EX-99.2 Shinhan Financial Group Review Report for the 3Q of 2023 (Seperate)
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Financial Statements
September 30, 2023 and 2022
(Unaudited)
Contents
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Report on Review of Interim Financial Statements |
| 1 |
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Separate Interim Statements of Financial Position |
| 3 |
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Separate Interim Statements of Comprehensive Income |
| 4 |
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Separate Interim Statements of Changes in Equity |
| 5 |
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Separate Interim Statements of Cash Flows |
| 6 |
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Notes to the Separate Interim Financial Statements |
| 8 |
Independent Auditors’ Review Report
Based on a report originally issued in Korean
The Board of Directors and Stockholders
Shinhan Financial Group Co., Ltd.:
Reviewed Financial Statements
We have reviewed the accompanying separate interim financial statements of Shinhan Financial Group Co., Ltd. (the “Company”), which comprise the separate interim statement of financial position as of September 30, 2023, the separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2023, and the separate interim statements of changes in equity and cash flows for the nine-month period ended September 30, 2023, and notes, comprising a summary of material accounting policy information and other explanatory information.
Management's Responsibility
Management is responsible for the preparation and fair presentation of these separate interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Review Responsibility
Our responsibility is to issue a report on these separate interim financial statements based on our review.
We conducted our review in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting.
Other Matters
The procedures and practices utilized in the Republic of Korea to review such separate interim financial statements may differ from those generally accepted and applied in other countries.
The accompanying separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2022, and the separate interim statements of changes in equity and cash flows for the nine-month period ended September 30, 2022, were reviewed by another auditor and their report thereon, dated November 14, 2022, expressed that nothing was found for them to believe those financial statements are not presented fairly, in all material respects, in accordance with K-IFRS No. 1034 Interim Financial Reporting.
The separate statement of financial position of the Company as of December 31, 2022, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended (not presented herein) were audited by another auditor in accordance with Korean Standards on Auditing and their report thereon, dated March 6, 2023, expressed an unqualified opinion. The accompanying separate statement of financial position of the Company as of December 31, 2022, presented for comparative purposes, is consistent, in all material respects, with the audited separate statement of financial position from which it has been derived.
KPMG Samjong Accounting Corp.
November 14, 2023
Seoul, Korea
This report is effective as of November 14, 2023, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. |
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Financial Position
As of September 30, 2023 and December 31, 2022
(In millions of Korean won) |
| Notes |
| September 30, 2023 (Unaudited) |
| December 31, 2022 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and due from banks at amortized cost |
| 4, 5, 24 | W | 20 |
| 2,187 |
Financial assets at fair value through profit or loss |
| 4, 6, 24 |
| 2,735,814 |
| 1,778,475 |
Loans at amortized cost |
| 4, 7, 24 |
| 4,109,353 |
| 4,009,467 |
Property and equipment |
| 24 |
| 7,212 |
| 5,820 |
Intangible assets |
| 24 |
| 5,719 |
| 5,591 |
Investments in subsidiaries |
| 8 |
| 30,730,353 |
| 30,730,364 |
Net defined benefit assets |
| 11 |
| - |
| 1,746 |
Deferred tax assets |
|
|
| - |
| 18,311 |
Other assets |
| 4, 7, 24 |
| 742,057 |
| 904,353 |
Total assets |
|
| W | 38,330,528 |
| 37,456,314 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Borrowings |
| 4, 9, 23 | W | 64,664 |
| 20,000 |
Debt securities issued |
| 4, 10, 23, 24 |
| 10,930,932 |
| 9,815,457 |
Net defined benefit liabilities |
| 11 |
| 687 |
| - |
Deferred tax liabilities |
|
|
| 3,810 |
| - |
Other liabilities |
| 4, 24 |
| 781,011 |
| 944,308 |
Total liabilities |
|
|
| 11,781,104 |
| 10,779,765 |
|
|
|
|
|
|
|
Equity |
| 12 |
|
|
|
|
Capital stock |
|
|
| 2,969,641 |
| 2,969,641 |
Hybrid bonds |
|
|
| 4,001,731 |
| 4,196,968 |
Capital surplus |
|
|
| 11,350,744 |
| 11,350,819 |
Capital adjustments |
|
|
| (148,464) |
| (46,114) |
Accumulated other comprehensive loss |
|
|
| (5,980) |
| (5,210) |
Retained earnings |
|
|
| 8,381,752 |
| 8,210,445 |
Total equity |
|
|
| 26,549,424 |
| 26,676,549 |
Total liabilities and equity |
|
| W | 38,330,528 |
| 37,456,314 |
See accompanying notes to the separate interim financial statements.
3
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Comprehensive Income
For the three-month and nine-month periods ended September 30, 2023 and 2022
(In millions of Korean won, except earnings per share data) |
| Notes |
| September 30, 2023 (Unaudited) |
| September 30, 2022 (Unaudited) | ||||
|
|
|
| Three-month |
| Nine- month |
| Three- month |
| Nine- month |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| 21, 24 | W | 23,471 |
| 69,012 |
| 22,752 |
| 63,950 |
Interest expense |
| 24 |
| (75,424) |
| (206,318) |
| (57,684) |
| (161,165) |
Net interest expense |
| 13 |
| (51,953) |
| (137,306) |
| (34,932) |
| (97,215) |
|
|
|
|
|
|
|
|
|
|
|
Fees and commission income |
| 21, 24 |
| 17,382 |
| 52,140 |
| 18,680 |
| 52,762 |
Fees and commission expense |
| 24 |
| (39) |
| (396) |
| (293) |
| (454) |
Net fees and commission income |
| 14 |
| 17,343 |
| 51,744 |
| 18,387 |
| 52,308 |
|
|
|
|
|
|
|
|
|
|
|
Dividend income |
| 15, 21, 24 |
| 12,659 |
| 1,773,089 |
| 8,704 |
| 1,461,953 |
Net gain (loss) on financial instruments at fair value through profit or loss |
| 21 |
| 19,868 |
| 103,748 |
| (39,178) |
| (128,036) |
Net foreign currency transaction gain |
|
|
| 3,451 |
| 25,748 |
| 77,780 |
| 138,429 |
Reversal of (provision for) credit loss allowance |
| 16, 21 |
| (142) |
| 1,294 |
| (653) |
| 163 |
General and administrative expense |
| 17, 24 |
| (30,783) |
| (93,128) |
| (31,755) |
| (93,462) |
|
|
|
|
|
|
|
|
|
|
|
Operating income (expense) |
|
|
| (29,557) |
| 1,725,189 |
| (1,647) |
| 1,334,140 |
|
|
|
|
|
|
|
|
|
|
|
Non-operating income |
|
|
| 533 |
| 218 |
| 4,197 |
| 4,116 |
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) before income taxes |
|
|
| (29,024) |
| 1,725,407 |
| 2,550 |
| 1,338,256 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
| 19 |
| (1,718) |
| 22,390 |
| 7,422 |
| (7,502) |
Profit (loss) for the period |
|
|
| (27,306) |
| 1,703,017 |
| (4,872) |
| 1,345,758 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) for the period, net of income tax Items that will not be reclassified to profit or loss: |
|
|
|
|
|
|
|
|
|
|
Remeasurements of the defined benefit liabilities (assets) |
|
|
| - |
| (770) |
| - |
| 1,078 |
Total comprehensive income (loss) for the period |
|
| W | (27,306) |
| 1,702,247 |
| (4,872) |
| 1,346,836 |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share in Korean won |
| 20 | W | (151) |
| 2,995 |
| (94) |
| 2,311 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the separate interim financial statements.
4
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Changes in Equity
For the nine-month periods ended September 30, 2023 and 2022
(In millions of Korean won) |
| Capital stock |
| Hybrid bonds |
| Capital surplus |
| Capital adjust-ments |
| Accumulated other comprehen-sive loss |
| Retained earnings |
| Total |
Balance at January 1, 2022 | W | 2,969,641 |
| 3,334,531 |
| 11,350,819 |
| (45,797) |
| (7,253) |
| 8,803,435 |
| 26,405,376 |
Total comprehensive income for the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
| - |
| - |
| - |
| - |
| - |
| 1,345,758 |
| 1,345,758 |
Other comprehensive income |
| - |
| - |
| - |
| - |
| 1,078 |
| - |
| 1,078 |
|
| - |
| - |
| - |
| - |
| 1,078 |
| 1,345,758 |
| 1,346,836 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends |
| - |
| - |
| - |
| - |
| - |
| (747,705) |
| (747,705) |
Quarterly dividends |
| - |
| - |
| - |
| - |
| - |
| (425,434) |
| (425,434) |
Dividends to hybrid bonds |
| - |
| - |
| - |
| - |
| - |
| (117,058) |
| (117,058) |
Redemption of hybrid bonds |
| - |
| (134,683) |
| - |
| (317) |
| - |
| - |
| (135,000) |
Issuance of hybrid bonds |
| - |
| 997,120 |
| - |
| - |
| - |
| - |
| 997,120 |
Acquisition of treasury stock |
| - |
| - |
| - |
| (150,300) |
| - |
| - |
| (150,300) |
Retirement of treasury stock |
| - |
| - |
| - |
| 150,300 |
| - |
| (150,329) |
| (29) |
|
| - |
| 862,437 |
| - |
| (317) |
| - |
| (1,440,526) |
| (578,406) |
Balance at September 30, 2022 (Unaudited) | W | 2,969,641 |
| 4,196,968 |
| 11,350,819 |
| (46,114) |
| (6,175) |
| 8,708,667 |
| 27,173,806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2023 | W | 2,969,641 |
| 4,196,968 |
| 11,350,819 |
| (46,114) |
| (5,210) |
| 8,210,445 |
| 26,676,549 |
Total comprehensive income for the period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
| - |
| - |
| - |
| - |
| - |
| 1,703,017 |
| 1,703,017 |
Other comprehensive loss |
| - |
| - |
| - |
| - |
| (770) |
| - |
| (770) |
|
| - |
| - |
| - |
| - |
| (770) |
| 1,703,017 |
| 1,702,247 |
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends |
| - |
| - |
| - |
| - |
| - |
| (455,215) |
| (455,215) |
Quarterly dividends |
| - |
| - |
| - |
| - |
| - |
| (546,486) |
| (546,486) |
Dividends to hybrid bonds |
| - |
| - |
| - |
| - |
| - |
| (142,893) |
| (142,893) |
Redemption of hybrid bonds |
| - |
| (1,092,883) |
| - |
| (102,667) |
| - |
| - |
| (1,195,550) |
Transfer of redemption loss of hybrid bonds to retained earnings |
| - |
| - |
| - |
| 317 |
| - |
| (317) |
| - |
Issuance of hybrid bonds |
| - |
| 897,646 |
| - |
| - |
| - |
| - |
| 897,646 |
Acquisition of treasury stock |
| - |
| - |
| - |
| (386,719) |
| - |
| - |
| (386,719) |
Retirement of treasury stock |
| - |
| - |
| - |
| 386,719 |
| - |
| (386,799) |
| (80) |
Preferred stock converted to common stock |
| - |
| - |
| (75) |
| - |
| - |
| - |
| (75) |
|
| - |
| (195,237) |
| (75) |
| (102,350) |
| - |
| (1,531,710) |
| (1,829,372) |
Balance at September 30, 2023 (Unaudited) | W | 2,969,641 |
| 4,001,731 |
| 11,350,744 |
| (148,464) |
| (5,980) |
| 8,381,752 |
| 26,549,424 |
See accompanying notes to the separate interim financial statements.
