Form 6-K
Table of Contents

 

 

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 August 2017

 

 

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             .

 

 

 


Table of Contents

Summary of FY2017 1H Business Report

On August 14, 2017, Shinhan Financial Group (“SFG”) filed its FY2017 1H 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   3
2. Business Results   6
3. Independent Auditor   15
4. Major Shareholder and Market Price Information of our Common Shares and ADRs   16
5. Directors, Executive Officers and Employees   17
6. Related Party Transactions   22

 

2


Table of Contents

1. Introduction of the Group

Company History in 2010 through 2017

 

    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

 

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Table of Contents

Principal Subsidiaries under Korean Law (as of Jun. 30, 2017)

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)

     68.9

Shinhan Savings Bank 2)

     100.0

Shinhan Data System

     100.0

Shinhan AITAS 3)

     99.8

Shinhan Credit Information

     100.0

Shinhan Private Equity

     100.0

SHC Management 4)

     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) 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.
4) Currently in liquidation proceedings

 

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Table of Contents

Indirect subsidiaries held through direct subsidiaries (as of Jun. 30, 2017)

 

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 Khmer Bank Limited 1)     94.3
  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     98.98
   

 

 

 

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
  KOFC Shinhan Frontier Champ 2010-4 PEF2)     8.5
  Shinhan Praxis K-Growth Global Private Equity Fund 3)     14.1
  Shinhan Securities Vietnam Co., Ltd     100.0
  PT Shinhan Securities Indonesia     99.0
   

 

 

 

Shinhan BNP Paribas Asset Management

  Shinhan BNP Paribas Asset Management (Hong Kong) Limited     100.0
   

 

 

 

Shinhan Private Equity

  Shinhan NPS Private Equity Fund 1st 4)     5.0
  Shinhan Private Equity Fund 2nd 5)     2.2
  Shinhan-Stonebridge Petro Private Equity Fund 6)     0.6

 

1) Shinhan Financial Group and its subsidiaries currently own 95.7% of Shinhan Khmer Bank Limited.
2) Shinhan Financial Group and its subsidiaries currently own 34.6% of KOFC Shinhan Frontier Champ 2010-4 PEF Investment Corp.
3) Shinhan Financial Group and its subsidiaries currently own 18.9% of Shinhan Praxis K-Growth Global Private Equity Fund.
4) Shinhan Financial Group and its subsidiaries currently own 36.7% of Shinhan NPS Private Equity Fund 1st.
5) Shinhan Financial Group and its subsidiaries currently own 32.6% of Shinhan Private Equity Fund 2nd.
6) Shinhan Financial Group and its subsidiaries currently own 1.8% of Shinhan-Stonebridge Petro Private Equity Fund.

Number of Shares (as of Jun. 30, 2017)

 

Types of Shares

   Number of Shares  

Common Shares

     474,199,587  
  

 

 

 

Total

     474,199,587  
  

 

 

 

 

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Table of Contents

2. Business Results

Operation Results

 

                   (KRW billion)  
     2017 1H
(Jan. 1 ~ Jun. 30)
     2016 1H
(Jan. 1 ~ Jun. 30)
     FY2016
(Jan. 1 ~ Dec. 31)
     FY2015
(Jan. 1 ~ Dec. 31)
 

Operating income

     2,453.8        1,545.6        3,108.6        2,973.1  

Equity method income

     13.6        3.8        10.0        21.0  

Other non-operating income

     27.8        39.2        51.8        146.5  

Profit before income taxes

     2,495.2        1,588.6        3,170.5        3,140.6  

Income tax expense

     586.1        100.4        345.6        694.6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated net income

     1,909.2        1,488.1        2,824.9        2,446.0  

Net income attributable to equity holders of the Group

     1,889.1        1,454.8        2,774.8        2,367.2  

Net income attributable to non-controlling interest

     20.0        33.3        50.1        78.8  

Notes :

 

    Some of the totals may not sum due to rounding.

