Exhibit 99.1

	SHINHAN FINANCIAL GROUP CO., LTD.
	Separate Interim Financial Statements (Unaudited)
	June 30, 2011
	(With Independent Auditors’ Review Report Thereon)

Contents

	Page
Independent Auditors’ Review Report		1
Separate Interim Statements of Financial Position		3
Separate Interim Statements of Comprehensive Income		4
Separate Interim Statements of Changes in Equity		5
Separate Interim Statements of Cash Flows		6
Notes to the Separate Interim Financial Statements		8

Independent Auditor’s Review Report

Based on a report originally issued in Korean

The Board of Directors and Stockholders

Shinhan Financial Group Co., Ltd.:

Reviewed financial statements

We have reviewed the accompanying separate statements of financial position of Shinhan Financial Group Co., Ltd. (the “Company”) as of June 30, 2011 and December 31, 2010 and the related separate statements of comprehensive income for the three-month and six-month periods ended June 30, 2011 and 2010 and the separate statements of changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010, and notes, comprising a summary of significant accounting policies and other explanatory information (the “Separate interim financial information”).

Management’s responsibility

Management is responsible for the preparation and fair presentation of these separate interim financial statements in accordance with Korean International Financial Reporting Standards No. 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ review responsibility

Our responsibility is to issue a report on these separate financial statements based on our reviews. We conducted our reviews in accordance with Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of Korea and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying separate interim financial information as of June 30, 2011 is not prepared, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034 Interim Financial Reporting.

KPMG Samjong Accounting Corp.

Seoul, Korea

August 25, 2011

This report is effective as of August 25, 2011, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events and circumstances, if any.

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Financial Position

As of June 30, 2011 and December 31, 2010

(Unaudited)

(In millions of won)	Note		2011			2010
Assets
Cash and due from banks		5,30	(Won)	1,153,728			609,659
Trading assets		6		1,992,548			251,414
Derivative assets		7		981			9,127
Loans		8,30		1,454,594			1,454,615
Property and equipment		9		1,512			1,651
Intangible assets		10		2,366			1,823
Investments in subsidiaries		11		25,046,002			25,046,002
Deferred tax assets				—			5,600
Other assets		12,30		550,163			280,705
Total assets			(Won)	30,201,894			27,660,596
Liabilities
Borrowings		13	(Won)	5,000			5,000
Debentures		14		7,248,612			6,581,104
Liability for defined benefit obligations		15		1,772			1,090
Deferred tax liabilities				176			—
Other liabilities		16,30		576,114			320,442
Total liabilities				7,831,674			6,907,636
Equity		17
Capital stock				2,645,053			2,589,553
Capital surplus				9,494,842			8,444,178
Accumulated other comprehensive income				(432	)		(1,702	)
Retained earnings				10,230,757			9,720,931
Total equity				22,370,220			20,752,960
Total liabilities and equity			(Won)	30,201,894			27,660,596

See accompanying notes to the separate interim financial statements.

3

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2011 and 2010

(Unaudited)

			2011						2010
(In millions of won, except earnings per share data)	Note		Three-month Period			Six-month Period			Three-month Period			Six-month Period
Interest income		30	(Won)	27,368			49,367			24,547			50,039
Interest expense				(92,904	)		(181,934	)		(86,207	)		(174,680	)
Net interest income		18		(65,536	)		(132,567	)		(61,660	)		(124,641	)
Fees and commission income		30		30,304			60,606			26,619			60,641
Fees and commission expense				(43	)		(234	)		(39	)		(104	)
Net fees and commission income		19		30,261			60,372			26,580			60,537
Dividend income		20		93,223			1,187,470			66,361			817,312
Net trading income		21		15,472			21,952			1,112			1,591
Net foreign currency transaction gain (loss)				(608	)		9,822			(23,501	)		(16,278	)
Reversal of (provision for) credit losses		22,30		(215	)		(66	)		20			(42	)
General and administrative expenses		23		(22,542	)		(33,486	)		(21,104	)		(36,008	)
Other operating income (expenses), net		25,30		(1,175	)		(9,741	)		23,568			16,618
Income before income taxes				48,880			1,103,756			11,376			719,089
Income tax expense (benefit)		26		2,474			7,694			(1,834	)		(2,650	)
Net income for the period				46,406			1,096,062			13,210			721,739
Other comprehensive income for the period, net of income tax
Cash flow hedges		17		373			1,677			(2,115	)		(931	)
Income tax effect				(90	)		(407	)		1,547			1,260
				283			1,270			(568	)		329
Total comprehensive income for the period			(Won)	46,689			1,097,332			12,642			722,068
Basic earnings (loss) per share in won		17,27	(Won)	(49	)		2,045			(93	)		1,281
Diluted earnings (loss) per share in won		17,27	(Won)	(33	)		2,011			(76	)		1,270

See accompanying notes to the separate interim financial statements.

