Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

For the Month of March 2017

 

 

SHINHAN FINANCIAL GROUP CO., LTD.

(Translation of registrant’s name into English)

 

 

20, Sejong-daero 9-gil, Jung-gu, Seoul 04513, Korea

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F   ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- n/a .

 

 

 


Table of Contents

Summary of FY2016 Business Report

On March 31, 2017, Shinhan Financial Group (“SFG”) filed its FY2016 Business Report (the “Business Report”) with the Financial Services Commission of Korea and the Korea Exchange pursuant to the Financial Investment Services and Capital Market Act of Korea. This is the summary of the Business Report translated into English. Non-material or previously disclosed information are omitted or abridged.

The financial information in this report has been prepared in accordance with Korean International Financial Reporting Standards.

Table of Contents

 

1.

 

Introduction of the Group

     3  

2.

  Business Results      6  

3.

  Independent Auditor      15  

4.

  Major Shareholder and Market Price Information of our Common Shares and ADRs      16  

5.

  Directors, Executive Officers and Employees      17  

6.

  Related Party Transactions      21  

 

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Table of Contents

1. Introduction of the Group

Company History in 2010 through 2016

 

    Jan. 2010 : Shinhan Data System became a direct subsidiary of SFG

 

    Aug. 2010 : Shinhan Macquarie Financial Advisory was disaffiliated from SFG

 

    Feb. 2011 : Shinhan BNP Paribas Asset Management (Hong Kong) Limited became an indirect subsidiary of SFG

 

    Nov. 2011 : Shinhan Bank Vietnam was merged with Shinhan Vina Bank

 

    Dec. 2011 : Shinhan Savings Bank became a direct subsidiary of SFG

 

    Nov. 2012 : Shinhan AITAS Co., Ltd. joined SFG as a direct subsidiary

 

    Jan. 2013 : Yehanbyoul Savings Bank joined SFG as a direct subsidiary

 

    Apr. 2013 : Shinhan Savings Bank merged with Yehanbyoul Savings Bank. As a result of the integration, Shinhan Savings Bank has been liquidated and Yehanbyoul Savings Bank now exists under the name of “Shinhan Savings Bank” as an existing legal entity

 

    Nov. 2014 : LLP MFO Shinhan Finance (Kazakhstan) became an indirect subsidiary of SFG

 

    Jul. 2015 : Shinhan Securities Vietnam Co., ltd became an indirect subsidiary of SFG

 

    Oct. 2015 : Banco Shinhan de Mexico became an indirect subsidiary of SFG

 

    Nov. 2015 : PT Bank Shinhan Indonesia became an indirect subsidiary of SFG

 

    Dec. 2015 : PT. Shinhan Indo Finance became an indirect subsidiary of SFG

 

    Dec. 2015 : PT Centratama Nasional Bank became an indirect subsidiary of SFG

 

    Mar. 2016 : Shinhan Microfinance Co.,ltd. became an indirect subsidiary of SFG

 

    Jul. 2016 : PT Shinhan Securities Indonesia became an indirect subsidiary of SFG

 

    Dec. 2016 : Launched new integrated PT Bank Shinhan Indonesia

 

3


Table of Contents

Principal Subsidiaries under Korean Law (as of Dec. 31, 2016)

Direct Subsidiaries

 

Subsidiaries

   Ownership by SFG  

Shinhan Bank

     100.0

Shinhan Card

     100.0

Shinhan Investment Corp.

     100.0

Shinhan Life Insurance

     100.0

Shinhan BNP Paribas Asset Management

     65.0

Shinhan Capital

     100.0

Jeju Bank 1)

     68.9

Shinhan Savings Bank 2)

     100.0

Shinhan Data System

     100.0

Shinhan AITAS 3)

     99.8

Shinhan Credit Information

     100.0

Shinhan Private Equity

     100.0

SHC Management 4)

     100.0

 

1) Jeju Bank is currently listed on the Korea Exchange.
2) On January 30, 2013, Yehanbyoul Savings Bank joined SFG as a direct subsidiary.

On April 1, 2013, Shinhan Savings Bank merged with Yehanbyoul Savings Bank, both of which were direct subsidiaries of Shinhan Financial Group. As a result of the integration of the two savings banks, the previous Shinhan Savings Bank has been liquidated and is thus no longer a subsidiary of Shinhan Financial Group and instead, Yehanbyoul Savings Bank now exists under the name of “Shinhan Savings Bank” as an existing legal entity constituting a member of Shinhan Financial Group.

 

3) On November 30, 2012, Shinhan AITAS Co., Ltd. joined SFG as a direct subsidiary. Prior to November 30, 2012, Shinhan AITAS was an indirect subsidiary of SFG under Shinhan Bank, a wholly-owned bank subsidiary of SFG.
4) Currently in liquidation proceedings

 

4


Table of Contents

Indirect subsidiaries held through direct subsidiaries (as of Dec. 31, 2016)

 

Direct Subsidiaries

  

Indirect Subsidiaries

   Ownership by
the Parent
 

Shinhan Bank

  

Shinhan Asia Limited

     100.0
  

Shinhan Bank America

     100.0
  

Shinhan Bank Europe

     100.0
  

Shinhan Khmer Bank Limited 1)

     90.0
  

Shinhan Bank Kazakhstan

     100.0
  

Shinhan Bank China Limited

     100.0
  

Shinhan Bank Canada

     100.0
  

Shinhan Bank Japan

     100.0
  

Shinhan Bank Vietnam

     100.0
  

Banco Shinhan de Mexico

     100.0
  

PT Bank Shinhan Indonesia

     98.98
     

 

 

 

Shinhan Card

  

LLP MFO Shinhan Finance

     100.0
  

PT. Shinhan Indo Finance

     50.0
  

Shinhan Microfinance Co.,ltd.

