shg-6k_20190401.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

 

For the Month of April 2019

 

SHINHAN FINANCIAL GROUP CO., LTD.

(Translation of registrant's name into English)

 

20, Sejong-daero 9-gil, Jung-gu, Seoul 04513, Korea

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will

file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F  √    Form 40-F      

 

Indicate by check mark if the registrant is submitting the Form 6-K in

paper as permitted by Regulation S-T Rule 101(b)(1): _______

 

Indicate by check mark if the registrant is submitting the Form 6-K in

paper as permitted by Regulation S-T Rule 101(b)(7): _______

 

Indicate by check mark whether the registrant by furnishing the

information contained in this form is also thereby furnishing the

information to the Commission pursuant to Rule 12g3-2(b) under the

Securities Exchange Act of 1934.

 

Yes        No___√___

 

If "Yes" is marked, indicate below the file number assigned to the

registrant in connection with Rule 12g3-2(b): 82-  n/a  .


Summary of FY2018 Business Report

 

On April 1, 2019, Shinhan Financial Group (“SFG”) filed its FY2018 Business Report (the “Business Report”) with the Financial Services Commission of Korea and the Korea Exchange pursuant to the Financial Investment Services and Capital Market Act of Korea. This is the summary of the Business Report translated into English. Non-material or previously disclosed information are omitted or abridged.

 

The financial information in this report has been prepared in accordance with Korean International Financial Reporting Standards.

 

Table of Contents

 

1. Introduction of the Group

2. Business Results

3. Independent Auditor

4. Major Shareholder and Market Price Information of our Common Shares and ADRs

5. Directors, Executive Officers and Employees

6. Related Party Transactions


2


1. Introduction of the Group

 

Company History in 2010 through 2018

 

 

Jan. 2010 : Shinhan Data System became a direct subsidiary of SFG

 

Aug. 2010 : Shinhan Macquarie Financial Advisory was disaffiliated from SFG

 

Feb. 2011 : Shinhan BNP Paribas Asset Management (Hong Kong) Limited became an indirect subsidiary of SFG

 

Nov. 2011 : Shinhan Bank Vietnam was merged with Shinhan Vina Bank

 

Dec. 2011 : Shinhan Savings Bank became a direct subsidiary of SFG

 

Nov. 2012 : Shinhan AITAS Co., Ltd. joined SFG as a direct subsidiary

 

Jan. 2013 : Yehanbyoul Savings Bank joined SFG as a direct subsidiary

 

Apr. 2013 : Shinhan Savings Bank merged with Yehanbyoul Savings Bank. As a result of the integration, Shinhan Savings Bank has been liquidated and Yehanbyoul Savings Bank now exists under the name of “Shinhan Savings Bank” as an existing legal entity

 

Nov. 2014 : LLP MFO Shinhan Finance (Kazakhstan) became an indirect subsidiary of SFG

 

Jul. 2015 : Shinhan Securities Vietnam Co., Ltd became an indirect subsidiary of SFG

 

Oct. 2015 : Banco Shinhan de Mexico became an indirect subsidiary of SFG

 

Nov. 2015 : PT Bank Shinhan Indonesia became an indirect subsidiary of SFG

 

Dec. 2015 : PT. Shinhan Indo Finance became an indirect subsidiary of SFG

 

Dec. 2015 : PT Centratama Nasional Bank became an indirect subsidiary of SFG

 

Mar. 2016 : Shinhan Microfinance Co., Ltd. became an indirect subsidiary of SFG

 

Jul. 2016 : PT Shinhan Securities Indonesia became an indirect subsidiary of SFG

 

Dec. 2016 : Launched new integrated PT Bank Shinhan Indonesia

 

Oct. 2017 : Established Shinhan REITs(Real Estate Investment Trusts) Management Co.,Ltd. as SFG subsidiary

 

Dec. 2017 : Shinhan K REITs became an indirect subsidiary of SFG

 

Apr. 2018 : Shinhan Alpha REITs (formerly known as Shinhan K REITs) was disaffiliated from SFG’s indirect subsidiary due to a change in the largest shareholder

 

May. 2018 : GX SHINHAN INTERVEST 1st PEF became an indirect subsidiary of SFG

 

May. 2018 : Shinhan DS Vietnam became an indirect subsidiary of SFG

 

Sep. 2018 : SFG entered into a share purchase agreement with Life Investment Ltd. for the acquisition of its majority shares, 59.15% interest, in Orange Life Insurance, Ltd.

 

Sep. 2018 : Shinhan Alpha Yongsan REIT became an indirect subsidiary of SFG

 

Oct. 2018. : SFG entered into a share purchase agreement with Asia Trust Co., Ltd. for the 100% acquisition.

3


Principal Subsidiaries under Korean Law (as of Dec. 31, 2018)

 

Direct Subsidiaries

Subsidiaries

 

Ownership by SFG

Shinhan Bank

 

100.0%

Shinhan Card

 

100.0%

Shinhan Investment Corp.

 

100.0%

Shinhan Life Insurance

 

100.0%

Shinhan BNP Paribas Asset Management

 

65.0%

Shinhan Capital

 

100.0%

Jeju Bank 1)

 

71.9%

Shinhan Savings Bank 2)

 

100.0%

Shinhan DS 3)

 

100.0%

Shinhan AITAS 4)

 

99.8%

Shinhan Credit Information

 

100.0%

Shinhan Alternative Investment Management

 

100.0%

Shinhan REITs Management

 

100.0%

SHC Management 5)

 

100.0%

 

1)

Jeju Bank is currently listed on the Korea Exchange.

