Shinhan Financial Group Co., Ltd. (NYSE:SHG) Q2 2025 Earnings Call Transcript

Shinhan Financial Group Co., Ltd. (NYSE:SHG) Q2 2025 Earnings Call Transcript July 25, 2025

Shinhan Financial Group Co., Ltd. misses on earnings expectations. Reported EPS is $2.21 EPS, expectations were $2.23.

Cheol Woo Park: Good afternoon. I am Park Cheol-woo, head of IR. I would like to thank everyone for attending the 2025 Q2 Shinhan Financial Group’s earnings presentation. In today’s earnings presentation, we have with us the Group’s CFO, Cheon Sang-young; Group CSO, Go Suk-Hyun; Group CRO, Bang Dong-kwon; Shinhan Bank’s CFO, Lee Jeong-Bin; Shinhan Card CFO, Park Hae-chang; Shinhan Investment Securities CFO, Jang Jeong-hoon; and from Shinhan Life CFO, [Gyu Song-han] is with us. Today’s earnings release will proceed as follows. We will hear a presentation on the Q2 business results by our CFO, which will be followed by a Q&A session. Now I invite our Group CFO, Cheon Sang-young, for a presentation on the quarter’s business results.

Sang-young Cheon Good afternoon. Thank you for participating in the 2025 Q2 earnings presentation. Let me begin on Page 2 with the highlights of our business performance. As of the end of June 2025, the Group’s CET1 ratio was provisionally estimated at 13.59%, an improvement of 32 bps compared to previous quarter. This was driven by solid group’s earnings, the impact of a weaker exchange rate and continued efforts to manage RWA efficiently. Today, the Board of Directors resolved to pay a cash dividend of KRW571 per share for Q2 and a result share buyback amounting to KRW800 billion. Of the total share repurchase amount, KRW600 billion will be executed in H2 of this year and the remaining KRW200 billion will be carried out in January 2026. Through this, we’ll continue our year-round share buyback program as we have done this year.

Including the KRW650 billion already acquired in H1 and the KRW600 billion scheduled for H2, the total share back for 2025 will amount to approximately KRW1.250 trillion. In Q2 2025, the Group recorded a net income of KRW1,549.1 billion, growing 4.1% QoQ despite an increase in credit cost, thanks to improvements in noninterest income. While the cost-to-income ratio remained stable, the credit cost ratio showed a slight increase due to delayed economic recovery. Next on Page 3, moving on to capital. As mentioned earlier, the Group CET1 ratio improved by 32 bps QoQ despite the increased size of share buyback program, supported by a favorable exchange rate and a stable net profit. The Group RWA declined by KRW4 trillion QoQ as foreign currency loan-denominated risk-weighted assets decreased due to FX depreciation and the Group’s portfolio was adjusted to prioritize profitability alongside appropriate growth in Korean won-denominated loans.

Going forward, we will do our utmost to supply funds where necessary while maintaining capital stability through internal efficiencies and strategic resource allocation. Page 4, assets and liabilities. Please refer to the slide for more details. Next, moving on to Page 5, our profit and loss. In Q2 2025, the Group’s net income increased by 4.1% QoQ despite rising credit costs, driven by strong growth in noninterest income under a diversified portfolio. As a result, ROE and ROTCE, the key indicators of our value enhancement strategy, each rose by 0.7%. This means that we are recording 11.4% and 12.9%, respectively. We will explain the details of each item on the following pages. Next, Page 6, net interest income. Despite falling market interest rates, net interest income remained flat QoQ, supported by appropriate growth focused on return on capital.

The Bank’s Korean won loan book grew at a similar level to the previous quarter as we pursued portfolio optimization through asset rebalancing while responding to market demand, especially in retail lending. For more details, please refer to Page 27. The Bank’s NIM declined by 16 bps QoQ as yield on interest-earning assets, including Korean won loans reflected the falling market rate. However, thanks to adequate asset growth and effective execution of LLM strategies, NIM was maintained at the previous quarter’s level. Next page is on noninterest income. The Group noninterest income grew 34.7% QoQ with improvement across all segments. In particular, securities and FX derivative-related gains, which benefited significantly from favorable market conditions led the overall growth in noninterest income.

