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Issuer Flash: Shinhan Financial Group Co., Ltd.

Issuer: Shinhan Financial Group | Document: Issuer Flash | Date: 2026-08-03 | Event: 2q 2026 Results

Report date: 2026-08-03 Event date: 2026-07-23 Event title: 2Q 2026 Business Results

1. Flash Conclusion

Shinhan Financial Group's 2Q 2026 results are modestly credit-positive for the consolidated group. Net income rose to KRW 1.820tn, preliminary CET1 improved to 13.43% at end-June from the revised 13.30% at end-March, and the NPL ratio and coverage both improved sequentially. The core bank remained the main earnings contributor. These developments support the existing view of a large Korean financial group with sound earnings generation and adequate capital.

The event does not, however, justify treating the holding company as equivalent to Shinhan Bank. The group continues shareholder distributions, including a KRW 700bn 3Q buyback and a KRW 740 per-share 2Q cash dividend, while asset-quality coverage remains below its end-2025 level and some non-bank earnings remain variable. More importantly for SHINFN HoldCo creditors, the results do not provide parent-only cash, debt-maturity, interest-expense, received-dividend or double-leverage data. The 2Q release therefore improves the consolidated operating and capital evidence but does not resolve the existing structural-subordination and parent-liquidity questions.

2. Earnings and Capital Improved in 2Q

Consolidated net income increased 12.2% quarter on quarter to KRW 1.820tn in 2Q 2026; 1H net income was KRW 3.443tn, 13.3% higher year on year. Operating income rose 8.8%, with interest income up 3.6% and non-interest income up 22.0%, led by fees and commission income. Group NIM was unchanged from 1Q at 1.93%. The company reported a 1H credit-cost ratio of 42bp and 2Q credit costs of KRW 437bn, 14.7% lower than in 1Q.

Metric 1Q 2026 2Q / end-June 2026 Credit read-through
Consolidated net income KRW 1.623tn KRW 1.820tn Higher earnings add internal capital-generation capacity.
CET1 ratio 13.30%* 13.43% preliminary Improved sequentially; assess alongside distributions and RWA growth.
Total RWA KRW 361.8tn KRW 367.6tn Up 1.6% QoQ; growth was contained relative to earnings, but credit RWA rose.
Group NPL ratio 0.81% 0.79% A sequential improvement, though still above the 0.72% at end-2025.
NPL coverage ratio 113.57% 115.53% Recovered from 1Q but remains below 125.98% at end-2025.

*The 1Q preliminary CET1 ratio was revised from 13.19% to 13.30% after the company reflected capital-regulation rationalization related to Productive Finance participation incentives.

Common equity increased by KRW 1.3tn during the quarter, supported by net income despite dividends and buybacks. This allowed CET1 to rise by 13bp quarter on quarter even as RWA increased by KRW 5.8tn; the presentation also reports a KRW 3.9tn increase in credit RWA. The reported capital profile is a favorable development for loss absorption. It should nevertheless be read alongside the distribution policy: the board resolved a KRW 700bn buyback for 3Q, and the company expects aggregate FY2026 buybacks of KRW 1.4tn through October, with a possible additional 4Q buyback subject to earnings and capital. The release supports the capacity to distribute capital at this point in the cycle; it does not establish a contractual priority of creditors over future shareholder returns. Source for this paragraph and the table: SFG's 2Q 2026 Business Results presentation, pp. 2, 4, 6 and 9.

3. Asset Quality Stabilized Sequentially, but Monitoring Remains Necessary

At end-June, group substandard-and-below loans were KRW 3.623tn, down modestly from KRW 3.672tn at end-March. The NPL ratio improved by 2bp to 0.79%, and the NPL coverage ratio improved by 1.96 percentage points to 115.53%, as the allowance increased slightly and problem loans declined. Management attributed the reduction in substandard-and-below assets partly to asset-quality management by non-bank affiliates, including Securities, Life and Asset Trust. This is a constructive sequential change after the rise in the NPL ratio and fall in coverage highlighted in the May issuer summary.

The improvement should not be over-read as a full return to the end-2025 position: coverage remained about 10 percentage points below 125.98%. Shinhan Bank SME delinquency rose to 0.49% from 0.46% at March, while retail-loan delinquency was stable at 0.25%; Shinhan Card's one-month-or-more delinquency improved to 1.21% from 1.30%. These indicators point to manageable credit stress but leave SME performance, coverage durability and credit-cost normalization as key confirmation items.

The earnings mix remains supportive but uneven. The Bank business generated KRW 1.306tn of 2Q profit, an increase of 12.5% quarter on quarter, preserving the bank as the main contributor to group earnings and capital generation. Shinhan Card's profit increased 19.5% quarter on quarter, and Shinhan Life's profit improved from the first quarter. Shinhan Securities' profit was broadly stable quarter on quarter, whereas Shinhan Capital's profit declined to KRW 32.9bn from KRW 61.8bn. This does not by itself indicate a capital-support need or a group credit reversal. It does reinforce the existing caution that non-bank diversification can improve earnings in normal conditions while also introducing business-specific volatility and potential capital-allocation demands.

4. Credit Read-Through for HoldCo Creditors

For SFG at the consolidated level, the result strengthens evidence of earnings resilience, capital generation and a contained near-term credit-cost burden. The increase in CET1 while RWA grew and distributions continued is more favorable than the 1Q picture. It also supports the prior view that the bank-centered franchise can absorb ordinary non-bank volatility.

For HoldCo creditors, the evidence is indirect. Shinhan Bank's deposit base, the group's consolidated assets and the earnings of financial subsidiaries support the economic strength of the group, but they are not direct repayment sources for parent-company debt. The presentation reports Shinhan Bank's all-currency LCR at 104.5% and foreign-currency LCR at 177.5% at end-June, which is useful evidence on the bank's disclosed liquidity position. It is not a group-level or parent-only liquidity measure. Parent creditors depend more directly on cash at the holding company, dividends that subsidiaries can legally and prudently upstream, parent debt maturities, interest expense and continuing market access. The 2Q material does not provide verified current group-level funding or liquidity metrics, or quantified parent-only liquidity factors. The existing distinction between SHINFN and Shinhan Bank debt therefore remains intact, as does the need to assess individual bond documentation separately.

The current additional discussion dated 2026-06-02 raised capital, non-bank and HoldCo questions. The present results confirm a higher CET1 ratio, improved group coverage and selected non-bank performance, but not its unverified claims on parent-only foreign-currency liquidity, dividend transferability, debt maturities or double leverage. These remain outstanding for the next issuer-summary review.

5. What To Watch Next

The 2Q data are preliminary: SFG states that the external auditor's review for the quarter was not complete when the presentation was issued and that the figures may change.

6. Sources