2)On January 30, 2013, Yehanbyoul Savings Bank joined SFG as a direct subsidiary.

On April 1, 2013, Shinhan Savings Bank merged with Yehanbyoul Savings Bank, both of which were

direct subsidiaries of Shinhan Financial Group. As a result of the integration of the two savings banks,

the previous Shinhan Savings Bank has been liquidated and is thus no longer a subsidiary of Shinhan

Financial Group and instead, Yehanbyoul Savings Bank now exists under the name of “Shinhan Savings

Bank” as an existing legal entity constituting a member of Shinhan Financial Group.

3)Shinhan Data System changed its company name to Shinhan DS on May 13, 2018.

4)On November 30, 2012, Shinhan AITAS Co., Ltd. joined SFG as a direct subsidiary. Prior to November 30,

2012, Shinhan AITAS was an indirect subsidiary of SFG under Shinhan Bank, a wholly-owned bank subsidiary of SFG.

5)Currently in liquidation proceedings

6)On February 1, 2019, Orange Life Insurance, Ltd. became a direct subsidiary of SFG

 

4


Indirect subsidiaries held through direct subsidiaries (as of Dec. 31, 2018)

Direct Subsidiaries

 

Indirect Subsidiaries

 

Ownership by the Parent

Shinhan Bank

 

Shinhan Asia Limited

 

100.0%

 

Shinhan Bank America

 

100.0%

 

Shinhan Bank Japan

 

100.0%

 

Shinhan Bank Europe

 

100.0%

 

Shinhan Bank Cambodia

 

97.5%

 

Shinhan Bank Kazakhstan

 

100.0%

 

Shinhan Bank China Limited

 

100.0%

 

Shinhan Bank Canada

 

100.0%

 

Shinhan Bank Vietnam

 

100.0%

 

 

Banco Shinhan de Mexico

 

100.0%

 

 

PT Bank Shinhan Indonesia

 

99.0%

Shinhan Card

 

LLP MFO Shinhan Finance

 

100.0%

 

PT. Shinhan Indo Finance

 

50.0%

 

Shinhan Microfinance Co., Ltd.

 

100.00%

Shinhan Investment Corp.

 

Shinhan Investment Corp. USA Inc.

 

100.0%

 

Shinhan Investment Corp. Asia Inc.

 

100.0%

 

Shinhan Securities Vietnam Co., Ltd

 

100.0%

 

PT Shinhan Sekuritas Indonesia

 

99.0%

 

KOFC Shinhan Frontier Champ 2010-4 PEF1)

 

8.5%

GX SHINHAN INTERVEST 1st PEF5)

 

14.5%

Shinhan Praxis K-Growth Global Private Equity Fund 2)

 

14.1%

Shinhan BNP Paribas Asset Management

 

Shinhan BNP Paribas Asset Management (Hong Kong) Limited

 

100.0%

Shinhan Alternative Investment Management

 

Shinhan Private Equity Fund 2nd 3)

 

2.2%

 

Shinhan-Stonebridge Petro Private Equity Fund 4)

 

0.6%

1) Shinhan Financial Group and its subsidiaries currently own 34.6% of KOFC Shinhan Frontier Champ 2010-4
PEF Investment Corp.

2) Shinhan Financial Group and its subsidiaries currently own 18.9% of Shinhan Praxis K-Growth Global Private
Equity Fund.

3) Shinhan Financial Group and its subsidiaries currently own 32.6% of Shinhan Private Equity Fund 2nd.

4) Shinhan Financial Group and its subsidiaries currently own 1.8% of Shinhan-Stonebridge Petro Private Equity Fund.

5) Shinhan Financial Group and its subsidiaries currently own 25.3% of GX SHINHAN INTERVEST 1st PEF.

Number of Shares (as of Dec. 31, 2018)

Types of Shares

 

Number of Shares

Common Shares

 

474,199,587

Total

 

474,199,587

Treasury Stocks

 

3,548,659

1) Based on the completion of settlement after transactions

5


2. Business Results

 

Operation Results

 

 

 

(KRW billion)

 

FY2018

(Jan. 1 ~ Dec. 31)

FY2017

(Jan. 1 ~ Dec. 31)

FY2016

(Jan. 1 ~ Dec. 31)

Operating income

4,499.3

3,830.0

3,108.6

Equity method income

17.5

20.4

10.0

Other non-operating income

-50.3

-52.8

51.8

Profit before income taxes

4,466.5

3,797.6

3,170.5

Income tax expense

1,268.3

848.4

345.6

Consolidated net income

3,198.2

2,949.2

2,824.9

Net income attributable to equity holders of the Group

3,156.7

2,918.8

2,774.8

Net income attributable to non-controlling interest

41.5

30.4

50.1

Notes :

 

Some of the totals may not sum due to rounding.