5
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Cash Flows
For the nine-month periods ended September 30, 2023 and 2022
|
|
|
| Nine-month periods ended September 30 | ||
(In millions of Korean won) |
| Notes |
| 2023 (Unaudited) |
| 2022 (Unaudited) |
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Profit for the period |
|
| W | 1,703,017 |
| 1,345,758 |
Adjustments for: |
|
|
|
|
|
|
Interest income |
| 13, 21 |
| (69,012) |
| (63,950) |
Interest expense |
| 13 |
| 206,318 |
| 161,165 |
Dividend income |
| 15, 21 |
| (1,773,089) |
| (1,461,953) |
Income tax benefit (expense) |
| 19 |
| 22,390 |
| (7,502) |
Net gain (loss) on financial instruments at fair value through profit or loss |
|
|
| (78,184) |
| 139,545 |
Reversal of credit loss allowance |
| 16, 21 |
| (1,294) |
| (163) |
Employee benefits |
|
|
| 3,811 |
| 3,732 |
Depreciation and amortization |
| 17 |
| 2,901 |
| 2,405 |
Net foreign currency translation gain |
|
|
| (4,253) |
| (128,299) |
Non-operating expense (income) |
|
|
| 4 |
| (4,834) |
|
|
|
| (1,690,408) |
| (1,359,854) |
Changes in assets and liabilities: |
|
|
|
|
|
|
Due from banks |
|
|
| - |
| 41,000 |
Financial instruments at fair value through profit or loss |
|
|
| (561,147) |
| (364,299) |
Other assets |
|
|
| (424) |
| 446 |
Net defined benefit liabilities (assets) |
|
|
| (25) |
| 1,671 |
Other liabilities |
|
|
| (8,238) |
| (3,901) |
|
|
|
| (569,834) |
| (325,083) |
|
|
|
|
|
|
|
Interest received |
|
|
| 73,545 |
| 69,514 |
Interest paid |
|
|
| (198,940) |
| (161,890) |
Dividends received |
|
|
| 1,768,431 |
| 1,459,078 |
Income tax paid (refund) |
|
|
| 515 |
| (1,532) |
Net cash provided by operating activities |
|
|
| 1,086,326 |
| 1,025,991 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Acquisition of financial assets at fair value through profit or loss |
|
|
| (300,000) |
| (400,000) |
Lending of loans at amortized cost |
|
|
| (203,361) |
| (420,000) |
Collection of loans at amortized cost |
|
|
| 200,000 |
| 450,000 |
Acquisition of property and equipment |
|
|
| (1,947) |
| (2,535) |
Acquisition of intangible assets |
|
|
| (205) |
| - |
Increase in other assets |
|
|
| (1,440) |
| (864) |
Decrease in other assets |
|
|
| 1,112 |
| 990 |
Acquisition of investments in subsidiaries |
|
|
| 11 |
| (310,175) |
Disposal of assets held-for-sale |
|
|
| - |
| 20,354 |
Net cash used in investing activities |
|
| W | (305,830) |
| (662,230) |
6
SHINHAN FINANCIAL GROUP CO., LTD.
Separate Interim Statements of Cash Flows (Continued)
For the nine-month periods ended September 30, 2023 and 2022
|
|
|
| Nine-month periods ended September 30 | ||
(In millions of Korean won) |
| Notes |
| 2023 (Unaudited) |
| 2022 (Unaudited) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Issuance of hybrid bonds |
|
| W | 897,646 |
| 997,120 |
Redemption of hybrid bonds |
|
|
| (1,195,550) |
| (135,000) |
Issuance of debt securities |
|
|
| 2,153,339 |
| 1,637,479 |
Repayments of debt securities issued |
|
|
| (1,149,626) |
| (1,446,000) |
Increase in borrowings |
|
|
| 163,763 |
| 20,000 |
Decrease in borrowings |
|
|
| (120,000) |
| - |
Conversion costs for preferred stock to common stock |
|
|
| (75) |
| - |
Dividends paid |
|
|
| (1,144,090) |
| (1,289,590) |
Acquisition of treasury stock |
|
|
| (386,719) |
| (150,300) |
Retirement costs for treasury stock |
|
|
| (81) |
| (29) |
Repayments of leased liabilities |
|
|
| (1,272) |
| (1,259) |
Net cash used in financing activities |
|
|
| (782,665) |
| (367,579) |
|
|
|
|
|
|
|
Effect on the exchange rate changes of cash equivalents in foreign currency |
|
|
| - |
| 2 |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
| (2,169) |
| (3,816) |
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
| 23 |
| 2,186 |
| 3,961 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
| 23 | W | 17 |
| 145 |
|
|
|
|
|
|
|
See accompanying notes to the separate interim financial statements.
7
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
1. Reporting entity
Shinhan Financial Group Co., Ltd. (hereinafter referred to as "the Company") was established on September 1, 2001 for the main business purposes such as control and management of companies operating in the financial industry, and financial support for subsidiaries. In addition, the stocks were listed on the Korea Exchange on September 10, 2001, and the Company was registered with the Securities and Exchange Commission (SEC) on September 16, 2003, and on the same date, ADS (American Depositary Shares) was listed on the New York Stock Exchange (NYSE).
2. Basis of preparation
The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (K-IFRS). The accompanying separate interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
The separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies of the Republic of Korea. These separate interim financial statements were prepared in accordance with K-IFRS No.1034, ‘Interim Financial Reporting’ as part of the period covered by the Company’s K-IFRS annual financial statements and contain less information than required in the annual separate financial statements. Selective comments include a description of transactions or events that are significant in understanding the changes in the financial position and management performance of the Company that occurred after December 31, 2022.
The separate interim financial statements of the Company are separate financial statements prepared in accordance with K-IFRS No. 1027 ‘Separate Financial Statements’, in which the controlling company, investors in associates or joint ventures account for their investments on the basis of direct equity investments, not on the investee’s reported performance and net assets.
(b) Use of estimates and judgments
The preparation of the separate interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, incomes and expenses. If the estimates and assumptions based on management's judgment as of the end of the interim reporting period differ from the actual circumstances, the related actual results may differ from these estimates.
Estimates and underlying assumptions about estimates are continually reviewed, and changes in accounting estimates are recognized for the period in which the estimates are changed and the period to be affected in the future. Income tax expense in the interim period is measured by applying the expected annual income tax rate, i.e. the estimated average annual effective income tax rate.
In preparing the separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the separate financial statements as of and for the year ended December 31, 2022 except for the method of estimation used to determine the income tax expense for the interim period.
8
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
3. Significant accounting policies
(a) The Company applies the same accounting policies applied as when preparing the annual separate financial statements for the year ended December 31, 2022, except for the following amendments that have been applied for the first time since January 1, 2023 and as described in Note 2(b).
i) Amendments to K-IFRS No. 1001 'Presentation of Financial Statements' –Disclosure of Accounting Policies
The amendments define material accounting policy information and require disclosure of material accounting policy information. The Company expects that the amendments will not have a significant impact on the separate financial statements.
ii) Amendments to K-IFRS No. 1001 'Presentation of Financial Statements'– Disclosure of profit or loss on assessment of financial liability with exercise price adjusting term
The amendments require disclosure of the carrying amount of financial liabilities and the related gain or loss, if all or part of financial instruments with the adjustable exercise price are classified as financial liabilities. The Company expects that the amendments will not have a significant impact on the separate financial statements.
iii) Amendments to K-IFRS No. 1008 ‘Accounting Policies, Changes in Accounting Estimates and Errors’– Definition of Accounting Estimates
The amendments define accounting estimates and clarify the way to distinguish changes in accounting policies from changes in accounting estimates. The Company expects that the amendments will not have a significant impact on the separate financial statements.
iv) Amendments to K-IFRS No. 1012 ‘Income Taxes’- Deferred Tax related to Assets and Liabilities arising from a Single Transaction
The amendments add a requirement to the initial recognition exemption by requiring entities to recognize the deferred tax on transactions that give rise to equal amounts of taxable and deductible temporary differences. The amendments will not have a significant impact on the separate financial statements.
i) Amendments to K-IFRS 1001 ‘Presentation of Financial Statements’ amended - Classification of Liabilities as Current or Non- current
The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2024, and earlier application is permitted. The Company currently reviews the effects of the amendments on its financial statements.
9
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
4. Financial risk management
(a) Overview
As a financial services provider, Shinhan Financial Group Co., Ltd. and its subsidiaries (hereinafter referred to as the “Group”) are exposed to various risks that may occur in each business area, and the main risks are credit risk, market risk, interest rate risk and liquidity risk. These risks are recognized, measured, controlled and reported in accordance with the basic risk management policies established by the controlling company and each subsidiary.
i) Risk management organization
The Group's basic policies and strategies for risk management are established by the Risk Management Committee (hereinafter referred to as the “Group Risk Management Committee”) within the board of directors of the controlling company. The Group's Chief Risk Management Officer (CRO) assists the Group Risk Management Committee and discusses risk policies and strategies of the group and each subsidiary through the Group Risk Council, which consists of each subsidiary's Chief Risk Management Officer. Subsidiaries implement the group's risk policies and strategies through risk management committees, risk-related working committees, and risk management organizations for each company, and consistently establish and implement detailed risk policies and strategies for subsidiaries. The risk management team of the controlling company performs the risk management and supervision by assisting the Group's Chief Risk Manager.
Shinhan Financial Group has a hierarchical limit system to manage the group's risks at an appropriate level. The Group Risk Management Committee sets the risk limits that can be borne by the group and each subsidiary, and the risk management committees and management level risk groups of each subsidiary establish and manage detailed risk limits by types of risk, departments, desks, and products.
ii) Risk management framework
ii-1) Risk capital management
Risk capital refers to capital necessary to compensate for losses in case of a potential risk being realized, and risk capital management refers to the process of asset management based on considerations of risk exposure and risk appetite, which is a datum point on the level of risk burden compared to available capital. As part of the Group’s risk capital management, the Group has adopted and maintains various risk planning processes and reflects such risk planning in the Group’s business and financial planning. The Group also has adopted and maintains a risk limit management system to ensure that risks in the Group’s business do not exceed prescribed limits.
ii-2) Risk monitoring
The Group proactively, preemptively, and periodically reviews risks that may impact our overall operations through a multidimensional risk monitoring system. Currently, each subsidiary is required to report to the Company any factors that could have a material impact on the group-wide risk management, and the Company reports to the Group’s Chief Risk Officer and other members of the Group’s senior management the results of risk monitoring on a weekly, monthly and on an ad hoc basis as needed.
In addition, the Group performs preemptive risk management through a “risk dashboard system” under which the Group closely monitors any increase in asset size, risk levels and sensitivity to external factors with respect to the major asset portfolios of each subsidiary, and to the extent such monitoring yields any warning signals, the Group promptly analyze the causes and, if necessary, formulates and implements actions in response to these warning signals.
ii-3) Risk review
The risk management departments of all subsidiaries are required to review in advance on matters relating to the adoption of new financial transactions, relating to the entry into new business concerning investment and capital increase, and relating to the settlement and change of limits. Through these reviews, risk factors are reviewed in advance, reckless promotion of business that may not easily detect risk factors are barred, and reasonable decision-making is supported.
4. Financial risk management (continued)
10
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(a) Overview (continued)
The risk management departments of all subsidiaries are required to review all new businesses, products and services prior to their launch and closely monitor the development of any related risks following their launch, and in the case of any action that involves more than one subsidiary, the relevant risk management departments are required to consult with the risk management team at the controlling company level prior to making any independent risk reviews.
ii-4) Crisis management
The Group maintains a group-wide risk management system to detect the signals of any risk crisis and to respond on a timely, efficient and flexible basis in the event of a crisis actually happening, so as to ensure the Group’s survival as a going concern. Each subsidiary maintains crisis planning for four levels of contingencies, namely, “caution”, “alert”, “imminent crisis” and “crisis”. Such contingency levels are determined based on quantitative and qualitative monitoring and consequence analysis, and upon the occurrence of any such contingency, each subsidiary is required to respond according to a prescribed contingency plan. At the controlling company level, the Company maintains and installs crisis detection and response system which is applied consistently group-wide, and upon the occurrence of any contingency at two or more subsidiary level, the Company directly takes charge of the situation so that the Company manages it on a concerted group-wide basis.
11
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
4. Financial risk management (continued)
(b) Credit risk
i) Credit risk management
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. The Company’s credit risk management encompasses all areas of credit that may result in potential economic loss, including not just transactions that are recorded on balance sheets, but also off-balance-sheet transactions such as guarantees, loan commitments and derivative transactions.
