-36
Table of Contents
2007 | ||||
(In millions of Won) | ||||
Contractually required payments receivable at acquisition | 619,928 | |||
Cash flows expected to be collected at acquisition | 323,069 | |||
Fair value of acquired receivables at acquisition | 220,538 |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Balance at beginning of year | — | 113,356 | ||||||
Purchases | 102,531 | — | ||||||
Accretion of accretable yield | (11,050 | ) | (45,169 | ) | ||||
Increase to expected cash flows | 21,875 | 3,023 | ||||||
Balance at end of year | 113,356 | 71,210 | ||||||
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Impaired loans with an allowance | 1,219,816 | 1,256,180 | 1,953,024 | |||||||||
Impaired loans without an allowance | 155,093 | 231,067 | 224,570 | |||||||||
Total impaired loans | 1,374,909 | 1,487,247 | 2,177,594 | |||||||||
Allowance for impaired loans | 864,802 | 908,630 | 1,181,446 | |||||||||
Average balance of impaired loans during the year | 1,402,510 | 1,523,274 | 1,910,041 | |||||||||
Interest income recognized on impaired loans | 56,106 | 59,537 | 79,251 |
F-37
Table of Contents
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Loans | 343,086 | 385,547 | 747,183 | |||||||||
Debt Securities | 47,361 | 42,295 | 34,710 | |||||||||
390,447 | 427,842 | 781,893 | ||||||||||
Allowance for Off-Balance | ||||||||||||||||||||||||
Allowance for Loan Losses | Sheet Credit(1) | |||||||||||||||||||||||
2006 | 2007 | 2008 | 2006 | 2007 | 2008 | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Balance at beginning of year | 1,511,503 | 1,575,013 | 2,099,122 | 187,274 | 160,774 | 221,558 | ||||||||||||||||||
Provision for loan losses | 252,346 | 40,174 | 1,318,772 | — | — | — | ||||||||||||||||||
Provision (reversal) foroff-balance sheet credit | — | — | — | (26,500 | ) | 40,385 | 117,826 | |||||||||||||||||
Allowance relating to: | ||||||||||||||||||||||||
Acquisition of LG Card | — | 541,337 | — | — | 20,399 | — | ||||||||||||||||||
Charge-offs | (512,625 | ) | (700,912 | ) | (916,644 | ) | — | — | — | |||||||||||||||
Recoveries | 323,789 | 643,510 | 699,383 | — | — | — | ||||||||||||||||||
Balance at end of year | 1,575,013 | 2,099,122 | 3,200,633 | 160,774 | 221,558 | 339,384 | ||||||||||||||||||
(1) | The allowance for off-balance sheet credit is included in other liabilities. |
F-38
Table of Contents
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Gross lease payments receivable | 1,527,671 | 1,767,911 | ||||||
Estimated unguaranteed residual values | 28,175 | 11,524 | ||||||
Unearned income | (185,754 | ) | (187,998 | ) | ||||
1,370,092 | 1,591,437 | |||||||
Less: Deferred loan origination fee | (1,585 | ) | (1,385 | ) | ||||
Allowance for loan losses | (15,514 | ) | (10,661 | ) | ||||
1,352,993 | 1,579,391 | |||||||
Years Ending | (In millions of Won) | |||
2009 | 609,444 | |||
2010 | 495,854 | |||
2011 | 431,703 | |||
2012 | 145,857 | |||
2013 | 38,381 | |||
Thereafter | 46,672 | |||
1,767,911 | ||||
9. | Premises and Equipment |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Land | 1,072,869 | 1,083,043 | ||||||
Buildings | 841,096 | 966,927 | ||||||
Equipment and furniture | 1,066,339 | 1,121,283 | ||||||
Capitalized software costs | 412,889 | 506,697 | ||||||
Leasehold improvements | 184,463 | 222,448 | ||||||
Construction in progress | 92,675 | 6,779 | ||||||
Operating lease assets | 228,498 | 93,750 | ||||||
Total premises and equipment, gross | 3,898,829 | 4,000,927 | ||||||
Less: Accumulated depreciation and amortization | (1,443,859 | ) | (1,588,463 | ) | ||||
Total premises and equipment, net | 2,454,970 | 2,412,464 | ||||||
F-39
Table of Contents
10. | Goodwill and Intangible Assets |
Shinhan Bank | Good Morning | Shinhan Card | Shinhan | |||||||||||||||||||||
(Formerly | Shinhan | Shinhan | (Formerly | Life | ||||||||||||||||||||
Chohung Bank) | Securities | Capital | LG Card) | Insurance | Total | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Balance at January 1, 2007 | 586,447 | 16,079 | 1,616 | 99,378 | 289,800 | 993,320 | ||||||||||||||||||
Acquisition | 46,344 | — | — | 2,938,430 | — | 2,984,774 | ||||||||||||||||||
Disposition | — | — | — | — | — | — | ||||||||||||||||||
Impairment loss | — | — | — | — | — | — | ||||||||||||||||||
Balance at December 31, 2007 | 632,791 | 16,079 | 1,616 | 3,037,808 | 289,800 | 3,978,094 | ||||||||||||||||||
Acquisition | 42,693 | — | — | — | — | 42,693 | ||||||||||||||||||
Disposition | — | — | — | — | — | — | ||||||||||||||||||
Impairment loss | (112,315 | ) | (16,079 | ) | — | — | — | (128,394 | ) | |||||||||||||||
Balance at December 31, 2008 | 563,169 | — | 1,616 | 3,037,808 | 289,800 | 3,892,393 | ||||||||||||||||||
Treasury & | Other | Good Morning | Shinhan | |||||||||||||||||||||||||||||||||||||||||
Retail | Institutional | Private | Corporate | International | Banking | Credit | Shinhan | Life | ||||||||||||||||||||||||||||||||||||
Banking | Banking | Banking | Banking | Business | Services | Card | Securities | Insurance | Other(1) | Total | ||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2007 | 334,978 | 81,716 | 14,010 | 48,873 | 39,537 | 10,495 | 99,378 | 16,079 | 289,800 | 58,454 | 993,320 | |||||||||||||||||||||||||||||||||
Acquisition | — | — | — | — | — | — | 2,938,430 | — | — | 46,344 | 2,984,774 | |||||||||||||||||||||||||||||||||
Disposition | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Impairment loss | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 334,978 | 81,716 | 14,010 | 48,873 | 39,537 | 10,495 | 3,037,808 | 16,079 | 289,800 | 104,798 | 3,978,094 | |||||||||||||||||||||||||||||||||
Acquisition | — | — | — | — | — | — | — | — | — | 42,693 | 42,693 | |||||||||||||||||||||||||||||||||
Disposition | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Impairment loss | — | — | — | (48,873 | ) | (39,537 | ) | — | — | (16,079 | ) | — | (23,905 | ) | (128,394 | ) | ||||||||||||||||||||||||||||
Balance atDecember 31, 2008 | 334,978 | 81,716 | 14,010 | — | — | 10,495 | 3,037,808 | — | 289,800 | 123,586 | 3,892,393 | |||||||||||||||||||||||||||||||||
(1) | Mostly relates to goodwill of reporting units of Merchant, AITAS and SH Asset Management. |
F-40
Table of Contents
2007 | 2008 | |||||||||||||||||||||||||||
Weighted | Gross | Net | Gross | Net | ||||||||||||||||||||||||
Average | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||||
Years | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Brokerage customer relationship | 3.4 | 68,266 | (68,064 | ) | 202 | 68,266 | (68,266 | ) | — | |||||||||||||||||||
KSFC deposit | 3.4 | 10,941 | (10,912 | ) | 29 | 10,941 | (10,941 | ) | — | |||||||||||||||||||
Core deposit of Shinhan Bank | 8.7 | 825,476 | (497,456 | ) | 328,020 | 825,476 | (583,739 | ) | 241,737 | |||||||||||||||||||
Credit card relationship of Shinhan Card | 5.7 | 1,262,366 | (402,113 | ) | 860,253 | 1,262,366 | (682,487 | ) | 579,879 | |||||||||||||||||||
VOBA | — | 978,532 | (212,201 | ) | 766,331 | 978,532 | (348,623 | ) | 629,909 | |||||||||||||||||||
Total intangible assets subject to amortization | 4.7 | 3,145,581 | (1,190,746 | ) | 1,954,835 | 3,145,581 | (1,694,056 | ) | 1,451,525 | |||||||||||||||||||
KSFC borrowing | — | 400 | — | 400 | 400 | — | 400 | |||||||||||||||||||||
Court deposit of Shinhan Bank | — | 226,353 | — | 226,353 | 226,353 | — | 226,353 | |||||||||||||||||||||
Total intangible assets not subject to amortization | 226,753 | — | 226,753 | 226,753 | — | 226,753 | ||||||||||||||||||||||
Total intangible assets | 3,372,334 | (1,190,746 | ) | 2,181,588 | 3,372,334 | (1,694,056 | ) | 1,678,278 | ||||||||||||||||||||
Years Ending | (In millions of Won) | |||
2009 | 390,026 | |||
2010 | 305,619 | |||
2011 | 227,468 | |||
2012 | 154,180 | |||
2013 | 84,630 | |||
Thereafter | 289,602 | |||
1,451,525 | ||||
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Table of Contents
11. | Other Assets |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Accrued interest and dividends receivable | 977,842 | 1,262,567 | ||||||
Receivables for foreign exchange spot contracts | 3,572,922 | 5,148,358 | ||||||
Accounts receivable | 719,185 | 933,920 | ||||||
Accrued income | 46,434 | 2,851 | ||||||
Deferred tax assets | 493,683 | 568,875 | ||||||
Other investments(1) | 1,502,282 | 1,686,165 | ||||||
Prepaid expenses | 160,744 | 186,019 | ||||||
Separate account assets | 560,163 | 716,737 | ||||||
Advances to suppliers | 154,624 | 291,672 | ||||||
Deferred acquisition costs | 530,331 | 723,411 | ||||||
Gold assets | 21,822 | 54,360 | ||||||
Other | 73,352 | 90,099 | ||||||
8,813,384 | 11,665,034 | |||||||
(1) | Other investments include unlisted equity securities, securities with sales restriction and investments accounted for by the equity method. |
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Table of Contents
12. | Deposits |
2007 | 2008 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Balance | Interest Rate | Balance | Interest Rate | |||||||||||||
(In millions of Won, except percentages) | ||||||||||||||||
Interest-bearing deposits | ||||||||||||||||
Demand deposits | 7,360,010 | 0.41 | % | 6,673,839 | 0.78 | % | ||||||||||
Savings deposits | 30,053,133 | 2.05 | % | 31,392,168 | 2.32 | % | ||||||||||
Certificate of deposits | 15,842,958 | 5.22 | % | 13,846,645 | 5.94 | % | ||||||||||
Other time deposits | 49,631,648 | 4.55 | % | 67,614,521 | 4.94 | % | ||||||||||
Mutual installment deposits | 353,588 | 3.88 | % | 235,288 | 3.78 | % | ||||||||||
103,241,337 | 3.53 | % | 119,762,461 | 4.15 | % | |||||||||||
Non-interest-bearing deposits | ||||||||||||||||
Demand deposits | 3,162,310 | — | 2,942,034 | — | ||||||||||||
106,403,647 | 3.43 | % | 122,704,495 | 4.06 | % | |||||||||||
Years Ending | (In millions of Won) | |||
2009 | 73,730,255 | |||
2010 | 4,823,417 | |||
2011 | 2,328,485 | |||
2012 | 171,460 | |||
2013 | 176,636 | |||
Thereafter | 466,201 | |||
81,696,454 | ||||
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Table of Contents
13. | Short-Term Borrowings |
2007 | 2008 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Balance | Interest Rate | Balance | Interest Rate | |||||||||||||
(In millions of Won, except percentages) | ||||||||||||||||
