Shinhan affiliates suffer losses in Indonesia

The headquarters of Shinhan Investment Corp. on Yeouido, Seoul. / Korea Times file

By Lee Kyung-min

Shinhan Financial Group's banking, financial investment and credit card businesses in Indonesia suffered losses last year.

The poor performance was most pronounced at the group's bank subsidiary. Shinhan Bank Indonesia reported an impairment loss of 14.2 billion won ($12.7 million) in 2020, accounting for over a third, or 34.3 percent, of the group's impairment loss of 41.4 billion won last year.

An impairment loss is a decrease in the net carrying value of an asset ― measured by acquisition cost minus depreciation.

If the future value of an asset is expected to be significantly lower than the carrying price following a steep drop in market value, this is treated as a loss in financial statements.

The 14.2 billion won loss caused the financial group's goodwill to drop to 468.99 billion won in 2020, down from 469.49 billion won a year earlier.

Goodwill in finance is calculated by taking the purchase price of a company and subtracting the difference between the fair market value of the assets and liabilities.

The drop is a major blow because it offset last year's 14 billion won in goodwill recognized after the group acquired Neoplux, a venture capital subsidiary of Doosan Group.

Shinhan Bank's Indonesian business was largely expected to suffer, given the drop in net interest margins (NIM) following a key base interest cut, compounded by shrinking loan operations amid the COVID-19 pandemic.

Shinhan Bank Indonesia suffered a comprehensive loss of 22.1 billion won last year, meaning its corporate profit went into the red from 2019 when it achieved a comprehensive profit of 15.5 billion won.

Comprehensive income is a financial statement that shows the overall management performance achieved over a period of time.

Comprehensive income is net income plus other comprehensive income. Other comprehensive income comprises items of income and expenses that are not recognized as profit or losses under the International Financial Reporting Standards (IFRS).

Shinhan Indo Finance, Shinhan Card's branch in Indonesia, reported a comprehensive loss of 2.4 billion won last year. The Indonesian business was launched in December 2015 and has reported net losses every year.

Shinhan Investment Corp.'s Indonesian business reported a comprehensive loss of 4.5 billion won in 2020, about a year after it logged a comprehensive profit of 3.3 billion won.

Shinhan Financial Group reported a record-high net profit of 1.19 trillion won in the first quarter of this year.