6


Source and Use of Funds

Consolidated Basis

(KRW billion, %)

FY2018

FY2017

FY2016

Jan. 1 ~ Dec. 31

Jan. 1 ~ Dec. 31

Jan. 1 ~ Dec. 31

Average

Balance1)

Proportions

(%)

Interest

Paid

Interest

Rate

(%)

Average

Balance1)

Proportions

(%)

Interest

Paid

Interest

Rate

(%)

Average

Balance1)

Proportions

(%)

Interest

Paid

Interest

Rate

(%)

Source

Deposits

257,656.5

58.2

3,091.7

1.20

241,523.7

58.3

2,482.5

1.03

226,966.8

58.7

2,586.7

1.14

Borrowings

19,211.9

4.3

316.9

1.65

17,479.8

4.2

217.3

1.24

15,047.2

3.9

176.4

1.17

Debt Securities Issued

57,284.3

12.9

1,336.8

2.33

47,594.6

11.5

1,085.4

2.28

42,790.8

11.1

1,085.8

2.54

Other Liabilities

73,666.5

16.7

-

-

74,788.5

18.1

-

-

70,504.9

18.2

-

-

Total Liabilities

407,819.2

92.1

-

-

381,386.6

92.1

-

-

355,309.7

91.9

-

-

Total Stockholder's Equity

34,911.0

7.9

-

-

32,750.5

7.9

-

-

31,499.5

8.1

-

-

Total Liabilities & SE

442,730.2

100.0

-

-

414,137.1

100.0

-

-

386,809.3

100.0

-

-

Use

Cash & Due from Banks

20,581.4

4.6

188.9

0.92

21,609.4

5.2

167.8

0.78

20,933.1

5.4

185.5

0.89

Loans

287,925.9

65.0

11,190.7

3.89

266,195.4

64.3

9,681.4

3.64

252,132.2

65.2

9,244.0

3.67

  Loans in KRW

224,504.2

50.7

7,892.5

3.52

207,439.9

50.1

6,828.2

3.29

197,841.4

51.2

6,541.9

3.31

  Loans in Foreign Currency

19,306.0

4.4

795.6

4.12

16,841.6

4.1

583.2

3.46

14,936.7

3.9

482.2

3.23

  Credit Card Accounts

21,543.9

4.9

1,790.2

8.31

19,952.8

4.8

1,680.9

8.42

18,804.3

4.9

1,708.5

9.09

  Others

22,571.8

5.0

712.5

3.16

21,961.1

5.3

589.1

2.68

20,549.8

5.3

511.4

2.49

FVOCI Financial Assets

37,064.0

8.4

754.6

2.04

34,272.9

8.3

645.3

1.88

30,308.9

7.8

612.1

2.02

AC Financial Assets

26,456.1

6.0

730.4

2.76

22,199.6

5.4

651.1

2.93

17,409.7

4.5

561.8

3.23

Other Assets

70,702.8

16.0

-

-

69,859.8

16.8

-

-

66,025.3

17.1

-

-

Total Assets

442,730.2

100.0

-

-

414,137.1

100.0

-

-

386,809.3

100.0

-

-

1) The “Average Balance” is the arithmetic mean of the ending balance of each quarter.

 

7


Other Financial Information

The main serial financial figures and indices for Dec. 31, 2018 listed herein may be subject to change.

 

1) Capital Adequacy

 

Consolidated BIS Ratio (Shinhan Financial Group)

 

 

 

(KRW billion)

 

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Aggregate Amount of Equity Capital (A)

33,993.1

30,713.5

29,786.5

Risk-Weighted Assets (B)

228,678.1

207,768.6

198,642.6

BIS Ratio (A/B)

14.87%

14.78%

15.00%

Note) based on Basel III

 

Capital Adequacy Ratios (Subsidiaries)

 

 

 

 

(%)

Subsidiary

Capital Adequacy Ratio

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Shinhan Bank

BIS Capital Adequacy Ratio

16.0

15.6

15.7

Shinhan Card

Adjusted Equity Capital Ratio

21.7

24.5

26.2

Shinhan Investment Corp.

Net Capital Ratio

796.9

706.4

892.0

Shinhan Life Insurance

Risk Based Capital Ratio

238.7

175.4

178.3

Shinhan BNP Paribas Asset Management

Equity Capital (KRW billion)

159.0

156.0

148.6

Minimum Capital Requirement (KRW billion)

27.4

23.5

24.0

Shinhan Capital

Adjusted Equity Capital Ratio

13.2

14.0

14.9

Jeju Bank

BIS Capital Adequacy Ratio

14.9

14.7

12.8

Shinhan Savings Bank

BIS Capital Adequacy Ratio

14.7

14.3

14.9


Notes :

 

The BIS Capital Adequacy Ratio is computed in accordance with the guidelines issued by the FSS for commercial banks. Under these guidelines, commercial banks are required to maintain a minimum capital adequacy ratio of 8%.

 

Basel III FIRB was applied in calculating Shinhan Bank’s BIS Capital Adequacy Ratio.

 

Basel III TSA was applied in calculating Jeju Bank’s BIS Capital Adequacy Ratio.

 

Basel I was applied in calculating Shinhan Savings Bank’s BIS Capital Adequacy Ratio.

 

The Adjusted Equity Capital Ratio represents the ratio of total adjusted shareholder’s equity to total adjusted assets and is computed in accordance with the guidelines issued by FSS. Under these guidelines, Shinhan Card and Shinhan Capital are required to maintain a minimum adjusted equity capital ratio of 8%.

 

Net Capital Ratio is computed in accordance with the guidelines issued by the FSS. Under these guidelines, Shinhan Investment Corporation is required to maintain a minimum net capital ratio of 100%.

 

Under the guidelines issued by the FSS, Shinhan Life Insurance is required to maintain a minimum RBC ratio of 100%.

 

Under the guidelines issued by the FSS, Shinhan BNP Paribas Asset Management is required to hold Equity Capital that exceeds the Minimum Capital Requirement.

