December 04, 2024

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Shinhan Financial Group's headquarters in central Seoul (Shinhan Financial Group)

Shinhan Financial Group on Friday unveiled a corporate value enhancement plan detailing specific targets and strategies to boost profitability.

According to the plan, the financial giant aims to achieve a 10 percent return on equity, a 50 percent shareholder return rate and reduce its shares by 50 million by 2027.

To reach a 50 percent shareholder return rate, Shinhan plans to decrease the number of shares through ongoing stock buybacks and cancellations. Last year, the company's shareholder return rate was 36 percent.

Shinhan intends to lower the current 510 million listed shares to 500 million by the end of this year and to 450 million by 2027. For this, the company anticipates that around 3 trillion won ($2.16 billion) in treasury shares will be sold or canceled over the next three years.

The firm stated it will focus on share cancellations until the price-to-book ratio reaches 1 and will then gradually increase cash dividends. Shinhan's current PBR is 0.54.

The group also raised its Common Equity Tier 1 target from 12 percent to 13 percent to bolster its loss-absorption capacity. Shinhan's CET1 ratio was 13.1 percent in the first quarter.

With the improved capital adequacy, the group aims to achieve a 10 percent ROE and an 11.5 percent Return on Tangible Common Equity. While ROE, return on equity, measures profitability relative to total shareholders' equity, ROTCE focuses on the return on tangible common equity, providing a more precise measure of profitability.

Shinhan will also adopt a ROC, or return on group capital, metric to assess profitability relative to capital allocated across its subsidiaries, using it as a tool for management performance and compensation.

To boost communication with shareholders, the group will collect questions and feedback on the plan via its website until next Friday and respond through its official YouTube channel on Aug. 21.

Shinhan has been focused on improving shareholder returns, having introduced quarterly dividends in 2021 and equal dividends in 2023 -- both firsts among domestic financial groups. The company has also carried out share buybacks and cancellations for seven consecutive quarters.

"By swiftly achieving the targets announced today, we are committed to enhancing value for all our stakeholders," a Shinhan official said.

On the same day, Shinhan Financial Group reported a net income of 1.4 trillion won for the second quarter, a 15.1 percent increase on-year. Combined with the 1.3 trillion won earned in the previous quarter, the group's net income for the first half of the year totaled approximately 2.7 trillion won, up 4.6 percent on-year.

The company emphasized that the operational net income for the second quarter is the highest ever recorded for the group. Previously, the highest nominal quarterly net income was 1.59 trillion won in the third quarter of 2022, but this included a 443.8 billion won gain from the sale of Shinhan Securities' building in Yeouido, Seoul.

Also notable is the 32.4 percent on-year increase in net income from global operations, reaching 410.8 billion won, driven by successful performances of Shinhan Bank in Vietnam and Japan.

By Choi Ji-won (jwc@heraldcorp.com)