Q&A Session

Let’s take a closer look at commission and fees. Credit card fee income was improved from savings and marketing costs but still sluggish on a YoY basis. Meanwhile, brokerage commissions were boosted by active stock market trading, up significantly YoY as brokerage trading volume increased. Investment banking commissions continued growth momentum centered around our banking business, driven by a continued pipeline of solid IP deals. Amid favorable market conditions, we recorded growth in our trust fee income from funds and bancassurance, up both YoY and QoQ. While insurance-related income showed a decline YoY, this was due to the high base effect from last year when SPP or short-term payment policy sales were promoted. Otherwise, we’re seeing stable earnings.

Next, Page 8 on SG&A and credit costs. Group SG&A is under stable management with nothing notable from last year. We recorded a cost-to-income ratio of 36.6% in H1. The rise in credit cost versus Q1 was mostly due to the delay in economic recovery as well as our conservative management in terms of our loan book, where we recognized more recurring credit costs in the current period. In the process of implementation of the government-led resolution of real estate bank loans, while we have seen some additional provisioning mostly from nonbanking, it is within our expected and manageable range. Amid the delayed economic recovery, we expect corporates to see rising credit risk while vulnerable customers will be increasingly challenged. For credit cost, the size may be slightly above our initial expectations while timing of recovery is slightly later than expected.

Please refer to Pages 9 to 10 for further details on our group asset quality metrics and loss-absorbing capacity. Next on to Page 11, net income by subsidiary and our overseas business performance. Shinhan Bank, despite the increase in credit costs while interest income held up at Q1 levels, while noninterest income was up significantly, thanks to improved fee income from IB and marketable securities, maintaining solid performance. Shinhan Investment Securities has been working to recover from last year’s poor performance, improving the competitiveness of its core offerings such as security trust and prop trading to improve underlying business fundamentals. Personal card and capital both remained sluggish amid continued funding and credit cost pressures.

But through self-help measures such as asset rebalancing, we expect improved fundamentals and a gradual recovery in earnings. Our Group’s overseas business continues to return solid performance despite ongoing internal and external uncertainties. Pages 12 through 13 outline our digital and sustainability-related initiatives. And Page 14 is on our group-wide inclusive co-prosperity finance initiatives. We have been offering refinancing for borrowers from Shinhan Savings Bank with lending from Shinhan Bank to enhance the credit of our customers. We’ve been helping customers discover their forgotten dormant accounts while lowering to a single-digit lending rate on all Shinhan Bank household loans, charging 10% or more to help support economic self-reliance and sustainable consumption.

We also have institutionalized support to help improve the financing conditions of our customers. Going forward, we are committed to the core role of finance to provide productive intermediation of financing. We will continue to pursue diverse programs for co-prosperity, to grow together with our customers as we do our best to become a sustainable financial group. Pages 15 through 18 are more on our corporate value program in terms of implementation progress and performance. Relative to the plans announced last year and this year, I can say that we have achieved good implementation results so far. Please refer to the materials for further details. From Page 19 and onward, we provide detailed breakdown of group subsidiaries, including financial highlights, P&L, asset management and funding so please refer to the pages.

In terms of our H1 performance and shareholder return policies, we intend to hold a separate session for individual retail investors, so we look forward to your engagement and support and your interest. Thank you very much.

Cheol Woo Park: Yes. Thank you very much, and we will now open the discussions to the floor for Q&A. We do excuse ourselves and seek your kind understanding regarding the technical difficulties.

Cheol Woo Park: The first question comes from Jung Joon-seop from NH Securities. Joon-seop Jung I’m Jung Joon-seop from NH Securities. I have 2 questions actually. The first question has to do with the fact in the beginning of the year, one of your competitors had actually carried out distribution from reduced capital. And yesterday, another peer announced that they are considering distribution from reduced capital. I think a similar question has been asked in the past, but there were recent changes in the capital market. Recently, with regards to this issue, has there been a change in your views or position regarding this matter? Second question has to do with the outlook for H2, especially this year’s H2, the economic outlook and also the credit cost ratio, what is the outlook in H2?