     100.00
     

 

 

 

Shinhan Investment Corp.

  

Shinhan Investment Corp. USA Inc.

     100.0
  

Shinhan Investment Corp. Asia Inc.

     100.0
  

KOFC Shinhan Frontier Champ 2010-4 PEF 2)

     8.5
  

Shinhan Praxis K-Growth Global Private Equity Fund 3)

     14.1
  

Shinhan Securities Vietnam Co., Ltd

     100.0
  

PT Shinhan Securities Indonesia

     99.0
     

 

 

 

Shinhan BNP Paribas Asset Management

  

Shinhan BNP Paribas Asset Management (Hong Kong) Limited

     100.0
     

 

 

 

Shinhan Private Equity

  

Shinhan NPS Private Equity Fund 1st 4)

     5.0
  

Shinhan Private Equity Fund 2nd 5)

     2.2
  

Shinhan-Stonebridge Petro Private Equity Fund 6)

     0.6

 

1) Shinhan Financial Group and its subsidiaries currently own 93.3% of Shinhan Khmer Bank Limited.
2) Shinhan Financial Group and its subsidiaries currently own 34.6% of KOFC Shinhan Frontier Champ 2010-4 PEF Investment Corp.
3) Shinhan Financial Group and its subsidiaries currently own 18.9% of Shinhan Praxis K-Growth Global Private Equity Fund.
4) Shinhan Financial Group and its subsidiaries currently own 36.7% of Shinhan NPS Private Equity Fund 1st.
5) Shinhan Financial Group and its subsidiaries currently own 32.6% of Shinhan Private Equity Fund 2nd.
6) Shinhan Financial Group and its subsidiaries currently own 1.8% of Shinhan-Stonebridge Petro Private Equity Fund.

Number of Shares (as of Dec. 31, 2016)

 

Types of Shares

   Number of Shares  

Common Shares

     474,199,587  
  

 

 

 

Total

     474,199,587  
  

 

 

 

 

* On April 21, 2016, we redeemed all of the Series 12 redeemable preferred shares.

 

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Table of Contents

2. Business Results

 

Operation Results    (KRW billion)
     FY2016
(Jan. 1 ~ Dec. 31)
     FY2015
(Jan. 1 ~ Dec. 31)
     FY2014
(Jan. 1 ~ Dec. 31)
 

Operating income

     3,108.6        2,973.1        2,654.8  

Equity method income

     10.0        21.0        30.6  

Other non-operating income

     51.8        146.5        182.2  

Profit before income taxes

     3,170.5        3,140.6        2,867.6  

Income tax expense

     345.6        694.6        668.0  
  

 

 

    

 

 

    

 

 

 

Consolidated net income

     2,824.9        2,446.0        2,199.6  

Net income attributable to equity holders of the Group

     2,774.8        2,367.2        2,081.1  

Net income attributable to non-controlling interest

     50.1        78.8        118.5  
  

 

 

    

 

 

    

 

 

 

Notes :

 

    Some of the totals may not sum due to rounding.

 

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Table of Contents

Source and Use of Funds

 

Consolidated Basis

(KRW billion, %)

  FY2016     FY2015     FY2014  
  Jan. 1 ~ Dec. 31     Jan. 1 ~ Dec. 31     Jan. 1 ~ Dec. 31  
  Average
Balance 1 )
    Proportions
(%)
    Interest
Paid
    Interest
Rate
(%)
    Average
Balance 1)
    Proportions
(%)
    Interest
Paid
    Interest
Rate
(%)
    Average
Balance 1)
    Proportions
(%)
    Interest
Paid
    Interest
Rate
(%)
 
Source  

Deposits

    226,966.8       58.7       2,586.7       1.14       203,910.5       57.3       2,861.0       1.40       186,086.1       57.2       3,449.5       1.85  
 

Borrowings

    15,047.2       3.9       176.4       1.17       13,492.9       3.8       150.7       1.12       12,145.2       3.7       190.0       1.56  
 

Debt Securities Issued

    42,790.8       11.1       1,085.8       2.54       39,334.8       11.0       1,183.8       3.01       36,609.9       11.3       1,301.9       3.56  
 

Other Liabilities

    70,504.9       18.2       —         —         68,378.1       19.2       —         —         60,397.7       18.6       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Total Liabilities

    355,309.7       91.9       —         —         325,116.3       91.3       —         —         295,238.9       90.8       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Total Stockholder’s Equity

    31,499.5       8.1       —         —         31,063.1       8.7       —         —         30,023.9       9.2       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Total Liabilities & SE

    386,809.3       100.0       —         —         356,179.4       100.0       —         —         325,262.8       100.0       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Use  

Cash & Due from Banks

    20,933.1       5.4       185.5       0.89       21,993.4       6.2       225.6       1.03       19,646.5       6.0       236.9       1.21  
 

Loans

    252,132.2       65.2       9,244.0       3.67       231,889.2       65.1       9,031.6       3.89       212,237.2       65.3       9,722.5       4.58  
 

Loans in KRW

    197,841.4       51.2       6,541.9       3.31       180,410.1       50.7       6,479.5       3.59       164,597.9       50.6       7,092.5       4.31  
 