4

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Changes in Equity

For the six-month periods ended June 30, 2011 and 2010

(Unaudited)

(In millions of won)	Capital stock		Capital surplus		Accumulated other comprehensive income			Retained earnings			Total equity
Balance at January 1, 2010	(Won)	2,589,553		8,444,178		(4,277	)		9,523,572			20,553,026
Net income for the period		—		—		—			721,739			721,739
Other comprehensive income, net of income tax
Cash flow hedges		—		—		329			—			329
Total comprehensive income for the period		—		—		329			721,739			722,068
Transactions with owners
Dividends		—		—		—			(420,266	)		(420,266	)
Balance at June 30, 2010	(Won)	2,589,553		8,444,178		(3,948	)		9,825,045			20,854,828
	Capital stock		Capital surplus		Accumulated other comprehensive income			Retained earnings			Total equity
Balance at January 1, 2011	(Won)	2,589,553		8,444,178		(1,702	)		9,720,931			20,752,960
Net income for the period		—		—		—			1,096,062			1,096,062
Other comprehensive income, net of income tax
Cash flow hedges		—		—		1,270			—			1,270
Total comprehensive income for the period		—		—		1,270			1,096,062			1,097,332
Transactions with owners
Dividends		—		—		—			(586,236	)		(586,236	)
Issuance of preferred stock		55,500		1,050,664		—			—			1,106,164
Balance at June 30, 2011	(Won)	2,645,053		9,494,842		(432	)		10,230,757			22,370,220

See accompanying notes to the separate interim financial statements.

5

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Cash Flows

For the six-month periods ended June 30, 2011 and 2010

(Unaudited)

(In millions of won)	Note		2011			2010
Cash flows from operating activities
Net income for the period			(Won)	1,096,062			721,739
Adjustments for:
Interest income				(302	)		(261	)
Interest expense				2,948			10,222
Net trading income				(8,134	)		(74	)
Net foreign currency transaction loss (gain)				(9,822	)		16,278
Provision for credit losses				66			42
Noncash employee expenses (benefit)				(3,087	)		1,155
Depreciation and amortization				600			662
Noncash other operating expenses (income), net				9,822			(16,016	)
Income tax expense (benefit)				5,574			(2,650	)
				(2,335	)		9,358
Changes in assets and liabilities:
Trading assets				(1,733,000	)		270,000
Other assets				217,960			(9,585	)
Liability for defined benefit obligations				12			(975	)
Other liabilities				(226,630	)		(17,562	)
				(1,741,658	)		241,878
Net cash provided by (used in) operating activities		29		(647,931	)		972,975
Cash flows from investing activities
Issuance of loan				(650,000	)		—
Collection of loans				650,000			50,000
Acquisition of property and equipment				(158	)		(749	)
Acquisition of intangible assets				(846	)		(16	)
Investments in subsidiaries				—			(10,026	)
Increase in other assets				(2,054	)		(3,600	)
Net cash provided by (used in) investing activities				(3,058	)		35,609

See accompanying notes to the separate interim financial statements

6

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Interim Statements of Cash Flows (continued)

For the six-month periods ended June 30, 2011 and 2010

(Unaudited)

(In millions of won)	Note		2011			2010
Cash flow from financing activities
Issuance of preferred stock				1,110,000			—
Proceeds from borrowings				—			390,000
Repayment of borrowings				—			(600,000	)
Issuance of debentures				1,560,000			1,050,000
Repayment of debentures				(880,000	)		(1,070,000	)
Stock issuance cost paid				(3,836	)		—
Debentures issuance cost paid				(5,618	)		(3,626	)
Dividends paid				(585,494	)		(419,950	)
Net cash provided by (used in) financing activities				1,195,052			(653,576	)
Increase in cash and cash equivalents				544,063			355,008
Cash and cash equivalents at beginning of period				609,865			129,820
Cash and cash equivalents at end of period		29	(Won)	1,153,928			484,828

See accompanying notes to the separate interim financial statement

7

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

1. Reporting entity

Shinhan Financial Group Co., Ltd. (the “Company”) was incorporated on September 1, 2001 through a business combination involving exchange of the Company’s common stock with the former shareholders of Shinhan Bank, Shinhan Investment Corp., Shinhan Capital Co., Ltd. and Shinhan BNP Paribas Investment Trust Management Co., Ltd. The Company’s shares were listed on the Korea Exchange on September 10, 2001 and the Company’s American depository shares were listed on the New York Stock Exchange on September 16, 2003.