< Techniques, assumptions and input variables used to measure impairment>
i-1) Determining significant increases in credit risk since initial recognition
At the end of each reporting period, the Company assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Company uses the change in the risk of default over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort and indicative of significant increases in credit risk since initial recognition.
i-1-1) Measuring the risk of default
The Company assigns an internal credit risk rating to each individual exposure based on observable data and historical experiences that have been found to have a reasonable correlation with the risk of default. The internal credit risk rating is determined by considering both qualitative and quantitative factors that indicate the risk of default, which may vary depending on the nature of the exposure and the type of borrower.
i-1-2) Measuring term structure of probability of default
Internal credit rate is a key input variable for determining term structure of probability of default. The Company accumulates information after analyzing the information regarding exposure to credit risk and default information by the type of product and borrower and results of internal credit risk assessment. For some portfolios, the Company uses information obtained from external credit rating agencies when performing these analyses. The Company applies statistical techniques to estimate the probability of default for the remaining life of the exposure from the accumulated data and to estimate changes in the estimated probability of default over time.
12
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
4. Financial risk management (continued)
(b) Credit risk (continued)
i) Credit risk management (continued)
i-1-3) Significant increases in credit risk
The Company uses the indicators defined as per portfolio to determine the significant increase in credit risk, and such indicators generally consist of changes in the risk of default estimated from changes in the internal credit risk rating, qualitative factors, days of delinquency and others.
i-2) Risk of default
The Company considers a financial asset to be in default if it meets one or more of the following conditions:
- if a borrower is overdue by 90 days or more from the contractual payment date
- if the Company judges that it is not possible to recover principal and interest without enforcing the collateral on a financial asset
The Company uses the following indicators when determining whether a borrower is in default:
- qualitative factors (e.g. breach of contract terms)
- quantitative factors (e.g. If the same borrower does not perform more than one payment obligations to the Company, the number of days past due per payment obligation. However, in the case of a specific portfolio, the Company uses the number of days past due for each financial instrument)
- internal data and external data
The definition of default applied by the Company generally conforms to the definition of default defined for regulatory capital management purposes; however, depending on the situations, the information used to determine whether a default has incurred and the extent thereof may vary.
i-3) Reflection of forward-looking information
The Company reflects forward-looking information presented by internal experts based on a variety of information when measuring expected credit losses. For the purpose of estimating this forward-looking information, the Company utilizes the economic outlook published by domestic and overseas research institutes or government and public agencies.
The Company identified the key macroeconomic variables needed to forecast credit risk and credit losses for each portfolio by analyzing data obtained from past experience and drew correlations across credit risk for each variable. After that, the Company reflected the forward-looking information through regression estimation. To reflect internal and external economic uncertainty, the Company reviewed the worst scenario in addition to the 3 scenarios of upside, central and downside to reflect the final forward-looking information.
Key macroeconomic variables |
| Correlation with credit risk |
GDP growth rate (YoY %) |
| (-) |
Private consumption index growth rate (YoY %) |
| (-) |
Index of equipment investment growth rate (YoY %) |
| (-) |
Consumer price index growth rate (%) |
| (+) |
Balance on current account ($0.1 billion) |
| (-) |
The predicted correlations between the macroeconomic variables and the risk of default used by the Company are derived based on the data from the past more than ten years.
4. Financial risk management (continued)
13
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(b) Credit risk (continued)
i) Credit risk management (continued)
i-4) Measurement of expected credit losses
Key variables used in measuring expected credit losses are as follows:
- Probability of default (“PD”)
- Loss given default (“LGD”)
- Exposure at default (“EAD”)
These variables have been estimated from historical experience data by using the statistical techniques developed internally by Shinhan Bank and have been adjusted to reflect forward-looking information.
Estimates of PD over a specified period are estimated by reflecting characteristics of counterparties and their exposure, based on a statistical model at a specific point of time and considering the distribution of ratings, so that the counterparty or exposure is not concentrated on a specific rating.
LGD refers to the expected loss if a borrower defaults. The Company calculates LGD based on the experience recovery rate measured from past default exposures. The model for measuring LGD is developed to reflect type of collateral, seniority of collateral, type of borrower, and cost of recovery. In particular, LGD for retail loan products uses loan to value (LTV) as a key variable. The recovery rate reflected in the LGD calculation is based on the present value of recovery amount, discounted at the effective interest rate.
EAD refers to the expected exposure at the time of default. The Company derives EAD reflecting a rate at which the current exposure is expected to be used additionally up to the point of default within the contractual limit. EAD of financial assets is equal to the total carrying amount of the asset, and EAD of loan commitments or financial guarantee contracts is calculated as the sum of the amount expected to be used in the future.
In measuring expected credit losses on financial assets, the Company uses the contractual maturity as the period subject to expected credit loss measurement. The contractual maturity is computed taking into account the extension right held by the borrower.
Risk factors of PD, LGD and EAD are collectively estimated according to the following criteria:
- Type of products
- Internal credit risk rating
- Type of collateral
- Loan to value (“LTV”)
- Industry that the borrower belongs to
- Location of the borrower or collateral
- Days of delinquency
The criteria for classifying groups are periodically reviewed to maintain the homogeneity of the group and adjusted if necessary. The Company uses external benchmark information to supplement internal information for a particular portfolio that did not have sufficient internal data accumulated from past experience.
14
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(b) Credit risk (continued)
i) Credit risk management (continued)
i-5) Write-off of financial assets
The Company writes off a portion of or entire loan or debt security for which the Company does not expect to receive its principal and interest. In general, the Company writes off the balance when it is deemed that the borrower has no sufficient resources or income to repay the principal and interest. Such determination on write-off is carried out in accordance with the internal rules of the Company and is carried out with the approval of the Financial Supervisory Service, if necessary. The Company may continue to exercise its right of collection under its own recovery policy even after the write-off of financial assets.
ii) The Company’s maximum exposure to credit risk without taking into account of any collateral held or other credit enhancements as of September 30, 2023 and December 31, 2022 are as follows:
|
|
| September 30, 2023 |
| December 31, 2022 |
Due from banks and loans at amortized cost(*1): | Banks | W | 20 |
| 2,187 |
Corporations |
| 4,109,353 |
| 4,009,467 | |
|
| 4,109,373 |
| 4,011,654 | |
Financial assets at fair value through profit or loss |
| 1,512,923 |
| 932,091 | |
Other financial assets at amortized cost (*1)(*2) |
| 740,093 |
| 902,881 | |
|
| W | 6,362,389 |
| 5,846,626 |
(*1) The maximum exposure amounts for due from banks, loans and other financial assets at amortized cost are measured as net of allowances.
(*2) It is comprised of accounts receivable, accrued income and guarantee deposits.
15
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(b) Credit risk (continued)
iii) Information of financial assets by credit risk
Financial assets by credit risk as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||||
|
| 12-month ECL |
| Lifetime ECL |
| Gross amount |
| Allowance |
| Total, net |
Due from banks and loans at amortized cost (*): |
|
|
|
|
|
|
|
|
|
|
Banks | W | 20 |
| - |
| 20 |
| - |
| 20 |
Corporations |
| 4,111,280 |
| - |
| 4,111,280 |
| (1,927) |
| 4,109,353 |
|
| 4,111,300 |
| - |
| 4,111,300 |
| (1,927) |
| 4,109,373 |
Other financial assets at amortized cost |
| 740,316 |
| - |
| 740,316 |
| (223) |
| 740,093 |
| W | 4,851,616 |
| - |
| 4,851,616 |
| (2,150) |
| 4,849,466 |
|
| December 31, 2022 | ||||||||
|
| 12-month ECL |
| Lifetime ECL |
| Gross amount |
| Allowance |
| Total, net |
Due from banks and loans at amortized cost (*): |
|
|
|
|
|
|
|
|
|
|
Banks | W | 2,189 |
| - |
| 2,189 |
| (2) |
| 2,187 |
Corporations |
| 4,012,304 |
| - |
| 4,012,304 |
| (2,837) |
| 4,009,467 |
|
| 4,014,493 |
| - |
| 4,014,493 |
| (2,839) |
| 4,011,654 |
Other financial assets at amortized cost |
| 903,486 |
| - |
| 903,486 |
| (605) |
| 902,881 |
| W | 4,917,979 |
| - |
| 4,917,979 |
| (3,444) |
| 4,914,535 |
(*) The credit quality of due from banks and loans is divided into Prime and Normal. The credit quality of due from banks and loans as of September 30, 2023 and December 31, 2022 was classified as Prime. The distinction between grade Prime and Normal is as follows:
Type of borrower |
| Corporations and banks |
Grade: 1. Prime |
| Internal credit rating of BBB+ or above |
Grade: 2. Normal |
| Internal credit rating of below BBB+ |
16
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(c) Liquidity risk
Liquidity risk refers to the risk of unexpected losses (such as the disposal of assets abnormal pricing, the procurement of high interest rates, etc.) or insolvency due to inconsistency in funding periods between assets and liabilities or a sudden outflow of funds.
According to the Financial Holding Companies Act, the Company manages liquidity so that the total amount of assets with a residual maturity of less than one month exceeds the total amount of liabilities with a residual maturity of less than one month as of the end of each month.
Contractual maturities for non-derivative financial liabilities as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||||||||
|
| Less than 1 month |
| 1 ~ 3 months |
| 3 ~ 6 months |
| 6 months ~ 1 year |
| 1 ~ 5 years |
| More than 5 years |
| Total |
Non-derivative financial liabilities (*) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings | W | 50,000 |
| - |
| 15,000 |
| - |
| - |
| - |
| 65,000 |
Debt securities issued |
| 502,261 |
| 120,014 |
| 332,179 |
| 1,356,192 |
| 8,474,440 |
| 1,222,737 |
| 12,007,823 |
Other financial liabilities |
| 53,780 |
| 2,077 |
| 1,058 |
| 408,695 |
| 713 |
| - |
| 466,323 |
| W | 606,041 |
| 122,091 |
| 348,237 |
| 1,764,887 |
| 8,475,153 |
| 1,222,737 |
| 12,539,146 |
|
|
December 31, 2022 | ||||||||||||
|
| Less than 1 month |
| 1 ~ 3 months |
| 3 ~ 6 months |
| 6 months ~ 1 year |
| 1 ~ 5 years |
| More than 5 years |
| Total |
Non-derivative financial liabilities (*) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings | W | - |
| 20,000 |
| - |
| - |
| - |
| - |
| 20,000 |
Debt securities issued |
| 118,327 |
| 410,000 |
| 521,135 |
| 850,040 |
| 7,128,979 |
| 1,625,108 |
| 10,653,589 |
Other financial liabilities |
| 24,039 |
| 6,602 |
| 131,488 |
| 1,079 |
| 107,906 |
| - |
| 271,114 |
| W | 142,366 |
| 436,602 |
| 652,623 |
| 851,119 |
| 7,236,885 |
| 1,625,108 |
| 10,944,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) The amounts include both principal and interest cash flows of financial liabilities.
17
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(d) Measurement of the fair value of financial instruments
The fair values of financial instruments being traded in an active market are determined by the published market prices of each period end. The published market prices of financial instruments being held by the Company are based on the trading agencies’ notifications. If the market for a financial instrument is not active, such as OTC (Over The Counter market) derivatives, fair value is determined either by using a valuation technique or independent third-party valuation service.
The Company uses its judgement to select a variety of methods and make rational assumptions that are mainly based on market conditions existing at the end of each reporting period. The fair value of financial instruments is determined using valuation techniques such as a method of using recent transactions between independent parties with reasonable judgement and willingness to trade or a method of referring to the current fair value of other financial instruments that are substantially identical, discounted cash flow model and option pricing models.
The Company classifies and discloses fair value of financial instruments into the following three-level hierarchy:
Level 1: Financial instruments measured at quoted prices from active markets are classified as fair value level 1.
Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.
Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.
i) Financial instruments measured at fair value
i-1) The fair value hierarchy of financial assets which are presented at their fair value in the statements of financial position as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets |
|
|
|
|
|
|
|
|
Financial assets measured at fair value through profit or loss | W | - |
| 1,512,923 |
| 1,222,891 |
| 2,735,814 |
|
| December 31, 2022 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets |
|
|
|
|
|
|
|
|
Financial assets measured at fair value through profit or loss | W | - |
| 932,091 |
| 846,384 |
| 1,778,475 |
18
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(d) Measurement of the fair value of financial instruments (continued)
i) Financial instruments measured at fair value (continued)
i-2) Changes in level 3 of the fair value hierarchy
- Changes in level 3 of the fair value hierarchy for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
| September 30, 2023 | |||
|
| Financial assets measured |
| |
|
| at FVTPL |
| |
Beginning balance | W | 846,384 |
| |
Recognized in profit or loss |
| 76,507 |
| |
Purchases |
| 300,000 |
| |
Ending balance | W | 1,222,891 |
| |
|
|
| ||
|
| December 31, 2022 | ||
|
| Financial assets measured |
| Net derivative instruments |
|
| at FVTPL |
| held for trading |
Beginning balance | W | 564,387 |
| 11,670 |
Recognized in profit or loss |
| (118,003) |
| 10,578 |
Purchases |
| 400,000 |
| - |
Payment |
| - |
| (22,248) |
Ending balance | W | 846,384 |
| - |
i-3) Valuation techniques and input variables unobservable in markets
i-3-1) The valuation techniques and the fair value measurement input variables of financial instruments classified as level 2 as of September 30, 2023 and December 31, 2022 are as follows:
| Classification |
| Valuation techniques |
| Type |
| Book value |
| Inputs |
2023 | Financial assets measured at FVTPL |
| Net asset valuation approach |
| Beneficiary certificates | W |
1,512,923 |
| Prices of underlying assets such as stocks, bonds and exchange rates |
2022 | Financial assets measured at FVTPL |
| Net asset valuation approach |
| Beneficiary certificates | W |
932,091 |
| Prices of underlying assets such as stocks, bonds and exchange rates |
19
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(d) Measurement of the fair value of financial instruments (continued)
i-3-2) Information about valuation techniques and significant unobservable inputs in measuring financial instruments categorized as level 3 as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||||
|
| Valuation technique |
| Type of financial instrument |
| Book value |
| Significant unobservable input |
| Range of estimates for unobservable input |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Financial assets |
|
|
|
|
|
|
|
| ||
Financial assets measured at FVTPL |
| Option model(*) |
| Hybrid bonds | W | 1,222,891 |
| Volatility of interest rate |
| 0.56%~1.37% |
(*) It is calculated by applying the Hull-White model.
|
| December 31, 2022 | ||||||||
|
| Valuation technique |
| Type of financial instrument |
| Book value |
| Significant unobservable input |
| Range of estimates for unobservable input |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Financial assets |
|
|
|
|
|
|
|
| ||
Financial assets measured at FVTPL |
| Option model(*) |
| Hybrid bonds | W | 846,384 |
| Volatility of interest rate
|
| 0.72%~1.47% |
(*) It is calculated by applying the Hull-White model.
20
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(d) Measurement of the fair value of financial instruments (continued)
i) Financial instruments measured at fair value (continued)
i-4) Sensitivity to changes in unobservable input variables
- For level 3 fair value measurement, effect on profit (loss) followed by changing one or more of the unobservable inputs to reasonably possible alternative assumptions as of September 30, 2023 and December 31, 2022 are as follows:
|
|
| September 30, 2023 | ||
Type of financial instrument |
| Profit (loss) for the year | |||
|
| Favorable change |
| Unfavorable change | |
Financial assets measured at FVTPL(*) | Financial assets at fair value through profit or loss | W | 867 |
| (1,039) |
(*) Based on 10% increase or decrease on interest rate volatility, which is the major unobservable input.
|
|
| December 31, 2022 | ||
Type of financial instrument |
| Profit (loss) for the year | |||
|
| Favorable change |
| Unfavorable change | |
Financial assets measured at FVTPL(*) | Financial assets at fair value through profit or loss | W | 989 |
| (1,149) |
(*) Based on 10% increase or decrease on interest rate volatility, which is the major unobservable input.
ii) The financial instruments measured at amortized cost
ii-1) The methods of measuring the fair value of financial instruments measured at amortized cost are as follows:
Type |
| Measurement methods of fair value |
Due from banks |
| The carrying amount and the fair value for cash are identical and most of deposits are floating interest rate deposit or the next day deposit of a short-term instrument. For this reason, the carrying value approximates fair value. |
Loans |
| The fair value of the loans is measured by discounting the expected cash flow at the market interest rate and credit risk of the borrower, etc. |
Borrowings and debt securities issued |
| The fair value of borrowings and debt securities issued is based on the published price quotations in an active market. In case there is no data for an active market price, it is measured by discounting the contractual cash flow at the market interest rate that takes into account the residual risk. |
21
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(d) Measurement of the fair value of financial instruments (continued)
ii) The financial instruments measured at amortized cost (continued)
ii-2) The carrying value and fair value of the financial instruments measured at amortized cost as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 | ||||
|
| Carrying value |
| Fair value |
| Carrying value |
| Fair value |
Assets: |
|
|
|
|
|
|
|
|
Due from banks at amortized cost | W | 20 |
| 20 |
| 2,187 |
| 2,187 |
Loans at amortized cost |
| 4,109,353 |
| 3,955,232 |
| 4,009,467 |
| 3,676,855 |
Other financial assets |
| 740,093 |
| 740,093 |
| 902,881 |
| 902,881 |
| W | 4,849,466 |
| 4,695,345 |
| 4,914,535 |
| 4,581,923 |
Liabilities: |
|
|
|
|
|
|
|
|
Borrowings | W | 64,664 |
| 64,311 |
| 20,000 |
| 19,922 |
Debt securities issued |
| 10,930,932 |
| 10,561,631 |
| 9,815,457 |
| 9,196,089 |
Other financial liabilities |
| 512,007 |
| 512,007 |
| 314,613 |
| 314,613 |
| W | 11,507,603 |
| 11,137,949 |
| 10,150,070 |
| 9,530,624 |
ii-3) The fair value hierarchy of financial assets and liabilities which are not measured at their fair values in the statements of financial position but disclosed at their fair values as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets: |
|
|
|
|
|
|
|
|
Due from banks at amortized cost | W | 17 |
| 3 |
| - |
| 20 |
Loans at amortized cost |
| - |
| - |
| 3,955,232 |
| 3,955,232 |
Other financial assets |
| - |
| - |
| 740,093 |
| 740,093 |
| W | 17 |
| 3 |
| 4,695,325 |
| 4,695,345 |
Liabilities: |
|
|
|
|
|
|
|
|
Borrowings | W | - |
| 64,311 |
| - |
| 64,311 |
Debt securities issued |
| - |
| 10,561,631 |
| - |
| 10,561,631 |
Other financial liabilities |
| - |
| - |
| 512,007 |
| 512,007 |
| W | - |
| 10,625,942 |
| 512,007 |
| 11,137,949 |
|
| December 31, 2022 | ||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Assets: |
|
|
|
|
|
|
|
|
Due from banks at amortized cost | W | 2,184 |
| 3 |
| - |
| 2,187 |
Loans at amortized cost |
| - |
| - |
| 3,676,855 |
| 3,676,855 |
Other financial assets |
| - |
| - |
| 902,881 |
| 902,881 |
| W | 2,184 |
| 3 |
| 4,579,736 |
| 4,581,923 |
Liabilities: |
|
|
|
|
|
|
|
|
Borrowings | W | - |
| 19,922 |
| - |
| 19,922 |
Debt securities issued |
| - |
| 9,196,089 |
| - |
| 9,196,089 |
Other financial liabilities |
| - |
| - |
| 314,613 |
| 314,613 |
| W | - |
| 9,216,011 |
| 314,613 |
| 9,530,624 |
22
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(d) Measurement of the fair value of financial instruments (continued)
ii) The financial instruments measured at amortized cost (continued)
ii-4) Information on valuation technique and inputs used as of September 30, 2023 and December 31, 2022 in measuring financial instruments not measured at fair value classified as level 2 or 3 are as follows:
|
| September 30, 2023 | ||||
|
| Valuation technique |
| Fair value |
| Inputs |
Assets: |
|
|
|
|
|
|
Due from banks at amortized cost |
| - | W | 3 |
| - |
Loans at amortized cost |
| DCF |
| 3,955,232 |
| Discount rate Exchange rate |
Other financial assets |
| DCF |
| 740,093 |
| Discount rate Exchange rate |
|
|
| W | 4,695,328 |
|
|
Liabilities: |
|
|
|
|
|
|
Borrowings |
| DCF | W | 64,311 |
| Discount rate |
Debt securities issued |
| DCF |
| 10,561,631 |
| Discount rate Exchange rate |
Other financial liabilities |
| DCF |
| 512,007 |
| Discount rate Exchange rate |
|
|
| W | 11,137,949 |
|
|
|
| December 31, 2022 | ||||
|
| Valuation technique |
| Fair value |
| Inputs |
Assets: |
|
|
|
|
|
|
Due from banks at amortized cost |
| - | W | 3 |
| - |
Loans at amortized cost |
| DCF |
| 3,676,855 |
| Discount rate Exchange rate |
Other financial assets |
| DCF |
| 902,881 |
| Discount rate Exchange rate |
|
|
| W | 4,579,739 |
|
|
Liabilities: |
|
|
|
|
|
|
Borrowings |
| DCF | W | 19,922 |
| Discount rate |
Debt securities issued |
| DCF |
| 9,196,089 |
| Discount rate Exchange rate |
Other financial liabilities |
| DCF |
| 314,613 |
| Discount rate Exchange rate |
|
|
| W | 9,530,624 |
|
|
23
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
4. Financial risk management (continued)
(e) Classification by categories of financial instruments
Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of each category of financial assets and financial liabilities as of September 30, 2023 and December 31, 2022 are as follows:
|
|
September 30, 2023 | ||||
|
| Financial assets measured at fair value through profit or loss |
| Financial assets measured at amortized cost |
| Financial liabilities measured at amortized cost |
Assets: |
|
|
|
|
|
|
Cash and due from banks at amortized cost | W | - |
| 20 |
| - |
Financial assets at fair value through profit or loss |
| 2,735,814 |
| - |
| - |
Loans at amortized cost |
| - |
| 4,109,353 |
| - |
Other financial assets at amortized cost |
| - |
| 740,093 |
| - |
| W | 2,735,814 |
| 4,849,466 |
| - |
Liabilities: |
|
|
|
|
|
|
Borrowings | W | - |
| - |
| 64,664 |
Debt securities issued |
| - |
| - |
| 10,930,932 |
Other financial liabilities |
| - |
| - |
| 512,007 |
| W | - |
| - |
| 11,507,603 |
|
|
December 31, 2022 | ||||
|
| Financial assets measured at fair value through profit or loss |
| Financial assets measured at amortized cost |
| Financial liabilities measured at amortized cost |
Assets: |
|
|
|
|
|
|
Cash and due from banks at amortized cost | W | - |
| 2,187 |
| - |
Financial assets at fair value through profit or loss |
| 1,778,475 |
| - |
| - |
Loans at amortized cost |
| - |
| 4,009,467 |
| - |
Other financial assets at amortized cost |
| - |
| 902,881 |
| - |
| W | 1,778,475 |
| 4,914,535 |
| - |
Liabilities: |
|
|
|
|
|
|
Borrowings | W | - |
| - |
| 20,000 |
Debt securities issued |
| - |
| - |
| 9,815,457 |
Other financial liabilities |
| - |
| - |
| 314,613 |
| W | - |
| - |
| 10,150,070 |
24
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
5. Restricted due from banks
Guaranteed deposits on bank accounts that are subject to restriction as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Overdraft deposit | W | 3 |
| 3 |
6. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Beneficiary certificates |
|
|
|
|
Beneficiary certificates in Korean won | W | 1,479,368 |
| 862,693 |
Beneficiary certificates in foreign currency |
| 33,555 |
| 69,398 |
| W | 1,512,923 |
| 932,091 |
Hybrid bonds |
|
|
|
|
Hybrid bonds in Korean won |
| 902,852 |
| 561,078 |
Hybrid bonds in foreign currency |
| 320,039 |
| 285,306 |
| W | 1,222,891 |
| 846,384 |
| W | 2,735,814 |
| 1,778,475 |
7. Loans measured at amortized cost
(a) Loans measured at amortized cost as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
|
| December 31, 2022 |
Corporate loans – working capital | W | 4,111,280 |
|
| 4,012,304 |
Less: allowance |
| (1,927) |
|
| (2,837) |
| W | 4,109,353 |
|
| 4,009,467 |
25
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
7. Financial assets at amortized cost (continued)
(b) Changes in financial assets at amortized cost and other assets for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||||||||
|
| Loans at amortized cost |
| Due from banks at amortized cost & other financial assets |
|
| ||||||||
|
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance | W | 4,012,304 |
| - |
| - |
| 905,675 |
| - |
| - |
| 4,917,979 |
Transfer to 12-month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Origination |
| 205,000 |
| - |
| - |
| - |
| - |
| - |
| 205,000 |
Collection |
| (200,000) |
| - |
| - |
| - |
| - |
| - |
| (200,000) |
Others (*) |
| 93,976 |
| - |
| - |
| (165,339) |
| - |
| - |
| (71,363) |
Ending balance | W | 4,111,280 |
| - |
| - |
| 740,336 |
| - |
| - |
| 4,851,616 |
(*) Other changes are due to changes in dividends receivables of subsidiaries, changes in consolidated tax receivables, changes in accrued income, changes in foreign exchange rate, etc.