8


2) Liquidity

 

Won Liquidity Ratio

 

 

 

(KRW billion, %)

Company

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Won Assets

Won Liabilities

Won Liquidity Ratio(%)

Won Assets

Won Liabilities

Won Liquidity Ratio(%)

Won Assets

Won Liabilities

Won Liquidity Ratio(%)

Shinhan Financial Group

1,860.4

138.3

1,344.8

309.8

131.6

235.3

198.8

134.8

147.5

Shinhan Card

17,425.6

4,568.9

381.4

15,768.6

4,236.0

372.3

14,722.9

4,069.1

361.8

Shinhan Investment Corp.

13,167.2

7,820.2

168.4

12,873.9

9,320.8

138.1

12,472.3

8,227.4

151.6

Shinhan Life Insurance

1,136.0

637.3

178.3

917.5

553.3

165.8

915.8

502.0

182.4

Shinhan Capital

637.7

543.7

117.3

768.9

560.4

137.2

684.5

521.2

131.3

Shinhan Savings Bank

320.5

222.4

144.1

308.0

213.3

144.4

169.8

138.7

122.4

Notes :

 

Shinhan Financial Group: Due within 1 month

 

Shinhan Life Insurance: (Won assets due within 3 months /3 months average of Claim payments )*100

 

Shinhan Card, Shinhan Investment Corp., Shinhan Capital, and Shinhan Savings Bank : Due within 3 months

 

Liquidity Ratio for Shinhan Bank and Jeju Bank have been replaced by Liquidity Coverage Ratio from Mar 31, 2015

to reflect the recent amendments to detailed regulations on supervision of banking business.

 

  

 

Liquidity Coverage Ratio

 

 

 

(KRW billion, %)

Company

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

High Quality Liquid Assets

Net Cash Outflows

Liquidity Coverage Ratio(%)*

High Quality Liquid Assets

Net Cash Outflows

Liquidity Coverage Ratio(%)

High Quality Liquid Assets

Net Cash Outflows

Liquidity Coverage Ratio(%)

Shinhan Bank

51,326.2

52,043.4

98.7

46,813.9

49,493.3

94.7

35,961.9

37,257.5

96.7

Jeju Bank

625.5

514.1

122.3

560.3

476

117.9

563.2

401.9

142.6

* Liquidity Coverage Ratios are the arithmetic mean of daily LCRs.

 

 

9


Foreign Currency (FC) Liquidity Ratio

 

 

 

(USD millions, %)

Company

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

FC

Assets

FC Liabilities

FC Liquidity Ratio(%)

FC

Assets

FC Liabilities

FC Liquidity Ratio(%)

FC

Assets

FC

Liabilities

FC Liquidity Ratio(%)

Shinhan Financial Group

-

-

-

-

-

-

-

-

-

Shinhan Bank

-

-

-

49,850.7

46,790.4

106.5

39,631.1

35,968.5

110.2

Shinhan Investment Corp.

5,983.6

5,641.7

106.1

7,577.9

7,913.3

95.8

5,635.3

5,073.4

111.1

Shinhan Capital

118.3

100.4

117.8

99.8

0.3

29,325.20

80.3

1.1

7,333.00

Jeju Bank

34.2

17.2

198.8

43.2

37.9

114.1

13.3

10.7

124.7

Notes :

 

Foreign currency liquidity ratios are computed with assets and liabilities due within 3 months.

 

Shinhan Bank’s foreign currency liquidity ratio reflected securitization weight with the guidelines issued by the FSS.

 

Shinhan Bank’s foreign curreny liquidity ratio has been replaced by Foreign Liquidity Coverage Ratio.

 

 

 

 

Foreign Currency (FC) Liquidity Coverage Ratio

 

 

 

 

(USD millions, %)

Company

2018 4Q

2018 3Q

2018 2Q

2018 1Q

Oct. 1 ~ Dec. 31

Jul. 1 ~ Sep. 30

Apr. 1 ~ Jun. 30

Jan. 1 ~ Mar. 31

Shinhan Bank

123.1

124.2

117.6

107.3

Notes :

 

Under the guidelines issued by the FSS, Shinhan Bank is required to hold a minimum requirement of foreign exchange debt in high-quality liquidity assets to withstand a 30-day net cash outflow in systemic risks. The minimum requirement of the foreign currency liquidity coverage ratio was set at 60% in 2017, 70% in 2018 and will be increased gradually to 80% in 2019.

 

 

10


3) Asset Quality

 

SFG Consolidated Basis

 

 

 

(KRW billion)

 

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Total Loans

299,349.9

274,719.1

259,772.6

Substandard & Below

1,612.9

1,734.1

1,927.6

Substandard & Below Ratio

0.54%

0.63%

0.74%

Non-Performing Loans

1,318.4

1,467.1

1,595.8

NPL Ratio

0.44%

0.53%

0.61%

Substandard & Below Coverage Ratio

170.40%

135.15%

125.99%

Loan Loss Allowance

2,748.3

2,343.6

2,428.7

Substandard & Below Loans

1,612.9

1,734.1

1,927.6

 

Separate Basis                                                                        

(%)

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Substandard & Below Ratio

NPL Ratio

Substandard & Below Coverage Ratio

Substandard & Below Ratio

NPL Ratio

Substandard & Below Coverage Ratio

Substandard & Below Ratio

NPL Ratio

Substandard & Below Coverage Ratio 1)

Shinhan Financial Group

-

-

-

-

-

-

-

-

-

Shinhan Bank

0.45

0.39

141

0.55

0.49

114

0.65

0.56

96

Shinhan Card

1.11

0.61

275

1.06

0.61

238

1.16

0.76

271

Shinhan Investment Corp.