Loans in Foreign Currency

    14,936.7       3.9       482.2       3.23       13,528.2       3.8       415.0       3.07       11,598.8       3.6       403.0       3.47  
 

Credit Card Accounts

    18,804.3       4.9       1,708.5       9.09       17,819.5       5.0       1,635.3       9.18       17,575.1       5.4       1,702.5       9.69  
 

Others

    20,549.8       5.3       511.4       2.49       20,131.5       5.7       501.9       2.49       18,465.4       5.7       524.5       2.84  
 

AFS Financial Assets

    30,308.9       7.8       612.1       2.02       26,830.0       7.5       654.4       2.44       26,801.5       8.2       814.8       3.04  
 

HTM Financial Assets

    17,409.7       4.5       561.8       3.23       14,961.0       4.2       539.0       3.60       12,076.7       3.7       521.7       4.32  
 

Other Assets

    66,025.3       17.1       —         —         60,505.8       17.0       —         —         54,500.9       16.8       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Total Assets

    386,809.3       100.0       —         —         356,179.4       100.0       —         —         325,262.8       100.0       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

1) The “Average Balance” is the arithmetic mean of the ending balance of each quarter.

 

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Table of Contents

Other Financial Information

 

ø The main serial financial figures and indices for Dec. 31, 2016 listed herein may be subject to change.

1) Capital Adequacy

 

Consolidated BIS Ratio (Shinhan Financial Group)    (KRW billion)
     Dec. 31, 2016     Dec. 31, 2015     Dec. 31, 2014  

Aggregate Amount of Equity Capital (A)

     29,786.5       27,216.4       25,938.0  

Risk-Weighted Assets (B)

     198,642.6       203,274.5       198,832.9  

BIS Ratio (A/B)

     15.00     13.39     13.05

Note) based on Basel III

 

Capital Adequacy Ratios (Subsidiaries)    (%)

Subsidiary

  

Capital Adequacy Ratio

   Dec. 31,
2016
     Dec. 31,
2015
     Dec. 31,
2014
 

Shinhan Bank

   BIS Capital Adequacy Ratio      15.7        14.8        15.4  

Shinhan Card

   Adjusted Equity Capital Ratio      26.2        28.9        29.7  

Shinhan Investment Corp.

   Net Capital Ratio      892.0        387.2        461.8  

Shinhan Life Insurance

   Risk Based Capital Ratio      178.3        204.2        230.7  

Shinhan BNP Paribas Asset Management

   Equity Capital (KRW billion)      148.6        157.3        159.0  
   Minimum Capital Requirement (KRW billion)      24.0        23.2        22.1  

Shinhan Capital

   Adjusted Equity Capital Ratio      14.9        16.8        15.5  

Jeju Bank

   BIS Capital Adequacy Ratio      12.8        12.6        14.3  

Shinhan Savings Bank

   BIS Capital Adequacy Ratio      14.9        16.3        16.3  

Notes :

 

    The BIS Capital Adequacy Ratio is computed in accordance with the guidelines issued by the FSS for commercial banks. Under these guidelines, commercial banks are required to maintain a minimum capital adequacy ratio of 8%.

 

    Basel III FIRB was applied in calculating Shinhan Bank’s BIS Capital Adequacy Ratio.

 

    Basel III TSA was applied in calculating Jeju Bank’s BIS Capital Adequacy Ratio.

 

    Basel I was applied in calculating Shinhan Savings Bank’s BIS Capital Adequacy Ratio.

 

    The Adjusted Equity Capital Ratio represents the ratio of total adjusted shareholder’s equity to total adjusted assets and is computed in accordance with the guidelines issued by FSS. Under these guidelines, Shinhan Card and Shinhan Capital are required to maintain a minimum adjusted equity capital ratio of 8%.

 

    Net Capital Ratio is computed in accordance with the guidelines issued by the FSS. Under these guidelines, Shinhan Investment Corporation is required to maintain a minimum net capital ratio of 100%.

 

    Under the guidelines issued by the FSS, Shinhan Life Insurance is required to maintain a minimum RBC ratio of 100%.

 

    Under the guidelines issued by the FSS, Shinhan BNP Paribas Asset Management is required to hold Equity Capital that exceeds the Minimum Capital Requirement.

 

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Table of Contents

2) Liquidity

 

Won Liquidity Ratio    (KRW billion, %)

Company

   Dec. 31, 2016      Dec. 31, 2015      Dec. 31, 2014  
   Won
Assets
     Won
Liabilities
     Won
Liquidity
Ratio(%)
     Won
Assets
     Won
Liabilities
     Won
Liquidity
Ratio(%)
     Won
Assets
     Won
Liabilities
     Won
Liquidity
Ratio(%)
 

Shinhan Financial Group

     198.8        134.8        147.5        624.1        216.0        288.9        76.1        41.4        183.9  

Shinhan Bank

     —          —          —          —          —          —          55338.0        45258.5        122.3  

Shinhan Card

     14722.9        4069.1        361.8        14588.0        3845.4        379.4        14583.7        3014.5        483.8  

Shinhan Investment Corp.