|
| December 31, 2022 | ||||||||||||
|
| Loans at amortized cost |
| Due from banks at amortized cost & other financial assets |
|
| ||||||||
|
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance | W | 3,980,753 |
| - |
| - |
| 843,202 |
| - |
| - |
| 4,823,955 |
Transfer to 12-month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Origination |
| 500,000 |
| - |
| - |
| - |
| - |
| - |
| 500,000 |
Collection |
| (568,000) |
| - |
| - |
| - |
| - |
| - |
| (568,000) |
Others (*) |
| 99,551 |
| - |
| - |
| 62,473 |
| - |
| - |
| 162,024 |
Ending balance | W | 4,012,304 |
| - |
| - |
| 905,675 |
| - |
| - |
| 4,917,979 |
(*) Other changes are due to changes in dividends receivables of subsidiaries, changes in consolidated tax receivables, changes in accrued income, changes in foreign exchange rate, etc.
26
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
7. Financial assets at amortized cost (continued)
(c) Changes in credit loss allowance of in financial assets at amortized cost and other assets for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||||||||
|
| Loans at amortized cost |
| Due from banks at amortized cost & other financial assets |
|
| ||||||||
|
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning allowance | W | 2,837 |
| - |
| - |
| 607 |
| - |
| - |
| 3,444 |
Transfer to 12-month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Reversal of allowance |
| (910) |
| - |
| - |
| (384) |
| - |
| - |
| (1,294) |
Ending allowance | W | 1,927 |
| - |
| - |
| 223 |
| - |
| - |
| 2,150 |
|
| December 31, 2022 | ||||||||||||
|
| Loans at amortized cost |
| Due from banks at amortized cost & other financial assets |
|
| ||||||||
|
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| 12-month expected credit loss |
| Lifetime expected credit loss |
| Impaired financial asset |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning allowance | W | 4,694 |
| - |
| - |
| 832 |
| - |
| - |
| 5,526 |
Transfer to 12-month expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to lifetime expected credit loss |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Transfer to impaired financial asset |
| - |
| - |
| - |
| - |
| - |
| - |
| - |
Reversal of allowance |
| (1,857) |
| - |
| - |
| (225) |
| - |
| - |
| (2,082) |
Ending allowance | W | 2,837 |
| - |
| - |
| 607 |
| - |
| - |
| 3,444 |
27
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
8. Investments in subsidiaries
Investments in subsidiaries as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 | ||||
Investees |
| Ownership percentage (%) |
| Carrying value |
| Ownership percentage (%) |
| Carrying value |
Shinhan Bank |
| 100.0 | W | 13,617,579 |
| 100.0 | W | 13,617,579 |
Shinhan Card Co., Ltd. |
| 100.0 |
| 7,919,672 |
| 100.0 |
| 7,919,672 |
Shinhan Securities Co., Ltd. |
| 100.0 |
| 3,001,420 |
| 100.0 |
| 3,001,420 |
Shinhan Life Insurance Co., Ltd. |
| 100.0 |
| 4,204,533 |
| 100.0 |
| 4,204,544 |
Shinhan Capital Co., Ltd. |
| 100.0 |
| 558,921 |
| 100.0 |
| 558,921 |
Shinhan Asset Management Co., Ltd. |
| 100.0 |
| 326,206 |
| 100.0 |
| 326,206 |
Jeju Bank |
| 75.3 |
| 179,643 |
| 75.3 |
| 179,643 |
Shinhan Savings Bank |
| 100.0 |
| 157,065 |
| 100.0 |
| 157,065 |
Shinhan Asset Trust Co. Ltd. |
| 100.0 |
| 429,491 |
| 100.0 |
| 429,491 |
Shinhan DS |
| 100.0 |
| 23,026 |
| 100.0 |
| 23,026 |
Shinhan Fund Partners Co., Ltd. (*) |
| 99.8 |
| 50,092 |
| 99.8 |
| 50,092 |
Shinhan REITs Management Co., Ltd. |
| 100.0 |
| 30,000 |
| 100.0 |
| 30,000 |
Shinhan AI Co., Ltd. |
| 100.0 |
| 42,000 |
| 100.0 |
| 42,000 |
Shinhan Venture Investment Co., Ltd. |
| 100.0 |
| 75,840 |
| 100.0 |
| 75,840 |
Shinhan EZ General Insurance, Ltd. |
| 85.1 |
| 106,210 |
| 85.1 |
| 106,210 |
SHC Management Co., Ltd. |
| 100.0 |
| 8,655 |
| 100.0 |
| 8,655 |
|
|
| W | 30,730,353 |
|
| W | 30,730,364 |
(*) On April 3, 2023, Shinhan AITAS Co., Ltd. has changed its name to Shinhan Fund Partners Co., Ltd.
9. Borrowings
Borrowings as of September 30, 2023 and December 31, 2022 are as follows:
|
|
|
|
| September 30, 2023 |
| December 31, 2022 | ||||
| Lender |
| Period |
| Interest rate (%) |
| Amount |
| Interest rate (%) |
| Amount |
Borrowings in Korean won | Daol Investment & Securities Co., Ltd. |
| 2022.02.03 ~2023.02.02 |
| 2.25 | W | - |
| 2.25 | W | 20,000 |
Kiwoom Securities Co., Ltd. |
| 2023.02.02 ~2024.02.01 |
| 3.79 |
| 14,807 |
| - |
| - | |
Hanyang Securities Co., Ltd. |
| 2023.06.26 ~2023.10.26 |
| 4.01 |
| 49,857 |
| - |
| - | |
|
|
|
|
|
| W | 64,664 |
|
| W | 20,000 |
28
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
10. Debt securities issued
Debt securities issued as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 | ||||
|
| Interest rate (%) |
| Amount |
| Interest rate (%) |
| Amount |
Debt securities issued in Korean won: |
|
|
|
|
|
|
|
|
Debt securities issued |
| 1.17 ~ 6.17 | W | 8,930,000 |
| 1.17 ~ 6.17 | W | 8,560,000 |
Discount |
|
|
| (7,332) |
|
|
| (7,289) |
|
|
|
| 8,922,668 |
|
|
| 8,552,711 |
|
|
|
|
|
|
|
|
|
Debt securities issued in foreign currency: |
|
|
|
|
|
|
|
|
Debt securities issued |
| 1.37 ~ 5.04 |
| 1,344,800 |
| 1.37 |
| 633,650 |
Subordinated debt securities issued |
| 3.34 |
| 672,400 |
| 3.34 |
| 633,650 |
Discount |
|
|
| (8,936) |
|
|
| (4,554) |
|
|
|
| 2,008,264 |
|
|
| 1,262,746 |
|
| W | 10,930,932 |
|
| W | 9,815,457 |
11. Net defined benefit liabilities (assets)
(a) Defined benefit assets & liabilities
Defined benefit obligations and plan assets as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Present value of defined benefit obligations | W | 24,152 |
| 20,586 |
Fair value of plan assets |
| (23,465) |
| (22,332) |
Net defined benefit liabilities (assets) | W | 687 |
| (1,746) |
(b) Profit or loss recognized for the nine-month periods ended September 30, 2023 and 2022 are as follows:
c |
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Current service costs | W | 499 |
| 1,496 |
| 606 |
| 1,819 |
Net interest income (expense) |
| (25) |
| (75) |
| 13 |
| 39 |
| W | 474 |
| 1,421 |
| 619 |
| 1,858 |
(*) Profit or loss arising from defined benefit plans is included in general and administrative expenses.
29
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
12. Equity
(a) Equity as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Capital stock |
|
|
|
|
Common stock | W | 2,695,586 |
| 2,608,176 |
Preferred stock (*1) |
| 274,055 |
| 361,465 |
|
| 2,969,641 |
| 2,969,641 |
|
|
|
|
|
Hybrid bonds |
| 4,001,731 |
| 4,196,968 |
|
|
|
|
|
Capital surplus |
|
|
|
|
Share premium |
| 11,350,744 |
| 11,350,819 |
|
|
|
|
|
Capital adjustments |
| (148,464) |
| (46,114) |
|
|
|
|
|
Accumulated other comprehensive loss |
| (5,980) |
| (5,210) |
Retained earnings |
|
|
|
|
Legal reserve (*2) |
| 2,698,360 |
| 2,573,435 |
Regulatory reserve for loan losses |
| 21,078 |
| 18,524 |
Other legal reserves |
| 2,000 |
| 2,000 |
Unappropriated retained earnings |
| 5,660,314 |
| 5,616,486 |
|
| 8,381,752 |
| 8,210,445 |
| W | 26,549,424 |
| 26,676,549 |
(*1) On May 1, 2023, 17,482,000 shares of convertible preferred stock issued on May 1, 2019 were converted to common stock at a conversion ratio of 1:1.
(*2) As of September 30, 2023, the legal reserve is restricted for the dividend to stockholders by law or legislation. According to Article 53 of the Financial Holding Companies Act, the Company is required to appropriate a legal reserve in an amount equal to at least 10% of cash dividends for each accounting period until the reserve equals 100% of stated capital. Such legal reserve shall be used either to reduce a deficit or to transfer capital.
30
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
12. Equity (continued)
(b) Hybrid bonds
Hybrid bonds classified as other equity instruments as of September 30, 2023 and December 31, 2022 are as follows:
| Issue date |
| Maturity date |
| Interest rate (%) |
| September 30, 2023 |
| December 31, 2022 |
Hybrid bonds in Korean won | June 25, 2015 |
| June 25, 2045 |
| 4.38 | W | 199,455 |
| 199,455 |
September 15, 2017 |
| Perpetual bond |
| 4.25 |
| 89,783 |
| 89,783 | |
April 13, 2018 |
| Perpetual bond |
| - |
| - |
| 134,678 | |
April 13, 2018 |
| Perpetual bond |
| 4.56 |
| 14,955 |
| 14,955 | |
August 29, 2018 |
| Perpetual bond |
| - |
| - |
| 398,679 | |
June 28, 2019 |
| Perpetual bond |
| 3.27 |
| 199,476 |
| 199,476 | |
September 17, 2020 |
| Perpetual bond |
| 3.12 |
| 448,699 |
| 448,699 | |
March 16, 2021 |
| Perpetual bond |
| 2.94 |
| 429,009 |
| 429,009 | |
March 16, 2021 |
| Perpetual bond |
| 3.30 |
| 169,581 |
| 169,581 | |
| January 25, 2022 |
| Perpetual bond |
| 3.90 |
| 560,438 |
| 560,438 |
| January 25, 2022 |
| Perpetual bond |
| 4.00 |
| 37,853 |
| 37,853 |
| August 26, 2022 |
| Perpetual bond |
| 4.93 |
| 343,026 |
| 343,026 |
| August 26, 2022 |
| Perpetual bond |
| 5.15 |
| 55,803 | �� | 55,803 |
| January 30, 2023 |
| Perpetual bond |
| 5.14 |
| 398,831 |
| - |
| July 13, 2023 |
| Perpetual bond |
| 5.40 |
| 498,815 |
| - |
Hybrid bonds in foreign currency | August 13, 2018 |
| Perpetual bond |
| - |
| - |
| 559,526 |
| May 12, 2021 |
| Perpetual bond |
| 2.88 |
| 556,007 |
| 556,007 |
|
|
|
|
| W | 4,001,731 |
| 4,196,968 |
(*) For the nine-month period ended September 30, 2023, the deduction for capital related to hybrid bond issued is W 2,354 million.