 

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Table of Contents

Source and Use of Funds

 

Consolidated Basis

(KRW billion, %)

  2017 1H     FY2016     FY2015  
  Jan. 1 ~ Jun. 30     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
(%)
 
  Deposits     236,289.0       58.4       1,208.1       1.02       226,966.8       58.7       2,586.7       1.14       203,910.5       57.3       2,861.0       1.40  
 

Borrowings

    17,006.5       4.2       98.7       1.16       15,047.2       3.9       176.4       1.17       13,492.9       3.8       150.7       1.12  
 

Debt Securities Issued

    45,686.7       11.3       521.4       2.28       42,790.8       11.1       1,085.8       2.54       39,334.8       11.0       1,183.8       3.01  

Source

 

Other Liabilities

    73,759.5       18.2       —         —         70,504.9       18.2       —         —         68,378.1       19.2       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Total Liabilities     372,741.7       92.1       —         —         355,309.7       91.9       —         —         325,116.3       91.3       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Total Stockholder’s Equity

    32,120.7       7.9       —         —         31,499.5       8.1       —         —         31,063.1       8.7       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Total Liabilities & SE

    404,862.4       100.0       —         —         386,809.3       100.0       —         —         356,179.4       100.0       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Cash & Due from Banks     20,866.1       5.2       84.0       0.81       20,933.1       5.4       185.5       0.89       21,993.4       6.2       225.6       1.03  
  Loans     260,214.2       64.3       4,667.7       3.59       252,132.2       65.2       9,244.0       3.67       231,889.2       65.1       9,031.6       3.89  
 

Loans in KRW

    202,921.8       50.1       3,289.8       3.24       197,841.4       51.2       6,541.9       3.31       180,410.1       50.7       6,479.5       3.59  
 

Loans in Foreign Currency

    16,167.0       4.0       270.0       3.34       14,936.7       3.9       482.2       3.23       13,528.2       3.8       415.0       3.07  

Use

 

Credit Card Accounts

    19,610.5       4.8       829.6       8.46       18,804.3       4.9       1,708.5       9.09       17,819.5       5.0       1,635.3       9.18  
 

Others

    21,514.9       5.4       278.3       2.59       20,549.8       5.3       511.4       2.49       20,131.5       5.7       501.9       2.49  
  AFS Financial Assets     33,190.9       8.2       304.9       1.84       30,308.9       7.8       612.1       2.02       26,830.0       7.5       654.4       2.44  
  HTM Financial Assets     20,735.6       5.1       309.4       2.98       17,409.7       4.5       561.8       3.23       14,961.0       4.2       539.0       3.60  
  Other Assets     69,855.6       17.2       —         —         66,025.3       17.1       —         —         60,505.8       17.0       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  Total Assets     404,862.4       100.0       —         —         386,809.3       100.0       —         —         356,179.4       100.0       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

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Table of Contents

Other Financial Information

 

* The main serial financial figures and indices for Jun. 30, 2017 listed herein may be subject to change.

1) Capital Adequacy

Consolidated BIS Ratio (Shinhan Financial Group)

 

       (KRW billion)  
     Jun. 30, 2017 (e)     Dec. 31, 2016     Dec. 31, 2015  

Aggregate Amount of Equity Capital (A)

     30,258.4       29,786.5       27,216.4  

Risk-Weighted Assets (B)

     199,719.9       198,642.6       203,274.5  

BIS Ratio (A/B)

     15.15     15.00     13.39

Note) based on Basel III

Capital Adequacy Ratios (Subsidiaries)

 

                        (%)  

Subsidiary

  

Capital Adequacy Ratio

   Jun. 30, 2017 (e)      Dec. 31, 2016      Dec. 31, 2015  

Shinhan Bank

   BIS Capital Adequacy Ratio      16.1        15.7        14.8  

Shinhan Card

   Adjusted Equity Capital Ratio      24.7        26.2        28.9  

Shinhan Investment Corp.

   Net Capital Ratio      881.7        892.0        387.2  

Shinhan Life Insurance

   Risk Based Capital Ratio      182.2        178.3        204.2  

Shinhan BNP Paribas Asset Management

   Equity Capital (KRW billion)      146.8        148.6        157.3  
   Minimum Capital Requirement (KRW billion)      23.5        24.0        23.2  

Shinhan Capital

   Adjusted Equity Capital Ratio      14.2        14.9        16.8  

Jeju Bank

   BIS Capital Adequacy Ratio      13.3        12.8        12.6  

Shinhan Savings Bank

   BIS Capital Adequacy Ratio      14.8        14.9        16.3  

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.