0.08

0.08

1,003

0.08

0.08

497

0.10

0.10

413

Shinhan Life Insurance

0.09

0.08

414

0.09

0.07

274

0.09

0.08

335

Shinhan Capital

0.97

1.04

159

1.33

1.6

129

2.61

2.93

94

Jeju Bank

0.49

0.47

102

1.09

0.8

41

1.24

0.93

35

Shinhan Savings Bank

3.88

3.40

72

3.86

2.98

62

5.42

3.45

53

 

 

4) Debt to Equity Ratios

 

Shinhan Financial Group (Separate Basis)

 

 

 

(KRW billion)

 

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Debt

8,464.2

7,447.7

6,977.7

Equity

21,650.0

20,192.1

20,217.9

Debt to Equity Ratio

39.10%

36.88%

34.51%


11


Twenty Largest Exposures by Borrower

 

 

 

 

 

(KRW billion)

As of Dec. 31, 2018

Consolidated basis

Loans in Won

Loans in Foreign Currency

Securities

Guarantees and Acceptances

Others

Total Exposures

Ministry of Strategy & Finance

0.0

-

17,848.0

-

-

17,848.0

Korea Housing Finance Corporation

0.0

-

6,870.3

-

-

6,870.3

Bank of Korea

40.0

-

5,608.9

0.1

-

5,649.0

Korea Development Bank

10.9

11.2

5,176.5

-

-

5,198.7

Industrial Bank of Korea

651.8

-

3,127.4

-

-

3,779.1

Export-Import Bank of Korea

-

11.2

2,431.3

-

-

2,442.5

Samsung Electronics Co., Ltd.

0.0

1,432.5

-

-

0.0

1,432.5

Korea Deposit Insurance Corporation

-

-

1,355.9

-

-

1,355.9

KB Investment & Securities Co.,Ltd

1,100.0

-

229.1

-

-

1,329.1

Woori Bank

381.1

84.1

839.8

-

-

1,305.0

Kookmin Bank

723.4

-

532.6

31.2

-

1,287.3

Korea Securities Finance Corporation

716.3

-

503.8

-

-

1,220.1

NongHyup Bank

627.1

10.6

536.8

15.5

-

1,190.0

Korea Land & Housing Corporation

0.0

-

1,106.9

-

-

1,107.0

Mirae Asset Daewoo Co., Ltd.

870.7

-

191.7

-

-

1,062.5

KEB Hana Bank

139.6

225.2

501.1

2.1

-

868.1

Korea Electric Power Corporation

2.4

-

760.2

88.3

-

851.0

Small & Medium Business Corporation

0.0

-

722.9

-

-

722.9

Korea Investment & Securities Co., Ltd

631.3

-

67.9

-

-

699.2

KB Kookmin Card Co., Ltd

27.4

-

660.8

-

-

688.2

Total

  5,922.1

  1,774.9

49,071.9

    137.3

0.0

56,906.2

Note) Some of the totals may not sum due to rounding

 

12


Exposure to ten Main Debtor Groups

 

 

 

 

 

(KRW billion)

As of Dec. 31, 2018

Consolidated basis

Loans in Won

Loans in Foreign Currency

Securities

Guarantees and Acceptances

Others

Total

Exposures

Samsung

      545.2

    2,001.3

    1,023.7

      967.9

0.1

4,538.1

Hyundai Motors

      845.8

    1,808.6

    1,029.3

      331.9

0.7

4,016.3

SK

      836.6

      378.2

      786.5

      803.9

0.0

2,805.1

Lotte

      327.8

      718.0

      925.6

      339.4

1.6

2,312.4

LG

      460.5

      255.7

      603.5

      536.9

0.0

1,856.6

Hanwha

      341.1

      264.6

      571.8

      328.3

0.2

1,505.9

Hyundai Heavy Industries

      158.2

      170.7

        75.6

    1,073.9

-

1,478.4

LS

        78.2

      388.0

      250.0

      627.2

-

1,343.4

Hyosung

      186.4

      452.9

        59.7

      139.2

0.0

838.1

GS

        55.7

      198.0

      216.8

      193.3

0.0

663.8

Total

  3,835.4

  6,635.9

  5,542.4

  5,341.9

2.6

21,358.2

Note) Some of the totals may not sum due to rounding

 

 

Loans, Due from banks and Securities Concentration by Industry

 

(KRW billion)

As of Dec. 31, 2018

Consolidated basis

Total Exposures

Amount

Weight (%)

Finance and Insurance

88,022.5

20.8%

Manufacturing

47,825.0

11.3%

Retail and Wholesale

19,287.6

4.6%

Real Estate, Leasing and Service

28,676.9

6.8%

Construction

4,600.6

1.1%

Hotel and Restaurant

5,695.4

1.3%

Others

92,157.3

21.8%

Retail customers

136,601.0

32.3%

Total

422,866.3

100.0%

Note) Some of the totals may not sum due to rounding

 

13


Top Twenty Non-Performing Loans

 

 

 

(KRW billion)