The Company can make early redemption for the above bonds, after 5 or 10 years from the issue date, and it has the rights to extend the maturity under the same condition.
(c) Capital adjustments
Changes in accumulated capital adjustments for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Beginning balance | W | (46,114) |
| (45,797) |
Loss on repayment of hybrid bonds |
| (102,667) |
| (317) |
Decrease in retained earnings (loss on repayment of hybrid bonds) |
| 317 |
| - |
Acquisition of treasury stock |
| (386,719) |
| (300,600) |
Retirement of treasury stock |
| 386,719 |
| 300,600 |
Ending balance | W | (148,464) |
| (46,114) |
31
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
12. Equity (continued)
(d) Changes in accumulated other comprehensive loss for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Beginning balance | W | (5,210) |
| (7,253) |
Remeasurement of net defined benefit liabilities (assets) |
| (1,037) |
| 2,916 |
Tax effect |
| 267 |
| (873) |
Ending balance | W | (5,980) |
| (5,210) |
(e) Regulatory reserve for loan losses
If the allowance for credit losses in accordance with K-IFRS falls short of the allowance for credit losses in accordance with Regulations for the Supervision of Financial Institutions, the Group reserves the difference between the two into regulatory reserve for loan losses for each accounting period.
i) Changes in regulatory reserve for loan losses as of September 30, 2023 and December 31, 2022 are as follows
|
| September 30, 2023 |
| December 31, 2022 |
Beginning balance | W | 21,078 |
| 18,524 |
Planned regulatory reserve for loan losses |
| 966 |
| 2,554 |
Ending balance | W | 22,044 |
| 21,078 |
ii) Profit for the period and earnings per share after adjusted for regulatory reserve for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 |
Profit for the period | W | 1,703,017 |
| 1,345,758 |
Provision for regulatory reserve for loan losses |
| (966) |
| (1,118) |
Profit for the period adjusted for regulatory reserve | W | 1,702,051 |
| 1,344,640 |
Basic and diluted earnings per share in Korean won adjusted for regulatory reserve (*) | W | 2,994 |
| 2,309 |
(*) Dividends for hybrid bonds are deducted.
32
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
(f) Treasury stock
Changes in treasury stock for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
|
| September 30, 2023 | |||||||
|
| Beginning balance |
| Acquisition (*) |
|
| Retirement (*) |
| Ending balance |
Number of shares |
| 6,352 |
| 10,762,680 |
|
| (10,762,680) |
| 6,352 |
Carrying value | W | 227 |
| 386,719 |
|
| (386,719) |
| 227 |
(*) During the period the Company acquired treasury stocks for the purpose of retirement and retired 3,676,470 shares, 4,243,281 shares, and 2,842,929 shares on March 28, 2023, June 16, 2023, and August 31, 2023, respectively.
|
| December 31, 2022 | |||||||
|
| Beginning balance |
| Acquisition (*) |
|
| Retirement (*) |
| Ending balance |
Number of shares |
| 6,352 |
| 7,814,685 |
|
| (7,814,685) |
| 6,352 |
Carrying value | W | 227 |
| 300,600 |
|
| (300,600) |
| 227 |
(*) During the period, the Company acquired treasury stocks for the purpose of retirement and retired 3,665,423 shares and 4,149,262 shares on April 25, 2022 and November 23, 2022, respectively.
33
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
13. Net interest expense
Net interest expense for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Interest income: |
|
|
|
|
|
|
|
|
Cash and due from banks at amortized cost | W | 28 |
| 204 |
| 52 |
| 109 |
Loans at amortized cost |
| 23,313 |
| 68,427 |
| 22,646 |
| 63,662 |
Others |
| 130 |
| 381 |
| 54 |
| 179 |
|
| 23,471 |
| 69,012 |
| 22,752 |
| 63,950 |
Interest expense: |
|
|
|
|
|
|
|
|
Borrowings |
| (648) |
| (1,014) |
| (114) |
| (295) |
Debt securities issued |
| (74,757) |
| (205,243) |
| (57,560) |
| (160,837) |
Others |
| (19) |
| (61) |
| (10) |
| (33) |
|
| (75,424) |
| (206,318) |
| (57,684) |
| (161,165) |
Net interest expense | W | (51,953) |
| (137,306) |
| (34,932) |
| (97,215) |
14. Net fees and commission income
Net fees and commission income for the nine-month periods ended September 30, 2023 and 2022 are as follows:
c |
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Fees and commission income: |
|
|
|
|
|
|
|
|
Royalty | W | 17,375 |
| 52,126 |
| 18,676 |
| 52,750 |
Others |
| 7 |
| 14 |
| 4 |
| 12 |
|
| 17,382 |
| 52,140 |
| 18,680 |
| 52,762 |
Fees and commission expense: |
|
|
|
|
|
|
|
|
Others |
| (39) |
| (396) |
| (293) |
| (454) |
Net fees and commission income: | W | 17,343 |
| 51,744 |
| 18,387 |
| 52,308 |
15. Dividend income
Dividend income for the nine-month periods ended September 30, 2023 and 2022 are as follows:
c |
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Dividends from subsidiaries | W | - |
| 1,736,958 |
| - |
| 1,439,500 |
Dividends from hybrid bonds |
| 12,659 |
| 36,131 |
| 8,704 |
| 22,453 |
| W | 12,659 |
| 1,773,089 |
| 8,704 |
| 1,461,953 |
34
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
16. Provision for (reversal of) credit losses allowance
Provision for (reversal of) credit losses allowance for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Provision for (reversal of) credit losses allowance | W | 142 |
| (1,294) |
| 653 |
| (163) |
17. General and administrative expenses
General and administrative expenses for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three-month |
| Nine-month |
| Three-month |
| Nine-month |
Salaries: |
|
|
|
|
|
|
|
|
Salary expenses and bonuses | W | 10,618 |
| 33,021 |
| 9,632 |
| 31,844 |
Severance benefits |
| 474 |
| 1,421 |
| 619 |
| 1,858 |
Rent |
| 327 |
| 792 |
| 258 |
| 684 |
Lease |
| 653 |
| 828 |
| 65 |
| 177 |
Entertainment |
| 541 |
| 1,630 |
| 672 |
| 1,860 |
Depreciation |
| 975 |
| 2,831 |
| 806 |
| 2,368 |
Amortization |
| 27 |
| 70 |
| 13 |
| 37 |
Taxes and dues |
| 151 |
| 726 |
| 264 |
| 721 |
Advertising |
| 12,072 |
| 35,634 |
| 13,209 |
| 33,532 |
Others |
| 4,945 |
| 16,175 |
| 6,217 |
| 20,381 |
| W | 30,783 |
| 93,128 |
| 31,755 |
| 93,462 |
35
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
18. Share-based payments
(a) Performance shares granted as of September 30, 2023 are as follows:
|
| Expired |
| Not expired |
Type |
| Cash-settled share-based payment | ||
|
|
| ||
Performance conditions |
| Relative stock price linked (20.0%), management index (80.0%) | ||
|
|
| ||
Exercising period |
| 4 years from the commencement date of the year to which the grant date belongs | ||
|
|
|
|
|
Estimated number of shares vested as of September 30, 2023 |
| 216,820 |
| 2,662,216 |
|
|
|
|
|
Fair value per share in Korean won (*) |
| 44,222 for Dec. 31, 2019 33,122 for Dec. 31, 2020 37,387 for Dec. 31, 2021 37,081 for Dec. 31, 2022 |
| 35,600 |
(*) Based on performance-based stock compensation, the reference stock price (the arithmetic average of the weighted average share price of transaction volume for the past two months, the previous one month, and the past one week) of four years after the commencement of the grant year is paid in cash, and the fair value of the reference stock to be paid in the future is assessed as the closing price of the settlement.
36
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
18. Share-based payments (continued)
(b) Share-based compensation costs
Based on the share-based payment arrangements held by the Company, the share-based compensation costs for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 | ||||
|
| Employees of |
|
| ||
|
| Shinhan Financial Group |
| Subsidiaries |
| Total |
Performance shares | W | 2,389 |
| 15,072 |
| 17,461 |
|
|
| September 30, 2022 | ||||
|
| Employees of |
|
| ||
|
| Shinhan Financial Group |
| Subsidiaries |
| Total |
Performance shares | W | 1,900 |
| 15,275 |
| 17,175 |
(c) Accrued expenses
In accordance with the share-based compensation agreements by the Company, accrued expenses as of September 30, 2023 and December 31, 2022 are as follows.
|
| September 30, 2023 | ||||
|
| Accrued expenses |
|
| ||
|
| Shinhan Financial Group |
| Subsidiaries (*) |
| Total |
Performance shares | W | 13,345 |
| 89,376 |
| 102,721 |
(*) As of September 30, 2023, the Company recognized accounts receivable from the subsidiaries for the amount of W 89,376 million, which was payable to employees of the subsidiaries.
|
| December 31, 2022 | ||||
|
| Accrued expenses |
|
| ||
|
| Shinhan Financial Group |
| Subsidiaries (*) |
| Total |
Performance shares | W | 12,746 |
| 91,469 |
| 104,215 |
(*) As of December 31, 2022, the Company recognized accounts receivable from the subsidiaries for the amount of W 91,469 million, which was payable to employees of the subsidiaries.
37
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won, except per share data)
19. Income taxes
Income tax expense (benefit) for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Current income tax expense | W | 2 |
| 2 |
| - |
| - |
Temporary differences |
| (1,720) |
| 22,121 |
| 7,422 |
| (7,093) |
Income tax recognized directly in equity |
| - |
| 267 |
| - |
| (409) |
Income tax expense (benefit) | W | (1,718) |
| 22,390 |
| 7,422 |
| (7,502) |
20. Earnings (loss) per share
Basic and diluted earnings (loss) per share for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Net profit (loss) for the period | W | (27,306) |
| 1,703,017 |
| (4,872) |
| 1,345,758 |
Less: |
|
|
|
|
|
|
|
|
Dividends to hybrid bonds |
| (50,939) |
| (142,893) |
| (44,815) |
| (117,058) |
Net profit (loss) available for common stock | W | (78,245) |
| 1,560,124 |
| (49,687) |
| 1,228,700 |
|
|
|
|
|
|
|
|
|
Weighted average number of common stocks outstanding (*) |
| 516,761,098 |
| 520,828,602 |
| 530,409,779 |
| 531,694,283 |
Basic and diluted earnings (loss) per share in Korean won | W | (151) |
| 2,995 |
| (94) |
| 2,311 |
(*) The number of common shares issued by the Company is 515,504,189 shares. The above weighted average number of common stocks outstanding is calculated by reflecting treasury stocks (10,762,680 shares and 7,814,685 shares for periods ended September 31, 2023 and December 31, 2022, respectively) that are retired and 17,482,000 common stocks converted on May 1, 2023 from preferred stock that were issued on May 1, 2019.
