Good afternoon. I am Yu Sung Hun, the head of the IR team. I would like to thank everyone for taking the time out to come to today's earnings presentation. We will now begin the Q1 2017 earnings presentation.
Together with us today is Vice President and head of Strategy, Woo Young-woong; Vice President and CFO, Yim Bo-Hyuk; and financing head and Managing Director, Jang Dong Ki. For today's earnings presentation, our CFO, Yim Bo-Hyuk, will walk you through the business results for Q1 2017, and this will be followed by a Q&A session.
Now let me invite Vice President and CFO, Yim Bo-Hyuk, to deliver the Q1 2017 earnings results.
Good afternoon. I am Vice President and CFO, Yim Bo-Hyuk. I would like to thank investors, analysts and journalists from Korea and abroad for taking part in Shinhan Financial Group's earnings call today. Now let me walk you through the Shinhan Financial Group's Q1 2017 earnings highlights. Let us begin with the group's income on Page 3.
In the first quarter 2017, Shinhan Financial Group's net income is up 29.3% Y-o-Y and by 62.9% Q-o-Q, recording KRW 997.1 billion. Points to note about this quarter's earnings are as follow: first, banking and nonbanking operations both posted balanced growth and recurring profit; second, continued SME growth and margin expansion helped maintain interest income at a solid level; third, our persistent cost control drive led to SG&A reduction; and lastly, a substantial drop in recurring loan-loss provisions reaffirm Shinhan's unique strength in preemptive risk management.
Now let us turn to Page 4 on income in greater detail. As you see in the left column, the group's interest income reached some KRW 1.87 trillion, up 9% on a Y-o-Y basis. Despite SME loan growth, due to a drop in retail loans, Korean won loan balance in banking operations is down by 0.5%. However, the bank's NIM rose 5 bps Y-o-Y and by 4 bps Q-on-Q, playing a part in boosting the group's interest income.
Now moving on to Page 5. In Q1, the group's noninterest income recorded some KRW 300 billion, down by 9.2% from Q1 last year. The largest contributor to this drop was the disappearance of large nonrecurring profits this quarter like the ones that we enjoyed in Q1 last year such as the KRW 44.3 billion gain on Ssangyong Cement equity forward transactions. On the other hand, on the back of stronger trust funds and bancassurance product sales, the group's fee income rose 3.5% Y-o-Y, which helped bringing up ordinary noninterest income.
Next regarding the SG&A expenses. In Q1, the group's SG&A was about KRW 1.06 trillion, down by 0.7% Y-o-Y. While the employee-related expenses due to a wage hike, among others, edged up 0.9%, other general SG&A, including A&P expenses, dropped 3.5%. For your reference, the group's cost-income ratio fell to 49.1%, down 3.4 percentage points from a year ago.
Next, the right column shows our credit cost. During Q1, the group's credit cost was written back in the amount of KRW 196.5 billion playing a crucial part in driving up net income. There was a one-off event regarding credit cost this quarter. As of year-end last year, the use of IRB approach related to group's credit risk, including that of Shinhan Card, was approved. In order to have more consistent management of group's provisioning, Shinhan Card began to use the internal rating method in calculating the loan-loss provisions starting this year. For a while, a rather conservative roll-rate method has been used to calculate the amount of provision. With the new model applied, Shinhan Card was able to write back loan-loss provisions amounting to KRW 360 billion, which was a one-off.
Even when Shinhan Card's one-off factor is excluded, the group's credit cost amounted to KRW 170 billion, which is more than 40% decrease Y-o-Y and Q-o-Q, and Shinhan Bank's credit cost ratio hugely improved from 33 bps to 12 bps, bringing the group's recurring credit cost ratio down to 20 bp level.
The group's consistent risk management efforts paid off, stabilizing the credit cost at record low level contributing to the group's higher income. In Q1, the non-bank subsidiaries accounted for 48% of the profit, up from 35% last year. By each subsidiary, Shinhan Bank's interest income went up 10%, credit cost went down 73% and before tax earnings went up more than 50%. However, with the corporate tax write-back factor gone, which had taken place in Q1 last year, the bank's net income decreased by 7%.
Shinhan Card's transaction volume increased 7.6% Y-o-Y, increasing operating income. But because of the increase in marketing expenses, pre-provision income remained at a similar level Y-o-Y. Because of the huge write-back of credit cost due to a new internal risk rating system, Shinhan Card's net income for the quarter increased by 170%.
Shinhan Investment, Shinhan BNPP Asset Management and Shinhan Capital all showed recovery in sales with their profits increasing 111%, 12% and 621%, respectively, Y-o-Y. Shinhan Life's earnings reduced with the disappearance of last year's one-off regarding corporate tax but before tax income improved 17% due to sales increase and gains from asset management.
Group's asset quality on Page 6. As of Q1, the group's NPL ratio stood at 0.76% and the bank's and the card's delinquency ratios are fairly managed at 0.33% and 1.4%, respectively. The reason why the bank's delinquency ratio went up 5 bps Q-o-Q was because the bank's write-off and sales amounts decreased by KRW 80 billion Y-o-Y and by KRW 240 billion Q-o-Q. The actual delinquency ratio is at a stable level. The group's and bank's BIS ratios in Q1 were estimated at 15% and 15.8%; and Common Equity Tier 1 ratios, 13.2% and 13.1%, respectively, increasing 0.5 percentage point and 0.3 percentage point Q-o-Q. Shinhan Card's adjusted capital ratio is 24.5% showing good capital adequacy.
Please refer to group's and subsidiaries' business earnings and indicators in more details from Page 7 and onward. With this, I'd like to conclude -- this concludes the earnings presentation of Shinhan Financial Group for Q1 2017. Thank you.