2. Basis of preparation

(a) Statement of compliance

The accompanying separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), No. 1034 Interim Financial Reporting , as prescribed in the Act on External Audit of Corporations.

The accompanying separate interim financial statements have been condensed, restructured and translated into English from the Korean language separate interim financial statements.

Certain information included in the Korean language separate interim financial statements, but not required for a fair presentation of the Company’s financial position, results of operations, changes in equity or cash flows, is not presented in the accompanying separate interim financial statements.

(b) Basis of measurement

The separate interim financial statements have been prepared on the historical cost basis except for the following material items in the separate statement of financial position:

• Derivative financial instruments are measured at fair value

• Financial instruments at fair value through profit or loss are measured at fair value

• Liabilities for cash-settled share-based payment arrangements are measured at fair value

• The liability for defined benefit obligations is recognized as the present value of the defined benefit obligation less the net total of the plan assets, plus unrecognized actuarial gains, less unrecognized past service cost and unrecognized actuarial losses

8

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

2. Basis of preparation, continued

(c) Functional and presentation currency

These separate interim financial statements are presented in Korean won, which is the Company’s functional currency and the currency of the primary economic environment in which the Company operates.

(d) Use of estimates and judgments

The preparation of the separate interim financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these separate interim financial statements and in preparing the opening K-IFRS separate statement of financial position at January 1, 2010 for the purposes of the transition from previous K-GAAP to K-IFRS, unless otherwise indicated.

An explanation of how the transition from previous K-GAAP to K-IFRS has affected the Company’s financial position and financial performance is provided in note 31.

(a) Investments in subsidiaries

The accompanying separate interim financial statements have been prepared on a stand-alone basis in accordance with K-IFRS No. 1027 Consolidated and Separate Financial Statements. The Company’s investments in subsidiaries are recorded at cost in accordance with K-IFRS No. 1027. The Company applied K-IFRS No. 1101 First-time Adoption of K-IFRS, and considered the amount reported previously in separate financial statements prepared in accordance with previous K-GAAP as deemed cost at the date of transition. Dividend received from its subsidiaries are recognized in profit or loss when the Company is entitled to receive the dividend.

9

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

(b) Foreign currency translation

Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

(c) Cash and cash equivalents

Cash and cash equivalents include notes and coins on hand, demand deposits and highly liquid financial assets subject to insignificant risk of changes in their fair value.

(d) Non-derivative financial assets

Financial assets are classified into financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets and held-to-maturity investments. Financial assets are recognized in the separate interim financial statements when the Company becomes a party to the contractual provisions of the instrument.

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.

i) Financial assets at fair value through profit or loss

These financial assets include a financial asset held for trading or designated at fair value through profit or loss upon initial recognition. These financial assets are measured at fair value after initial recognition and changes in the fair value are recognized through profit or loss of the period. Costs attributable to the acquisition are immediately expensed in the period.

ii) Held-to-maturity investments

Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity. They are carried at amortized cost using the effective interest method after their initial recognition.

10

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

iii) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

iv) Available-for-sale financial assets

Available-for-sales financial assets are the non-derivative financial assets not classified into financial assets at fair value through profit or loss or loans and receivables. They are measured at fair value after their initial recognition.

v) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.

vi) Offsetting

Financial assets and liabilities are offset and the net amount presented in the separate statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(e) Impairment of financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

The Company first assesses whether objective evidence of impairment exists individually for loans and receivables that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.

11

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

(f) Derivative financial instruments

Derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the statement of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.

(g) Property and equipment

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain items of property and equipment was determined by reference to a previous K-GAAP revaluation.

Cost includes expenditure that is directly attributable to the acquisition of the asset.

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of 5 years, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Depreciation methods, useful lives and residual values are reviewed at each fiscal year-end and adjusted if appropriate.

12

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

(h) Intangible assets

Intangible assets are recognized at cost upon initial recognition and subsequently stated at cost less accumulated amortization and impairment losses, if any. Intangible assets are amortized using the straight-line method over an estimated useful life of 5 years.

Amortization methods, useful lives and residual values are reviewed at each fiscal year-end and adjusted if appropriate.

(i) Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets, other than plan assets and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”).