Borrowings from BOK | 882,748 | 2.97 | % | 1,259,290 | 2.54 | % | ||||||||||
Borrowings in foreign currencies | 5,122,321 | 3.86 | % | 5,798,825 | 2.70 | % | ||||||||||
Borrowings from trust accounts | 1,218,622 | 4.63 | % | 3,357,531 | 4.37 | % | ||||||||||
Call money | 1,673,449 | 5.49 | % | 4,877,940 | 5.41 | % | ||||||||||
Debentures in won | 1,747,908 | 3.64 | % | 3,867,141 | 5.84 | % | ||||||||||
Other borrowings(1) | 5,156,378 | 2,65 | % | 4,064,264 | 4.10 | % | ||||||||||
15,801,426 | 23,224,991 | |||||||||||||||
(1) | Mostly relate to borrowings from other financial institutions. |
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Table of Contents
14. | Secured Borrowings |
2007 | 2008 | |||||||||||||||||||||||||||
Secured | Collateral | Secured | Collateral | |||||||||||||||||||||||||
Maturity | Borrowings | Loans(1) | Securities | Borrowings | Loans(1) | Securities | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Shinhan 4th Securitization Specialty L.L.C. | 2011 | 250 | 9,572 | 12,136 | — | — | — | |||||||||||||||||||||
20.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Goldwing Co., Ltd. | 2022 | 299,050 | 275,396 | 963,569 | — | — | — | |||||||||||||||||||||
4.30%~5.47% Asset-Backed Commercial Papers | ||||||||||||||||||||||||||||
Shinhan Card2003-1 Securitization Specialty L.L.C. | 2008 | 338,405 | 830,436 | — | — | — | — | |||||||||||||||||||||
4.65% Type 1 beneficiary certificate | ||||||||||||||||||||||||||||
Miraedon Co., Ltd. | 2008 | 472,000 | — | 501,764 | — | — | — | |||||||||||||||||||||
4.22%~4.68% Asset-Backed Commercial Papers | ||||||||||||||||||||||||||||
Work and Joy2007-1 ABS Specialty Co., Ltd. | 2012 | 319,883 | — | 400,300 | 400,300 | — | 400,300 | |||||||||||||||||||||
5.39%~5.42% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan 6th Securitization Specialty L.L.C. | 2009 | 111,831 | 34,877 | — | — | — | — | |||||||||||||||||||||
10.00% collateralized bond obligation | ||||||||||||||||||||||||||||
SamsungShinhan 4th ABS Specialty Co.Ltd. | 2009 | 214,999 | — | 239,500 | 114,500 | — | 114,500 | |||||||||||||||||||||
4.13%~7.00% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Dongbu Steel 2nd ABS Specialty Co.Ltd. | 2008 | 74,918 | — | 85,000 | — | — | — | |||||||||||||||||||||
4.07% collateralized bond obligation | ||||||||||||||||||||||||||||
Cheongge ABS Specialty Co., Ltd. | 2008 | 87,600 | — | 110,169 | — | — | — | |||||||||||||||||||||
5.90%~6.10% Asset-Backed Commercial Papers | ||||||||||||||||||||||||||||
Shinhan 7th Securitization Specialty L.L.C. | 2009 | 74,909 | 90,252 | — | 9,992 | 52,175 | 3,916 | |||||||||||||||||||||
5.00%~15.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Frontier 9th ABS Specialty Co., Ltd. | 2010 | 143,000 | — | 200,500 | 110,500 | — | 114,500 | |||||||||||||||||||||
4.31%~7.00% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Neo DWC 2nd ABS Specialty Co., Ltd. | 2009 | 150,050 | — | 500,000 | 355,050 | — | 500,000 | |||||||||||||||||||||
5.04%~6.26% collateralized bond obligation | ||||||||||||||||||||||||||||
Han-il U&I ABS Specialty Co., Ltd. | 2009 | 22,336 | — | 22,988 | 12,880 | — | 21,241 | |||||||||||||||||||||
5.03%~8.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Costone Delta Co., Ltd. | 2009 | 1,390 | — | — | 1,886 | — | — | |||||||||||||||||||||
10.00% collateralized bond obligation | ||||||||||||||||||||||||||||
I-Clover ABS Specialty Co., Ltd. | 2009 | 390,000 | 300,000 | 297,719 | 872,000 | 565,470 | 1,248,528 | |||||||||||||||||||||
5.93~7.29% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan 8th Securitization Specialty L.L.C. | 2010 | — | — | — | 9,859 | 20,815 | — | |||||||||||||||||||||
8.50%~8.90% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Mortgage 1st Securitization Specialty L.L.C. | 2039 | — | — | — | 797,098 | 748,712 | — | |||||||||||||||||||||
6.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Neo DWC 3rd ABS Specialty | 2009 | — | — | — | 100,049 | — | 200,000 | |||||||||||||||||||||
8% collateralized bond obligation | ||||||||||||||||||||||||||||
Good Invest Co., Ltd. | 2008 | 102,049 | — | 98,680 | — | — | — | |||||||||||||||||||||
6.33~6.50% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia2004-1 ABS Specialty Co., Ltd. | 2008 | 299,834 | 1,419,239 | — | — | — | — | |||||||||||||||||||||
4.47%~5.10% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2005 plus 1 ABS Specialty Co., Ltd. | 2008 | 406,256 | 608,983 | — | — | — | — | |||||||||||||||||||||
4.81% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2005 plus 2 ABS Specialty Co., Ltd. | 2010 | 407,678 | 647,867 | — | 411,144 | 685,310 | — | |||||||||||||||||||||
5.45% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2005 plus 3 ABS Specialty Co., Ltd. | 2009 | 311,117 | 444,890 | — | 155,652 | 574,674 | — | |||||||||||||||||||||
5.39% collateralized bond obligation | ||||||||||||||||||||||||||||
Credipia 2006 plus 1 A,B ABS Specialty Co., Ltd. | 2010 | 458,127 | 892,598 | — | 462,694 | 646,871 | — | |||||||||||||||||||||
4.58~6.29% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card2007-1 Securitization Specialty L.L.C. | 2011 | 277,500 | 448,250 | — | 277,500 | 515,958 | — | |||||||||||||||||||||
7.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card2007-2 Securitization Specialty L.L.C. | 2011 | 277,200 | 467,465 | — | 277,200 | 475,293 | — | |||||||||||||||||||||
7.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card2008-1 Securitization Specialty L.L.C. | 2012 | — | — | — | 320,658 | 529,964 | — | |||||||||||||||||||||
4.76% collateralized bond obligation | ||||||||||||||||||||||||||||
Shinhan Card 2008 Trust | 2012 | — | — | — | 350,000 | 620,761 | — | |||||||||||||||||||||
8.97% collateralized bond obligation | ||||||||||||||||||||||||||||
Good Invest 2nd Securitization Specialty Co., Ltd. | 2010 | — | — | — | 20,048 | — | 56,242 | |||||||||||||||||||||
9.00% ABCP and collateralized bond obligation | ||||||||||||||||||||||||||||
Other secured borrowings | 2008 | 501 | — | — | 100 | — | 109 | |||||||||||||||||||||
8.00%~25.00% collateralized bond obligation | ||||||||||||||||||||||||||||
Securities sold under repurchase agreements | 2009 | 6,210,782 | — | 6,621,774 | 5,166,667 | — | 6,922,056 | |||||||||||||||||||||
0.06%~11.5% | ||||||||||||||||||||||||||||
11,451,665 | 6,469,825 | 10,054,999 | 10,225,777 | 5,436,003 | 9,581,392 | |||||||||||||||||||||||
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Table of Contents
(1) | Represents the carrying amounts, exclusive of the related specific allowance for loan losses of |
15. | Long-Term Debt |
Interest | ||||||||||||
Rates (%) | Maturity | 2007 | 2008 | |||||||||
(In millions of Won) | ||||||||||||
Senior | ||||||||||||
Won-denominated | ||||||||||||
Notes payable to the Small Business Corporation | 2.00 ~ 5.83 | 2009 ~ 2018 | 627,682 | 600,106 | ||||||||
Notes payable to the Industrial Bank of Korea | 2.00 ~ 4.63 | 2009 ~ 2016 | 5,783 | 87,161 | ||||||||
Notes payable to the Institute of Information Technology Assessment | 2.78 ~ 4.90 | 2009 | 43,870 | 11,944 | ||||||||
Notes payable to the Korea Energy Management Corporation | 0.75 ~ 4.75 | 2009 ~ 2023 | 371,184 | 421,584 | ||||||||
Notes payable to other Korean Government Funds | 1.00 ~ 5.10 | 2009 ~ 2023 | 381,710 | 363,825 | ||||||||
Fixed and floating rate debentures(1)(2) | 0.56 ~ 14.00 | 2009 ~ 2038 | 33,708,805 | 36,795,036 | ||||||||
Other notes payable(3) | 0.20 ~ 12.00 | 2009 ~ 2015 | 1,895,464 | 1,613,960 | ||||||||
Subtotal | 37,034,498 | 39,893,616 | ||||||||||
Foreign currency-denominated | ||||||||||||
Floating rate debentures(1) | 0.47 ~ 6.88 | 2009 ~ 2016 | 2,123,000 | 2,809,765 | ||||||||
Other fixed and floating rate notes payable | 0.45 ~ 7.54 | 2009 ~ 2013 | 1,395,847 | 1,665,043 | ||||||||
Subtotal | 3,518,847 | 4,474,808 | ||||||||||
Total senior debt | 40,553,345 | 44,368,424 | ||||||||||
Subordinated | ||||||||||||
Won-denominated | ||||||||||||
Hybrid bonds(4) | 5.70 ~ 7.02 | 2034 ~ 2038 | 495,033 | 922,469 | ||||||||
Fixed and floating rate debentures(1)(5) | 4.40 ~ 14.45 | 2009 ~ 2016 | 2,042,607 | 1,113,291 | ||||||||
Convertible debt(6) | 1.50 | 2009 | 299,670 | 299,670 | ||||||||
Bond with warrants(6) | 1.50 | 2009 | 282,665 | 282,665 | ||||||||
Subtotal | 3,119,975 | 2,618,095 | ||||||||||
Foreign currency-denominated | ||||||||||||
Hybrid bonds(7) | 5.66 ~ 6.82 | 2035 ~ 2036 | 609,830 | 817,375 | ||||||||
Fixed and floating rate debentures(1) | 4.50 ~ 5.75 | 2014 ~ 2016 | 1,266,570 | 1,383,250 | ||||||||
Subtotal | 1,876,400 | 2,200,625 | ||||||||||
Total subordinated debt | 4,996,375 | 4,818,720 | ||||||||||
Redeemable preferred stock(8) | ||||||||||||
Series 3 Redeemable preferred stock | — | — | 168,504 | — | ||||||||
Series 4 Redeemable preferred stock | 4.04 | 2009 | 168,504 | 168,504 | ||||||||
Series 5 Redeemable preferred stock | 4.04 | 2010 | 168,504 | 168,504 | ||||||||
Series 7 Redeemable preferred stock | — | — | 365,000 | — | ||||||||
Series 8 Redeemable preferred stock | 7.86 | 2010 | 10,000 | 10,000 | ||||||||
Total redeemable preferred stock | 880,512 | 347,008 | ||||||||||
Long-term debt, gross | 46,430,232 | 49,534,152 | ||||||||||
Less: Unamortized discounts | (64,461 | ) | (51,013 | ) | ||||||||
Add: Guaranteed interest | 130,536 | 168,567 | ||||||||||
Long-term debt, net | 46,496,307 | 49,651,706 | ||||||||||
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Table of Contents
(1) | Interest rates on floating rate debt were those rates in effect at December 31, 2007 and 2008, respectively. | |
(2) | Majority of these debentures relate to miscellaneous bank borrowings from individual lenders. | |
(3) | The Group adopted fair value election under SFAS 155 on certain hybrid financial instrument. The fair value of those instruments were | |
(4) | Shinhan Bank has a call option that can be exercised five years after the issuance date, or earlier with the approval of the Financial Supervisory Service. The call options mature in 30 years from the issuance date, but may be extended by Shinhan Bank at any time. | |
(5) | Majority of these debentures relate to miscellaneous bank borrowings from corporate lenders and Korean governmental entities. | |