 

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Table of Contents

2) Liquidity

Won Liquidity Ratio

 

       (KRW billion, %)  

Company

   Jun. 30, 2017      Dec. 31, 2016      Dec. 31, 2015  
   Won
Assets
     Won
Liabilities
     Won
Liquidity
Ratio(%)
     Won
Assets
     Won
Liabilities
     Won
Liquidity
Ratio(%)
     Won
Assets
     Won
Liabilities
     Won
Liquidity
Ratio(%)
 

Shinhan Financial Group

     319.3        131.5        242.9        198.8        134.8        147.5        624.1        216.0        288.9  

Shinhan Card

     15,407.1        4,380.4        351.7        14,722.9        4,069.1        361.8        14,588.0        3,845.4        379.4  

Shinhan Investment Corp.

     13,885.5        9,311.6        149.1        12,472.3        8,227.4        151.6        11,546.7        6,525.0        177.0  

Shinhan Life Insurance

     1,155.6        520.9        221.8        915.8        502.0        182.4        1,189.5        486.7        244.4  

Shinhan Capital

     633.0        470.5        134.5        684.5        521.2        131.3        784.7        355.4        220.8  

Shinhan Savings Bank

     269.4        224.6        119.9        169.8        138.7        122.4        144.2        103.1        139.9  

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

   Jun. 30, 2017      Dec. 31, 2016      Dec. 31, 2015  
   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

     40,233.5        38,552.2        104.5        35,961.9        37,257.5        96.7        37,421.5        38,253.3        97.8  

Jeju Bank

     517.6        395.3        131.0        563.2        401.9        142.9        546.3        352.0        155.2  

* The “High quality liquid assets” and “Net cash outflows” are the arithmetic mean of the ending balance of every day.

 

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Table of Contents

Foreign Currency (FC) Liquidity Ratio

 

       (USD millions, %)  

Company

   Jun. 30, 2017      Dec. 31, 2016      Dec. 31, 2015  
   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

     47,732.1        41,758.0        114.3        39,631.1        35,968.5        110.2        31,925.0        27,205.6        117.4  

Shinhan Investment Corp.

     5,806.7        4,896.1        118.6        5,635.3        5,073.4        111.1        1,875.7        1,793.8        104.6  

Shinhan Capital

     99.3        50.7        195.7        80.3        1.1        7,333.0        83.1        73.4        113.2  

Jeju Bank

     16.5        13.7        120.2        13.3        10.7        124.7        15.2        9.7        156.3  

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 Financial Group figures are based on the separate basis.

 

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Table of Contents

3) Asset Quality

SFG Consolidated Basis

 

     (KRW billion)  
     Jun. 30, 2017     Dec. 31, 2016     Dec. 31, 2015  

Total Loans

     261,986.6       259,772.6       246,487.6  

Substandard & Below

     1,876.2       1,927.6       2,171.6  

Substandard & Below Ratio

     0.72     0.74     0.88

Non-Performing Loans

     1,564.5       1,595.8       1,691.5  

NPL Ratio

     0.60     0.61     0.69

Substandard & Below Coverage Ratio

     120.55     125.99     191.22

Loan Loss Allowance

     2,261.7       2,428.7       4,152.5 1) 

Substandard & Below Loans

     1,876.2       1,927.6       2,171.6  

 

1) Including reserve for credit losses

Separate Basis

 

                             ( %) 
     Jun. 30, 2017      Dec. 31, 2016      Dec. 31, 2015  
   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

     0.63        0.55        97        0.65        0.56        96        0.80        0.61        173  

Shinhan Card

     1.24        0.75        225        1.16        0.76        271        1.24        0.81        355  

Shinhan Investment Corp.