In case recoverable amount of an asset or CGU is lower than its carrying amount, the carrying amount is reduced to the recoverable amount and the impairment loss is recognized in profit or loss.

13

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

(j) Non-derivative financial liabilities

The Company initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

Depending on commitments in a contract and definition of financial liabilities, the non-derivative financial liabilities are categorized as either at fair value through profit or loss or other financial liabilities.

i) Financial liabilities at fair value through profit or loss

The financial liabilities at fair value through profit or loss include a financial liability held for trading or designated at fair value through profit or loss upon initial recognition. These financial liabilities are measured at fair value after initial recognition and changes in the fair value are recognized through profit or loss of the period. Costs attributable to the issuance or acquisition are immediately expensed in the period.

ii) Other financial liabilities

The financial liabilities not classified as at fair value through profit or loss are classified into other financial liabilities. The liabilities are measured at a fair value minus cost relating to issuance upon initial recognition. Then, they are carried at amortized cost, using the effective interest rate method.

Only when financial liabilities become extinct, or obligations in a contract are cancelled or terminated, they are derecognized form the Company’s separate statement of financial position.

(k) Employee benefits

i) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

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SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

iii) Other long-term employee benefits

The Company’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Company’s obligations. The calculation is performed using the projected unit credit method. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise.

iv) Share-based payment transactions

The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.

15

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

(l) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

(m) Capital stock

Common stock is classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

Preferred stock capital is classified as equity if it is non-redeemable, or redeemable only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognized as distributions within equity upon approval by the Company’s shareholders’ meeting.

(n) Financial income and expense

i) Interest income and expense

Interest income and expense are recognized in profit or loss using the effective interest method. When calculating the effective interest rate, the Company estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. The calculation of the effective interest includes all fees and points paid or received.

However, when it is believed that interest income cannot be recognized as income under accrual base accounting because the interest is not likely to be realized as income, it is recognized as income at the time of receiving the interest in cash.

ii) Fees and commissions

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. Fees and commissions are generally recognized on an accrual basis when the service has been provided or significant act performed.

iii) Dividend

Dividend income is recognized when the right to receive income is authorized.

16

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

3. Significant accounting policies (continued)

(o) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Company files its national income tax return with the Korean tax authorities under the consolidated corporate tax system, which allows it to make national income tax payments based on the combined profits or losses of the Company and its wholly owned domestic subsidiaries. Deferred taxes are measured based on the future tax benefits expected to be realized in consideration of the expected combined profits or losses of eligible companies in accordance with the consolidated corporate tax system. Consolidated corporate tax amounts, once determined, are allocated to each of the subsidiaries and are used as a basis for the income taxes to be recorded in their separate financial statements.

(p) Earnings per share

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

17

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

4. Financial risk management

(a) Overview

As a financial services provider, Shinhan Financial Group (the “Group”), which includes the Company and its subsidiaries, is exposed to various risks relating to lending, credit card, insurance, securities investment, trading and leasing businesses, deposit taking and borrowing activities and operating environment.

The principal risks to which the Company is exposed are credit risk, market risk, liquidity risk and operational risk. These risks are recognized, measured and reported in accordance with risk management guidelines established at the holding company level and implemented at the subsidiary level through a carefully stratified checks-and-balances system.

i) Risk management principles

The Group risk management is guided by the following core principles:

• identifying and managing all inherent risks;

• standardizing risk management process and methodology;

• ensuring supervision and control of risk management independent of business activities;

• continuously assessing risk preference;

• preventing risk concentration;

• operating a precise and comprehensive risk management system including statistical models; and

• balancing profitability and risk management through risk-adjusted profit management.

ii) Risk management framework

The Group has established the Group Risk Management Committee, the Group Risk Management Council and the Group Risk Management Team at the holding company level and the Risk Management Committees and the Risk Management Team of the relevant subsidiary at the subsidiary level.

The Group Risk Management Committee consists of directors of the Company. The Group Risk Management Committee convenes at least once every quarter and may also convene on an ad hoc basis as needed. Specifically, the Group Risk Management Committee does the following: (i) establish the overall risk management policies consistent with management strategies, (ii) set risk limits for the Group and each of subsidiaries, (iii) approve appropriate investment limits or allowed loss limits, (iv) enact and amends risk management regulations, and (v) decide other risk management-related issues the Board of Directors or the Group Risk Management Committee sees fit to discuss. The results of the Group Risk Management Committee meetings are reported to the Board of Directors of the Company. The Group Risk Management Committee makes decisions through affirmative votes by a majority of the committee members.