     12472.3        8227.4        151.6        11546.7        6525.0        177.0        17500.5        11305.5        154.8  

Shinhan Life Insurance

     915.8        502.0        182.4        1189.5        486.7        244.4        1302.2        472.6        275.6  

Shinhan Capital

     684.5        521.2        131.3        784.7        355.4        220.8        567.6        161.1        352.3  

Jeju Bank

     —          —          —          —          —          —          798.2        716.9        111.3  

Shinhan Savings Bank

     169.8        138.7        122.4        144.2        103.1        139.9        242.0        94.9        255.0  

Notes :

 

    Shinhan Financial Group, Shinhan Bank and Jeju Bank: Due within 1 month

 

    Shinhan Life Insurance: (Won assets due within 3 months /3 months average of Claim payments )*100

 

    Shinhan Card, Shinhan Investment Corp., Shinhan Capital, and Shinhan Savings Bank : Due within 3 months

 

    Liquidity Ratio for Shinhan Bank and Jeju Bank have been replaced by Liquidity Coverage Ratio from Mar 31, 2015 to reflect the recent amendments to detailed regulations on supervision of banking business.

 

Liquidity Coverage Ratio    (KRW billion, %)

Company

   Dec. 31, 2016      Dec. 31, 2015      Dec. 31, 2014  
   High
Quality
Liquid
Assets
     Net Cash
Outflows
     Liquidity
Coverage
Ratio(%)
     High
Quality
Liquid
Assets
     Net Cash
Outflows
     Liquidity
Coverage
Ratio(%)
     High
Quality
Liquid
Assets
     Net Cash
Outflows
     Liquidity
Coverage
Ratio(%)
 

Shinhan Bank

     35,961.9        37,257.5        96.7        37,421.5        38,253.3        97.8        —          —          —    

Jeju Bank

     563.2        401.9        140.1        546.3        352.0        155.2        —          —          —    

Note) The “High quality liquid assets” and “Net cash outflows” are the arithmetic mean of the ending balance of every month.

 

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Table of Contents
Foreign Currency (FC) Liquidity Ratio    (USD millions, %)

Company

   Dec. 31, 2016      Dec. 31, 2015      Dec. 31, 2014  
   FC
Assets
     FC
Liabilities
     FC
Liquidity
Ratio(%)
     FC
Assets
     FC
Liabilities
     FC
Liquidity
Ratio(%)
     FC
Assets
     FC
Liabilities
     FC
Liquidity
Ratio(%)
 

Shinhan Financial Group

     —          —          —          —          —          —          —          —          —    

Shinhan Bank

     39,631.1        35,968.5        110.2        31,925.0        27,205.6        117.4        25,309.1        19,472.6        130.0  

Shinhan Investment Corp.

     5,635.3        5,073.4        111.1        1,875.7        1,793.8        104.6        1,195.7        871.5        137.2  

Shinhan Capital

     80.3        1.1        7,333.0        83.1        73.4        113.2        73.8        49.6        148.8  

Jeju Bank

     13.3        10.7        124.7        15.2        9.7        156.3        9.8        6.1        160.0  

Notes :

 

    Foreign currency liquidity ratios are computed with assets and liabilities due within 3 months.

 

    Shinhan Bank’s foreign currency liquidity ratio reflected securitization weight with the guidelines issued by the FSS.

 

    Shinhan Financial Group figures are based on the separate basis.

 

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Table of Contents

3) Asset Quality

 

SFG Consolidated Basis    (KRW billion)
     Dec. 31, 2016     Dec. 31, 2015     Dec. 31, 2014  

Total Loans

     259,772.6       246,487.6       226,503.2  
  

 

 

   

 

 

   

 

 

 

Substandard & Below

     1,927.6       2,171.6       2,595.3  

Substandard & Below Ratio

     0.74     0.88     1.15

Non-Performing Loans

     1,595.8       1,691.5       2,031.7  

NPL Ratio

     0.61     0.69     0.90

Substandard & Below Coverage Ratio

     125.99     191.22     168.88

Loan Loss Allowance

     2,428.7 1)       4,152.5       4,383.0  

Substandard & Below Loans

     1,927.6       2,171.6       2,595.3  

 

1) excluding reserve for credit losses.

 

Separate Basis    (%)
     Dec. 31, 2016      Dec. 31, 2015      Dec. 31, 2014  
   Substandard
& Below
Ratio
     NPL
Ratio
     Substandard &
Below
Coverage
Ratio 1)
     Substandard
& Below
Ratio
     NPL
Ratio
     Substandard
& Below
Coverage
Ratio
     Substandard
& Below
Ratio
     NPL
Ratio
     Substandard
& Below
Coverage
Ratio
 

Shinhan Financial Group

     —          —          —          —          —          —          —          —          —    

Shinhan Bank

     0.65        0.56        96        0.80        0.61        173        1.03        0.78        154  

Shinhan Card

     1.16        0.76        271        1.24        0.81        355        1.69        1.21        295  

Shinhan Investment Corp.

     0.10        0.10        413        0.15        0.15        485        1.37        1.36        208  

Shinhan Life Insurance

     0.09        0.08        335        0.09        0.09        927        0.10        0.09        867  

Shinhan Capital

     2.61        2.93        94        3.06        3.58        86        2.87        4.08        96  

Jeju Bank

     1.24        0.93        35        0.87        0.50        141        2.04        1.84        80  

Shinhan Savings Bank

     5.42        3.45        53        6.51        5.37        58        12.15        10.27        33  

 

1) excluding reserve for credit losses.