     0.09        0.09        445        0.10        0.10        413        0.15        0.15        485  

Shinhan Life Insurance

     0.07        0.06        387        0.09        0.08        335        0.09        0.09        927  

Shinhan Capital

     2.29        2.72        91        2.61        2.93        94        3.06        3.58        86  

Jeju Bank

     1.13        0.81        29        1.24        0.93        35        0.87        0.50        141  

Shinhan Savings Bank

     4.71        3.33        61        5.42        3.45        53        6.51        5.37        58  

 

1) Including reserve for credit losses

4) Debt to Equity Ratios

Shinhan Financial Group (Separate Basis)

 

     (KRW billion)  
     Jun. 30, 2017     Dec. 31, 2016     Dec. 31, 2015  

Debt

     7,591.4       6,977.7       6,894.5  

Equity

     20,065.0       20,217.9       20,781.0  

Debt to Equity Ratio

     37.83     34.51     33.18

 

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Table of Contents

Twenty Largest Exposures by Borrower

 

 

                          (KRW billion)  

As of Jun. 30, 2017 Consolidated basis

   Loans in
Won
     Loans in
Foreign
Currency
     Securities      Guarantees
and
Acceptances
     Others      Total
Exposures
 

Ministry of Strategy & Finance

     0.0        —          12,978.9        —          —          12,978.9  

Bank of Korea

     1,920.0        —          5,675.1        0.1        —          7,595.2  

Korea Housing Finance Corporation

     0.0        —          5,104.1        —          —          5,104.1  

Korea Development Bank

     15.4        —          4,890.8        —          —          4,906.2  

Industrial Bank of Korea

     659.1        68.4        2,082.6        0.4        —          2,810.5  

Korea Deposit Insurance Corporation

     —          —          2,772.5        —          —          2,772.5  

Export-Import Bank of Korea

     —          —          2,069.6        0.6        —          2,070.3  

NongHyup Bank

     1,452.9        8.1        518.0        2.1        —          1,981.2  

Korea Securities Finance Corporation

     42.6        —          1,688.2        —          —          1,730.8  

Samsung Electronics Co., Ltd.

     0.0        1,362.8        21.6        —          0.0        1,384.4  

Korea Land & Housing Corporation

     —          —          1,322.6        —          —          1,322.6  

Woori Bank

     80.5        162.6        935.4        0.8        —          1,179.4  

Kookmin Bank

     470.4        —          699.3        0.4        —          1,170.2  

Hana Bank

     100.8        416.0        597.6        0.0        —          1,114.3  

Hyundai Heavy Industries Co., Ltd.

     38.8        101.7        12.9        667.0        —          820.3  

LG Electronics Inc.

     69.8        52.6        122.3        466.3        —          710.9  

Small & medium Business Corporation

     0.0        —          674.5        —          —          674.5  

Hyundai Motor Company

     63.8        516.0        40.1        40.6        0.1        660.6  

Samsung Asset Management

     —          —          641.9        —          —          641.9  

KB Kookmin Card Co., Ltd

     62.1        —          578.3        —          —          640.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,976.2        2,688.2        43,426.4        1,178.3        0.1        52,269.2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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Table of Contents

Exposure to ten Main Debtor Groups

 

                          (KRW billion)  

As of Jun. 30, 2017 Consolidated basis

   Loans in
Won
     Loans in
Foreign
Currency
     Securities      Guarantees
and
Acceptances
     Others      Total
Exposures
 

Samsung

     330.8        1,799.7        1,397.0        1,035.8        1.4        4,564.7  

Hyundai Motors

     1,004.4        2,179.5        975.2        389.5        0.1        4,548.8  

Lotte

     416.4        746.5        1,250.0        465.6        0.4        2,878.8  

Hyundai Heavy Industries

     175.5        199.5        393.4        1,112.3        —          1,880.8  

SK

     321.1        279.5        583.1        388.9        0.0        1,572.6  

LS

     108.8        332.6        366.1        649.4        —          1,456.8  

LG

     381.9        179.9        284.0        606.4        0.0        1,452.2  

Hanwha

     420.8        253.9        476.6        300.3        0.0        1,451.6  

GS

     332.5        156.8        282.6        114.5        0.0        886.5  

Hyosung

     165.6        453.8        73.5        164.3        0.2        857.5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     3,657.8        6,581.8        6,081.5        5,227.0        2.1        21,550.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