(6) | Shinhan Card (formerly LG Card) issued convertible bonds at July 21, 2003. As of December 31, 2008, 18,575 shares have been converted and 147,207 shares could be issued upon exercise of conversion right. Details of the convertible bonds are as follows: |
Conversion period: | From three months after issuance date (July 21, 2003) to one month before redemption date (January 21, 2009) | |
Stock to be issued: | Common stock with par value of | |
Adjustment of conversion price: | The conversion price is adjusted for stock issuances without consideration, stock dividends, or stock issuances at a price lower than the market price. | |
Special arrangement: | In case of bankruptcy, claims to the principal of the convertible bond have a lower priority than all non-guaranteed, non-subordinated claim, but have a higher priority over claims of common and preferred stock shareholders and bondholders where special agreements inferior to convertible bonds apply. | |
Conversion price: |
Shihan Card (formerly LG Card) issued bonds with warrants at August 12, 2003. As of December 31, 2008, 1,179,249 shares have been issued and 142,157 shares could be issued upon exercise of the warrants. Details of the bonds with warrants are as follows: |
Exercise period of the warrants: | From three months after issuance date (August 12, 2003) to one month before redemption date (February 12, 2009) | |
Stock to be issued: | Common stock with par value of | |
Adjustment of exercise price: | The exercise price is adjusted in case of stock issuances without consideration, stock dividends, or stock issuances at a price lower than the market price. | |
Special arrangement: | In case of bankruptcy, claims to the principal of the convertible bond have a lower priority than all non-guaranteed, non-subordinated claims, but have a higher priority over claims of common and preferred stock shareholders and bondholders where special agreements inferior to bond with warrants apply. | |
Payment method for stock: | Cash or bond redemption | |
Exercise price: |
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Table of Contents
(7) | Shinhan Bank has a call option that can be exercised ten years after the issuance date. The call options mature in 30 years from the issuance date. | |
(8) | See Note 21 for the terms of the redeemable preferred stock. |
Years Ending | (In millions of Won) | |||
2009 | 12,015,137 | |||
2010 | 11,948,718 | |||
2011 | 7,746,860 | |||
2012 | 2,794,310 | |||
2013 | 2,694,023 | |||
Thereafter | 12,335,104 | |||
Long-term debt, gross | 49,534,152 | |||
Less: Unamortized discount | (51,013 | ) | ||
Add: Guaranteed interest | 168,567 | |||
Long-term debt, net | 49,651,706 | |||
16. | Future Policy Benefits |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Life insurance | 3,833,904 | 4,013,630 | ||||||
Annuity contracts | 1,767,625 | 1,914,616 | ||||||
Other contracts | 907,180 | 996,061 | ||||||
Unpaid claims and claim adjustment expenses | 260,313 | 336,026 | ||||||
6,769,022 | 7,260,333 | |||||||
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Table of Contents
17. | Accrued Expenses and Other Liabilities |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Accrued interest and dividend payables | 2,524,609 | 3,181,871 | ||||||
Payables for foreign exchange spot contracts | 3,575,084 | 5,103,005 | ||||||
Accrued severance benefits | 283,624 | 323,226 | ||||||
Accrued expenses | 512,214 | 499,117 | ||||||
Accounts payable | 1,572,258 | 1,800,354 | ||||||
Advances from customers | 136,683 | 135,234 | ||||||
Unearned income | 196,968 | 241,936 | ||||||
Other withholdings(except withholding taxes) | 127,002 | 131,384 | ||||||
Income tax payable | 621,106 | 605,560 | ||||||
Withholding value-added tax and other taxes | 113,230 | 112,118 | ||||||
Deferred tax liabilities | 476,707 | 168,327 | ||||||
Security deposits received | 511,427 | 505,269 | ||||||
Due to agencies | 1,071,153 | 702,238 | ||||||
Allowance for losses on off-balance sheet credit instruments | 221,558 | 339,384 | ||||||
Utility bill payments received on behalf of government | 197,792 | 396,709 | ||||||
Separate account liabilities | 560,163 | 716,737 | ||||||
Other allowances(1) | 539,246 | 489,723 | ||||||
Other | 128,191 | 225,734 | ||||||
13,369,015 | 15,677,926 | |||||||
(1) | Other allowances include assets retirement obligation, legal provision and allowance for reward on credit card use. |
F-49
Table of Contents
18. | Commissions and Fees |
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Brokerage fees and commissions | 479,327 | 857,551 | 626,033 | |||||||||
Other fees and commissions: | ||||||||||||
Credit card fees | 455,980 | 1,205,708 | 1,315,117 | |||||||||
Commissions received on remittance | 71,437 | 72,915 | 69,204 | |||||||||
Commissions received on import and export letters of credit | 57,411 | 56,344 | 70,043 | |||||||||
Financial guarantee fees | 21,745 | 27,249 | 40,356 | |||||||||
Commissions received in foreign exchange activities | 64,110 | 61,088 | 69,132 | |||||||||
Commission received as agency | 28,302 | 30,776 | 44,866 | |||||||||
Commission received as electronic charge receipt | 65,301 | 68,544 | 73,182 | |||||||||
Other fees | 267,771 | 231,466 | 287,282 | |||||||||
Total other fees and commissions | 1,032,057 | 1,754,090 | 1,969,182 | |||||||||
1,511,384 | 2,611,641 | 2,595,215 | ||||||||||
19. | Other Non-Interest Income and Other Non-Interest Expense |
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Gain on sale of premises and equipment | 8,757 | 17,971 | 6,524 | |||||||||
Income from operating leases | 32,085 | 68,362 | 48,750 | |||||||||
Rental income | 16,718 | 19,120 | 19,049 | |||||||||
Extinguished escheatment of deposits | 28,513 | 28,299 | 20,224 | |||||||||
Gain from exchange of membership interest to VISA shares | — | 279,881 | — | |||||||||
Gain on hedge activity | 85,423 | 17,047 | 11,726 | |||||||||
Other lease income | 785 | 10,854 | 29,934 | |||||||||
Income from partnering with foreign credit card companies | 874 | 14,536 | 30,879 | |||||||||
Income from brokering insurance | 1,530 | 29,860 | 49,640 | |||||||||
Income from collection of legal fees | 669 | 17,774 | 17,017 | |||||||||
Other | 159,893 | 143,869 | 145,034 | |||||||||
335,247 | 647,573 | 378,777 | ||||||||||
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Table of Contents
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Loss on sale of premises and equipment | 11,089 | 10,840 | 4,920 | |||||||||
Impairment loss on goodwill | 129,285 | — | 128,394 | |||||||||
Impairment loss on other investment | 31,351 | 11,741 | 33,206 | |||||||||
Loss on hedge activity | 84,680 | 4,063 | 10,845 | |||||||||
Expense of suspense payments related to credit and accident | 36,708 | 2,157 | 176,456 | |||||||||
Donations | 25,089 | 44,326 | 178,258 | |||||||||
Loss on disposal of other investment | 30,583 | 6,640 | 5,810 | |||||||||
Loss on equity method | 329 | 6,594 | 10,462 | |||||||||
Other | 116,058 | 118,887 | 153,892 | |||||||||
465,172 | 205,248 | 702,243 | ||||||||||
20. | Common Stock |
21. | Redeemable Preferred Stock and Redeemable Convertible Preferred Stock |
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Table of Contents
RPS issued to KDIC (Series 1 to 5) | 4.04 | % | ||
RPS issued to Strider: | ||||
Series 6 | 7.00 | % | ||
Series 7 | 7.46 | % | ||
Series 8 | 7.86 | % |
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Table of Contents
22. | Retained Earnings |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Appropriated retained earnings for legal reserves under Korean GAAP | 580,200 | 819,838 | ||||||
Unappropriated retained earnings under US GAAP | 6,221,002 | 6,890,059 | ||||||
6,801,202 | 7,709,897 | |||||||
23. | Regulatory Requirements |
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Table of Contents
2007 | 2008 | |||||||
(In millions of Won, except equity capital ratio) | ||||||||
Equity Capital | 15,815,434 | 18,723,461 | ||||||
Risk-weighted assets | 161,849,385 | 183,741,412 | ||||||
Consolidated equity capital ratio | 9.77 | % | 10.19 | % |
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Table of Contents
2007 | 2008 | |||||||
(In millions of Won, | ||||||||
except capital ratio) | ||||||||
Tier 1 capital | 10,346,985 | 12,388,534 | ||||||
Tier 2 capital | 6,027,899 | 5,500,601 | ||||||
Total risk-adjusted capital | 16,374,884 | 17,889,135 | ||||||
Total risk-weighted assets | 135,495,682 | 133,140,142 | ||||||
Total risk-based capital ratio (%) | 12.09 | % | 13.43 | % | ||||
Tier 1 capital ratio (%) | 7.64 | % | 9.30 | % | ||||
Tier 2 capital ratio (%) | 4.45 | % | 4.13 | % |
2007 | 2008 | |||||||
(In millions of Won, | ||||||||
except capital ratio) | ||||||||
Total risk-adjusted capital | 3,662,472 | 3,906,057 | ||||||
Total risk-weighted assets | 10,693,905 | 19,222,236 | ||||||
Total risk-based capital ratio (%) | 34.25 | % | 20.32 | % |
24. | Income Taxes |
2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Current tax expense | ||||||||||||
National | 640,365 | 828,557 | 888,389 | |||||||||
Local | 64,036 | 82,855 | 88,839 | |||||||||
Total current tax expense | 704,401 | 911,412 | 977,228 | |||||||||
Deferred tax expense | ||||||||||||
National | (49,632 | ) | 133,665 | (256,634 | ) | |||||||
Local | (4,963 | ) | 13,367 | (25,663 | ) | |||||||
Total deferred tax expense | (54,595 | ) | 147,032 | (282,297 | ) | |||||||
Total tax expense | 649,806 | 1,058,444 | 694,931 | |||||||||
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2006 | 2007 | 2008 | ||||||||||
(In millions of Won, except tax rates) | ||||||||||||
Statutory tax rate | 27.5 | % | 27.5 | % | 27.5 | % | ||||||
Income before income tax expense, minority interest, and cumulative effect of a change in accounting principle | 2,233,334 | 3,083,012 | 2,187,331 | |||||||||
Income tax calculated at the statutory tax rate | 614,167 | 847,828 | 601,516 | |||||||||
Income not assessable for tax purposes | (223,044 | ) | (328,315 | ) | (104,862 | ) | ||||||
Expenses not deductible for tax purposes | 329,395 | 468,802 | 96,434 | |||||||||
Foreign tax rate differentials | (1,010 | ) | 39 | (5,573 | ) | |||||||