4) Debt to Equity Ratios

 

Shinhan Financial Group (Separate Basis)    (KRW billion)
     Dec. 31, 2016     Dec. 31, 2015     Dec. 31, 2014  

Debt

     6,977.7       6,894.5       6,859.4  

Equity

     20,217.9       20,781.0       20,235.1  

Debt to Equity Ratio

     34.51     33.18     33.90

 

11


Table of Contents

Twenty Largest Exposures by Borrower

 

     (KRW billion)

As of Dec. 31, 2016

Consolidated basis

   Loans in
Won
     Loans in
Foreign
Currency
     Securities      Guarantees
and
Acceptances
     Others      Total
Exposures
 

Ministry of Strategy & Finance

     0.0        —          9,807.9        —          —          9,807.9  

Bank of Korea

     1,890.0        —          5,947.1        0.1        —          7,837.2  

Korea Housing Finance Corporation

     0.0        —          5,267.8        —          —          5,267.8  

Korea Development Bank

     69.0        32.9        4,943.7        —          —          5,045.7  

Industrial Bank of Korea

     660.0        —          1,667.0        0.3        —          2,327.2  

Korea Deposit Insurance Corporation

     —          —          1,776.9        —          —          1,776.9  

NongHyup Bank

     519.9        135.9        986.8        4.3        —          1,646.8  

Export-Import Bank of Korea

     —          —          1,452.1        0.7        —          1,452.8  

Samsung Electronics Co., Ltd.

     0.0        1,349.7        25.1        —          0.0        1,374.7  

Korea Securities Finance Corporation

     24.5        —          1,249.4        —          —          1,273.9  

Korea Land & Housing Corporation

     —          —          1,253.9        —          —          1,253.9  

Kookmin Bank

     419.2        —          830.7        0.4        —          1,250.2  

Hana Bank

     171.5        94.6        875.2        0.0        —          1,141.3  

Woori Bank

     76.3        3.6        1,035.1        0.2        —          1,115.2  

Hyundai Heavy Industries Co., Ltd.

     81.0        140.2        15.0        796.9        —          1,033.1  

Samsung Heavy Industries Co., Ltd.

     150.0        —          10.2        643.7        —          803.8  

LG Electronics Inc.

     98.9        55.8        103.9        434.1        —          692.7  

Hyundai Motor Company

     107.8        478.3        42.3        43.7        0.1        672.2  

National Federation of Fisheries Cooperatives

     2.0        9.0        656.0        —          —          666.9  

Mirae Asset Securities Co., Ltd.

     500.9        —          147.8        —          —          648.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,771.1        2,300.0        38,093.7        1,924.2        0.1        47,089.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note) Some of the totals may not sum due to rounding

 

12


Table of Contents

Exposure to ten Main Debtor Groups

(KRW billion)

As of Dec. 31, 2016

Consolidated basis

   Loans in
Won
     Loans in
Foreign
Currency
     Securities      Guarantees
and
Acceptances
     Others      Total
Exposures
 

Samsung

     464.6        1,894.6        886.4        1,312.5        0.0        4,558.2  

Hyundai Motors

     1,038.9        1,629.8        1,048.5        425.3        0.2        4,142.7  

Lotte

     481.8        877.5        1,318.5        441.1        0.2        3,119.1  

Hyundai Heavy Industries

     212.3        267.3        154.9        1,531.9        —          2,166.5  

SK

     317.0        326.1        643.1        655.1        0.0        1,941.3  

LG

     407.0        378.3        279.8        619.4        0.1        1,684.7  

Hanwha

     520.7        239.0        418.4        273.7        0.2        1,452.0  

LS

     85.9        452.3        159.6        604.7        0.0        1,302.5  

GS

     344.7        102.6        325.6        132.5        —          905.4  

Hyosung

     160.9        418.6        81.8        175.5        0.0        836.8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,033.9        6,586.2        5,316.6        6,171.7        0.7        22,109.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Note) Some of the totals may not sum due to rounding

Loans, Due from banks and Securities Concentration by Industry

(KRW billion)

As of Dec. 31, 2016

Consolidated basis

   Total Exposures  
   Amount      Weight (%)  

Finance and Insurance

     71,025.7        20.1

Manufacturing

     43,203.0        12.2

Retail and wholesale

     16,927.5        4.8

Real Estate, leasing and service

     22,338.6        6.3

Construction

     3,669.6        1.0

Hotel and Restaurant

     5,241.4        1.5

Others

     57,562.5        16.3

Consumers

     133,902.6        37.8
  

 

 

    

 

 

 

Total

     353,871.0        100.0
  

 

 

    

 

 

 

Note) Some of the totals may not sum due to rounding

 

13


Table of Contents

Top Twenty Non-Performing Loans

(KRW billion)

Borrower

  

Industry

   Gross Principal
Outstanding
     Substandard &
Below
     Allowance for Loan
Losses
 

A

  

Manufacture of Cold Rolled, Drawn and Extruded Iron or Steel Products

     110.6        110.6        34.8  

B

  

Manufacture of Distilling Machinery, Heat exchange unit and Gas Generators

     81.0        81.0        55.9  

C

  

Manufacture of Plastic Products for Fabricating of Machine

     61.1        61.1        46.8  

D

  

Wholesale of Non-Specialized Goods

     40.3        40.3        40.2  

E

  

Manufacture of Sections for Ships

     42.4        40.1        25.4  

F

  

Building of Steel Ships

     39.3        39.3        3.4  

G

  

Renting of Non-Residential Buildings

     31.5        31.5        —    

H

  

Development and Subdividing of Residential Buildings

     30.0        30.0        23.5  

I

  

Other Civil Engineering Construction

     29.7        29.7        20.8  

J

  

Building of Steel Ships

     26.0        26.0        12.5  

K

  

Manufacture of Sections for Ships

     27.2        25.7        —    

L

  

Building of Steel Ships

     24.1        24.1        0.8  

M

  

Construction of Highways, Streets and Roads

     17.7        17.7        12.3  

N

  