Loans, Due from banks and Securities Concentration by Industry

 

     (KRW billion)  

As of Jun. 30, 2017 Consolidated basis

   Total Exposures  
   Amount      Weight (%)  

Finance and Insurance

     74,271.7        20.4

Manufacturing

     43,900.5        12.0

Retail and wholesale

     17,514.7        4.8

Real Estate, leasing and service

     22,817.1        6.3

Construction

     3,875.2        1.1

Hotel and Restaurant

     5,305.2        1.5

Others

     61,251.0        16.8

Consumers

     135,528.6        37.2
  

 

 

    

 

 

 

Total

     364,464.0        100.0
  

 

 

    

 

 

 

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

 

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Table of Contents

Top Twenty Non-Performing Loans

 

     (KRW billion)  

Borrower

  

Industry

   Gross Principal
Outstanding
     Substandard
& Below
     Allowance for Loan
Losses
 

A

   Manufacture of Cold Rolled, Drawn and Extruded Iron or Steel Products      111.1        111.1        33.0  

B

   Manufacture of Distilling Machinery, Heat exchange unit and Gas Generators      81.0        81.0        54.8  

C

   Manufacture of Plastic Products for Fabricating of Machine      57.6        57.6        43.4  

D

   Manufacture of Sections for Ships      42.3        40.1        25.8  

E

   Building of Steel Ships      39.0        39.0        12.3  

F

   Other Civil Engineering Construction      29.8        29.8        20.6  

G

   Manufacture of Sections for Ships      26.2        24.7        0.0  

H

   Building of Steel Ships      24.4        24.4        12.2  

I

   Building of Steel Ships      22.8        22.8        0.8  

J

   Construction of Highways, Streets and Roads      17.4        17.4        12.3  

K

   Apartment Building Construction      17.5        16.5        15.0  

L

   Apartment Building Construction      16.5        16.5        2.0  

M

   Manufacture of Sections for Ships      15.9        15.9        4.9  

N

   Golf Course Operation      14.6        14.6        7.3  

O

   Manufacture of Other Smelting, Refining and Alloys of Non-ferrous Metals      11.5        11.5        5.7  

P

   Golf Course Operation      11.4        11.4        0.0  

Q

   Other Financial Business n.e.c.      10.0        10.0        1.4  

R

   Manufacture of Other Special Purpose Machinery, n.e.c.      8.9        8.9        2.3  

S

   Development and Subdividing of Other Real Estate      8.2        8.2        0.0  

T

   Operation of Passenger Bus Terminal Facilities      7.5        6.9        4.1  
     

 

 

    

 

 

    

 

 

 
  

Total

     573.5        568.1        257.8  
     

 

 

    

 

 

    

 

 

 

Notes :

 

    Consolidated basis as of Jun. 30, 2017.

 

    Some of the totals may not sum due to rounding.

 

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Table of Contents

3. Independent Auditor

Audit Opinion for the last 3 years

 

     2017 1H      FY2016      FY2015  

Audit Opinion

     —          Unqualified        Unqualified  

* For the first half of 2017, the independent accountant conducted a review for our financial statements instead of auditing them.

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

FY2017    KPMG Samjong Accounting Corp.   

626

(annualized basis)

   Review/Audit of Financial Statements   

2,829

Hours

   KPMG Samjong Accounting Corp.   

78

(annualized basis)

   K-IFRS Report Package Audit for Shinhan Savings Bank   

240

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

FY2015    KPMG Samjong Accounting Corp.   

561

(annualized basis)

   Review/Audit of Financial Statements   

8,236

Hours

   KPMG Samjong Accounting Corp.   

73

(annualized basis)

   K-IFRS Report Package Audit for Shinhan Savings Bank   

895

Hours

   KPMG Samjong Accounting Corp.   

12

(annualized basis)

   Non-statutory audit of subsidiaries under the consolidated corporate tax system for CY2015   

282

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 KRW1,430 million(excluding value-added taxes) for FY2017.

