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Likely to proceed with shareholder return plans

Retain Buy and TP of W70,000

We maintain our Buy rating and target price of W70,000 on Shinhan Financial Group (SFG). For 4Q24, we estimate net profit attributable to owners of the parent at W719.9bn (-1.7% YoY), meeting the consensus. We also believe the group managed to keep its CET1 ratio above the target level (13%); this should allow it to continue implementing its shareholder return policy as planned. On Oct. 24, the group announced share buybacks/cancellations worth W400bn (W250bn in 4Q24 + W150bn in 1Q25), indicating that share repurchases are likely to continue in 1Q25.

We believe interest income declined 1.9% QoQ despite slight growth in won-denominated loans (estimate: +0.7% QoQ), hurt by a 5bp QoQ drop in NIM. Meanwhile, non-interest income likely declined QoQ and YoY due to a bearish stock market and won depreciation. SG&A expenses likely increased YoY due to voluntary retirement-related costs. However, we estimate credit cost ratio improved sharply YoY on a favorable base (following significant PF-related provisions in 2023).

We estimate the CET1 ratio inched down QoQ to 13.03% but remained above the target (13%) thanks to its relatively low sensitivity to FX fluctuations. Accordingly, the group should be able to continue implementing its shareholder return plans.

For 2025, we forecast shareholder return ratio (payout ratio including dividends and buybacks) at 40.6%. SFG recently unveiled a plan to raise its shareholder return ratio to 50% by end-2027 through the expansion of both cash dividends and share buybacks/cancellations. We expect full-year stock buybacks/cancelations to be close to W1tr and estimate the shareholder return yield for 2025 at 8.6% (based on the Jan. 10 closing price).