Adjustment of deferred tax liability on investment in subsidiaries and associates | (16,387 | ) | 20,990 | 12,195 | ||||||||
Change in statutory tax rate(1) | — | — | 100,756 | |||||||||
Change in valuation allowance | (54,222 | ) | 48,675 | (5,683 | ) | |||||||
Other | 907 | 425 | 148 | |||||||||
Income tax expense | 649,806 | 1,058,444 | 694,931 | |||||||||
(1) | Pursuant to amendments to the Corporation Income Tax Law that was enacted in December 2008, the statutory tax rates changed from 27.5% in 2007 to 24.2% in 2009, and 22.0% in 2010 and thereafter. |
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2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Deferred income tax assets | ||||||||
Allowance for loan losses | 342,678 | 208,781 | ||||||
Other allowances | 229,809 | 267,724 | ||||||
Valuation of trading assets | 17,424 | 25,105 | ||||||
Premises and equipment | 108,055 | 188,426 | ||||||
Available-for-sale securities | 450,898 | 749,379 | ||||||
Other assets | 97,524 | 180,739 | ||||||
Future policy benefits | 218,772 | 104,442 | ||||||
Long-term debt | 162,687 | 40,724 | ||||||
Other temporary differences | 98,926 | 80,759 | ||||||
Net operating loss carry forwards | 219,966 | 66,181 | ||||||
1,946,739 | 1,912,260 | |||||||
Less: Valuation allowance | (73,626 | ) | (67,879 | ) | ||||
Deferred income tax assets | 1,873,113 | 1,844,381 | ||||||
Deferred income tax liabilities | ||||||||
Valuation of trading assets | — | (15,235 | ) | |||||
Foreign exchange contracts and derivative instruments | (78 | ) | (40,675 | ) | ||||
Allowance for loan losses | (709,386 | ) | (228,981 | ) | ||||
Accrued interest and dividend receivable | (91,785 | ) | (78,458 | ) | ||||
Other assets | (968,811 | ) | (1,012,208 | ) | ||||
Other temporary differences | (86,077 | ) | (68,276 | ) | ||||
Deferred income tax liabilities | (1,856,137 | ) | (1,443,833 | ) | ||||
Net deferred income tax assets (liabilities) | 16,976 | 400,548 | ||||||
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Other assets | 493,683 | 568,875 | ||||||
Accrued expenses and other liabilities | (476,707 | ) | (168,327 | ) | ||||
Total net deferred tax liabilities | 16,976 | 400,548 | ||||||
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Years Ending | (In millions of Won) | |||
2009 | 13,514 | |||
2010 | 65,132 | |||
2011 | 55,913 | |||
2012 | 164,913 | |||
299,472 | ||||
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Beginning balance | 231,117 | 217,636 | ||||||
Increases for tax positions of current year | 12,241 | 12,740 | ||||||
Decreases for tax positions of prior years | (3,950 | ) | (38,353 | ) | ||||
Amounts of decreases in the unrecognized tax benefits relating to settlements | (21,772 | ) | (38,269 | ) | ||||
Ending balance | 217,636 | 153,754 | ||||||
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25. | Earnings Per Share |
2006 | 2007 | 2008 | ||||||||||
(In millions of Won, except per share data) | ||||||||||||
Basic EPS | ||||||||||||
Net income before cumulative effect of a change in accounting principle | 1,565,668 | 1,929,612 | 1,480,699 | |||||||||
Cumulative effect of a change in accounting principle, net of taxes | (10,184 | ) | — | — | ||||||||
Accretion and dividends on redeemable preferred stock and redeemable convertible preferred stock | — | (214,793 | ) | (230,586 | ) | |||||||
Net income attributable to common stock shareholders | 1,555,484 | 1,714,819 | 1,250,113 | |||||||||
Weighted-average number of common stocks outstanding (in thousands) | 372,173 | 382,731 | 396,199 | |||||||||
Net income per share | ||||||||||||
Net income before cumulative effect of a change in accounting principle | 4,207 | 4,480 | 3,155 | |||||||||
Cumulative effect of a change in accounting principle | (27 | ) | — | — | ||||||||
Basic net earnings per share | 4,180 | 4,480 | 3,155 | |||||||||
Diluted EPS | ||||||||||||
Net income before cumulative effect of a change in accounting principle for purposes of computing diluted net income per share | 1,565,668 | 1,929,612 | 1,480,699 | |||||||||
Cumulative effect of a change in accounting principle, net of taxes | (10,184 | ) | — | — | ||||||||
Dividends on redeemable preferred stock | — | (189,031 | ) | (202,930 | ) | |||||||
Net income attributable to common stock shareholders | 1,555,484 | 1,740,581 | 1,277,769 | |||||||||
Weighted-average number of common stocks outstanding (in thousands) | 372,173 | 382,731 | 396,199 | |||||||||
Diluted effect of redeemable convertible preferred stock (in thousands) | — | 13,753 | 14,721 | |||||||||
Weighted-average number of common stock outstanding, assuming dilution (in thousands) | 372,173 | 396,484 | 410,920 | |||||||||
Net income per share | ||||||||||||
Net income before cumulative effect of a change in accounting principle | 4,207 | 4,390 | 3,110 | |||||||||
Cumulative effect of a change in accounting principle | (27 | ) | — | — | ||||||||
Diluted net earnings per share | 4,180 | 4,390 | 3,110 | |||||||||
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26. | Employee Severance Plans |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Balance at beginning of year | 336,386 | 480,296 | ||||||
Accruals | 278,747 | 224,758 | ||||||
Increase from acquisition of subsidiaries | 87,279 | 2,652 | ||||||
Payments | (222,116 | ) | (179,116 | ) | ||||
480,296 | 528,590 | |||||||
Less: Contributions to National Pension Fund and severance insurance deposit | (196,672 | ) | (205,364 | ) | ||||
Balance at end of year | 283,624 | 323,226 | ||||||
Years Ending | (In millions of Won) | |||
2009 | 10,198 | |||
2010 | 4,905 | |||
2011 | 485 | |||
2012 | 3,367 | |||
2013 | 6,469 | |||
2014 ~ 2018 | 103,610 | |||
129,034 | ||||
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27. | Employee Share-based Compensation and Other Benefits |
Shinhan Financial Group | ||||||
2006 | 2007 | 2008 | ||||
Risk-free interest rate | 5.02% | 4.69% | 5.16% | |||
Expected lives(1) | 5.00 years | 5.00 years | 5.00 years | |||
Expected volatility(2) | 11.19% | 32.12% | 30.60% | |||
Expected dividend rate | 3.26% | 3.06% | 2.62% |
(1) | Expected lives are calculated based on a simplified method since the Group does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. | |
(2) | Expected volatility is based on implied volatility derived from historical volatility of the Group’s stock price. |
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Shinhan Financial Group | ||||||||
Weighted- | ||||||||
Average | ||||||||
Grant Date | ||||||||
Number of | Fair Value | |||||||
Options | per Option | |||||||
(In Won) | ||||||||
Unvested at January 1, 2007 | 5,479,159 | 8,145 | ||||||
Granted | 1,301,050 | 16,259 | ||||||
Vested | (2,369,031 | ) | 11,201 | |||||
Forfeited | (455,180 | ) | 9,014 | |||||
Unvested at December 31, 2007 | 3,955,998 | 8,884 | ||||||
Unvested at January 1, 2008 | 3,955,998 | 8,884 | ||||||
Granted | 808,700 | 12,275 | ||||||
Vested | (2,765,738 | ) | 5,797 | |||||
Forfeited | (138,202 | ) | 11,469 | |||||
Unvested at December 31, 2008 | 1,860,758 | 14,754 | ||||||
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Shinhan Financial Group | Shinhan Bank | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Exercise | Aggregate | Exercise | Aggregate | |||||||||||||||||||||
Number | Price per | Intrinsic | Number | Price per | Intrinsic | |||||||||||||||||||
of Options | Option | Value | of Options | Option | Value | |||||||||||||||||||
(In Won) | (In million Won) | (In Won) | (In million Won) | |||||||||||||||||||||
Outstanding at January 1, 2006 | 5,326,793 | 22,848 | 885,401 | 5,106 | ||||||||||||||||||||
Granted | 3,296,200 | 38,829 | — | — | ||||||||||||||||||||
Exercised | (277,849 | ) | 17,647 | (216,379 | ) | 5,054 | ||||||||||||||||||
Forfeited | (393,884 | ) | 33,371 | (280,000 | ) | 5,000 | ||||||||||||||||||
Outstanding at December 31, 2006 | 7,951,260 | 29,133 | 140,233 | 389,022 | 5,395 | 365 | ||||||||||||||||||
Granted | 1,301,050 | 54,560 | — | — | ||||||||||||||||||||
Exercised | (1,036,956 | ) | 17,973 | (231,499 | ) | 5,562 | ||||||||||||||||||
Forfeited | (455,180 | ) | 43,165 | — | — | |||||||||||||||||||
Outstanding at December 31, 2007 | 7,760,174 | 34,065 | 151,986 | 157,523 | 5,150 | 330 | ||||||||||||||||||
Granted | 808,700 | 49,053 | — | — | ||||||||||||||||||||
Exercised | (1,379,042 | ) | 20,964 | (135,173 | ) | 5,175 | ||||||||||||||||||
Forfeited | (138,202 | ) | 47,729 | — | — | |||||||||||||||||||
Outstanding at December 31, 2008 | 7,051,630 | 38,078 | 12,457 | 22,350 | 5,000 | 0 | ||||||||||||||||||
Exercisable at December 31, 2008 | 2,425,134 | 26,170 | 12,457 | 22,350 | 5,000 | 0 | ||||||||||||||||||
Good Morning Shinhan Securities | ||||||||||||
Weighted-Average | Aggregate | |||||||||||
Number | Exercise Price | Intrinsic | ||||||||||
of Options | per Option | Value | ||||||||||
(In Won) | (In million Won) | |||||||||||
Outstanding at January 1, 2006 | 9,774,291 | 6,754 | ||||||||||
Granted | — | — | ||||||||||
Exercised | (445,777 | ) | 5,076 | |||||||||
Forfeited | (223,789 | ) | 5,000 | |||||||||
Outstanding at December 31, 2006 | 9,104,725 | 6,879 | 12,744 | |||||||||
Granted | — | — | ||||||||||
Exercised | (3,408,956 | ) | 6,751 | |||||||||
Forfeited | — | — | ||||||||||
Outstanding at December 31, 2007 | 5,695,769 | 6,956 | 14,404 | |||||||||
Granted | — | — | ||||||||||
Exercised | (342,857 | ) | 5,273 | |||||||||
Forfeited | — | — | ||||||||||
Outstanding at December 31, 2008 | 5,352,912 | 7,064 | 0 | |||||||||
Exercisable at December 31, 2008 | 5,352,912 | 7,064 | 0 | |||||||||
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Shinhan Financial Group | ||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||
Average | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||
Remaining | Average | Average | Remaining | |||||||||||||||||||||
Number | Contractual | Exercise | Number | Exercise | Contractual | |||||||||||||||||||
Exercise Price | Outstanding | Life(1) | Price | Exercisable | Price | Life(1) | ||||||||||||||||||
(In Won) | (In Won) | (In Won) | ||||||||||||||||||||||
165,253 | 0.37 | 11,800 | 165,253 | 11,800 | 0.37 | |||||||||||||||||||
21,595 | 276,623 | 0.23 | 21,595 | 276,623 | 21,595 | 0.23 | ||||||||||||||||||