 

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Table of Contents

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

Major Shareholders1) of Shinhan Financial Group as of Jun. 30, 2017

 

Name

   No. of Common Shares owned2)      Ownership%  

National Pension Service

     45,269,850        9.55

BlackRock Fund Advisors3)

     24,320,723        5.13

 

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, 2016
3) Based on the large equity ownership discloser by BlackRock Fund Advisors with the Financial Supervisory Service on Oct. 20, 2016.

Share ownership of Employee Stock Ownership Association

 

                   (Number of shares, %)  

Share ownership

   Beginning Balance
(Jan. 1, 2017)
     Increase      Decrease      Ending Balance
(Jun. 30, 2017)
     Ownership%
(Jun. 30, 2017)
 

Employee Stock Ownership

     22,310,764        1,998,417        1,694,067        22,615,114        —    

ESOA account

     88,320        27,659        25,621        90,358        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22,399,084        2,026,076        1,719,688        22,705,472        4.79
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Common Share Traded on the Korea Exchange

 

                               (KRW, number of shares)  
          Jan. 2017      Feb. 2017      Mar. 2017      Apr. 2017      May. 2017      Jun. 2017  

Price per share

   High      47,000        47,500        49,750        48,900        50,800        50,700  
  

Low

     44,800        45,800        46,600        45,600        48,150        48,450  
  

Avg.

     45,728        46,675        47,989        47,200        49,392        49,567  

Trading Volume

     29,005,344        16,963,361        22,415,521        15,982,095        20,318,010        19,994,728  

Highest Daily Trading Volume

     10,173,319        1,647,779        1,852,240        1,314,224        2,329,091        1,404,702  

Lowest Daily Trading Volume

     242,707        460,634        466,466        369,293        543,818        437,819  

American Depositary Receipts traded on the New York Stock Exchange

 

                               (USD, number of shares)  
          Jan. 2017      Feb. 2017      Mar. 2017      Apr. 2017      May. 2017      Jun. 2017  

Price per share

   High      39.78        41.87        43.68        43.06        45.35        45.10  
  

Low

     36.81        39.77        40.51        40.20        41.79        42.66  
  

Avg.

     38.58        40.93        42.30        41.57        43.83        43.99  

Trading Volume

     1,778,962        1,275,836        1,811,306        1,457,502        1,862,440        2,066,088  

Highest Daily Trading Volume

     206,031        172,320        187,417        109,599        196,431        227,522  

Lowest Daily Trading Volume

     40,949        33,096        23,952        54,358        28,081        52,780  

Note) 1 ADR = 1 Common Shares

 

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Table of Contents

5. Directors, Executive Officers and Employees

Directors and Executive Officers

1) Executive Director

 

               (As of Jun. 30, 2017)

Name

   Month and
Year

of Birth
  

Position

  

Service Term

Cho Yong-byoung

   June 1957   

-   Chairman of Shinhan Financial Group

-   Board Steering Committee Chair

-   Corporate Governance & CEO Recommendation Committee member

-   Outside Director Recommendation
Committee member

-   Corporate Social Responsibility
Committee member

   3 years starting from March 23, 2017

 

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Table of Contents

2) Non-Executive Directors

Currently, 11 non-executive directors are in office, 10 of which outside directors who are nominated by our Outside Director Recommendation Committee and appointed pursuant to the approval of general shareholders’ meeting.

7 outside directors were appointed as board of directors at the 16th Annual General Meeting of Shareholders on March 23, 2017, of which 5 directors renewed their terms and 2 directors were newly appointed.