38
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
21. Operating income
Operating income for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month |
Dividend income | W | 12,659 |
| 1,773,089 |
| 8,704 |
| 1,461,953 |
Fees and commission income |
| 17,382 |
| 52,140 |
| 18,680 |
| 52,762 |
Interest income |
| 23,471 |
| 69,012 |
| 22,752 |
| 63,950 |
Gain on financial assets at fair value through profit or loss |
| 19,868 |
| 103,748 |
| 8,408 |
| 29,269 |
Gain on foreign currency transaction |
| 66,735 |
| 138,007 |
| 219,747 |
| 388,580 |
Reversal of (provision for) credit loss allowance |
| (142) |
| 1,294 |
| (653) |
| 163 |
| W | 139,973 |
| 2,137,290 |
| 277,638 |
| 1,996,677 |
22. Commitments and contingencies
(a) As of September 30, 2023, the Company has borrowing limit agreements for W 100 billion with Korea Development Bank, W 200 billion with KB Bank, and W 200 billion with Hana Bank and there is no amount executed. As of December 31, 2022, the Company has borrowing limit agreements for W 100 billion with Korea Development Bank and there is no amount executed.
(b) As of September 30, 2023, the Company has a lawsuit (W 64 million) filed as a defendant. Though the result is not expected to affect the financial statements significantly, an additional loss may incur.
23. Statement of cash flows
(a) Cash and cash equivalents in the separate statements of cash flows as of September 30, 2023 and December 31, 2022 are as follows:
|
| September 30, 2023 |
| December 31, 2022 |
Due from financial institutions with a maturity less than three months from date of acquisition | W | 17 |
| 2,186 |
39
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
23. Statement of cash flows (continued)
(b) Changes in liabilities arising from financing activities for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 | ||||||
|
| Borrowings |
| Debentures |
| Lease liabilities |
| Total |
Balance at January 1, 2023 | W | 20,000 |
| 9,815,457 |
| 979 |
| 9,836,436 |
Changes from cash flows |
| 43,763 |
| 1,003,713 |
| (1,272) |
| 1,046,204 |
Changes from non-cash flows: |
|
|
|
|
|
|
|
|
Amortization of discount on debentures |
| 901 |
| 3,496 |
| 62 |
| 4,459 |
Foreign currency difference |
| - |
| 108,266 |
| - |
| 108,266 |
Other changes |
| - |
| - |
| 1,854 |
| 1,854 |
Balance at September 30, 2023 | W | 64,664 |
| 10,930,932 |
| 1,623 |
| 10,997,219 |
|
| September 30, 2022 | ||||||
|
| Borrowings |
| Debentures |
| Lease liabilities |
| Total |
Balance at January 1, 2022 | W | - |
| 9,559,553 |
| 1,903 |
| 9,561,456 |
Changes from cash flows |
| 20,000 |
| 191,479 |
| (1,259) |
| 210,220 |
Changes from non-cash flows: |
|
|
|
|
|
|
|
|
Amortization of discount on debentures |
| - |
| 2,837 |
| 33 |
| 2,870 |
Foreign currency difference |
| - |
| 248,358 |
| - |
| 248,358 |
Other changes |
| - |
| - |
| 685 |
| 685 |
Balance at September 30, 2022 | W | 20,000 |
| 10,002,227 |
| 1,362 |
| 10,023,589 |
24. Related party transactions
40
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
The Company defines subsidiaries, key managements and their families as a range of related parties in accordance with K-IFRS No.1024, and discloses the amount of transactions between the Company and related parties and the balance of receivables and payables. For details of subsidiaries, refer to 'Note 8'.
(a) Significant transactions with the related parties for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| Account |
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month | ||
Revenue: |
|
|
|
|
|
|
|
|
|
|
Shinhan Bank |
| Interest income | W | 131 |
| 382 |
| 56 |
| 181 |
〃 |
| Fees and commission income |
| 10,421 |
| 31,262 |
| 10,421 |
| 31,262 |
〃 |
| Dividend income |
| - |
| 1,157,105 |
| - |
| 900,000 |
〃 |
| Reversal of (provision for) credit losses |
| (7) |
| 234 |
| - |
| - |
Shinhan Card Co., Ltd. |
| Interest income |
| 13,428 |
| 39,191 |
| 12,788 |
| 34,897 |
〃 |
| Fees and commission income |
| 3,563 |
| 10,688 |
| 3,563 |
| 10,687 |
〃 |
| Dividend income |
| 7,977 |
| 278,689 |
| 3,932 |
| 346,177 |
〃 |
| Reversal of (provision for) credit losses |
| (56) |
| 545 |
| - |
| - |
〃 |
| Other non-operating income (*1) |
| 86 |
| 86 |
| 4,893 |
| 4,979 |
Shinhan Securities Co., Ltd. |
| Interest income |
| 5,011 |
| 15,005 |
| 5,100 |
| 14,467 |
〃 |
| Fees and commission income |
| 1,276 |
| 3,829 |
| 1,276 |
| 3,829 |
〃 |
| Dividend income |
| 2,517 |
| 107,600 |
| 2,589 |
| 107,424 |
〃 |
| Reversal of (provision for) credit losses |
| (50) |
| 255 |
| (230) |
| 58 |
Shinhan Life Insurance Co., Ltd. |
| Fees and commission income |
| 1,184 |
| 3,552 |
| 2,484 |
| 4,176 |
〃 |
| Dividend income |
| - |
| 162,257 |
| - |
| - |
〃 |
| Reversal of (provision for) credit losses |
| (1) |
| 2 |
| - |
| - |
Shinhan Capital Co., Ltd. |
| Interest income |
| 3,571 |
| 10,673 |
| 3,588 |
| 10,564 |
〃 |
| Fees and commission income |
| 473 |
| 1,417 |
| 473 |
| 1,417 |
〃 |
| Dividend income |
| 2,164 |
| 51,964 |
| 2,183 |
| 47,682 |
〃 |
| Reversal of (provision for) credit losses |
| (18) |
| 208 |
| - |
| - |
Jeju Bank |
| Fees and commission income |
| 58 |
| 173 |
| 58 |
| 173 |
〃 |
| Dividend income |
| - |
| 2,420 |
| - |
| 2,420 |
〃 |
| Reversal of credit losses |
| - |
| 1 |
| - |
| - |
Shinhan Credit Information Co., Ltd. (*2) |
| Fees and commission income |
| - |
| - |
| - |
| 2 |
Shinhan Asset Management Co., Ltd. |
| Interest income |
| - |
| - |
| 135 |
| 402 |
〃 |
| Fees and commission income |
| 97 |
| 291 |
| 97 |
| 291 |
〃 |
| Dividend income |
| - |
| 7,000 |
| - |
| 53,000 |
〃 |
| Reversal of (provision for) credit losses |
| - |
| 2 |
| (30) |
| 237 |
Shinhan DS |
| Interest income |
| 146 |
| 423 |
| 116 |
| 345 |
〃 |
| Fees and commission income |
| 8 |
| 19 |
| 7 |
| 17 |
〃 |
| Reversal of (provision for) credit losses |
| (1) |
| 8 |
| - |
| - |
41
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
Shinhan Fund Partners Co., Ltd. (*3) |
| Fees and commission income |
| 33 |
| 98 |
| 33 |
| 98 |
〃 |
| Dividend income |
| - |
| 6,054 |
| - |
| 5,251 |
Shinhan Savings Bank |
| Interest income |
| 671 |
| 2,009 |
| 670 |
| 2,546 |
〃 |
| Fees and commission income |
| 88 |
| 266 |
| 90 |
| 267 |
〃 |
| Reversal of (provision for) credit losses |
| (4) |
| 42 |
| - |
| - |
42
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
24. Related party transactions (continued)
(a) Significant transactions with the related parties for the nine-month periods ended September 30, 2023 and 2022 are as follows (continued):
|
| Account |
| September 30, 2023 |
| September 30, 2022 | |||||||||
|
|
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month | |||||
Revenue: |
|
|
|
|
|
|
|
|
|
| |||||
Shinhan REITs Management Co., Ltd. |
| Fees and commission income |
| 21 |
| 63 |
| 21 |
| 63 | |||||
Shinhan Asset Trust Co., Ltd. |
| Fees and commission income |
| 141 |
| 423 |
| 141 |
| 423 | |||||
〃 |
| Reversal of credit losses |
| - |
| - |
| - |
| 1 | |||||
Shinhan Venture Investment Co., Ltd. |
| Interest income |
| 514 |
| 1,329 |
| 299 |
| 548 | |||||
〃 |
| Fees and commission income |
| 20 |
| 59 |
| 20 |
| 59 | |||||
〃 |
| Reversal of (provision for) credit losses |
| (1) |
| 5 |
| 324 |
| 338 | |||||
|
|
| W | 53,461 |
| 1,895,629 |
| 55,097 |
| 1,584,281 | |||||
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
43
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
24. Related party transactions (continued)
(a) Significant transactions with the related parties for the nine-month periods ended September 30, 2023 and 2022 are as follows (continued):
Related party |
| Account |
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three- month |
| Nine- month | ||
Expense: |
|
|
|
|
|
|
|
|
|
|
Shinhan Bank |
| Interest expenses | W | (267) |
| 28 |
| 3 |
| 12 |
〃 |
| General and administrative expenses |
| 611 |
| 1,098 |
| 308 |
| 941 |
〃 |
| Provision for credit losses |
| - |
| - |
| 25 |
| 75 |
Shinhan Card Co., Ltd. |
| Interest expenses |
| 1 |
| 6 |
| - |
| 2 |
〃 |
| General and administrative expenses |
| 28 |
| 149 |
| 16 |
| 48 |
〃 |
| Provision for (reversal of) credit losses |
| - |
| - |
| (136) |
| 324 |
Shinhan Securities Co., Ltd. |
| Interest expenses |
| 42 |
| 113 |
| 43 |
| 128 |
〃 |
| Fees and commission expense (*4) |
| 380 |
| 1,212 |
| 180 |
| 876 |
〃 |
| General and administrative expenses |
| 26 |
| 65 |
| 7 |
| 7 |
Shinhan Life Insurance Co., Ltd. |
| Interest expenses |
| 220 |
| 653 |
| 436 |
| 658 |
〃 |
| Provision for credit losses |
| - |
| - |
| - |
| 1 |
Shinhan Capital Co., Ltd. |
| Provision for (reversal of) credit losses |
| - |
| - |
| (18) |
| 111 |
Shinhan DS |
| General and administrative expenses |
| 562 |
| 1,425 |
| 471 |
| 1,210 |
〃 |
| Provision for (reversal of) credit losses |
| - |
| - |
| (3) |
| 55 |
Shinhan Savings Bank |
| Provision for credit losses |
| - |
| - |
| 1 |
| 223 |
Shinhan Asset Trust Co. Ltd. |
| Provision for credit losses |
| - |
| 5 |
| - |
| - |
Shinhan REITs Management Co., Ltd. |
| Provision for credit losses |
| 1 |
| 1 |
| 2 |
| 5 |
Shinhan A.I. Co. Ltd. |
| General and administrative expenses |
| 10 |
| 30 |
| 10 |
| 30 |
〃 |
| Provision for credit losses |
| - |
| - |
| 2 |
| 3 |
|
|
| W | 1,614 |
| 4,785 |
| 1,347 |
| 4,709 |
(*1) Other non-operating income for 2022 includes disposal gains from the sale of Shinhan Credit Information. W20,354 million was received from Shinhan Card Co., Ltd. for this transaction.
(*2) On July 28, 2022, the entire shares of Shinhan Credit Information Co., Ltd. was sold to Shinhan Card., Ltd., and the transaction above occurred prior to the sale.
(*3) On April 3, 2023, Shinhan AITAS Co., Ltd. has changed its name to Shinhan Fund Partners Co., Ltd.
(*4) It consists of commissions paid for acquisitions of hybrid bonds and trading commissions paid for retirement of treasury stock. It was directly deducted from the equity.