Apartment Building Construction

     17.3        16.3        15.1  

O

  

Apartment Building Construction

     16.1        16.1        2.4  

P

  

Manufacture of Sections for Ships

     15.9        15.9        —    

Q

  

Apartment Building Construction

     15.4        15.4        15.1  

R

  

Manufacture of Pipes and Tubes, of Non-cast Iron or Steel

     77.6        15.3        0.9  

S

  

Golf Course Operation

     15.0        15.0        7.6  

T

  

Manufacture of Other Smelting, Refining and Alloys of Non-ferrous Metals

     12.4        12.4        6.6  
     

 

 

    

 

 

    

 

 

 

Total

     730.4        663.3        324.2  
     

 

 

    

 

 

    

 

 

 

Notes :

 

    Consolidated basis as of Dec. 31, 2016.

 

    Some of the totals may not sum due to rounding.

 

14


Table of Contents

3. Independent Auditor

Audit Opinion for the last 3 years

 

     FY2016      FY2015      FY2014  

Audit Opinion

     Unqualified        Unqualified        Unqualified  

Compensation to the Independent Auditor for Audit and Review Services

The following is a description of the fees for audit and review services performed by our independent auditor for the last three years in connection with our financial statements preparation.

 

Year

  

Auditor

  

Payment 1)
(KRW mil.)

  

Details

  

Working
hours

FY2016

   KPMG Samjong Accounting Corp.   

581

(annualized basis)

   Review/Audit of Financial Statements   

7,512

Hours

   KPMG Samjong Accounting Corp.   

73

(annualized basis)

   K-IFRS Report Package Audit for Shinhan Savings Bank   

807

Hours

FY2015

   KPMG Samjong Accounting Corp.   

561

(annualized basis)

   Review/Audit of Financial Statements   

8,236

Hours

   KPMG Samjong Accounting Corp.   

73

(annualized basis)

   K-IFRS Report Package Audit for Shinhan Savings Bank   

895

Hours

   KPMG Samjong Accounting Corp.   

12

(annualized basis)

   Non-statutory audit of subsidiaries under the consolidated corporate tax system for CY2015   

282

Hours

FY2014

   KPMG Samjong Accounting Corp.   

500

(annualized basis)

   Review/Audit of Financial Statements   

6,564

Hours

   KPMG Samjong Accounting Corp.   

73

(annualized basis)

   K-IFRS Report Package Audit for Shinhan Savings Bank   

845

Hours

   KPMG Samjong Accounting Corp.   

12

(annualized basis)

   Non-statutory audit of subsidiaries under the consolidated corporate tax system for CY2014   

182

Hours

 

1) Excluding value-added taxes.
* In addition to above mentioned description of fees for audit and review services, KPMG Samjong Accounting Corp. also provided services related to US listing and ICOFR audit in accordance with the standards of the PCAOB which we agreed to pay KRW1,302 million(excluding value-added taxes) for FY2016.

 

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Table of Contents

4. Major Shareholder and Market Price Information of our Common Shares and ADRs

Major Shareholders 1) of Shinhan Financial Group as of Dec. 31, 2016

 

Name

   No. of Common Shares owned    Ownership%  

National Pension Service

   45,269,850      9.55

BNP Paribas

   25,356,276      5.35

BlackRock Fund Advisors 3)

   24,320,723      5.13

 

1) Shareholders who own beneficial ownership of 5% or more(common share basis).
2) Based on the results of shareholder registry closing as of December 31, 2016
3) Based on the large equity ownership discloser by BlackRock Fund Advisors with the Financial Supervisory Service on Oct. 20, 2016.

 

Share ownership of Employee Stock Ownership Association                    (Number of shares, %)  

Share ownership

   Beginning Balance
(Jan. 1, 2016)
     Increase      Decrease      Ending Balance
(Dec. 31, 2016)
     Ownership% 1)
(Dec. 31, 2016)
 

Employee Stock Ownership

     21,200,687        3,230,874        2,120,797        22,310,764        —    

ESOA account

     72,686        58,791        43,157        88,320        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     21,273,373        3,289,665        2,163,954        22,399,084        4.72
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1) Common share basis.

 

Common Share Traded on the Korea Exchange                    (KRW, number of shares)  
     Jul.2016      Aug.2016      Sep.2016      Oct.2016      Nov.2016      Dec.2016  

Price

per

share

   High      40,350        41,050        41,500        44,150        45,600        47,700  
   Low      37,300        39,450        39,500        39,950        42,100        43,000  
   Avg.      38,743        40,441        40,566        42,538        43,839        46,143  

Trading Volume

     14,316,441        13,120,803        12,441,477        16,898,605        26,285,441        19,185,002  

Highest Daily Trading Volume

     1,104,791        1,006,658        1,044,950        1,249,175        5,791,871        2,555,332  

Lowest Daily Trading Volume

     386,030        265,512        447,025        481,075        435,530        309,297  

 

American Depositary Receipts traded on the New York Stock Exchange      (USD, number of shares)  
     Jul.2016      Aug.2016      Sep.2016      Oct.2016      Nov.2016      Dec.2016  

Price

per

share

   High      35.69        37.45        37.7        39        38.76        40.88  
   Low      31.82        35.43        35.15        35.87        36.93        37.17  
   Avg.      33.78        36.43        36.31        37.55        37.75        39.11  

Trading Volume

     1,342,910        1,081,119        1,083,707        850,185        1,404,277        2,168,102  