Our non-executive directors are as follows:

 

        (As of Jun. 30, 2017)

Name

 

Month and Year

of Birth

  Outside
Director
   

Sub-Committees

 

Service Term

Wi Sung-ho   June 1958     X     -   2 years starting from March 23, 2017
Park Ansoon   January 1945     O    

Corporate Social Responsibility Committee member

Outside Director Recommendation Committee member

  2 years starting from March 23, 2017
Park Cheul   April 1946     O    

Chairman of Board of Directors

Outside Director Recommendation Committee Chair

Risk Management Committee member

Board Steering Committee member

  3 years starting from March 25, 2015
Lee Manwoo   November 1954     O    

Audit Committee Chair

Corporate Social Responsibility Committee member

Board Steering Committee member

  4 years starting from March 26, 2014
Lee Sang-kyung   September 1945     O    

Corporate Governance & CEO Recommendation Committee member

Audit Committee member

Remuneration Committee member

Outside Director Recommendation Committee member

  6 years starting from March 29, 2012
Lee Steven Sung-ryang   August 1955     O    

Remuneration Committee Chair

Audit Committee member

Corporate Governance & CEO Recommendation Committee member

  2 years starting from March 24, 2016
Lee Jung-il   August 1952     O     Corporate Governance & CEO Recommendation Committee member   2 years starting from March 24, 2016
Lee Heun-ya   September 1959     O    

Risk Management Committee member

Board Steering Committee member

Outside Director Recommendation Committee member

  2 years starting from March 24, 2016
Joo Jaeseong   January 1956     O    

Risk Management Committee Chair

Corporate Social Responsibility Committee Chair

Board Steering Committee member

  2 years starting from March 23, 2017
Yuki Hirakawa   October 1960     O    

Corporate Social Responsibility Committee member

Corporate Governance & CEO Recommendation Committee member

  3 years starting from March 25, 2015
Philippe Avril   April 1960     O    

Risk Management Committee member

Remuneration Committee member

Corporate Governance & CEO Recommendation Committee member

  3 years starting from March 25, 2015

 

* Audit Committee Member Recommendation Committee consists of all the outside directors.

 

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Table of Contents

3) Executive Officers

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

 

         (As of Jun. 30, 2017)

Name

   Month and Year
of Birth
    

Position

  

In charge of

Yim Bo-hyuk      March 1961     

Deputy President &

Chief Financial Officer

  

-   Finance Management Team

-   Investor Relations Team

-   HR Team

-   Information & Communication Technology Planning Team

Woo Young-woong      March 1960     

Deputy President &

Chief Strategy Officer

  

-   Strategic Planning Team

-   Global Business Strategy Team

-   Future Strategy Research Institute

-   Digital Strategy Team

Jin Okdong      February 1961      Deputy President   

-   Synergy Management Team

-   Public Relations Team

-   Management Support Team

-   CSR Team

-   Platform Marketing Team

Lee Chang-goo      January 1961      Executive Vice President   

-   Wealth Management Planning Office

Park Woo-gyun      March 1959      Executive Director   

-   Compliance Team

-   Corporate Culture Development Team

Kim Im-geun      July 1963     

Executive Director &

Chief Risk Officer

  

-   Risk Management Team

-   Risk Model Validation Team

-   Credit Review Team

Compensation to Directors

1) Total Amount Approved at the Meeting of Shareholders

 

        (As of Jun. 30, 2017)
     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). Excludes long-term incentives.

 

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Table of Contents

2) Total Amount Paid

 

                          (As of Jun. 30, 2017)
     Total number of
Persons
     Total
Compensation
(KRW millions)
     Average
Compensation
per person
(KRW millions)
    

Notes

Registered Directors

     2        882        335      Excluding outside directors

Outside Directors

     7        211        32      Excluding Audit committee members

Audit committee members or internal auditor

     3        114        38     
  

 

 

    

 

 

    

 

 

    

Total

     12        1,147        96     
  

 

 

    

 

 

    

 

 

    

Notes :

 

    Represents the total number of applicable persons as of Jun. 30, 2017.

 

    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 W500 million or greater.

In 2017, Han Dongwoo, former Chairman and Chief Executive Officer, received W589 million which consisted of W183 million in salaries and wages, W406 million in bonus payments. He also currently holds 4,403 performance shares. The exercisability of these performance shares will be determined based on business performance evaluation and share price performance during the period from 2017 to 2020.

