Greetings.
I am CFO, Roh Yong-hoon, heading the group finance from this year.
First,
I would like to thank all the shareholders, investors, analysts, and journalists in and out of Korea for participating in our 2019 business results presentation.
I would like to walk you through the major highlights of Shinhan Financial Group's 2019 business results.
Please look at Page 3 of our material, and I would like to cover the major highlights.
Shinhan Financial Group's 2019 net income posted KRW 3,403.5 billion and grew 7.8% Y-o-Y.
Excluding the Q4 one-off items, the normal life net income posted around KRW 3.46 trillion.
The 2020 SMART Project strategy, which was implemented consistently for the last 3 years, led to fruition and led to the record high full year earnings.
On the other hand,Q4 quarterly net income posted KRW 507.5 billion, a 1.1% drop Y-o-Y.
This is due to the one-off items, including the main depository bank for city government intangible asset-related expenses and slightly increased Y-o-Y.
I would like to summarize the 5 major highlights of the 2019 earnings.
First, the bank and nonbank net income all had balanced growth compared to the previous year, and the growth trend has been continuing for 6 consecutive years from 2014.
In particular, through the strengthening of nonbank and global business, Shinhan's differentiated and stable earnings generation base was confirmed once again.
As a result of focusing on strengthening our profitability for a long time, the group's global net income grew 23.3% Y-o-Y and posted KRW 397.9 billion.
Along with the solid global growth of the bank, Shinhan Vietnam, a consumer financial company, was launched, and with this opportunity, the group's overseas income contribution grew to around 12%, accelerating our strategy to localize our nonbanking business.
Also in the case of nonbanking business, based on our One Shinhan advancement strategy, it recorded KRW 1,211.2 billion, a 15.3% increase Y-o-Y and expanded the income contribution to 34%.
Second, in the case of the group's interest income, the group saw solid asset growth based on balanced loan portfolio, it grew 4.8% Y-o-Y.
In particular, loans in 1 asset through the sales drive continuing from the beginning of the year grew 7.4% Y-o-Y, centering on SMEs and SOHO.
On the other hand, group and bank NIM was influenced by the market interest rate drop, which continued from last year and declined by 10 bp and 8 bp, respectively.
But with the gradual stabilization of the market interest rates, the range of margin's fall is being stabilized.
The group's noninterest income, along with our successful major structure in place and through organizational efficiency, improvement and portfolio diversification, grew 33.3% Y-o-Y.
And contribution also expanded to 28.3%.
In addition, Orange Life and as Asia Trust were successfully merged, and our insurance and real estate earnings base became expanded. Going forward, we will create a sustainable, successful model through linking and expanding between our channels and group subsidiaries.
Fourth, to manage human resources based on group's productivity-centered organization and channels, Shinhan Financial Group has been continuously implementing ERP each year.
In Q4 of last year, there were 335 employees who received the ERP packages from the bank part and investment, and around KRW 120 billion one-off expenses were recognized.
Through our high-cost structure improvement efforts, cost efficiency and profitability going forward will be additionally improved. And within the group, an organizational structure and system which can immediately respond to the market environment changes caused by digitalization will firmly be established.
The group's CI ratio posted 46.1%, the lowest level in the industry, through increasing stable operational profit, work process improvement, including digital customer bases expansion and cost management.
Thus, cost efficiency and profitability improvement has been continued for 2 consecutive years.
Lastly, despite the asset quality deterioration concerns following the economic slowdown, which has been heightened from the previous year on the back of appropriate group strategy and preemptive provisioning policy taking risk into consideration, led to the group loan loss ratio and NPL ratio, posting 30 bp and 152%, respectively, continuing systematic risk management.
Now page 4, the Group's P&L is explained in more detail.
Looking at the graph on the left, the group's interest income posted around KRW 8 trillion, a 4.8% growth Y-o-Y.
Bank loans and bond through balanced growth between household and corporate grew 2.0% in Q4 and 7.4% Y-o-Y, and with the expansion of selected asset expansion, centering on prime SME is maintaining a solid growth rate.
Bank's net interest with the October base rate cut and debt relief conversion zone posted 1.46%, a 7 bp drop Q-o-Q.
On the other hand, the bank consolidated NIM, including overseas branches, posted 1.52%, still recording high profitability compared to the domestic situation and led to the overseas interest income growth.
We will do our best so that solid interest income flow can continue through ALM management, taking profitability into consideration.
Now on to Page 5. The group's noninterest income rose 33.3% Y-o-Y to KRW 3,151.7 billion, showing growth in all of fee income as well as securities and insurance-related income.