28,006 | 1,983,258 | 3.25 | 28,006 | 1,983,258 | 28,006 | 3.25 | ||||||||||||||||||
38,829 | 2,765,738 | 4.22 | 38,829 | — | — | — | ||||||||||||||||||
54,560 | 1,157,898 | 5.22 | 54,560 | — | — | — | ||||||||||||||||||
49,053 | 702,860 | 6.21 | 49,053 | — | — | — | ||||||||||||||||||
7,051,630 | 4.06 | 38,078 | 2,425,134 | 26,170 | 1.00 | |||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||||||
Average | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||||||
Remaining | Average | Average | Remaining | |||||||||||||||||||||||||
Number | Contractual | Exercise | Number | Exercise | Contractual | |||||||||||||||||||||||
Exercise Price | Outstanding | Life(1) | Price | Exercisable | Price | Life(1) | ||||||||||||||||||||||
(In Won) | (In Won) | (In Won) | ||||||||||||||||||||||||||
22,350 | 0.23 | 5,000 | 22,350 | 5,000 | 0.23 | |||||||||||||||||||||||
22,350 | 0.23 | 5,000 | 22,350 | 5,000 | 0.23 | |||||||||||||||||||||||
Good Morning Shinhan Securities | ||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||
Average | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||
Remaining | Average | Average | Remaining | |||||||||||||||||||||
Number | Contractual | Exercise | Number | Exercise | Contractual | |||||||||||||||||||
Exercise Price | Outstanding | Life(1) | Price | Exercisable | Price | Life(1) | ||||||||||||||||||
(In Won) | (In Won) | (In Won) | ||||||||||||||||||||||
2,588,355 | 0.10 | 7,640 | 2,588,355 | 7,640 | 0.10 | |||||||||||||||||||
7,085 | 1,434,510 | 0.10 | 7,085 | 1,434,510 | 7,085 | 0.10 | ||||||||||||||||||
5,850 | 605,000 | 0.40 | 5,850 | 605,000 | 5,850 | 0.40 | ||||||||||||||||||
6,040 | 90,000 | 1.08 | 6,040 | 90,000 | 6,040 | 1.08 | ||||||||||||||||||
6,370 | 450,000 | 3.40 | 6,370 | 450,000 | 6,370 | 3.40 | ||||||||||||||||||
5,000 | 185,047 | 0.41 | 5,000 | 185,047 | 5,000 | 0.41 | ||||||||||||||||||
5,352,912 | 0.43 | 7,064 | 5,352,912 | 7,064 | 0.43 | |||||||||||||||||||
(1) | Contractual life indicates the sum of service (vesting) period and exercisable period. |
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28. | Fair Value Measurements |
• | Level 1 —Quoted prices for identical instruments in active markets. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain securities that are highly liquid and are actively traded in over-the-counter markets. | |
• | Level 2 —Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. | |
• | Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurements. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques based on significant unobservable inputs, as well as management judgements or estimates that are significant to valuation. |
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• | Credit valuation adjustments (“CVA”) are necessary when the market price (or parameter) is not indicative of the changes in credit quality of the counterparty. As few classes of derivative contracts are listed on an exchange, the majority of derivative positions are valued using internally developed models and the Group makes an adjustment necessary to reflect the credit quality of each derivative counterparty to arrive at fair value. The adjustment also takes into account contractual factors designed to reduce the Group’s credit exposure to each counterparty, such as collateral and legal rights of offset. | |
• | Debit valuation adjustments (“DVA”) are necessary to reflect the credit quality of the Group in the valuation of liabilities measured at fair value. This adjustment is incorporated into the Group’s valuations in accordance with SFAS 157. The methodology to determine the adjustment is consistent with CVA and incorporates the Group’s credit spread as observed through the credit default swap market. |
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Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In millions of Won) | ||||||||||||||||
Assets measured at fair value | ||||||||||||||||
Trading assets | ||||||||||||||||
Trading securities | 2,156,756 | 4,281,378 | 227,277 | 6,665,411 | ||||||||||||
Derivative instruments | 1,549 | 11,554,585 | 420,660 | 11,976,794 | ||||||||||||
Other trading assets — commodity indexed deposits | — | 58,737 | — | 58,737 | ||||||||||||
Securities | ||||||||||||||||
Available-for-sale securities | 11,196,242 | 18,449,498 | 100,364 | 29,746,104 | ||||||||||||
Other assets | ||||||||||||||||
Hedging derivative instruments | — | 3,801 | — | 3,801 | ||||||||||||
Liabilities measured at fair value | ||||||||||||||||
Trading liabilities | ||||||||||||||||
Derivative instruments | 274 | 11,179,770 | 430,605 | 11,610,649 | ||||||||||||
Other trading liabilities — commodity indexed deposits | — | 220,016 | — | 220,016 | ||||||||||||
Short-term borrowings | ||||||||||||||||
Securities sold short, not yet purchased | 9,417 | — | — | 9,417 | ||||||||||||
Long-term debt | ||||||||||||||||
Equity linked securities sold | — | — | 610,971 | 610,971 | ||||||||||||
Other liabilities | ||||||||||||||||
Hedging derivatives instruments | — | 12 | — | 12 |
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Total Realized/Unrealized | Transfers | |||||||||||||||||||||||||||
Gains (Losses) Recorded in | in and/or | Purchases, | Unrealized | |||||||||||||||||||||||||
January 1, | Trading | Out of | Issuances and | December 31, | Gains (Losses) | |||||||||||||||||||||||
2008 | Revenues | Others(1) | Level 3(2) | Settlements | 2008 | Still Held(3) | ||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||
Trading assets | ||||||||||||||||||||||||||||
Trading securities | 482,354 | (75,948 | ) | — | — | (179,129 | ) | 227,277 | (75,626 | ) | ||||||||||||||||||
Derivatives instruments | 164,648 | 296,635 | — | 52,074 | (92,697 | ) | 420,660 | 386,652 | ||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||
Available-for-sale securities | 164,949 | (6,542 | ) | (48,202 | ) | — | (9,841 | ) | 100,364 | 5,803 | ||||||||||||||||||
Trading liabilities | ||||||||||||||||||||||||||||
Derivatives instruments | 491,425 | 47,642 | — | 33,310 | (46,488 | ) | 430,605 | (98,072 | ) | |||||||||||||||||||
Long-term debt | ||||||||||||||||||||||||||||
Equity linked securities sold | 738,469 | 137,871 | — | — | 10,373 | 610,971 | 204,512 |
(1) | Includes the change in fair value of available-for-sale securities and other investments, change in accumulated other comprehensive income (loss), gains (losses) from sales and impairment losses. | |
(2) | Transfers into or out of Level 3 are made if the inputs used in the financial models measuring the fair values of the assets and liabilities became unobservable or observable, respectively. These transfers are effective as of the beginning of the year, and any gains or losses occurring on these assets and liabilities during the year are presented as Level 3. | |
(3) | Represents the amount of total gains or losses for the year ended December 31, 2008, included in earnings (and accumulated other comprehensive income (loss) for changes in fair value of available-for-sale investments and other investment) attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2008. |
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Level 1 | Level 2 | Level 3 | Impairment Loss | |||||||||||||
(In millions of Won) | ||||||||||||||||
Other assets — other investments | 67,201 | — | 17,755 | 33,206 |
29. | Fair Value of Financial Instruments (SFAS 107 Disclosure) |
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2007 | 2008 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(In millions of Won) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Financial assets for which carrying value approximates fair value | 12,238,681 | 12,238,681 | 12,842,990 | 12,842,990 | ||||||||||||
Interest-bearing deposits in banks | 1,093,830 | 1,093,830 | 1,626,880 | 1,626,880 | ||||||||||||
Held-to-maturity securities | 8,224,279 | 8,166,017 | 8,696,144 | 8,872,951 | ||||||||||||
Loans | 149,722,605 | 149,858,106 | 167,308,055 | 169,075,453 | ||||||||||||
Non-marketable equity investments included in other assets | 1,502,282 | 3,045,605 | 1,686,165 | 2,372,982 | ||||||||||||
Total Financial assets | 172,781,677 | 174,402,239 | 192,160,234 | 194,791,256 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Financial liabilities for which carrying value approximates fair value | 4,341,918 | 4,341,918 | 6,120,236 | 6,120,236 | ||||||||||||
Deposits | 106,403,647 | 105,198,346 | 122,704,495 | 123,416,833 | ||||||||||||
Short-term borrowings | 15,557,046 | 15,557,046 | 23,215,574 | 23,215,574 | ||||||||||||
Secured borrowings | 11,451,665 | 11,464,648 | 10,225,777 | 10,288,417 | ||||||||||||
Long-term debt | 45,757,838 | 44,463,830 | 49,040,735 | 48,609,805 | ||||||||||||
Total Financial liabilities | 183,512,114 | 181,025,788 | 211,306,817 | 211,650,865 | ||||||||||||
30. | Derivative Instruments, Hedging Activities and Credit Derivatives |
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Maximum Payout/Notional Amount | ||||||||||||
Protection Purchased | ||||||||||||
with Identical | ||||||||||||
Protection Sold | Underlyings(1) | Net Protection Sold | ||||||||||
(In millions of Won) | ||||||||||||
Credit derivatives : | ||||||||||||
Credit default swaps | 108,025 | — | 108,025 | |||||||||
Credit linked notes | 37,725 | — | 37,725 |
(1) | Represents the notional amount of purchased credit derivatives where the Group is a protection seller on the identical underlying reference instrument. |
Credit Derivatives Ratings/Maturity Profile | ||||||||||||||||||||
Less than | One to | Over | Total | Fair Value | ||||||||||||||||
One Year | Five Years | Five Years | Notional Amout | Liability(2) | ||||||||||||||||
(In millions of Won) | ||||||||||||||||||||
Risk rating of reference entity : | ||||||||||||||||||||
AAA to BBB-(1) | — | 133,175 | 12,575 | 145,750 | 15,148 |
(1) | The Group consideres ratings of BBB- or higher to meet the definition of investment grade. | |
(2) | Represents the netted amount of credit default swaps included in trading liabilities amounting to |
31. | Commitments and Contingencies |
Years Ending | (In millions of Won) | |||
2009 | 80,889 | |||
2010 | 62,652 | |||
2011 | 51,213 | |||
2012 | 28,487 | |||