Cheol Woo Park: Thank you very much for that question. While we’re preparing for the answer, please hold for a few seconds. Sang-young Cheon Thank you very much for that question. With regards to the distribution from reduced capital, our views and second question was about the economic outlook and also credit cost outlook for H2 of the year. The first question about the distribution from reduced capital reserves and the second question about the credit cycle outlook. Our CRO will take that question and the credit cost-related question, I’ll take that question. With regards to distribution from reduced capital, at this point in time, as of yet, there is no actually a positive consideration review that has been undertaken. At the beginning of the year, when one of our peers had reviewed it, we did actually review it.

There was a lot of factors to consider, but the regulatory body, I think they are looking into the tax-related issues. When this conclusion comes out from the regulatory body, I think at that point in time, we can do another review. But at this point, we have new plans of engaging in distribution from reduced capital. In the case of our peers, the reason why they have conducted distribution from reduced capital, I think it was partially done to enhance shareholder return, or maybe they were forced to do it because they lack earnings to distribute. But in our case, as of the end of last year, we had enough, actually grew KRW4.6 trillion, so we’re not in a position to really review this matter. So were there any changes regarding tax issues or others.

But as of now, we have no plans to consider this matter.

Dong-kwon Bang: Yes, this is the CRO. Regarding our economic outlook for H2 of the year and in terms of the overall asset soundness conditions. As you know, in H1 of the year, across the financial sector, the real economy, domestic political and economic conditions, well, various factors weighed on the prospects for a quick economic turnaround. At Shinhan Bank, of course, it could be in part due to a base effect. But in terms of the number of new delinquencies or the delinquency amount has been in decline. Based on our vintage analysis within the last 2 years of new loans, the delinquency amount in the last 2 years from the last 2 years’ worth of origination has been in decline as well. As you know, recently, the supplementary budget will be implemented, and there’s the livelihood support voucher program and the bad bank initiative.

These government policies are intended to promote consumption while providing support for small merchants. Starting from last year, regarding the real estate PF loan, we have been working together with the government for normalization of the PF loans. As a result of these efforts and also there will be an added effect from rate cuts expected in H2 of the year. So on balance, we think that in H2, cautiously, we may see a peak-out of our asset quality metrics. However, that said, given the tariff issue, this is a challenging time. There are tighter regulations against household loans so we still believe that there are many sources of uncertainty that remains. So we intend to stay on guard and be vigilant in our management. In terms of credit cost, in H1, just to recap what happened, as we explained earlier, overall, there is a delayed recovery in terms of overall asset soundness.

In H1, we were more conservative in terms of credit assessment, and so that had the result of increasing credit costs. We did additional provisioning against real estate loans as well, which is why compared to our initial expectations, our actual credit costs were above our expectations. Sang-young Cheon The CRO talked about the outlook for the credit side in H2. Whenever we do this earnings presentation, the quarter outlook for asset quality and we are giving guidance for credit cost as well. However, this is a difficult year. We have the full year presentation and the Q1 earnings presentation. Whenever we do that, the numbers are actually increasing. So in Q1, actually, the number that we had provided was about 40 bps, early 40 bps, but we do believe that the number can go over mid-40 bps range.

Internally, our target is for mid-40 bps level. But the credit cost has been dealt with by the CRO. But as asset quality deteriorates on a recurring level, credit cost actually does increase in proportion. But from a conservative point of view, provisioning, if we can move more proactively in this regard. If we do have some room in terms of capital ratio or in our ability to absorb the losses, and we do want to actually absorb the losses in a more conservative manner. That is reflected in our credit cost as well. All in all, for credit cost for H2, we do believe our assessment is for the mid- to late 40 bps range.

Cheol Woo Park: Mr. Seol Yong-jin from SK Securities, please go ahead. Yong-jin Seol I will also ask about 2 things. Recently, separate taxations for dividend income, for example, this has been drawing greater interest recently. If there’s legislation and if it does materialize in terms of shareholder return, will there be any changes to your Value-up program? If you could share your overall directionality and some thoughts. Then second, recently, there’s a lot of talk about stablecoins. Is there anything in the works within the Shinhan Group regarding stablecoins?