Despite the lowered merchant fees and decreased trading value on the stock market, the group's fee income grew 10.5% Y-o-Y due to an increase in investment banking and lease assets.
In the securities-related category, due to an increased gain from IB investment and bonds, there was a Y-o-Y increase of 29.7%, driving the group's growth momentum in the noninterest income.
As for this year's insurance-related income with the acquisition of Orange Life's remaining stake completed, we are expecting additional growth.
Moving on to SG&A.
The group's SG&A increased 8.3% Y-o-Y, driven by an increase in salary and employee benefits with Orange Life and Asia Trust coming onboard. But if we exclude that factor, the annual SG&A growth rate is around 3.4%.
Going forward, we'll be actively managing the cost through efficient channel strategies and digital process improvement.
The group's and the bank's CI ratios are 46.1% and 46.5%, respectively, each showing an improvement of 1.4 percentage point and 0.8 percentage point Y-o-Y, which is a great achievement. This is the lowest CI ratio recorded in history.
And now the group's credit cost.
The group's credit cost ratio was 30 bp, 9 bps improvement over the last 5 years average, but an increase of 4 bps Y-o-Y.
This is because of the steady growth in the bank's loans and 1 card loans, installments and lease assets. It is also due to our preemptive provisioning in light of market uncertainties at home and abroad.
Going forward, in order to minimize risk volatility, we'll continue our efforts for credit risk management and asset rebalancing.
Page 6, group's asset quality. As of December end last year, the group's NPL ratio had improved 0.01 percentage point Y-o-Y, recording a historical low of 0.52%.
This was possible because the qualitative growth strategy focusing on sound assets continued.
Shinhan Bank's delinquency ratio went up by 1 bp Y-o-Y to 0.26% but is being maintained at a stable level, considering their steady asset growth.
As for Shinhan Card, the delinquency ratios of card loans and cash advance have stabilized since the second half of last year. And the card's delinquency ratio was a record low of 1.26%.
As of year-end, the group's and the bank's BIS ratios were estimated to be 14% and 16%, respectively;
and the CET1 ratios, 11.2% and 13.4% each.
The group's CET1 ratio had gone down by 1.4 percentage point due to the acquisition of Orange Life,
Asia Trust and treasury buyback. However, starting from this year, CET1 ratio will steadily recover based on stable earnings power without any further dips.
Orange Life, now being a fully owned subsidiary, the group's BIS ratio will be affected to a minimum as the treasury stocks has been disposed of and new shares have been issued.
The BOD had proposed a dividend for 2019 of KRW 18.50 per share, and if it is passed at the Annual General Meeting, we could expect the dividend payout ratio of 25% and dividend yield of 4.1%.
There have been consistent efforts made to enhance shareholder value by implementing various
capital policies such as M&A and treasury policies.
We will continue to enhance shareholder value further through flexible and proactive capital policies.
Now lastly, on Page 7, I'd like to share with you what has been achieved so far regarding the 2020 SMART Project.
First, in terms of the group's balanced growth strategy, the 2020 strategic platform bore fruit. In so doing, there was harmonized growth improvement between bank and nonbank, driving sound growth momentum.
Compared to the previous year, the bank's net income increased by 2% and the nonbanks by 15%,
accelerating the earnings growth pace.
Interest income, noninterest income also grew by 5% and 33% each. With the acquisition of Orange Life's remaining equities, the earnings base of nonbank and noninterest income will continue to expand further.
Second, the global business achieved the highest income quarter-after-quarter, accounting for 12% of income contribution.
We're continuing to see stable results in the core Asian markets. In addition, global card and investment corp. are accelerating their globalization strategies in Vietnam and Hong Kong, and the 2019 net income increased by KRW 24.4 billion Y-o-Y. Going forward, we will continue to create differentiated results from
the nonbank side.
Lastly, concerning the upgrade to Digital Shinhan.
During 2019, the group expanded into new businesses such as innovative financial services and created a digital ecosystem through alliance with many ICT companies. Digital's contribution to income steadily increased, marking KRW 1,380 billion, up KRW 184.1 billion Y-o-Y.
Going forward, we'll respond proactively to the changes brought on by the Fourth Industrial Revolution such
as open banking and revision of Personal Information Protection Act and other acts. We'll focus on building Shinhan's unique innovation ecosystem to secure our new growth engine.
This year, we'll be completing the 2020 SMART Project successfully, and we will produce more visible results to get us closer to a world-class Shinhan.
Please refer to the remaining slides for detailed information on key financial indices of the group and the subsidiaries.
Thank you very much