Highest Daily Trading Volume

     116,971        105,227        106,438        83,148        118,133        340,037  

Lowest Daily Trading Volume

     40,129        20,504        24,042        19,095        24,152        37,042  

Note) 1 ADR = 1 Common Shares

 

16


Table of Contents

5. Directors, Executive Officers and Employees

Directors and Executive Officers

 

1) Executive Director         (As of Mar. 31, 2017)

Name

  

Month and
Year

of Birth

  

Position

  

Service Term

Cho Yong-byoung    June 1957   

-   Chairman of Shinhan Financial Group

 

-   Board Steering Committee Chair

 

-   Corporate Governance & CEO Recommendation Committee member

 

-   Outside Director Recommendation Committee member

 

-   Corporate Social Responsibility Committee member

   3 years starting from March 23, 2017

On March 23, 2017, The Board of Directors of Shinhan Financial Group appointed Cho Yong-byoung as the Chairman and Chief Executive Officer of Shinhan Financial Group.

 

17


Table of Contents

2) Non-Executive Directors

Currently, 11 non-executive directors are in office, 10 of which outside directors who are nominated by our Outside Director Recommendation Committee and appointed pursuant to the approval of general shareholders’ meeting.

7 outside directors were appointed as board of directors at the 16th Annual General Meeting of Shareholders on March 23, 2017, of which 5 directors renewed their terms and 2 directors were newly appointed.

 

Our non-executive directors are as follows:         (As of Mar. 31, 2017)

Name

  

Month and Year

of Birth

  

Outside

Director

  

Sub-Committees

  

Service Term

Wi Sung-ho    June 1958    X    —      2 years starting from March 23, 2017
Park Ansoon    January 1945    O   

Corporate Social Responsibility Committee member

Outside Director Recommendation Committee member

   2 years starting from March 23, 2017
Park Cheul    April 1946    O   

Chairman of Board of Directors

Outside Director Recommendation

Committee Chair

Risk Management Committee member

Board Steering Committee member

   3 years starting from March 25, 2015
Lee Manwoo    November 1954    O   

Audit Committee Chair

Corporate Social Responsibility Committee member

Board Steering Committee member

   4 years starting from March 26, 2014
Lee Sang-kyung    September 1945    O   

Corporate Governance & CEO Recommendation Committee member

Audit Committee member

Remuneration Committee member

Outside Director Recommendation Committee member

   6 years starting from March 29, 2012
Lee Steven Sung-ryang    August 1955    O   

Remuneration Committee Chair

Audit Committee member

Corporate Governance & CEO Recommendation Committee member

   2 years starting from March 24, 2016
Lee Jung-il    August 1952    O    Corporate Governance & CEO Recommendation Committee member    2 years starting from March 24, 2016
Lee Heun-ya    September 1959    O   

Risk Management Committee member

Board Steering Committee member

Outside Director Recommendation Committee member

   2 years starting from March 24, 2016
Joo Jaeseong    January 1956    O   

Risk Management Committee Chair

Corporate Social Responsibility Committee Chair

Board Steering Committee member

   2 years starting from March 23, 2017
Yuki Hirakawa    October 1960    O   

Corporate Social Responsibility Committee member

Corporate Governance & CEO Recommendation Committee member

   3 years starting from March 25, 2015
Philippe Avril    April 1960    O   

Risk Management Committee member

Remuneration Committee member

Corporate Governance & CEO Recommendation Committee member

   3 years starting from March 25, 2015

 

* Audit Committee Member Recommendation Committee consists of all the outside directors.

 

18


Table of Contents

3) Executive Officers

In addition to the executive directors, we currently have the following executive officers:

(As of Mar. 31, 2017)

Name

  

Month and Year

of Birth

  

Position

  

In charge of

Yim Bo-hyuk    March 1961   

Deputy President &

Chief Financial Officer

  

- Finance Management Team

- Investor Relations Team

- HR Team

- Information & Communication Technology Planning Team

Woo Young-woong    March 1960   

Deputy President &

Chief Strategy Officer

  

- Strategic Planning Team

- Global Business Strategy Team

- Future Strategy Research Institute

- Digital Strategy Team

Jin Okdong    February 1961    Deputy President   

- Public Relations Team

- Management Support Team

- CSR Team

- Synergy Management Team

- Platform Marketing Team

Lee Chang-goo    January 1961    Executive Vice President    - Wealth Management Planning Office
Park Woo-gyun    March 1959    Executive Director   

- Compliance Team

- Corporate Culture Development Team

Kim Im-geun    July 1963   

Executive Director &

Chief Risk Officer

  

- Risk Management Team

- Risk Model Validation Team

- Credit Review Team

Compensation to Directors

 

  1) Total Amount Approved at the Meeting of Shareholders

(As of Dec. 31, 2016)

     Total number of persons      Total amount approved
at shareholders’ meeting
(KRW millions)
     Notes  

Directors (Outside directors)

     12(9      3,500        —    

Note) Represents the aggregate amount for all directors(including outside directors). Excludes long-term incentives.

 

19


Table of Contents

2) Total Amount Paid

(As of Dec. 31, 2016)

     Total number of
Persons
     Total
Compensation
(KRW millions)
     Average
Compensation
per person
(KRW millions)
    

Notes

Registered Directors

     3        1,619        584      Excluding outside directors

Outside Directors

     6        326        54      Excluding Audit committee members

Audit committee members or internal auditor

     3        203        63      —  
  

 

 

    

 

 

    

 

 

    

Total

     12        2,148        179     
  

 

 

    

 

 

    

 

 

    

Notes :

 

  Represents the total number of applicable persons as of Dec. 31, 2016.

