Shinhan Financial Q3 net jumps 52 pct

(ATTN: UPDATES with closing share price in para 6; ADDS more details from conference
call in paras 11-13)
SEOUL, Nov. 3 (Yonhap) -- Shinhan Financial Group Co., South Korea's No. 3
financial services company, said Tuesday its third-quarter earnings jumped 52
percent from a year earlier on lower loan-loss provisions.
Net profit came to 491.3 billion won (US$417.1 million) in the July-September
period, compared with 323.3 billion won the previous year, the group said in a
regulatory filing. Compared with three months earlier, it climbed 11.7 percent on
rising profit margins.
Sales declined 33.4 percent on-year to 10.6 trillion won while operating profit
rose 47.5 percent to 763.3 billion won, it added.
"The group's bottom line improved from a year ago mainly because bad debt
expenses decreased amid the economic recovery," an official at the group said.
The group put aside 157.1 billion won in loan-loss reserves in the third quarter,
down 46.6 percent from a year earlier.
Its non-banking businesses, including credit card and life insurance units,
contributed 61.7 percent of the total net profit in the third quarter, reflecting
the group's balanced business portfolio.
Shares of Shinhan Financial closed down 2.29 percent to 44,750 won on the main
bourse.
Its total assets reached 311.2 trillion won as of the end of September, down 1.3
percent from the previous year.
Shinhan Bank, the flagship unit of the group, posted a net profit of 288.8
billion won last quarter, up 34.8 percent from a year earlier.
The lender's net interest margin (NIM), a key barometer of profitability, reached
1.74 percent in the third quarter, up from 1.46 percent three months earlier. The
group's NIM climbed 0.28 percentage point on-quarter to 3.05 percent.
Korean banks' NIMs were under pressure as record-low benchmark interest rates
narrowed their loan-deposit spread. But signs of an economic recovery and
expectations of a rate hike by the central bank have begun to boost market rates
like returns on certificates of deposit, helping their profit margins improve.
"We expect the NIM to rise to the 2 percent range in the first half of next
year," the group said in a conference call.
Shinhan Bank's non-performing ratio stood at 1.44 percent in the third quarter,
down from 1.59 percent in the second quarter. The country's financial watchdog
has advised local banks to lower their bad loan ratio to around 1 percent by the
end of this year.
"To meet the guideline, the group plans to clean up 500 billion won in bad loans
in the fourth quarter. It will likely write off 300 billion won and sell the
remainder," it added.
Shinhan Bank's capital adequacy ratio, a key gauge of financial health, reached
16.1 percent as of end-September, up from 15.7 percent at the end of June.
The bank's loan delinquency rate fell to 0.79 percent, compared with 0.89 percent
the previous quarter, it added. Local banks recently saw their loan default rates
decline as they wrote-off a portion of bad debts and the economy has shown signs
of improvement.
sooyeon@yna.co.kr
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