18

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

4. Financial risk management (continued)

Group Risk Management Council consists of the Company’s chief risk officer, head of risk management team, and risk officers from each subsidiary. The Group Risk Management Council holds meetings for risk management executives from each subsidiary to discuss the groupwide risk management guidelines and strategy in order to maintain consistency in the groupwide risk policies and strategies. Specifically, the Group Risk Management Council deliberates on the following: (i) changes in risk management policies and strategies for each subsidiary, (ii) matters warranting discussion of risk management at the group level and cooperation among the subsidiaries, (iii) the effect of external factors on the groupwide risk, (iv) determination of the risk appetite for the Group as a whole and each of the subsidiaries, (v) risk limits of the Group as a whole and each of our subsidiaries, (vi) operation of risk measuring systems for the Group as a whole and each of the subsidiaries, (vii) matters requiring joint deliberation in relation to groupwide risk management and (viii) matters related to providing funds to the subsidiaries. The Group Risk Management Council has a sub-council consisting of working-level risk management officers, to discuss the above-related matters in advance.

(b) Credit risk

i) Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. The Company complies with credit risk management procedures pursuant to internal guidelines and regulations and continually monitors and improves these guidelines and regulations.

ii) The Company’s maximum exposure to credit risk without taking account of any collateral held or other credit enhancements as of June 30, 2011 and December 31, 2010 was as follows:

	2011		2010
Due from banks and loans
Banks	(Won)	1,153,728		139,775
Corporate		1,454,594		1,924,499
Derivative assets		981		9,127
Other financial assets		542,622		273,494
	(Won)	3,151,925		2,346,895

(*) The maximum exposure amounts for due from banks and loans are recorded as net of allowances

19

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

4. Financial risk management (continued)

iii) Classification of financial assets under consideration of credit risk

Financial assets that are neither past due nor impaired as of June 30, 2011 and December 31, 2010 were as follows:

	2011
	Banks			Corporate			Total
Normal due from banks and loans	(Won)	1,153,933			1,455,000			2,608,933
Less: allowance		(205	)		(406	)		(611	)
	(Won)	1,153,728			1,454,594			2,608,322
	2010
	Banks			Corporate			Total
Normal due from banks and loans	(Won)	139,800			1,925,070			2,064,870
Less: allowance		(25	)		(571	)		(596	)
	(Won)	139,775			1,924,499			2,064,274

(c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments.

Interest rate risk is the risk of loss resulting from interest rate fluctuations that adversely affect the financial condition and results of operations of the Company.

Foreign exchange risk arises because of the Company’s assets and liabilities which are denominated in currencies other than the won. The Company manages foreign exchange risk on an overall position basis by covering all of its foreign exchange spot and forward positions.

Foreign currency denominated liabilities as of June 30, 2011 and December 31, 2010 were as follows:

	2011				2010
(In thousands of JPY)	Foreign currency (JPY)		Foreign currency translation		Foreign currency (JPY)		Foreign currency translation
Foreign currency liabilities Debentures	¥	16,000	(Won)	213,710	¥	16,000	(Won)	223,553

20

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

4. Financial risk management (continued)

(d) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company maintains the liquidity position of the balance of assets exceeding the balance of liabilities based on the remaining maturities at 30 days below at each month-end financial position in accordance with the Financial Holding Company Act.

Contractual maturities for financial instruments as of June 30, 2011 and December 31, 2010 were as follows;

	2011
	Less than 1 month		1~3 months			3~6 months		6 months ~ 1 year		1~5 years		More than 5 years		Total
Non-derivatives:
Assets
Cash and due from banks	(Won)	1,153,728		—			—		—		—				1,153,728
Loans		4,874		219,171			15,891		229,632		1,190,530		—		1,660,098
Trading assets		1,992,548		—			—		—		—		—		1,992,548
Other financial assets		58,737		182,179			—		265,698		33,125		—		539,739
		3,209,887		401,350			15,891		495,330		1,223,655				5,346,113
Liabilities
Borrowings		—		5,000			—		—		—		—		5,000
Debentures		23,267		579,026			763,900		739,740		6,001,707		—		8,107,640
Other financial liabilities		78,481		177,348			—		267,495		17,286		—		540,610
		101,748		761,374			763,900		1,007,235		6,018,993		—		8,653,250
	(Won)	3,311,635		1,162,724			779,791		1,502,565		7,242,648				13,999,363
Derivatives:
Cash inflow	(Won)	—		213,710			—		—		—		—		213,710
Cash outflow		—		(212,160	)		—		—		—		—		(212,160	)
	(Won)	—		1,550			—		—		—		—		1,550