2013 | 10,513 | |||
Thereafter | 10,780 | |||
244,534 | ||||
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2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Commitments to extend credit: | ||||||||
Corporate | 65,611,150 | 49,872,646 | ||||||
Credit card | 46,078,856 | 52,577,454 | ||||||
Consumer(1) | 6,967,675 | 8,350,144 | ||||||
Commercial letters of credit | 3,517,684 | 3,005,711 | ||||||
122,175,365 | 113,805,955 | |||||||
(1) | Excludes credit card. |
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Maximum | ||||||||||||||||||||||||
Expire | Expire | Total | Current | Amount of | Potential | |||||||||||||||||||
Within | After | Notional | Carrying | Recourse or | Amount of | |||||||||||||||||||
One | One | Amount | Liability | Collateral | Future | |||||||||||||||||||
Year | Year | Outstanding | Amount(1) | Held | Payments | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Financial stand-by letters of credit | 331,004 | 74,739 | 405,743 | 10,531 | 124,363 | 405,743 | ||||||||||||||||||
Other financial guarantees | 755,130 | 57,213 | 812,343 | 3,616 | 176,212 | 812,343 | ||||||||||||||||||
Performance letters of credit and guarantees | 7,831,213 | 3,719,015 | 11,550,228 | 196,413 | 1,749,505 | 11,550,228 | ||||||||||||||||||
Liquidity facilities to SPEs | 337,300 | 1,753,473 | 2,090,773 | 13,776 | — | 2,090,773 | ||||||||||||||||||
Loans sold with recourse | — | 225 | 225 | 130 | — | 225 | ||||||||||||||||||
Guarantees on trust accounts | 428,032 | 3,098,359 | 3,526,391 | — | — | 3,526,391 | ||||||||||||||||||
9,682,679 | 8,703,024 | 18,385,703 | 224,466 | 2,050,080 | 18,385,703 | |||||||||||||||||||
(1) | Includes allowance for guarantees and liabilities recorded under FIN. 45. |
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2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Restricted cash | 640 | 42,479 | ||||||
Trading securities | 2,374,484 | 2,938,989 | ||||||
Available-for-sale securities | 7,423,344 | 7,342,153 | ||||||
Held-to-maturity securities | 4,674,240 | 5,278,368 | ||||||
Loans | 7,317,202 | 7,687,576 | ||||||
Real estate | 31,252 | 25,298 | ||||||
Other assets | 7,485 | 7,161 | ||||||
21,828,647 | 23,322,024 | |||||||
32. | Concentrations of Geographic and Credit Risks |
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2007 | 2008 | |||||||||||||||||||||||
Credit | On-Balance | Off-Balance | Credit | On-Balance | Off-Balance | |||||||||||||||||||
Exposure | Sheet | Sheet | Exposure | Sheet | Sheet | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Commercial and industrial | 102,010,404 | 48,485,436 | 53,524,968 | 107,999,663 | 55,466,168 | 52,533,495 | ||||||||||||||||||
Other commercial | 58,488,146 | 30,311,497 | 28,176,649 | 52,840,975 | 37,637,026 | 15,203,949 | ||||||||||||||||||
Lease financing | 1,370,092 | 1,370,092 | — | 1,591,437 | 1,591,437 | — | ||||||||||||||||||
Mortgage and home equity | 31,895,982 | 31,495,258 | 400,724 | 36,605,643 | 36,182,970 | 422,673 | ||||||||||||||||||
Credit cards | 60,759,658 | 14,680,802 | 46,078,856 | 67,214,538 | 14,637,084 | 52,577,454 | ||||||||||||||||||
Other consumer | 32,041,738 | 25,474,788 | 6,566,950 | 32,954,245 | 25,026,774 | 7,927,471 | ||||||||||||||||||
286,566,020 | 151,817,873 | 134,748,147 | 299,206,501 | 170,541,459 | 128,665,042 | |||||||||||||||||||
33. | Related Party Transactions |
2007 | 2008 | |||||||
(In millions of Won) | ||||||||
Loans at beginning of the year | 171,763 | 109,557 | ||||||
New loans | 87,068 | 180,232 | ||||||
Repayments | (149,274 | ) | (35,326 | ) | ||||
Loans at end of the year | 109,557 | 254,463 | ||||||
2006 | 2007 | 2008 | ||||||||||||||||||||||
Executives, | Executives, | Executives, | ||||||||||||||||||||||
Directors and | Directors and | Directors and | ||||||||||||||||||||||
Trust | Affiliated | Trust | Affiliated | Trust | Affiliated | |||||||||||||||||||
Accounts | Parties | Accounts | Parties | Accounts | Parties | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
Loans | — | 171,763 | — | 109,557 | — | 254,463 | ||||||||||||||||||
Trust fees payable | 8,846 | — | 5,836 | — | 9,514 | — | ||||||||||||||||||
Short-term borrowings | 957,812 | — | 1,044,059 | — | 929,175 | — | ||||||||||||||||||
Other liabilities | 602 | — | 41,479 | — | 39,365 | — | ||||||||||||||||||
Other interest income | — | — | — | — | — | — | ||||||||||||||||||
Net trust management fees | 70,093 | — | 62,641 | — | 33,567 | — | ||||||||||||||||||
Interest expense on short-term borrowings | 28,267 | — | 44,675 | — | 42,929 | — | ||||||||||||||||||
Interest on loans | — | 3,863 | — | 3,668 | — | 5,844 |
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34. | Segment Reporting |
• | Retail banking— Activities within this segment include savings and demand deposits, consumer loans and mortgages of individual customers and sole proprietors with lending limits of | |
• | Corporate banking — Activities within this segment include loans, overdrafts, other credit facilities, deposits in foreign currencies and other foreign currency activities. The corporate banking segment’s assets and liabilities are mainly from transactions with customers including small and medium sized private companies, publicly traded enterprises and sole proprietors with lending limits greater than | |
• | Treasury and international business— Activities within this segment include Shinhan Bank’s internal asset and liability management, proprietary trading in securities and derivatives, proprietary investment in security portfolios using Shinhan Bank’s capital, and international business. | |
• | Other banking services— Activities within this segment include Shinhan Bank’s impaired loan management, administration of Shinhan Bank, and trust account management services. | |
• | Securities brokerage services— Activities within this segment include a full range of brokerage services, investment advice and financial planning to retail customers, and various investment banking services to corporate customers conducted through Good Morning Shinhan Securities. | |
• | Credit card— Activities within this segment include processing domestic as well as overseas credit and debit card operations conducted through Shinhan Card. The credit card segment’s assets and liabilities are mainly from transactions with individual or corporate cardholders and card merchants. | |
• | Life insurance— Activities within this segment include Shinhan Life Insurance’s providing life-insurance products and financial consulting services, by various sales distributions such as FC, TM, CM and Bancasurance (bank alliances including Shinhan Bank), which meet the needs of individual and group customers who want health insurance, whole life insurance and pension plan, etc. |
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2006 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury & | Other | Securities | Subtotal | US | Inter- | |||||||||||||||||||||||||||||||||||||||||||
Retail | Corporate | International | Banking | Brokerage | Credit | Life | before | GAAP | Segment | |||||||||||||||||||||||||||||||||||||||
Banking | Banking | Business | Services | Services(1) | Card(2) | Insurance | Other | Elimination | Adjustments | Transactions(3) | Total | |||||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 2,273,556 | 833,140 | (171,910 | ) | 612,172 | 66,779 | 717,696 | 227,637 | 58,664 | 4,617,734 | (598,230 | ) | (38,706 | ) | 3,980,798 | |||||||||||||||||||||||||||||||||
Non-interest income | 596,646 | 222,985 | 6,109,968 | 1,033,758 | 1,258,781 | 1,296 | 2,134,346 | 2,436,079 | 13,793,859 | (9,757,104 | ) | (250,102 | ) | 3,786,653 | ||||||||||||||||||||||||||||||||||
Total revenues | 2,870,202 | 1,056,125 | 5,938,058 | 1,645,930 | 1,325,560 | 718,992 | 2,361,983 | 2,494,743 | 18,411,593 | (10,355,334 | ) | (288,808 | ) | 7,767,451 | ||||||||||||||||||||||||||||||||||
Provision(reversal) for credit losses | 291,656 | 141,568 | (13,099 | ) | 44,692 | 2,578 | 92,021 | 2,314 | 49,291 | 611,021 | (384,918 | ) | (257 | ) | 225,846 | |||||||||||||||||||||||||||||||||
Non-interest expense(4) | 1,318,635 | 437,400 | 5,576,739 | 1,194,854 | 1,173,243 | 430,395 | 2,187,251 | 418,108 | 12,736,625 | (7,661,637 | ) | (209,480 | ) | 4,865,508 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 97,557 | 4,456 | 3,638 | 89,217 | 15,637 | 12,318 | 6,619 | 28,560 | 258,002 | 212,805 | — | 470,807 | ||||||||||||||||||||||||||||||||||||
Net income (loss) before tax | 1,162,354 | 472,701 | 370,780 | 317,167 | 134,102 | 184,258 | 165,799 | 1,998,784 | 4,805,945 | (2,521,584 | ) | (79,071 | ) | 2,205,290 | ||||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 336,819 | 133,151 | 104,442 | 89,340 | 37,912 | (47,834 | ) | 44,265 | 29,230 | 727,325 | (79,227 | ) | 1,708 | 649,806 | ||||||||||||||||||||||||||||||||||
Net income (loss) | 825,535 | 339,550 | 266,338 | 227,827 | 96,190 | 232,092 | 121,534 | 1,969,554 | 4,078,620 | (2,442,357 | ) | (80,779 | ) | 1,555,484 | ||||||||||||||||||||||||||||||||||
US GAAP adjustments | 735,044 | (624,388 | ) | (549,431 | ) | 23,600 | 4,698 | 25,761 | (25,608 | ) | (2,032,033 | ) | (2,442,357 | ) | — | — | — | |||||||||||||||||||||||||||||||
Intersegment transactions | (13,536 | ) | (21,975 | ) | (165,196 | ) | (4,516 | ) | 9,848 | 120,492 | 16,645 | (22,541 | ) | (80,779 | ) | — | — | — | ||||||||||||||||||||||||||||||
Consolidated net income (loss) | 1,547,043 | (306,813 | ) | (448,289 | ) | 246,911 | 110,736 | 378,345 | 112,571 | (85,020 | ) | 1,555,484 | — | — | 1,555,484 | |||||||||||||||||||||||||||||||||
Segments’ total assets | 70,533,863 | 33,462,110 | 26,653,700 | 23,557,387 | 4,126,940 | 3,558,415 | 6,225,865 | 25,583,922 | 193,702,202 | (9,569,507 | ) | (9,045,257 | ) | 175,087,438 | ||||||||||||||||||||||||||||||||||
(1) | Securities brokerage business is conducted through Good Morning Shinhan Securities. | |
(2) | Credit card business is conducted through Shinhan Card and the credit card segment in Shinhan Bank(formerly Chohung bank). | |
(3) | Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system. | |
(4) | Includes cumulative effect of change in accounting principle of |