Borrower

Industry

Gross Principal Outstanding

Substandard & Below

Allowance for Loan Losses

A

Manufacture of steel products by cold rolling, cold extrusion and cold drawing

87.4

87.4

77.7

B

Manufacture of distilling machinery, heat exchangers and gas generators

76

76

54.4

C

Manufacture of plastic products for fabricating of machine

40.7

40.7

35.2

D

Manufacture of sections for ships

41.8

39.5

27.1

E

Building of steel ships

24.1

24.1

25.3

F

Building of steel ships

23.4

23.4

7.1

G

Building of steel ships

22.3

22.3

0.7

H

Manufacture of sections for ships

22.1

20.7

0

I

Other construction of civil engineering projects

19.7

19.7

8.3

J

Construction of highways, streets and roads

17.1

17.1

14.6

K

Apartment building construction

16.7

15.8

14.5

L

Manufacture of sections for ships

11.5

11.5

4.4

M

Development and subdividing of other real estate

8.2

8.2

0

N

General hospitals

8.2

8.2

8.2

O

Manufacture of smelting, refining and alloys of other non-ferrous metals

6.5

6.5

3.2

P

Golf course operation

5.9

5.9

0

Q

Wholesale of outerwear and shirts

5.6

5.6

5.1

R

Other engineering services

8.3

5.5

5.5

S

Sea freight water transport

5.4

5.2

5.2

T

Operation of Passenger Bus Terminal Facilities

5.1

5.1

0.9

Total

456.1

448.4

297.4

Notes :

 

Consolidated basis as of Dec. 31, 2018.

 

Some of the totals may not sum due to rounding.

 

14


3. Independent Auditor

 

Audit Opinion for the last 3 years

 

FY2018

FY2017

FY2016

Audit Opinion

Unqualified

Unqualified

Unqualified

 

Compensation to the Independent Auditor for Audit and Review Services

The following is a description of the fees for audit and review services performed by our independent auditor for the last three years in connection with our financial statements preparation.

 

Year

Auditor

Payment 1)
(KRW mil.)

Details

Working hours

FY2018

KPMG Samjong Accounting Corp.

715

(annualized basis)

Review/Audit of Financial Statements

8,470

Hours

KPMG Samjong Accounting Corp.

94

(annualized basis)

K-IFRS Report Package Audit for Shinhan Savings Bank

850

Hours

FY2017

KPMG Samjong Accounting Corp.

626

(annualized basis)

Review/Audit of Financial Statements

7,641

Hours

KPMG Samjong Accounting Corp.

78

(annualized basis)

K-IFRS Report Package Audit for Shinhan Savings Bank

896

Hours

KPMG Samjong Accounting Corp.

261

(annualized basis)

Non-statutory audit for  IFRS 9 adoption

2,896

Hours

FY2016

KPMG Samjong Accounting Corp.

581

(annualized basis)

Review/Audit of Financial Statements

7,512

Hours

KPMG Samjong Accounting Corp.

73

(annualized basis)

K-IFRS Report Package Audit for Shinhan Savings Bank

807

Hours

 

1)

Excluding value-added taxes.

 

* In addition to above mentioned description of fees for audit and review services, KPMG Samjong Accounting Corp. also provided services related to US listing and ICOFR audit in accordance with the standards of the PCAOB which we agreed to pay KRW1,582 million(excluding value-added taxes) for FY2018 and a comfort letter issuance services between June 11, 2018 and August 13, 2018 which we paid KRW 120 million(excluding value-added taxes).

15


4. Major Shareholder and Market Price Information of our Common Shares and ADRs

 

Major Shareholders1) of Shinhan Financial Group as of Dec. 31, 2018

Name

No. of Common Shares owned2)

Ownership%

National Pension Service

44,497,838

9.38%

BlackRock Fund Advisors3)

29,063,012

6.13%

 

1)

Shareholders who own beneficial ownership of 5% or more (common share basis).

 

2)

Based on the results of shareholder registry closing as of December 31, 2018

 

3)

Based on the large equity ownership discloser by BlackRock Fund Advisors with the Financial Supervisory Service on Sep. 27, 2018.

 

4)

Ownership is based on the total number of shares, 474,199,587

 

Share ownership of Employee Stock Ownership Association

 

 

 

 

(Number of shares, %)

Share ownership

Beginning Balance
(Jan. 1, 2018)

Increase

Decrease

Ending Balance

(Dec. 31, 2018)

Ownership%

(Dec. 31, 2018)

Employee Stock Ownership

22,211,786

3,101,808

3,252,637

22,060,957

-

ESOA account

112,241

35,699

29,668

118,272

-

Total

22,324,027

3,137,507

3,282,305

22,179,229

4.68%

 

Common Share Traded on the Korea Exchange

 

 

 

 

 

(KRW, number of shares)

 

Jul. 2018

Aug. 2018

Sep. 2018

Oct. 2018

Nov. 2018

Dec. 2018

Price per share

High

45,700

43,600

45,000

45,700

43,600

45,000

Low

42,800

41,450

42,000

42,800

41,450

42,000

Avg.

44,143

42,859

43,015

44,143

42,859

43,015

Trading Volume

19,688,334

19,200,154

22,771,013

19,688,334

19,200,154

22,771,013

Highest Daily Trading Volume

2,374,170

1,613,802

2,656,021

2,374,170

1,613,802

2,656,021

Lowest Daily Trading Volume

459,214

491,336

595,359

459,214

491,336

595,359

 

American Depositary Receipts traded on the New York Stock Exchange

 

 

 

 

 

(USD, number of shares)

 

Jul. 2018

Aug. 2018

Sep. 2018

Oct. 2018

Nov. 2018

Dec. 2018

Price per share

High

40.43

39.42

40.13

40.68

38.71

37.64

Low

38.13

36.58

37.23

37.01

37.01

34.78

Avg.