21

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

4. Financial risk management (continued)

	2010
	Less than 1 month		1~3 months			3~6 months			6 months ~ 1 year			1~5 years			More than 5 years		Total
Non-derivatives:
Assets
Cash and due from banks	(Won)	609,864		—			—			—			—			5		609,869
Loans		52,032		410,972			214,150			223,560			639,952			—		1,540,666
Trading assets		251,414		—			—			—			—			—		251,414
Other financial assets		158,723		3,036			91,476			—			21,596			—		274,831
		1,072,033		414,008			305,626			223,560			661,548			5		2,676,780
Liabilities
Borrowings		—		—			—			5,000			—			—		5,000
Debentures		149,341		445,580			399,781			1,333,883			4,865,326			—		7,193,911
Other financial liabilities		119,356		18,060			1,918			—			12,052			—		151,386
		268,697		463,640			401,699			1,338,883			4,877,378			—		7,350,297
	(Won)	803,336		(49,632	)		(96,073	)		(1,115,323	)		(4,215,830	)		5		(4,673,517	)
Derivatives:
Cash inflow		—		736			—			225,039			—			—		225,775
Cash outflow		—		(2,537	)		—			(217,347	)		—			—		(219,884	)
	(Won)	—		(1,801	)		—			7,692			—			—		5,891

(e) Measurement for the fair value of financial instruments

When available, the Company measures the fair value of an instrument using the quoted prices in an active market for that instrument. If a market for a financial instrument is not active, the Company establishes fair value using a valuation technique.

i) The financial instruments measured at amortized cost

The financial instruments measured at amortized cost as of June 30, 2011 and December 31, 2010 were as follows:

	2011
	Carrying amounts										Fair value
	Balance		Unamortized balance			Allowance			Total
Assets
Cash and due from banks	(Won)	1,153,933		—			(205	)		1,153,728		1,153,728
Loans (corporate)		1,455,000		—			(406	)		1,454,594		1,447,258
Other financial assets		543,739		(937	)		(180	)		542,622		542,622
		3,152,672		(937	)		(791	)		3,150,944		3,143,608
Liabilities
Borrowings		5,000		—			—			5,000		5,000
Debentures
Debentures in won		7,050,000		(15,029	)		—			7,034,971		7,138,881
Debentures in foreign currency		213,710		(69	)		—			213,641		213,641
		7,263,710		(15,098	)		—			7,248,612		7,352,522
Other financial liabilities		573,502		—			—			573,502		573,502
	(Won)	7,842,212		(15,098	)		—			7,827,114		7,931,024

22

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

4. Financial risk management (continued)

	2010
	Carrying amounts										Fair value
	Balance		Unamortized balance			Allowance			Total
Assets
Cash and due from banks	(Won)	609,870		—			(211	)		609,659		609,659
Loans (corporate)		1,455,000		—			(385	)		1,454,615		1,467,798
Other financial assets		274,830		(1,207	)		(129	)		273,494		273,544
		2,339,700		(1,207	)		(725	)		2,337,768		2,351,001
Liabilities
Borrowings		5,000		—			—			5,000		5,000
Debentures
Debentures in won		6,370,000		(12,223	)		—			6,357,777		6,490,345
Debentures in foreign currency		223,532		(205	)		—			223,327		223,327
		6,593,532		(12,428	)		—			6,581,104		6,713,672
Other financial liabilities		151,385		—			—			151,385		151,385
	(Won)	6,749,917		(12,428	)		—			6,737,489		6,870,057

ii) The table below analyzes financial instruments measured at the fair value as of June 30, 2011 and December 31, 2010, by the level in the fair value hierarchy into which the fair value measurement is categorized:

	2011
	Level 1		Level 2		Level 3		Total
Trading assets	(Won)	—		1,992,548		—		1,992,548
Derivatives financial assets		—		981		—		981
		—		1,993,529		—		1,993,529
	2010
	Level 1		Level 2		Level 3		Total
Trading assets	(Won)	—		251,414		—		251,414
Derivatives financial assets		—		9,127		—		9,127
	(Won)	—		260,541		—		260,541

(f) Capital management

The Company, which is a financial holding company controlling banks or other financial institutions conducting banking business as prescribed in the Financial Holding Company Act, is required to maintain a minimum consolidated equity capital ratio of 8.0%. “Consolidated equity capital ratio” is defined as the ratio of equity capital as a percentage of risk-weighted assets on a consolidated basis, determined in accordance with the Financial Services Commission requirements that have been formulated based on Bank of International Settlement standards. “Equity capital”, as applicable to bank holding companies, is defined as the sum of Tier I capital (including capital stock, retained earnings, etc.) and Tier II capital (including qualifying subordinated liabilities, etc.) less any deductible items (including goodwill, income tax assets, etc.), each as defined under the Regulation on the Supervision of Financial Holding Companies. “Risk-weighted assets” is defined as the sum of credit risk-weighted assets and market risk-weighted assets.