Cheol Woo Park: Yes. Please wait just momentarily as we prepare answer. Sang-young Cheon Yes, thank you for your questions. I think there were 2. First about the shareholder return mix and then second about stablecoin. I will take the first question and pass on the second question to our CSO. Recently, in terms of separate taxation for dividend income, there is a lot of talk going on, and certainly, we are monitoring very closely. However, it’s similar for this as well. Like we said, some are saying 35%. There’s a lot of speculation, but as to how it will ultimately be decided, we will have to wait and see our legislation. Once it is entered into law, of course, we’ll have to think hard about our shareholder return mix. When we first announced our Value-up program, every year and every quarter, we said we will monitor progress and have discussions at the BOD level, so likewise, this will, of course, be subject to those discussions as well.

At our BOD meeting earlier this morning, there were discussions about this as well. However, we still do not know how it will be legislated so we were not able to review the details. But a key characteristic of our value program is the pace of shareholder return and also our share buyback. We have a target in terms of how many shares outstanding we will be buying back and canceling. So buyback and cancellation being the mainstay of our program, I think that remains unchanged. What’s fortunate is that in terms of the pace of the buyback and cancellation, has been quite fast, so we may not have to wait until 2027 to achieve our target of 50 million shares. At an appropriate time, the mix is between dividends and share buyback and cancellations.

Well, it gives us room to be more flexible in terms of adjusting the mix. And so our PBR, if it goes above 0.8x and we have adequate valuation, then rather than through buyback and cancellation, we could shift toward more dividends to boost cash flow for post-retirement investors, for example. So we will be flexible in reviewing our options and then also communicating our results with the market as well. Regarding stablecoin, I think according to the press, well, I can only provide a very high-level generic answer. So 14 banks are studying. There’s a consultative consortium in place deliberating about stablecoins and we are a member of that consortium as well. But again, there has not been legislation yet as to who the insurers will be, where you can use the stablecoin, how the supervisory and oversight system will be.

There are many unknowns. But in the longer term, we will not just stand by not doing anything as stablecoin materializes. But we will look and study hard how to use this as an opportunity instead of as something that can be a source of concern.

Cheol Woo Park: We will take the next question. HSBC Securities, Won Jae-woong, the floor is yours.

Dong-kwon Bang: A difficult and challenging environment, thank you for the solid results. And also thank you very much for paying a lot of attention to shareholder returns. I have 2 questions. If you look at Page 16, when you say shareholder return, depending on the PBR interval, you said that in the case of greater PBR [Inaudible] that it seems that there is management about share buyback. If the number is greater than 1 PBR, then there will be no share buyback, is that how we should understand it? And then there is no comment on the 1.8 1 multiple. That interval will the cash dividend move up faster? That’s my first question. Secondly, the loan growth, I think, was weaker than expectations in H1. In H2, I think the loan environment was quite challenging. But even in that environment, are you going to maintain the current pace in H2 or going to increase the pace? And also, what’s your outlook for NIM as well, so outlook for the loan as well as NIM?

Cheol Woo Park: Thank you very much for the question. While we are preparing for the answer, please hold. Company Representative So PBR, by the interval of PBR, the shareholder return mix and also outlook for loan. So the first question, I’ll take the first question. And the CFO of the Bank will take the second question. With regards to your first question, I also actually talked about this during our announcement of the corporate Value-up program. Our principle when it comes to the corporate value-up is we look at the COE and ROE, so COE and ROE is lifted and a balanced approach will be taken. If you look at the current levels, in order to normalize the PBR, then the shareholder return rate has to be accelerated. In order for this to have an impact, we do believe that a share buyback is actually more effective than cash dividend.

So if we say the PBR is 1, then up until PBR of 0.8, then our principle would be to do share buyback. And then if it goes beyond that, we will actually change the mix. So if it goes over 1 PBR, then will we not engage in share buybacks? No, that’s not, actually. If you look at the overseas cases, up until 1 or 2 PBR, then our share buyback is actually effective. There are evidence of that. And our ROE and also the rate of recovery at the PBR level, all of these factors will be looked at, will be a very flexible approach. And also this mix of dividends and share buyback, we will look at our performance as well as other factors. We’ll discuss this matter with the market as well and decide. Jeong-bin Lee I’m Lee Jeong-Bin, the Bank’s CFO. With regards to the asset growth and NIM outlook, that was the question, let me answer those questions.