2007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury & | Other | Securities | Subtotal | US | Inter- | |||||||||||||||||||||||||||||||||||||||||||
Retail | Corporate | International | Banking | Brokerage | Credit | Life | before | GAAP | Segment | |||||||||||||||||||||||||||||||||||||||
Banking | Banking | Business | Services | Services(1) | Card(2) | Insurance | Other | Elimination | Adjustments | Transactions(3) | Total | |||||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 2,328,020 | 863,827 | (265,242 | ) | 815,499 | 137,274 | 2,804,150 | 292,659 | 92,810 | 7,068,997 | (1,581,689 | ) | (316,952 | ) | 5,170,356 | |||||||||||||||||||||||||||||||||
Non-interest income | 967,520 | 265,988 | 5,463,967 | 1,766,806 | 1,803,377 | 197,496 | 2,401,362 | 3,414,529 | 16,281,045 | (11,102,429 | ) | (440,410 | ) | 4,738,206 | ||||||||||||||||||||||||||||||||||
Total revenues | 3,295,540 | 1,129,815 | 5,198,725 | 2,582,305 | 1,940,651 | 3,001,646 | 2,694,021 | 3,507,339 | 23,350,042 | (12,684,118 | ) | (757,362 | ) | 9,908,562 | ||||||||||||||||||||||||||||||||||
Provision(reversal) for credit losses | 222,432 | 136,542 | 37,535 | 63,112 | 6,960 | 301,406 | 1,234 | (26,475 | ) | 742,746 | (726,059 | ) | 63,872 | 80,559 | ||||||||||||||||||||||||||||||||||
Non-interest expense | 1,280,449 | 463,689 | 5,855,173 | 1,042,168 | 1,666,125 | 1,539,765 | 2,501,624 | 626,413 | 14,975,406 | (8,726,318 | ) | (221,486 | ) | 6,027,602 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 112,157 | 4,331 | 1,404 | 132,482 | 14,869 | 77,981 | 7,795 | 29,729 | 380,748 | 442,888 | (11,291 | ) | 812,345 | |||||||||||||||||||||||||||||||||||
Net income (loss) before tax | 1,680,502 | 525,253 | (695,387 | ) | 1,344,543 | 252,697 | 1,082,494 | 183,368 | 2,877,672 | 7,251,142 | (3,674,629 | ) | (588,457 | ) | 2,988,056 | |||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 473,033 | 147,850 | (195,740 | ) | 378,466 | 75,920 | 194,420 | 51,335 | (545,223 | ) | 580,061 | 517,298 | (38,915 | ) | 1,058,444 | |||||||||||||||||||||||||||||||||
Net income (loss) | 1,207,469 | 377,403 | (499,647 | ) | 966,077 | 176,777 | 888,074 | 132,033 | 3,422,895 | 6,671,081 | (4,191,927 | ) | (549,542 | ) | 1,929,612 | |||||||||||||||||||||||||||||||||
US GAAP adjustments | 114,637 | 227,325 | (1,059,718 | ) | (36,445 | ) | (30,913 | ) | 55,501 | (138,793 | ) | (3,323,521 | ) | (4,191,927 | ) | — | — | — | ||||||||||||||||||||||||||||||
Intersegment transactions | (1,671 | ) | (359,599 | ) | 5,144 | (644 | ) | 14,860 | (204,560 | ) | 50,391 | (53,463 | ) | (549,542 | ) | — | — | — | ||||||||||||||||||||||||||||||
Consolidated net income (loss) | 1,320,435 | 245,129 | (1,554,221 | ) | 928,988 | 160,724 | 739,015 | 43,631 | 45,911 | 1,929,612 | — | — | 1,929,612 | |||||||||||||||||||||||||||||||||||
Segments’ total assets | 76,218,864 | 38,958,864 | 30,535,586 | 29,392,573 | 6,685,978 | 16,880,921 | 7,410,857 | 45,991,211 | 252,074,854 | (11,470,798 | ) | (18,982,152 | ) | 221,621,904 | ||||||||||||||||||||||||||||||||||
(1) | Securities brokerage business is conducted through Good Morning Shinhan Securities. |
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(2) | Credit card business is conducted through Shinhan Card and the credit card segment in Shinhan Bank(formerly Chohung Bank). | |
(3) | Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system. |
2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shinhan Bank | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury & | Other | Securities | Subtotal | US | Inter- | |||||||||||||||||||||||||||||||||||||||||||
Retail | Corporate | International | Banking | Brokerage | Credit | Life | before | GAAP | Segment | |||||||||||||||||||||||||||||||||||||||
Banking | Banking | Business | Services | Services(1) | Card(2) | Insurance | Other | Elimination | Adjustments | Transactions(3) | Total | |||||||||||||||||||||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 2,309,914 | 2,476,414 | (578,185 | ) | 134,540 | 184,408 | 2,958,371 | 357,085 | (500,365 | ) | 7,342,182 | (1,528,543 | ) | (34,267 | ) | 5,779,372 | ||||||||||||||||||||||||||||||||
Non-interest income | 1,999,084 | 5,339,037 | 27,961,314 | 2,773,492 | 1,531,926 | 631,799 | 2,505,032 | 5,028,456 | 47,770,140 | (42,109,891 | ) | (1,088,832 | ) | 4,571,417 | ||||||||||||||||||||||||||||||||||
Total revenues | 4,309,998 | 7,815,451 | 27,383,129 | 2,908,032 | 1,716,334 | 3,590,170 | 2,862,117 | 4,528,091 | 55,112,322 | (43,638,434 | ) | (1,123,099 | ) | 10,350,789 | ||||||||||||||||||||||||||||||||||
Provision(reversal) for credit losses | 361,749 | 326,219 | (3,660 | ) | 244,541 | 29,009 | 43,110 | 9,189 | 33,407 | 1,043,564 | 457,233 | (64,199 | ) | 1,436,598 | ||||||||||||||||||||||||||||||||||
Non-interest expense | 2,718,954 | 5,426,404 | 27,940,895 | 3,261,292 | 1,463,084 | 2,159,435 | 2,657,719 | 1,071,084 | 46,698,867 | (40,193,949 | ) | (637,773 | ) | 5,867,145 | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | 105,439 | 4,650 | 1,607 | 124,384 | 14,832 | 63,250 | 8,816 | 19,322 | 342,300 | 529,116 | — | 871,416 | ||||||||||||||||||||||||||||||||||||
Net income (loss) before tax | 1,122,856 | 2,058,178 | (555,713 | ) | (722,185 | ) | 209,409 | 1,324,375 | 186,393 | 3,404,278 | 7,027,591 | (4,430,834 | ) | (421,127 | ) | 2,175,630 | ||||||||||||||||||||||||||||||||
Income tax expense (benefit) | 309,441 | 74,099 | (51,527 | ) | 124,396 | 53,108 | 383,800 | 47,160 | 44,888 | 985,365 | (191,269 | ) | (99,165 | ) | 694,931 | |||||||||||||||||||||||||||||||||
Net income (loss) | 813,415 | 1,984,079 | (504,186 | ) | (846,581 | ) | 156,301 | 940,575 | 139,233 | 3,359,390 | 6,042,226 | (4,239,565 | ) | (321,962 | ) | 1,480,699 | ||||||||||||||||||||||||||||||||
US GAAP adjustments | (53,561 | ) | (480,122 | ) | 149,673 | (8,694 | ) | (15,169 | ) | (503,266 | ) | 256,082 | (3,584,508 | ) | (4,239,569 | ) | — | — | — | |||||||||||||||||||||||||||||
Intersegment transactions | 24,855 | (416,592 | ) | (2,033 | ) | 9,177 | (9,375 | ) | 248,781 | 6,717 | (183,492 | ) | (321,962 | ) | — | — | — | |||||||||||||||||||||||||||||||
Consolidated net income (loss) | 784,709 | 1,087,365 | (356,546 | ) | (846,098 | ) | 131,757 | 686,090 | 402,032 | (408,610 | ) | 1,480,699 | — | — | 1,480,699 | |||||||||||||||||||||||||||||||||
Segments’ total assets | 84,746,067 | 46,860,042 | 50,672,104 | 31,290,886 | 7,315,710 | 17,051,579 | 8,517,262 | 48,041,984 | 294,495,634 | (15,492,069 | ) | (18,030,432 | ) | 260,973,133 | ||||||||||||||||||||||||||||||||||
(1) | Securities brokerage business is conducted through Good Morning Shinhan Securities. | |
(2) | Credit card business is conducted through Shinhan Card. | |
(3) | Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system. |
35. | Trust Accounts |
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36. | Securitizations and Variable Interest Entities |
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Asset-Backed | Guaranteed Fixed | |||||||||||||||
Securitizations | Investment Trusts | Rate Money Trusts | Total | |||||||||||||
(In millions of Won) | ||||||||||||||||
December 31, 2007 | ||||||||||||||||
Consolidated Assets | ||||||||||||||||
Loans | 6,929,270 | — | 712 | 6,929,982 | ||||||||||||
Securities | 3,480,354 | 1,756,183 | 1,735 | 5,238,272 | ||||||||||||
Other assets | 542,822 | 117,540 | 11,292 | 671,654 | ||||||||||||
Total Assets(1) | 10,952,446 | 1,873,273 | 13,739 | 12,839,908 | ||||||||||||
December 31, 2008 | ||||||||||||||||
Consolidated Assets | ||||||||||||||||
Loans | 7,359,077 | 43,720 | 599 | 7,403,396 | ||||||||||||
Securities | 2,627,863 | 1,680,910 | 1,787 | 4,310,560 | ||||||||||||
Other assets | 500,497 | 191,689 | 3,483 | 695,669 | ||||||||||||
Total Assets(1) | 10,487,437 | 1,916,319 | 5,869 | 12,409,625 | ||||||||||||
Consolidated Liabilities | ||||||||||||||||
Total Liabilities(1) | 5,155,354 | 6,035 | 6,991 | 5,168,380 | ||||||||||||
(1) | Total assets and total liabilities of consolidated VIEs are reported net of intercompany balances that have been eliminated in consolidation. |
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Guaranteed | ||||||||||||||||||||||||
Principal | ||||||||||||||||||||||||
SPEs Created | Money Trusts | |||||||||||||||||||||||
Asset-Backed | for Structured | Investment | & Performance | Other | ||||||||||||||||||||
Securitizations | Financing | Trusts | Based Trusts | Vehicles | Total | |||||||||||||||||||
(In millions of Won) | ||||||||||||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||
Maximum exposure to loss(1) | 5,494,596 | 12,224,085 | 187,000 | 3,543,665 | 765,463 | 22,214,809 | ||||||||||||||||||
Total assets of VIEs | 21,193,107 | 28,140,755 | 489,187 | 3,672,727 | 11,053,949 | 64,549,725 | ||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Maximum exposure to loss(1) | 4,757,476 | 12,014,374 | 1,495,887 | 3,510,352 | 1,609,127 | 23,387,216 | ||||||||||||||||||
Total assets of VIEs | 16,611,636 | 27,685,011 | 7,744,614 | 3,687,839 | 12,522,675 | 68,251,775 | ||||||||||||||||||
On-Balance Sheet Assets | ||||||||||||||||||||||||
Loans | 1,821,505 | 6,536,367 | — | — | 141,078 | 8,498,950 | ||||||||||||||||||
Securities | 1,218,770 | 160,582 | 833,148 | — | 200,680 | 2,413,180 | ||||||||||||||||||
Other assets | 27,907 | 4,230 | 53 | — | 663 | 32,853 | ||||||||||||||||||
Total | 3,068,182 | 6,701,179 | 833,201 | — | 342,421 | 10,944,983 | ||||||||||||||||||
On-Balance Sheet Liabilities | 17,525 | 4,998 | 32 | — | 2,241 | 24,796 | ||||||||||||||||||
(1) | The Group’s maximum exposure to loss often differs from the carrying amount of assets and liabilities in Group’s balance sheet that relate to the Group’s variable interest in the VIEs. The maximum exposure to loss is dependent on the nature of the Group’s variable interest in the VIEs and is limited to the notional amounts of certain liquidity facilities, other credit support, derivatives and investments the Group has made in the VIEs. |
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37. | Other Comprehensive Income |
Foreign | Net Unrealized | Accumulated | ||||||||||
Currency | Gain on | Other | ||||||||||
Translation | Available-for- | Comprehensive | ||||||||||
Adjustments | Sale Securities | Income | ||||||||||