23

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

5. Cash and due from banks

(a) Cash and due from banks as of June 30, 2011 and December 31, 2010 were as follows:

	2011			2010
Due from banks in won
Deposits	(Won)	1,150,000			—
Other financial institution deposits		3,933			609,870
		1,153,933			609,870
Allowance		(205	)		(211	)
	(Won)	1,153,728			609,659

(b) Restricted guaranteed deposits on bank accounts as of June 30, 2011 and December 31, 2010 were as follows:

	2011		2010
Other financial institution deposits	(Won)	5		5

6. Trading assets

Trading assets as of June 30, 2011 and December 31, 2010 were as follows:

	2011		2010
Beneficiary certificates	(Won)	1,992,548		251,414

7. Derivatives and hedge accounting

(a) Derivative instruments as of June 30, 2011 and December 31, 2010 were as follows:

	2011
	Notional amount		Fair value				Valuation gain (loss)
			Asset		Liabilities		Operating revenue (expenses)			Other comprehensive income (loss)
Currency swap	(Won)	213,710		981		—		(9,822	)		1,677
	2010
	Notional amount		Fair value				Valuation gain (loss)
			Asset		Liabilities		Operating revenue (expenses)			Other comprehensive income (loss)
Currency swap	(Won)	223,533		9,127		—		21,482			2,031

Hedged items are debentures in foreign currency. The Company hedges cash flow volatility due to foreign currency and interest rate fluctuation through currency swaps.

24

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

7. Derivatives and hedge accounting (continued)

(b) The gains and losses reclassified from other comprehensive income to profit or loss as a reclassification adjustment for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011			2010
Cash flow hedges:
Effective portion of changes in fair value	(Won)	(8,145	)		16,712
Less: Amount transferred to profit or loss		(9,822	)		16,278
Income tax effect		(407	)		(105	)
	(Won)	1,270			329

8. Loans

(a) Loans as of June 30, 2011 and December 31, 2010 consisted of the following:

	2011			2010
Loans	(Won)	1,455,000			1,455,000
Less: allowance		(406	)		(385	)
	(Won)	1,454,594			1,454,615

(b) Changes in allowance for credit loss for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011						2010
	Loans		Other(*)		Total		Loans			Other(*)		Total
Balance at the beginning of period	(Won)	385		340		725		403			99		502
Provision for (reversal of) credit losses		21		45		66		(18	)		241		223
Balance at the ending of period	(Won)	406		385		791		385			340		725

(*) Includes allowance for due from banks and other assets

25

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

9. Property and equipment

(a) Property and equipment as of June 30, 2011 and December 31, 2010 were as follows:

	2011
	Acquisition cost		Accumulated depreciation			Book value
Furniture and fixtures	(Won)	2,068		(1,531	)		537
Other tangible assets		3,829		(2,854	)		975
	(Won)	5,897		(4,385	)		1,512
	2010
	Acquisition cost		Accumulated depreciation			Book value
Furniture and fixtures	(Won)	2,018		(1,440	)		578
Other tangible assets		3,721		(2,648	)		1,073
	(Won)	5,739		(4,088	)		1,651

(b) Changes in property and equipment for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011
	Furniture and fixtures			Other			Total
Balance at the beginning of period	(Won)	578			1,073			1,651
Acquisition		50			108			158
Depreciation		(92	)		(205	)		(297	)
Balance at the ending of period	(Won)	536			976			1,512
	2010
	Furniture and fixtures			Other			Total
Balance at the beginning of period	(Won)	360			928			1,288
Acquisition		396			551			947
Disposals		(3	)		—			(3	)
Depreciation		(175	)		(406	)		(581	)
Balance at the ending of period	(Won)	578			1,073			1,651

26

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

10. Intangible assets

Changes in intangible assets for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011
	Balance at the beginning of period		Acquisition		Depreciation			Balance at the end  of period
Software	(Won)	1,823		846		(303	)		2,366
	2010
	Balance at the beginning of period		Acquisition		Depreciation			Balance at the end  of period
Software	(Won)	2,493		60		(730	)		1,823