In H1, as we have mentioned, our asset growth slowed down a bit as you have mentioned. In the case of household lending, there was a total quantity regulated guidance from the regulator, and so in H1, household loans have grown by KRW2.5 trillion. And so in H2 as well, we will be taking into consideration the policy-related environment and manage growth at an appropriate level. So the corporate loan in H1, well, in 2024, we have actually increased significantly the corporate loan volume. And so in H1, we are focusing on profitability as well as margin management. And also in terms of asset quality, we have taken a rather conservative approach in our asset growth management. In the case of the corporate loan segment, the growth has been somewhat weak.

However, in H2, based on the portfolio management that was conducted in H1, we do believe that the growth momentum for the corporate side has been secured. So in H2, unlike H1, we will be more proactive in the corporate loan market and move forward asset growth. And also, in the case of corporate loan segment, while we are growing the segment, I think you may have concerns about the margins. Well, in H1, when we manage the NIM, there was interest rate-related loans but also funding cost management was very important. So in H2, the liquidity and other factors will be considered. So cost management for the funding will be done and also margins will be closely monitored in order to grow the asset. That is all.

Cheol Woo Park: I hope that was a sufficient answer for you. Now from Mirae Asset, Mr. Jeong Tae-joon, please go ahead. Jeong-hoon Jang Yes, this is Jeong Tae-joon from Mirae. I also have 2 questions. So the capital ratio seems up, so what is your adequate level in terms of an appropriate capital ratio? And other than [Inaudible], other plans? Regarding shareholder return, I think it’s almost at 50% or so. Do you have plans to do above 50% shareholder returns, which some of your competitors have been doing? Sang-young Cheon Okay, so there were 2 questions. First about the adequate capital ratio, I think. Compared to Q1, our capital ratio was actually quite improved, I think on the market. Regarding our capital position, there were some perceptions that we are a little bit tight internally.

Of course, there was a matter of externalities, including FX rates, but there were many efficiency gain measures and rebalancing that helped us boost our capital ratio. So I think you’re asking about where we intend to use the capital other than loans. We do not intend to use it for big projects like M&A. But like our bank CFO has mentioned, at an adequate level, it can go toward loan growth and also toward investments as well. There will have to be an effective allocation. As you know, the Korean economy overall is experiencing many challenges like low growth, sluggish consumption as well, so it’s a combination of different factors. So our financing intermediation, mediation to more productive parts of the economy, we will be very faithful to that role.

In terms of the methodology of exactly how, we will be quite thoughtful as we execute. We do have a sufficient capital buffer, but given the regulatory environment and the macro condition, it could be subject to change. We said our CET1 ratio would be above 13.1% so at a minimum, we believe we should manage it at around that level or higher. Given the US tariff issues, there are lots of externalities in terms of the macro so we do want to be more on the conservative side. Regarding the level of shareholder returns, I think July last year, we committed to a 50% shareholder return ratio. And I think the reaction from the market found it to be quite revolutionary, quite fresh because 2 years ago, it was 30%. Last year, it went up to 40%. And I think now for the other financial institutions, I think some are talking about above 50%.

We are expecting significant increase on our side as well. But in terms of what level is most appropriate, I think I have to maintain a similar tone as before as to the actual level of shareholder return. 50% by 2027 is our directionality, but we are, of course, open to different options. But this will depend on PBR, ROE and the internal management strategy. These factors will all have to be taken into comprehensive consideration. We have already announced our shareholder returns for H2 of the year. So if there are any changes beyond those plans, we will try to communicate those new developments with the market.

Cheol Woo Park: Thank you for that answer. We move to the next question from Daishin Securities, Park Hye-jin. Hye-jin Park I have 2 questions. With regards to credit costs, can you elaborate and give us more detail about this period? The Bank and the card, I think your write-off have increased. And also the NPL ratio is not falling. Look at Page 10, rather than the Bank and the card or [Inaudible] through Q3 last year, I think you said the card segment, rate or the funding cost. So is that outlook still valid? And also with regards to increase in credit cost, would you take into consideration increase in NPL assets in the card segment, asset quality of the card side? Can you explain more about that? The second question is you said in H2, the share buyback will be around KRW800 billion. What will happen in 2025? Is KRW600 billion and then KRW200 billion will be done in the earlier half of next year, is that correct?