39.26

38.1

38.48

39.13

37.85

35.98

Trading Volume

1,754,178

1,742,128

1,830,101

2,002,067

2,052,878

4,531,946

Highest Daily Trading Volume

128,160

152,221

194,238

124,497

266,511

630,887

Lowest Daily Trading Volume

46,876

37,392

55,291

56,620

39,956

80,891

Note) 1 ADR = 1 Common Shares

16


5. Directors, Executive Officers and Employees

 

Directors and Executive Officers

 

1) Executive Director

 

 

 

(As of Mar. 31, 2019)

Name

Month and Year

of Birth

Position

Service Term

Cho Yong-byoung

June 1957

- Chairman of Shinhan Financial Group

- Board Steering Committee Chair

- Corporate Social Responsibility Committee member

3 years starting from March 23, 2017

Note) The date on which the term will end will be the date of the general shareholders’ meeting in the relevant year


17


2) Non-Executive Directors

Currently, 12 non-executive directors are in office, 11 of which outside directors who are nominated by our Outside Director Recommendation Committee and appointed pursuant to the approval of general shareholders’ meeting.

9 outside directors were appointed as board of directors at the 18th Annual General Meeting of Shareholders on March 27, 2019, of which 5 directors renewed their terms and 4 directors were newly appointed.

 

Our non-executive directors are as follows:

 

 

 

 

(As of Mar. 31, 2019)

Name

Month and Year

of Birth

Outside

Director

Sub-Committees

Service Term

Park Cheul

April 1946

O

Chairman of Board of Directors

Corporate Governance & CEO Recommendation Committee member

Remuneration Committee member

Board Steering Committee member

5 years starting from March 25, 2015

Lee Manwoo

November 1954

O

Audit Committee chair

Corporate Governance & CEO Recommendation Committee chair
Outside Director Recommendation Committee member

Remuneration Committee member

6 years starting from March 26, 2014

Yuki Hirakawa

October 1960

O

Corporate Governance & CEO Recommendation Committee member

Corporate Social Responsibility Committee member

5 years starting from March 25, 2015

Philippe Avril

April 1960

O

Corporate Governance & CEO Recommendation Committee member
Risk Management Committee member

5 years starting from March 25, 2015

Park Ansoon

January 1945

O

Corporate Social Responsibility Committee member

3 years starting from March 23, 2017

Kim Hwa-nam

December 1945

O

Corporate Governance & CEO Recommendation Committee member

Outside Director Recommendation Committee member

2 years starting from March 22, 2018

Choi Kyong-rok

May 1966

O

Outside Director Recommendation Committee member

Risk Management Committee member

Board Steering Committee member

2 years starting from March 22, 2018

Lee Yoon-jae

November 1950

O

Corporate Social Responsibility Committee chair

Outside Director Recommendation Committee member

Audit Committee member

2 years starting from March 27, 2019

Byeon Yang-ho

July 1954

O

Risk Management Committee chair

Corporate Governance & CEO Recommendation Committee member

Board Steering Committee member

Corporate Social Responsibility Committee member

2 years starting from March 27, 2019

Huh Yong-hak

September 1958

O

Remuneration Committee chair

Risk Management Committee member

2 years starting from March 27, 2019

Sung Jae-ho

March 1960

O

Outside Director Recommendation Committee chair

Corporate Governance & CEO Recommendation Committee member

Audit Committee member

Board Steering Committee member

2 years starting from March 27, 2019

Jin Ok-dong

February 1961

X

-

2 years starting from March 27, 2019

Note 1) Audit Committee Member Recommendation Committee consists of all the outside directors.

Note2) The date on which the term will end will be the date of the general shareholders’ meeting in the relevant year

18


3) Executive Officers

In addition to the executive directors, we currently have the following executive officers:

 

 

 

(As of Mar 31, 2019)

Name

Month and Year

of Birth

Position

In charge of

Park Woo-hyuk

March 1963

Deputy President and
Chief Strategy Officer

- Strategic Palanning Team

- One Shinhan Strategy Team

- Digital Strategy Team

- Platform Marketing Team

Yu Sung-hun

January 1965

Deputy President and

Chief Financial Officer

- Finance Management Team

- Accounting Team

- Investor Relations Team

- Internal Control on Financial Reporting Team

Lee Byeong-cheol

January 1963

Deputy President and
Chief Public Relations Officer

- Brand Strategy Division

Jeong Woon-jinl

April 1964

Deputy President

- Global Investment Banking Business Group

Jang Dong-ki

January 1964

Deputy President

- Global Markets & Securities Business Group

Jeong Jiho

June 1963

Deputy President

- Global Business Management Group

Wang Mi-hwa

October 1964

Deputy President

- Wealth Management Planning Group

Kim Im-geun

July 1963

Deputy President and

Chief Risk Officer

- Risk Management Team

- Risk Model Validation Team

- Credit Review Team

Wang Ho-min

March 1964

Managing Director and
Chief Compliance Officer

- Compliance Team

Lee Een-kyoon

April 1967

Managing Director and
Chief Operating Officer

- Shinhan Leadership Center

- Management Support Team

- Management Innovation Team

 

Compensation to Directors

1) Total Amount Approved at the Meeting of Shareholders

 

 

 

(As of Dec. 31, 2018)

 

Total number of persons

Total amount approved

at shareholders’ meeting

(KRW millions)

Notes

Directors

(Outside directors)

12(10)

3,500

-

Note) Represents the aggregate amount for all directors (including outside directors) excluding long-term incentives.

