Yuanta Securities Korea said on the 29th that the return on equity (ROE) for Shinhan Financial Group improved on the back of solid third-quarter (July–September) results. It kept its "Buy" rating and raised the target price to 91,000 won from 84,500 won. Shinhan Financial Group's closing price the previous day was 74,000 won.
Earlier, Shinhan Financial Group said on the 28th that third-quarter (July–September) net income attributable to controlling interests on a consolidation basis came to 1.4235 trillion won. The figure beat market expectations by 5.5%, driven largely by higher interest income and lower credit costs.
According to Yuanta Securities Korea, third-quarter interest income rose 2.9% from the previous quarter, while won-denominated loans increased 2.7% from the previous quarter. The net interest margin (NIM) also climbed 1 basis point from the previous quarter to 1.56% on the repricing effect of high-rate deposits.
However, non-interest income fell 23.7%. Woo Do-hyeong, an analyst at Yuanta Securities Korea, said, "Due to the slowdown in the pace of market rate cuts, profit related to marketable securities decreased from the previous quarter," adding, "The common equity tier 1 (CET1) ratio was 13.56%, and despite a stronger exchange rate and loan asset growth, it was well managed thanks to RWA management and profit growth."
Tax-exempt dividends are also likely to be reviewed positively, according to Woo. Shinhan Financial Group's shareholder return this year totals 2.35 trillion won, with a total shareholder return ratio expected at 45.8%.
Woo said, "Internally, distributable income is sufficient, but to broaden the base of individual shareholders, tax-exempt dividends are also being reviewed positively," noting, "If separate taxation on dividend income is implemented, the payout ratio is expected to be raised in line with the standard."