Cheol Woo Park: Thank you very much for the question. Please hold while we are preparing the answer. Sang-young Cheon You have asked 2 questions. So with regards to credit cost, you asked the question and also share buyback schedule. With regards to the second question, let me take the first. And the credit cost question, I’ll give you a brief overview. And because your question pertains to the card business, with regards to asset quality and also other matters, our Card CFO will be taking that question. With regards to share buyback, our BOD had resolved KRW800 billion this time around. And what they had clearly, we saw was that KRW600 billion will be bought back by the end of this year, and KRW200 billion will be bought back early next year.

This was the same last year because our share buyback program is growing. In order to spread that out over the year, we’re taking this approach. Consistently, on a fiscal year basis, we are differentiating it. This year, KRW600 billion, up until that amount is what we are doing for this year and the remaining KRW200 billion will be done next year. So that will be next year’s shareholder return portion. With regards to asset quality and credit cost so we are doing some write-offs as well and disposal. The NPL loans are actually growing faster than our initial expectations, that is true. But in the write-off and disposal, we do have some concerns and issues. Because we are seeing growing NPLs, the price for write-offs and disposal is actually coming down very quickly steeply compared to last year.

And in order to manage asset quality, how much of loss are we going to take? So that is actually an issue of concern internally for us. Managing asset quality ratio is very important, so we need to maintain that at an appropriate level, but there are that concerns. Regarding the card business, I think our Card CFO can provide you with more sufficient answer. Hae-chang Park This is the Card CFO. As we have explained already about the delinquency during our last presentation, new delinquency is actually the focus now. So 2 months overdue, that’s a key indicator. After the impeachment last year, the number has grown steeply. Internally, we are taking a lot of actions so that by February, the delinquency roll rate actually peaked at 0.45%. And then in July, it’s about 4.1% that we’re expecting so it’s improving.

However, recently, in order to stabilize the housing prices, loan provision is being limited. That impact will be felt in the next couple of months and we need to closely monitor the market. In the current situation, we have ticked down and we are coming down. That is the trend that we are observing. You talked about NPL, the delinquent loans are becoming NPLs, and we are managing that through write-offs. And in the case of NPL ratio and also the delinquency we get, in order to ensure that those are not growing, we are actually increasing the write-off so the rates will be managed at the previous level.

Cheol Woo Park: There are no questions pending so we do have another question from Hanwha Investment & Securities, Do-ha Kim. Do-Ha Kim I just have 1 final question regarding real estate trust. I do understand there was a legal litigation. There was some write-off in the press about it. I think regarding your provisioning against that kind of litigation, I understand there is some set aside. So additional provisioning, how much do you expect to have to set aside further against this kind of real estate trust type exposure?

Cheol Woo Park: Please hold on as we prepare the answer. Sang-young Cheon So in terms of real estate trust, I think within the industry, if you look at real estate trust companies based on their financials, a lot of them are still loss-making and the sector remains still challenged. For us, you remember last year, we actually saw a significant loss, which was reflected into our closed accounts. So we wanted to be preemptive in terms of absorbing against that loss. So there is a significant buffer against that kind of loss. Regarding the litigation, we actually set aside about KRW25 billion in provisioning against that kind of loss. But still for Shinhan real estate trust, although profits actually have gone down compared to historical levels, we have seen uptrend in Q2.

Now it depends on the real estate market, so if we suppose that the downtrend continues and the expected recovery amount, of course, will become smaller, so there may be additional loss in that case. But at a high level, for the most part, we have set aside our required provisioning so it’s already done. As of June, we have about KRW380 billion in loans to the trust account and KRW340 billion in provisioning against that exposure so it’s almost full coverage. So rather than a large sum loss, we potentially can have a little bit of loss depending on the real estate business cycle. But in the larger scheme of things, we have a good provisioning already.

Cheol Woo Park: We will move on, [Kim Ji-won] from Securities. Participant I have questions about the securities. Recently, Shinhan Securities brokerage market share is going up and IB-related activities is also growing as well. In terms of contribution to the noninterest income, what area of the business is securities business focusing on or trying to diversify? And also I think you have asked for a new issuer license. What kind of business are you pursuing based on that?