 

 


19


2) Total Amount Paid

 

 

 

 

(As of Dec. 31, 2018)

 

Total number of

Persons

Total Compensation

(KRW millions)

Average

Compensation

per person

(KRW millions)

Notes

Registered Directors

2

1,149

574

Excluding outside directors

Outside Directors

6

387

62

Excluding Audit committee members

Audit committee members or internal auditor

4

262

69

 

Total

12

1,798

150

 

Notes :

 

Represents the total number of applicable persons as of Dec. 31, 2018.

 

Under the Financial Supervisory Service’s standards for preparing corporate disclosure forms, which standards were amended in November 2013, we are required to disclose in our Business Report the individual annual compensation paid by us to our directors and auditors if such individual annual compensation is W 500 million or greater.
In 2018, Cho Yong-byoung, our Chairman and Chief Executive Officer, received W 1,149 million in salaries and wages. He also currently holds 18,200 performance shares. The exercisability of these performance shares will be determined based on business performance evaluation and share price performance during the period from 2018 to 2021. Additionally, in 2018, Woo Young-woong, our former deputy president and Chief Strategy Officer, received W 552 million which consisted of W 517 million in salaries and wages, W 35 million in severance payments. He also currently holds 5,500 performance shares. The exercisability of these performance shares will be determined based on business performance evaluation and share price performance during the period from 2018 to 2021.

 

Stock Options

 

 

 

 

(As of Dec. 31, 2018)

 

No. of

Granted Options (A)

No. of Exercised Options
(B)

No. of Cancelled Options
(C)

No. of Exercisable Options
(D = A – B – C)

Exercise Price
(KRW)

Granted in 2005

2,500

2,500

-

-

28,006

Granted in 2006

2,500

-

-

2,500

38,829

Granted in 2007

58,764

-

-

58,764

54,560

Granted in 2008

60,753

-

15,125

45,628

49,053

Total

124,517

2,500

15,125

106,892

-

Notes :

 

The weighted-average exercise price of outstanding exercisable options as of Dec. 31, 2018 is KRW 51,841.

 

The closing price of our common stock was KRW 39,600 on Dec. 31, 2018.

 

As of Dec. 31, 2018, the exercise of 9,466 options granted in 2008 is temporarily suspended.

  

Employees

 

 

 

 

(As of Dec. 31, 2018)

Gender

Number of Employees

Average length of Service

Total Salaries and wages

paid in 2018

(KRW million)

Average Payment

per person

(KRW million)

Male

137

2 yrs 11 mths

(14 yrs 7 mths) 1)

17,569

128

Female

29

4 yrs 6 mths

(10 yrs 11 mths) 1)

2,308

79

Total

166

3 yrs 1 mths

(13 yrs 3 mths) 1)

19,878

119

1) Average length of service including service within group subsidiaries

20


6. Related Party Transactions

 

Loans to Subsidiaries

 

 

 

 

 

 

 

 

(KRW billion)

Subsidiary

Loan Type

Origination

Date

Maturity

Date

Lending

Rate

Beginning Balance

(Jan. 1, 2018)

Decrease

Increase

Others

Ending Balance

(Dec. 31, 2018)

Shinhan Card

KRW

2016-01-26

2021-01-26

1.98%

150

-

-

-

150

KRW

2016-02-24

2021-02-24

1.84%

150

-

-

-

150

KRW

2017-03-22

2022-03-22

2.22%

150

-

-

-

150

KRW

2017-04-20

2022-04-20

2.21%

100

-

-

-

100

KRW

2017-05-12

2022-05-12

2.35%

50

-

-

-

50

KRW

2018-02-22

2023-02-22

2.90%

-

-

100

-

100

Shinhan Capital

KRW

2013-01-18

2018-01-18

3.18%

50

50

-

-

-

KRW

2013-09-05

2018-09-05

3.61%

80

80

-

-

-

KRW

2014-01-27

2019-01-27

3.60%

50

-

-

-

50

KRW

2016-03-16

2021-03-16

1.90%

50

-

-

-

50

KRW

2016-04-27

2019-04-27

1.63%

100

-

-

-

100

KRW

2017-03-22

2022-03-22

2.22%

50

-

-

-

50

KRW

2017-04-20

2022-04-20

2.21%

50

-

-

-

50

KRW

2017-05-12

2022-05-12

2.35%

50

-

-

-

50

KRW

2017-08-24

2022-08-24

2.37%

50

-

-

-

50

KRW

2018-01-22

2023-01-22

2.75%

-

-

50

-

50

Shinhan Alternative
Investment Management

KRW

2017-11-22

2018-11-21

2.24%

5

5

-

-

-

KRW

2018-11-21

2019-11-20

2.36%

-

-

5

-

5

Shinhan Savings Bank

KRW

2016-06-17

2021-06-17

1.61%

50

-

-

-

50

KRW

2017-06-23

2022-06-23

2.27%

50

-

-

-

50

Shinhan Life

USD

2018-11-30

2028-11-30

5.10%

-

-

393

-1

391

Total

1,235

135

548

-1

1,646

 

21


For more detailed information, please refer to the Independent Accountant’s Audit Report, which was reported on Form 6-K on March 11, 2019.

22


 

 

SIGNATURES

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

SHINHAN FINANCIAL GROUP CO., LTD.

 

By: /s/ Yu Sung-hun

Name: Yu Sung-hun

Title: Chief Financial Officer

Date: April 1, 2019

23