(In millions of Won) | ||||||||||||
Balance at January 1, 2006 | (24,447 | ) | (75,750 | ) | (100,197 | ) | ||||||
Foreign currency translation adjustment, net of tax effect of | (13,315 | ) | — | (13,315 | ) | |||||||
Unrealized net gains on available-for-sale securities, net of tax effect of | — | 86,961 | 86,961 | |||||||||
Reclassifications from other comprehensive income to net income, net of tax effect | — | 167,434 | 167,434 | |||||||||
Balance at December 31, 2006 | (37,762 | ) | 178,645 | 140,883 | ||||||||
Cumulative adjustment for accounting change, net of tax effect of | — | 274 | 274 | |||||||||
Foreign currency translation adjustment, net of tax effect of | 7,958 | — | 7,958 | |||||||||
Unrealized net gains on available-for-sale securities, net of tax effect of | — | 696,471 | 696,471 | |||||||||
Reclassifications from other comprehensive income to net income, net of tax effect | — | (83,386 | ) | (83,386 | ) | |||||||
Balance at December 31, 2007 | (29,804 | ) | 792,004 | 762,200 | ||||||||
Foreign currency translation adjustment, net of tax effect of | 142,257 | — | 142,257 | |||||||||
Unrealized net losses on available-for-sale securities, net of tax effect of | — | (214,571 | ) | (214,571 | ) | |||||||
Reclassifications from other comprehensive income to net income, net of tax effect | — | (94,405 | ) | (94,405 | ) | |||||||
Balance at December 31, 2008 | 112,453 | 483,028 | 595,481 | |||||||||
38. | Shinhan Financial Group Co., Ltd. |
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2006 | 2007 | 2008 | ||||||||||
(In millions of Won) | ||||||||||||
Cash dividends paid by: | ||||||||||||
Consolidated subsidiaries | 465,525 | 489,990 | 1,931,865 | |||||||||
Equity method investees | 5,616 | 4,915 | 12,010 | |||||||||
471,141 | 494,905 | 1,943,875 | ||||||||||
2007 | 2008 | |||||||
(In millions of Korean Won) | ||||||||
Assets | ||||||||
Deposits with banking subsidiary | 131,994 | 670,815 | ||||||
Receivables from subsidiaries: | ||||||||
Non-banking subsidiaries | 1,415,000 | 2,410,000 | ||||||
Investment (at equity) in subsidiaries: | ||||||||
Banking subsidiaries | 11,799,398 | 12,693,260 | ||||||
Non-banking subsidiaries | 11,654,325 | 10,353,528 | ||||||
Premises and equipment | 1,545 | 2,237 | ||||||
Other assets | 173,997 | 206,928 | ||||||
Total assets | 25,176,259 | 26,336,768 | ||||||
Liabilities and stockholders’ equity | ||||||||
Short-term debt | 1,255,000 | 1,155,300 | ||||||
Long-term debt | 6,888,270 | 7,411,010 | ||||||
Accrued expenses and other liabilities | 122,897 | 118,390 | ||||||
Total liabilities | 8,266,167 | 8,684,700 | ||||||
Stockholders’ equity | 16,910,092 | 17,652,068 | ||||||
Total liabilities and stockholders’ equity | 25,176,259 | 26,336,768 | ||||||
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2006 | 2007 | 2008 | ||||||||||
(In millions of Korean Won) | ||||||||||||
Income | ||||||||||||
Dividends from banking subsidiaries | 428,412 | 301,123 | 406,516 | |||||||||
Dividends from non banking subsidiaries | 42,729 | 193,782 | 1,537,359 | |||||||||
Interest income from banking subsidiaries | 3,977 | — | 7,329 | |||||||||
Interest income from non banking subsidiaries | 75,173 | 63,762 | 116,914 | |||||||||
Other income | 19,189 | 54,408 | 148,008 | |||||||||
Total income | 569,480 | 613,075 | 2,216,126 | |||||||||
Expenses | ||||||||||||
Interest expense | 239,115 | 401,342 | 442,683 | |||||||||
Salaries and employee benefits | 15,641 | 33,720 | 4,813 | |||||||||
Other expense | 36,154 | 23,042 | 44,445 | |||||||||
Total expenses | 290,910 | 458,104 | 491,941 | |||||||||
Income before income tax expense (benefit) and undistributed net income of subsidiaries | 278,570 | 154,971 | 1,724,185 | |||||||||
Income tax expense (benefit) | (12,610 | ) | 33,235 | 14,560 | ||||||||
Income before undistributed net income of subsidiaries | 291,180 | 121,736 | 1,709,625 | |||||||||
Equity in undistributed net income of subsidiaries: | ||||||||||||
Banking subsidiaries | 925,639 | 967,433 | 261,237 | |||||||||
Non-banking subsidiaries | 338,665 | 840,443 | (490,163 | ) | ||||||||
Net income | 1,555,484 | 1,929,612 | 1,480,699 | |||||||||
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2006 | 2007 | 2008 | ||||||||||
(In millions of Korean Won) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income | 1,555,484 | 1,929,612 | 1,480,699 | |||||||||
Less: Net income of subsidiaries | (1,735,446 | ) | (2,302,781 | ) | (1,714,949 | ) | ||||||
Parent Company net loss | (179,962 | ) | (373,169 | ) | (234,250 | ) | ||||||
Depreciation on premises and equipment | 857 | 714 | 811 | |||||||||
Grant of stock options | (1,872 | ) | — | — | ||||||||
Cash dividends from subsidiaries and equity method investees | 471,141 | 494,905 | 1,943,875 | |||||||||
Interest expense | 28,675 | 29,088 | 27,208 | |||||||||
Unrealized foreign exchange gain | (5,838 | ) | — | — | ||||||||
Unrealized foreign exchange loss | 5,838 | — | — | |||||||||
Other assets, net (excluding assets for LG Card acquisition) | (6,463 | ) | 27,131 | 8,427 | ||||||||
Accrued expense and other liabilities, net | (38,498 | ) | 35,480 | (5,062 | ) | |||||||
Net cash provided by operating activities | 273,878 | 214,149 | 1,741,009 | |||||||||
Cash flows from investing activities | ||||||||||||
Changes in receivables from subsidiaries | 293,140 | (229,928 | ) | (995,000 | ) | |||||||
Increase in investment in subsidiaries | — | (7,215,876 | ) | (967,011 | ) | |||||||
Decrease in investment in subsidiaries | — | — | 977,471 | |||||||||
Net change in premises and equipment | (87 | ) | (556 | ) | (1,503 | ) | ||||||
Increase in other assets (relating to LG Card acquisition in 2007) | (519,318 | ) | (16,190 | ) | (45,678 | ) | ||||||
Net cash used in investing activities | (226,265 | ) | (7,462,550 | ) | (1,031,721 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Net change in short-term debt | 34,812 | 1,135,000 | (99,700 | ) | ||||||||
Proceeds from issuance of long-term debt | 2,300,000 | 3,350,000 | 1,480,000 | |||||||||
Repayments of long-term debt | (1,700,131 | ) | (972,362 | ) | (978,763 | ) | ||||||
Proceed from the issuance of stock | — | 3,736,238 | — | |||||||||
Net change in treasury stock | (29 | ) | (48 | ) | — | |||||||
Cash dividends paid | (278,078 | ) | (336,994 | ) | (572,004 | ) | ||||||
Net cash provided by (used in) financing activities | 356,574 | 6,911,834 | (170,467 | ) | ||||||||
Net increase(decrease) in cash and due from banks | 404,187 | (336,567 | ) | 538,821 | ||||||||
Cash and due from banks, beginning of year | 64,374 | 468,561 | 131,994 | |||||||||
Cash and due from banks, end of year | 468,561 | 131,994 | 670,815 | |||||||||
Cash paid for interest | 210,441 | 375,573 | 421,180 |
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39. | Subsequent Events |
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1 | .1 | Articles of Incorporation, last amended as of March 17, 2009 (in English)† | ||
2 | .1 | Form of Common Stock Certificate (in English)†* | ||
2 | .2 | Form of Deposit Agreement to be entered into among Shinhan Financial Group, Citibank, N.A., as depositary, and all owners and holders from time to time of American depositary shares issued thereunder, including the form of American depositary receipt* | ||
2 | .3 | Long-term debt instruments of Shinhan Financial Group, Shinhan Bank and other consolidated subsidiaries for which financial statements are required to be filed are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Shinhan Financial Group agrees to furnish the Commission on request a copy of any instrument defining the rights of holders of its long-term debt and that of any subsidiary for which consolidated or unconsolidated financial statements are required to be filed.* | ||
4 | .1 | Stock Purchase Agreement by and between Korea Deposit Insurance Corporation and Shinhan Financial Group dated July 9, 2003** | ||
4 | .2 | Investment Agreement by and between Shinhan Financial Group and Korea Deposit Insurance Corporation dated July 9, 2003* | ||
4 | .3 | Agreed Terms, dated June 22, 2004, by and among the President of Korea Deposit Insurance Corporation, CEO of Shinhan Financial Group, CEO of Chohung Bank, Chairman of the National Financial Industry Labor Union of Korea and the Head of the Chohung Bank Chapter of the National Financial Industry Labor Union* | ||
4 | .4 | Merger Agreement between Shinhan Bank and Chohung Bank (in English)†*** | ||
4 | .5 | Split-Merger Agreement between Shinhan Card and Chohung Bank (in English)†*** | ||
4 | .6 | Form of Share Purchase Agreement, dated January 17, 2006, by and between Shinhan Financial Group and the holders of the redeemable preferred shares and the redeemable convertible shares issued by Shinhan Financial Group as part of the funding for the acquisition of LG Card Co., Ltd. (in English)†*** | ||
4 | .7 | LG Card Acquisition Agreement, dated 2006, between Korea Development Bank and 13 other financial institutions, on the one hand, and Shinhan Financial Group†**** | ||
8 | .1 | List of all subsidiaries of Shinhan Financial Group | ||
12 | .1 | Certifications of our Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act | ||
12 | .2 | Certifications of our Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act | ||
13 | .1 | Certifications of our Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) | ||
13 | .2 | Certifications of our Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350) |
† | A fair and accurate translation from Korean into English. | |
* | Incorporated by reference to the registrant’s previous filing on Form 20-F(No. 001-31798), filed on September 15, 2003. | |
** | Incorporated by reference to the registrant’s previous filing on Form 20-F(No. 001-31798), filed on September 15, 2003. Confidential treatment has been requested for certain portions of the Stock Purchase Agreement. | |
*** | Incorporated by reference to the registrant’s previous filing on Form 20-F(No. 001-31798), filed on June 30, 2006. | |
**** | Incorporated by reference to registrant’s previous filing onForm 20-F(No. 001-31798), filed on June 30, 2008. |
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