이 기사는 2019년 10월 31일 08:00 thebell 에 표출된 기사입니다.

South Korea's Shinhan Financial Group said it will strengthen its non-interest income business to address expected drop in net interest margin (NIM).

"The downward pressure on margin will likely to continue next year. Considering uncertainties on interest income growth, we will continue to develop the matrix approach," said Shinhan Financial Group in a third quarter 2019 earnings conference call on October 23. Matrix system is Shinhan Financial Group's organization structure that combines synergistic business areas within units such as global investment banking (GIB), wealth management (WM) and global markets and securities (GMS).

Shinhan Financial Group's NIM fell four basis points to 1.99 percent quarter-on-quarter. Shinhan Bank's NIM fell five basis points to 1.53 percent. Yu Sung-hun, Deputy President and Chief Financial Officer (CFO) of Shinhan Financial Group, said despite interest rate cuts the group could post positive earnings in the third quarter as its matrix approach including units like GIB, WM, Global, and GMS picked up steam. Yu added that the group will continue to pursue its unit system next year to get over some internal and external challenges.

"Wealth management and trust are areas where actually we can deliver profitability without eating into our capital. That is why we want to keep enhancing our matrix structure," said Yu. The positive performance of non-bank affiliates, such as insurance and cards was coupled with visible improvements in the performance of Asia Trust, delivering 37.3 percent year-over-year growth in the group's non-interest income.

The group said it is planning to convert Orange Life Insurance into a wholly-owned subsidiary around the end of 2020 or early 2021. Regarding the consolidation or merger with Orange Life Insurance and Shinhan Life Insurance, the group has a joint management committee that does preparation work for consolidation or merger integration work. Last year, Shinhan Financial Group acquired a 59.15-percent stake in Orange Life Insurance, formerly known as ING Life Insurance.

"We do see the need to resolve any market uncertainty, and we would like to therefore bring in Orange Life Insurance into our wholly-owned subsidiary sooner than later. As the ultimate purpose [of the acquisition] is to make synergies by combining with Shinhan Life, we will continue to prepare steps," said Yu.

Shinhan Bank's loan deposit ratio went down to 96.4 percent in the third quarter. "We are at the lowest loan deposit ratio, with Korean won loans growing only by 0.7 percent. Under the new loan deposit ratio rule, we are around 100 percent as of the end of third quarter. So in terms of meeting the new loan deposit ratio criteria, we don't feel any burden; especially our growth strategy is not too burdensome on the loan growth side," Yu explained.

Shinhan Financial Group's Bank of International Settlement (BIS) capital adequacy ratio stood at 14.2 percent for the third quarter, with Tier1 ratio at 12.6 percent and common equity tier 1 (CET1) ratio at 11.4 percent. The BIS ratio fell 0.7 percent points compared to the end of last year, while Tier1 ratio went down 0.8 percent points and CET1 ratio down 1.1 percent points, respectively. "This is mainly due to the share buyback. We do not expect our capital ratios to continue to decline. We think that this is temporary," said Yu.

The group's year-to-date net income was around 2.9 trillion won, an increase of 9.6 percent year-over-year. Despite the fall in NIM, interest income increased five percent to 2.28 trillion won, compared to the same period last year. Fee income recorded noticeable growth of around 9.8 percent year-on-year.

(By reporter Kim Hyun-jung)