Stock Options

 

                   (As of Jun. 30, 2017)  
     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

     102,389        80,000        —          22,389        28,006  

Granted in 2006

     108,356        —          —          108,356        38,829  

Granted in 2007

     58,764        —          —          58,764        54,560  

Granted in 2008

     60,753        —          15,125        45,628        49,053  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     330,262        80,000        15,125        235,137        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Notes :

 

    The weighted-average exercise price of outstanding exercisable options as of Jun. 30, 2017 is KRW 43,714.

 

    The closing price of our common stock was KRW 49,300 on Jun. 30, 2017.

 

    As of Jun. 30, 2017, the exercise of 38,604 options granted in 2008 is temporarily suspended.

 

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Table of Contents

Employees

 

           (As of Jun. 30, 2017)  

Gender

   Number of
Employees
    

Average length of Service

   Total Salaries and wages
paid in 2017
(KRW million)
     Average Payment
per person
(KRW million)
 

Male

     116      2 yrs 8 mths
(13 yrs 5 mths)1)
     7,449        64  

Female

     24      6 yrs 3 mths
(9 yrs 9 mths)1)
     1,088        45  
  

 

 

       

 

 

    

 

 

 

Total

     140      3 yrs 3 mths
(12 yrs 10 mths)1)
     8,538        60  
  

 

 

       

 

 

    

 

 

 

 

1) Average length of service including service within group subsidiaries

 

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Table of Contents

6. Related Party Transactions

Loans to Subsidiaries

 

                      (KRW billion)  

Subsidiary

  

Loan Type

   Origination
Date
     Maturity
Date
     Lending
Rate
    Beginning
Balance

(Jan. 1, 2017)
     Decrease      Increase      Ending
Balance

(Jun. 30, 2017)
 

Shinhan Card

   Loans in KRW      2012-03-14        2017-03-14        4.12     150        150        —          —    
  

Loans in KRW

     2016-01-26        2021-01-26        1.98     150        —          —          150  
  

Loans in KRW

     2016-02-24        2021-02-24        1.84     150        —          —          150  
  

Loans in KRW

     2017-03-22        2022-03-22        2.22     —          —          150        150  
  

Loans in KRW

     2017-04-20        2022-04-20        2.21     —          —          100        100  
  

Loans in KRW

     2017-05-12        2022-05-12        2.35     —          —          50        50  

Shinhan Capital

  

Loans in KRW

     2012-03-14        2017-03-14        4.12     50        50        —          —    
  

Loans in KRW

     2012-12-14        2017-12-14        3.33     50        —          —          50  
  

Loans in KRW

     2013-01-18        2018-01-18        3.18     50        —          —          50  
  

Loans in KRW

     2013-09-05        2018-09-05        3.61     80        —          —          80  
  

Loans in KRW

     2014-01-27        2019-01-27        3.60     50        —          —          50  
  

Loans in KRW

     2016-03-16        2021-03-16        1.90     50        —          —          50  
  

Loans in KRW

     2016-04-27        2019-04-27        1.63     100        —          —          100  
  

Loans in KRW

     2017-03-22        2022-03-22        2.22     —          —          50        50  
  

Loans in KRW

     2017-04-20        2022-04-20        2.21     —          —          50        50  
  

Loans in KRW

     2017-05-12        2022-05-12        2.35     —          —          50        50  

Shinhan Private Equity

   Loans in KRW      2016-11-23        2017-11-22        1.95     5        —          —          5  

Shinhan Savings Bank

   Loans in KRW      2016-06-17        2021-06-17        1.61     50        —          —          50  
  

Loans in KRW

     2017-06-23        2022-06-23        2.27     —          —          50        50  
             

 

 

    

 

 

    

 

 

    

 

 

 

Total

 

    935        200        500        1,235  
             

 

 

    

 

 

    

 

 

    

 

 

 

 

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Exhibit 99.1

Independent Auditors’ Review Report (Separate Financial Statements) of Shinhan Financial Group as of June 30, 2017

Exhibit 99.2

Independent Auditors’ Review Report (Consolidated Financial Statements) of Shinhan Financial Group as of June 30, 2017

 

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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.

 /s/ Yim Bo-hyuk

Name: Yim Bo-hyuk
Title:   Chief Financial Officer

Date: August 14, 2017

 

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