Cheol Woo Park: Please hold while we are preparing the answer. Jeong-hoon Jang I’m the CFO from Securities. Thank you very much for those questions. With regards to the brokerage IB fees going forward, the income that we anticipate for the past 4 to 5 years, WM and IB [Inaudible] and we had the private equity issue and then alternative investments in overseas market, we had incurred some losses. And so retail WM and IB has been rather sluggish. That is true. As we have said, the asset management, WM and IB segment, yes, we are trying to enhance profitability in these segments. In the case of overseas stock, MS, even if those are included, it’s over 5% in terms of MS and the brokerage income continues to grow in this segment.

In the IB, in H1 compared to last year, there has been an increase of about KRW20 billion underwriting fees. So our fundamentals are actually improving. That is our internal assessment. However, for potential loss factors, potential default factors, we are actually closely monitoring these issues, and we will be preemptively removing any of these uncertainty factors. And also the issuer license acquisition, I think this is a cautious issue. Five players have applied for this license, I do believe. With regards to this matter, we’re taking a cautious approach. We have engaged in a thorough review of this and a more aggressive or proactive existing issuers, rather than those kind of aggressive approach, align with the government policies. And then also conservative growth and also in order to align with our group’s portfolio about these kind of assets, so the profitability and the growth of the segment, we want to pursue all this in a balanced manner.

And that’s how we have constructed our portfolio. And so we have done a simulation of various scenarios and so we are preparing the business to ensure stable growth.

Cheol Woo Park: Mr. Kim Jae-woo from Samsung Securities, please go ahead.

Jaewoo Kim: I just have some brief questions. First of all, you mentioned credit cost, you talked about mid- to high 40 basis points for the full year. If I do the math, for Q2, I think you are around 60 basis points. So 50 basis is just on a cumulative basis. For Q2, it’s 60 basis points. So typically, in Q4, it does tend to go up. Are you expecting that in H2, the credit cost is likely to go down to achieve that full year goal? And then there was a lot of fee income from derivatives and other marketable securities. So since it has gone up already, is there room for further upside? Was it more of a one-off or what are your expectations for H2? Regarding your collaboration with Jeju Bank, could you provide some progress update? And if this goes well, is there a possibility of expanding it further?

Cheol Woo Park: Yes, let us prepare to answer just one moment. Sang-young Cheon First, regarding our credit cost outlook, I think you asked about some of our underlying ground for our outlook. If you look at just Q2 at 50 basis points, if these trends continue, of course, mid- to high 40 basis points will not be achievable. So for us, we are looking at recurring trends in Q3. Are there any big factors in Q3? So we have run simulations and we are expecting a slight decrease in credit costs going forward than Q2. Then marketable securities and derivatives. In the rate cut cycle, although our interest income goes down, this provides a boost to our overall earnings. This is correlated with macro factors, so the stock market, how active it is and the cost index and the capital markets, the market interest trends, these will be factors.

So I cannot say it will go way above current levels to see explosive growth, but market interest trends and also the cost activity that we have seen starting in Q2 makes us believe that this kind of trend is likely to go up. And there wasn’t any one-off factor driving up derivatives. It’s not so much valuation gains, but there’s a lot of volatility in the FX rates, for example, that can lead to gain and loss. And so that said, we see remaining potential there as well. And then regarding the collaboration, yes, so we are working hard on the collaboration with Jeju [Inaudible] And we have experts from our side at Shinhan as well. So together, we have a team of 40 people from all parties making the overall preparation starting in April this year.

Like we said, the target is end of Q1 to provide meaningful products available to SMEs or small business owners. So we are working in line with the schedule. In terms of expansion, I think that’s a matter for later after we do a successful launch of the initiative first. So that is it.

Cheol Woo Park: Thank you very much for that answer. Today, a number of financial groups have presentation. The time is up. I’d like to conclude today’s earnings presentation. We have a bit of housekeeping announcement for our retail investors. Our CFO did mention that on August 28, we intend to have an individual IR session for retail investors through our Shinhan Financial Group YouTube channel, same as last year. So from today up to August 4, you can apply to join on our website. During that IR session, we will entertain your questions. So please upload your questions on the Group website in advance of the IR session. Any questions that were not covered today, please go ahead and let us know by uploading them on to our home page. More information will be provided through our website and the site as well so we look forward to your interest. And with that, we will conclude our earnings call for Q2. Thank you. [END]