44
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
24. Related party transactions (continued)
(b) Significant balances with the related parties as of September 30, 2023 and December 31, 2022 are as follows:
Creditor |
| Debtor |
| Account |
| September 30, 2023 |
| December 31, 2022 |
Assets: |
|
|
|
|
|
|
|
|
Shinhan Financial Group Co., Ltd. |
| Shinhan Bank |
| Cash and due from banks | W | 20 |
| 2,187 |
〃 |
| 〃 |
| Property and equipment |
| 354 |
| - |
〃 |
| 〃 |
| Other assets |
| 222,303 |
| 481,007 |
〃 |
| Shinhan Card Co., Ltd. |
| Financial assets at fair value through profit or loss (*1) |
| 673,685 |
| 342,959 |
〃 |
| 〃 |
| Loans |
| 2,258,264 |
| 2,224,939 |
〃 |
| 〃 |
| Reserve for loan losses |
| (1,058) |
| (1,573) |
〃 |
| 〃 |
| Property and equipment |
| 180 |
| 122 |
〃 |
| 〃 |
| Other assets |
| 96,522 |
| 105,364 |
〃 |
| Shinhan Securities Co., Ltd. |
| Financial assets at fair value through profit or loss (*2) |
| 320,039 |
| 285,306 |
〃 |
| 〃 |
| Loans |
| 789,398 |
| 743,905 |
〃 |
| 〃 |
| Reserve for loan losses |
| (370) |
| (526) |
〃 |
| 〃 |
| Property and equipment |
| 97 |
| - |
〃 |
| 〃 |
| Other assets |
| 74,948 |
| 188,626 |
〃 |
| Shinhan Life Insurance Co., Ltd. |
| Other assets |
| 8,121 |
| 8,348 |
〃 |
| Shinhan Capital Co., Ltd. |
| Financial assets at fair value through profit or loss (*3) |
| 229,168 |
| 218,119 |
〃 |
| 〃 |
| Loans |
| 848,960 |
| 833,460 |
〃 |
| 〃 |
| Reserve for loan losses |
| (398) |
| (589) |
〃 |
| 〃 |
| Other assets |
| 51,039 |
| 56,859 |
〃 |
| Shinhan Asset Management Co., Ltd. |
| Other assets |
| 5,857 |
| 6,462 |
〃 |
| Jeju Bank |
| Other assets |
| 2,463 |
| 2,681 |
〃 |
| Shinhan DS |
| Loans |
| 14,803 |
| 20,000 |
〃 |
| 〃 |
| Reserve for loan losses |
| (7) |
| (14) |
〃 |
| 〃 |
| Property and equipment |
| 432 |
| 585 |
〃 |
| 〃 |
| Intangible assets |
| 58 |
| - |
〃 |
| 〃 |
| Other assets |
| 4,708 |
| 3,590 |
〃 |
| Shinhan Fund Partners Co., Ltd. (*4) |
| Other assets |
| 754 |
| 878 |
|
|
|
|
|
|
|
|
|
45
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
24. Related party transactions (continued)
(b) Significant balances with the related parties September 30, 2023 and December 31, 2022 are as follows (continued):
Creditor |
| Debtor |
| Account |
| September 30, 2023 |
| December 31, 2022 |
Assets: |
|
|
|
|
|
|
|
|
〃 |
| Shinhan Savings Bank |
| Loans |
| 150,000 |
| 150,000 |
〃 |
| 〃 |
| Reserve for loan losses |
| (70) |
| (106) |
〃 |
| 〃 |
| Other assets |
| 6,341 |
| 12,433 |
〃 |
| Shinhan Asset Trust Co. Ltd. |
| Other assets |
| 11,809 |
| 891 |
〃 |
| Shinhan REITs Management Co., Ltd. |
| Other assets |
| 2,119 |
| 545 |
〃 |
| Shinhan A.I. Co., Ltd. |
| Other assets |
| 298 |
| 267 |
〃 |
| Shinhan Venture Investment Co., Ltd. |
| Loans |
| 49,855 |
| 40,000 |
〃 |
| 〃 |
| Reserve for loan losses |
| (23) |
| (28) |
〃 |
| 〃 |
| Other assets |
| 1,108 |
| 154 |
〃 |
| Shinhan EZ General Insurance, Ltd. |
| Other assets |
| 64 |
| 26 |
|
|
|
|
| W | 5,821,841 |
| 5,726,877 |
Liabilities: |
|
|
|
|
|
|
|
|
Shinhan Bank |
| Shinhan Financial Group Co., Ltd. |
|
Other liabilities | W | 40,563 |
| 1,814 |
Shinhan Card Co., Ltd. |
| 〃 |
| Other liabilities |
| 22,253 |
| 22,348 |
Shinhan Securities Co., Ltd. |
| 〃 |
| Other liabilities |
| 182,016 |
| 31 |
Shinhan Life Insurance Co., Ltd. |
| 〃 |
| Debt security issued in Korean won |
| 30,000 |
| 30,000 |
〃 |
| 〃 |
| Other liabilities |
| 95,785 |
| 115,629 |
Shinhan Capital Co., Ltd. |
| 〃 |
| Other liabilities |
| 2 |
| 1 |
Shinhan DS |
| 〃 |
| Other liabilities |
| 256 |
| 186 |
Shinhan Savings Bank |
| 〃 |
| Other liabilities |
| 2,915 |
| 45 |
Shinhan A.I. Co., Ltd. |
| 〃 |
| Other liabilities |
| 117 |
| 123 |
Shinhan Venture Investment Co., Ltd. |
| 〃 |
| Other liabilities |
| 4 |
| 1,222 |
|
|
|
|
| W | 373,911 |
| 171,399 |
(*1) The balance arises from the purchase of hybrid bonds, and it includes a gain of W 30,726 million and a loss of W 57,041 million on financial assets at fair value through profit or loss for the period ended September 30, 2023 and for the year ended December 31, 2022, respectively.
(*2) The balance arises from the purchase of hybrid bonds, and it includes a gain of W 17,286 million and a loss of W 53,786 million on financial assets at fair value through profit or loss for the period ended September 30, 2023 and for the year ended December 31, 2022, respectively.
(*3) The balance arises from the purchase of hybrid bonds, and it includes a gain of W 11,049 million and a loss of W 29,063 million on financial assets at fair value through profit or loss for the period ended September 30, 2023 and for the year ended December 31, 2022, respectively.
(*4) On April 3, 2023, Shinhan AITAS Co., Ltd. has changed its name to Shinhan Fund Partners Co., Ltd.
46
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
24. Related party transactions (continued)
(c) Right-of-use assets and lease liabilities recognized through lease transactions with related parties as of September 30, 2023 and December 31, 2022 are as follows:
Related parties |
| September 30, 2023 |
| December 31, 2022 |
Right-of-use assets |
|
|
|
|
Shinhan Bank | W | 354 |
| - |
Shinhan Card Co., Ltd. |
| 180 |
| 122 |
Shinhan Securities Co., Ltd. |
| 97 |
| - |
| W | 631 |
| 122 |
|
|
|
|
|
Lease liabilities |
|
|
|
|
Shinhan Bank | W | 232 |
| - |
Shinhan Card Co., Ltd. |
| 199 |
| 135 |
Shinhan Securities Co., Ltd. |
| 98 |
| - |
| W | 529 |
| 135 |
(d) Financing transaction
Major financing transactions with related parties for the nine-month period ended September 30, 2023 and for the year ended December 31, 2022 are as follows:
|
| September 30, 2023 | ||||||||||
|
| Beginning balance |
| Lending |
| Purchases (*1) |
| Collection |
| Others (*2) |
| Ending balance |
Shinhan Card Co., Ltd. | W | 2,567,898 |
| 100,000 |
| 300,000 |
| (100,000) |
| 64,051 |
| 2,931,949 |
Shinhan Securities Co., Ltd. |
| 1,029,211 |
| - |
| - |
| - |
| 80,226 |
| 1,109,437 |
Shinhan Capital Co., Ltd. |
| 1,051,580 |
| - |
| - |
| - |
| 26,549 |
| 1,078,129 |
Shinhan Savings Bank |
| 150,000 |
| - |
| - |
| - |
| - |
| 150,000 |
Shinhan DS |
| 20,000 |
| 15,000 |
| - |
| (20,000) |
| (197) |
| 14,803 |
Shinhan Venture Investment Co., Ltd. |
| 40,000 |
| 90,000 |
| - |
| (80,000) |
| (145) |
| 49,855 |
| W | 4,858,689 |
| 205,000 |
| 300,000 |
| (200,000) |
| 170,484 |
| 5,334,173 |
(*1) It includes an acquisition of hybrid bonds, issued by the subsidiary, for the amount of W 90,000 million from Shinhan Securities Co., Ltd., the underwriter.
(*2) Other transactions include financial asset assessment, foreign currency translation, etc.
|
| December 31, 2022 | ||||||||||
|
| Beginning balance |
| Lending |
| Purchases (*1) |
| Collection |
| Others (*2) |
| Ending balance |
Shinhan Card Co., Ltd. | W | 2,189,765 |
| 300,000 |
| 400,000 |
| (300,000) |
| (21,867) |
| 2,567,898 |
Shinhan Securities Co., Ltd. |
| 1,013,093 |
| - |
| - |
| - |
| 16,118 |
| 1,029,211 |
Shinhan Capital Co., Ltd. |
| 1,064,283 |
| - |
| - |
| - |
| (12,703) |
| 1,051,580 |
Shinhan Asset Management Co., Ltd. (*3) |
| 38,000 |
| - |
| - |
| (38,000) |
| - |
| - |
Shinhan Savings Bank |
| 200,000 |
| - |
| - |
| (50,000) |
| - |
| 150,000 |
Shinhan DS |
| 24,000 |
| 20,000 |
| - |
| (24,000) |
| - |
| 20,000 |
Shinhan Venture Investment Co., Ltd. |
| 16,000 |
| 180,000 |
| - |
| (156,000) |
| - |
| 40,000 |
| W | 4,545,141 |
| 500,000 |
| 400,000 |
| (568,000) |
| (18,452) |
| 4,858,689 |
(*1) It includes an acquisition of hybrid bonds, issued by the subsidiary, for the amount of W 190,000 million from Shinhan Securities Co., Ltd., the underwriter.
(*2) Other transactions include financial asset assessment, foreign currency translation, etc.
(*3) It is the lending balance with Shinhan Alternative Investment Management Inc. before the merger.
24. Related party transactions (continued)
47
SHINHAN FINANCIAL GROUP CO., LTD.
Notes to the Separate Interim Financial Statements
September 30, 2023 and 2022 (Unaudited), and December 31, 2022
(In millions of Korean won)
(e) Management Compensation
Compensation for key management for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| September 30, 2023 |
| September 30, 2022 | ||||
|
| Three- month |
| Nine- month |
| Three-month |
| Nine- month |
Short-term employee benefits | W | 1,695 |
| 4,847 |
| 1,590 |
| 5,672 |
Severance benefits |
| 40 |
| 118 |
| 46 |
| 139 |
Share-based payment expenses (*) |
| 835 |
| 2,081 |
| 22 |
| 1,613 |
| W | 2,570 |
| 7,046 |
| 1,658 |
| 7,424 |
(*) Expenses recognized during the vesting period under the agreement on share-based payments.
(f) Shinhan Securities Co., Ltd., a subsidiary, acquired debt securities and hybrid bonds of W 360 billion and W 358 billion issued by the Company for the nine-month periods ended September 30, 2023 and 2022, respectively.
(g) As of September 30, 2023, W 4 billion is the agreed limit for credit card use that is provided by Shinhan Card Co., Ltd., a subsidiary of the Company.
25. Events after the reporting period
(a) Quarterly dividend resolution
The Company decided to pay a quarterly dividend of W 525 per share for common stock based on the resolution of the board of directors on October 25, 2023. The total amount of dividends is W 270,636 million, and the dividend base date is September 30, 2023.
(b) Treasury stock acquisition and retirement
To enhance the shareholders’ value, the Company made a decision on the acquisition and retirement of treasury stock amounted to W 100 billion based on the resolution of the board of directors on October 25, 2023.
26. Uncertainty due to changes in domestic and global economic conditions
The rapid spread of the COVID-19 is negatively affecting the global economy. The Company uses forward-looking information to estimate expected credit losses in accordance with K-IFRS No.1109 ‘Financial Instruments’, and there have been significant changes in forward-looking information due to the spread of the COVID-19 virus. The estimated probability of default and the estimated loss given default are re-estimated using changed forward-looking information on GDP growth rate, private consumption index growth rate, etc., which are major variables for calculating the default rate. The Company will continue to monitor the domestic and global economic uncertainty and the impact of the COVID-19 on the economy.
48