Shinhan set to leap in growth

By Kim Tong-hyung

It has been a frustrating year so far for the financial sector, but the only struggles Shinhan Financial faces is trying to hide its smile. An internal management feud blew up last year forcing a shake-up at its executive suite, but Shinhan quickly rebounded by bursting out of the gate in 2011 and setting a course for its most lucrative year yet.

In size of assets, Shinhan is a distant third among the country’s banking groups, with KB Financial and Woori Financial in tight competition for the No. 1 spot.

But Shinhan has been consistently punching above its weight. Despite all the leadership turbulence last year, it managed to post a record 2.38 trillion won (about $2.6 billion), which represented more than an 80-percent annual increase, driven by robust growth in its credit card and insurance divisions that complement its bread-and-butter unit, Shinhan Bank.

No other financial group came close to approaching the 2-trillion-won profit threshold, with Woori finishing a distant second with 1.3 trillion won.

Now with a steady hand at the helm in Han Dong-woo, who replaced interim boss Ryoo Shee-yul as Shinhan chairman in March, business has been running on all cylinders.

After posting 924.3 billion won in net profit for the first three months to March, which represented a comfortable lead over KB’s 727.5 billion during the same period, Shinhan managed to do even better in the second quarter with a profit of 964.8 billion won.

Its 1.89-trillion-won profit through the first-half of the year represented a more than 38-percent growth from last year’s numbers, fueled by its flourishing bank and credit card divisions.

“The group’s asset lineup has become healthier and more stabilized, pushing down credit costs significantly compared to last year’s level. Shinhan Bank has been enjoying steady growth, driven by the largest margins from interest revenue, and our dual strength in banking and non-banking businesses continues to separate us from our rivals,” said a Shinhan Financial official.

Shinhan Bank saw its net profit jump more than 56 percent year-on-year at 1.43 trillion won during the first two quarters as it was involved in fewer corporate insolvency processes, allowing it to dramatically reduce credit costs.

Shinhan Card, which continues to be the country’s No. 1 credit-card provider, posted 442 billion won in first-half profit, despite the intensifying competition in the credit-card industry.

Cementing its status as the leading banking group in the domestic market, Shinhan has now set its sights on the global market. Shinhan currently earns around 3 percent of its profit overseas, but Han vows to propel this number to double digits.

Spearheading Shinhan’s efforts to go global is Shinhan Bank, already looking to expand its international network that currently consists of 53 business units in 14 countries. China, Japan, India and Vietnam have been identified as its core Asian markets, although the bank is involved in a variety of business operations elsewhere.

“Shinhan and other Korean financial companies have yet to earn their stripes as globally relevant banking groups,’’ Han told journalists recently. “The ability to provide differentiated value in the global market will determine whether we can enter the next phase in evolution as a financial company.”