 

  Under the Financial Supervisory Service’s standards for preparing corporate disclosure forms, which standards were amended in November 2013, we are required to disclose in our Business Report the individual annual compensation paid by us to our directors and auditors if such individual annual compensation is W500 million or greater.In 2016, Han Dongwoo, our Chairman and Chief Executive Officer, received W1,131 million which consisted of W733 million in salaries and wages, W398 million in bonus payments. Separately, in 2016, Mr. Han received W236 million in long-term performance compensation and W204 million(4,996 shares) in performance shares which were initially granted in 2011 subject to the Group’s performance. He also currently holds 22,000 performance shares. The exercisability of these performance shares will be determined based on business performance evaluation and share price performance during the period from 2016 to 2019.

Stock Options

(As of Dec. 31, 2016)

     No. of
Granted Options
(A)
     No. of Exercised
Options
(B)
     No. of Cancelled
Options
(C)
     No. of Exercisable
Options
(D = A – B – C)
     Exercise Price
(KRW)
 

Granted in 2005

     2,620,331        2,266,642        251,300        102,389        28,006  

Granted in 2006

     3,206,173        2,617,517        480,300        108,356        38,829  

Granted in 2007

     1,231,169        967,092        205,313        58,764        54,560  

Granted in 2008

     805,174        574,150        185,396        45,628        49,053  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7,862,847        6,425,401        1,122,309        315,137        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Notes :

 

    The weighted-average exercise price of outstanding exercisable options as of Dec. 31, 2016 is KRW 39,726

 

    The closing price of our common stock was KRW 45,250 on Dec. 31, 2016.

 

    On March 18, 2015, the exercise period for all outstanding stock options expired, except for a limited number of stock options for which the expiration of the exercise period has been suspended by a resolution of the board of directors.

 

Employees   (As of Dec. 31, 2016)

Gender

   Number of
Employees
    

Average length of Service

   Total Salaries and wages
paid in 2016
(KRW million)
     Average Payment
per person
(KRW million)
 

Male

     120     

3 yrs 1 mths

(14 yrs) 1)

     14,048        117  

Female

     27     

6 yrs

(10 yrs) 1)

     2,176        80  
  

 

 

       

 

 

    

 

 

 

Total

     147     

3 yrs 7 mths

(13 yrs 3 mths) 1)

     16,224        110  
  

 

 

       

 

 

    

 

 

 

 

1) Average length of service including service within group subsidiaries

 

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6. Related Party Transactions

 

Loans to Subsidiaries

   (KRW billion)

Subsidiary

  

Loan Type

   Origination
Date
   Maturity
Date
   Lending
Rate
    Beginning
Balance

(Jan. 1,
2016)
     Decrease      Increase      Ending
Balance

(Dec. 31,
2016)
 

Shinhan Investment Corp.

   Loans in KRW    2012-01-30    2017-01-30      4.11     100.0        100.0        —          —    
   Loans in KRW    2012-06-28    2017-06-28      3.84     100.0        100.0        —          —    

Shinhan Card

   Loans in KRW    2011-01-28    2016-01-28      4.91     100.0        100.0        —          —    
   Loans in KRW    2011-02-24    2016-02-24      4.82     250.0        250.0        —          —    
   Loans in KRW    2011-05-17    2016-05-17      4.47     100.0        100.0        —          —    
   Loans in KRW    2012-03-14    2017-03-14      4.12     150.0        —          —          150.0  
   Loans in KRW    2016-01-26    2021-01-26      1.98     —             150.0        150.0  
   Loans in KRW    2016-02-24    2021-02-24      1.84     —             150.0        150.0  

Shinhan Capital

   Loans in KRW    2011-04-29    2016-04-29      4.65     100.0        100.0        —          —    
   Loans in KRW    2011-05-17    2016-05-17      4.47     50.0        50.0        —          —    
   Loans in KRW    2012-03-14    2017-03-14      4.12     50.0        —          —          50.0  
   Loans in KRW    2012-12-14    2017-12-14      3.33     50.0        —          —          50.0  
   Loans in KRW    2013-01-18    2018-01-18      3.18     50.0        —          —          50.0  
   Loans in KRW    2013-09-05    2018-09-05      3.61     80.0        —          —          80.0  
   Loans in KRW    2014-01-27    2019-01-27      3.60     50.0        —          —          50.0  
   Loans in KRW    2016-03-16    2021-03-16      1.90        —          50.0        50.0  
   Loans in KRW    2016-04-27    2019-04-27      1.63        —          100.0        100.0  

Shinhan Private Equity

   Loans in KRW    2015-11-25    2016-11-23      2.12     5.0        5.0        —          —    
   Loans in KRW    2016-11-23    2017-11-22      1.95     —          —          5.0        5.0  

Shinhan Savings Bank

   Loans in KRW    2016-06-17    2021-06-17      1.61     —          —          50.0        50.0  
             

 

 

    

 

 

    

 

 

    

 

 

 

Total

 

    1235.0        805.0        505.0        935.0  
 

 

 

    

 

 

    

 

 

    

 

 

 

 

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For more detailed information, please refer to the Independent Accountant’s Audit Report, which was reported on Form 6-K on March 8, 2017.

 

22


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

SHINHAN FINANCIAL GROUP CO., LTD.

/s/ Yim Bo-hyuk

Name:   Yim Bo-hyuk
Title:   Chief Financial Officer

Date: March 31, 2017

 

23

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