11. Investments in subsidiaries

Investments in subsidiaries as of June 30, 2011 and December 31, 2010 were as follows;

Investees	Country	Closing date	2011				2010
			Ownership percentage (%)		Book value		Ownership percentage (%)		Book value
Shinhan Bank	Korea	December 31		100.0		13,617,579		100.0		13,617,579
Shinhan Card	”	”		100.0		7,919,672		100.0		7,919,672
Shinhan Investment	”	March 31		100.0		1,841,420		100.0		1,841,420
Shinhan Life Insurance	”	”		100.0		982,775		100.0		982,775
Shinhan Capital	”	December 31		100.0		408,922		100.0		408,922
Jeju Bank	”	”		68.9		135,220		68.9		135,220
Shinhan BNP Paribas AMC	”	March 31		65.0		91,565		65.0		91,565
Shinhan PE	”	December 31		100.0		14,783		100.0		14,783
Shinhan Credit Information	”	”		100.0		15,385		100.0		15,385
SHC Management	”	”		100.0		8,655		100.0		8,655
Shinhan Data System	”	”		100.0		10,026		100.0		10,026
					(Won)	25,046,002				25,046,002

27

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

12. Other assets

Other assets as of June 30, 2011 and December 31, 2010 were as follows:

	2011			2010
Guarantee deposits	(Won)	13,474			12,474
Accounts receivable (Note 24)		516,023			254,534
Accrued income		14,242			7,822
Advance payments		1,164			1,888
Sundry assets		6,377			5,324
		551,280			282,042
Allowance for credit loss		(180	)		(129	)
Present value discounts		(937	)		(1,208	)
	(Won)	550,163			280,705

13. Borrowings

Borrowings as of June 30, 2011 and December 31, 2010 consisted of the following:

	2011					2010
	Interest rate (%)			Amount		Interest rate (%)			Amount
Borrowings in won (CP)		3.58	%	(Won)	5,000		3.58	%	(Won)	5,000

14. Debentures

Debentures as of June 30, 2011 and December 31, 2010 were as follows:

	2011				2010
	Interest rate (%)		Amount		Interest rate (%)		Amount
Debentures in won		3.71~8.11%	(Won)	7,050,000		3.71~8.11%	(Won)	6,370,000
Discount on debentures				(15,029)				(12,223)
				7,034,971				6,357,777
Debentures in foreign currency		3M Libor(JPY)    +1.1%		213,710		3M Libor(JPY) +1.1%		223,533
Discount on debentures				(69)				(206)
				213,641				223,327
			(Won)	7,248,612			(Won)	6,581,104

28

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

15. Employee benefits

(a) Defined benefit plan assets and liabilities

Defined benefit plan assets and liabilities as of June 30, 2011 and December 31, 2010 were as follows:

	2011			2010
Present value of defined benefit obligation	(Won)	5,819			5,220
Fair value of plan assets		(4,047	)		(4,130	)
Recognized liabilities for defined benefit obligation	(Won)	1,772			1,090

(b) Changes in the present value of defined benefit obligation for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011			2010
Balance at the beginning of period	(Won)	5,220			3,600
Current service costs		597			914
Interest expense		151			238
Actuarial gains		—			521
Benefits paid by the plan		(684	)		(457	)
Succession		535			404
Balance at the end of period	(Won)	5,819			5,220

(c) Changes in the present value of plan assets for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011			2010
Balance at the beginning of period	(Won)	4,130			2,300
Expected return		77			113
Actuarial losses		—			(2	)
Contributions paid into the plan		—			2,008
Benefits paid by the plan		(160	)		(289	)
Balance at the end of period	(Won)	4,047			4,130

(d) Expenses recognized in profit or loss for the three-month and six-month period ended June 30, 2011 and 2010 were as follows:

	2011						2010
	Three-month Period			Six-month Period			Three-month Period			Six-month Period
Current service costs	(Won)	299			597			228			457
Interest expense		75			151			60			119
Expected return on plan assets		(39	)		(77	)		(28	)		(56	)
	(Won)	335			671			260			520

The Company recognizes all profit or loss arising from defined benefit plans in general and administrative expenses.

29

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

15. Employee benefits (continued)

(e) Changes in defined benefit plan assets and liabilities for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011			2010
Present value of defined benefit obligation	(Won)	5,819			5,220
Fair value of plan assets		(4,047	)		(4,130	)
Deficit in the plan		1,772			1,090
Experience adjustments arising on plan liabilities		—			521
Experience adjustments arising on plan assets		—			(2	)

(f) Plan assets as of June 30, 2011 and December 31, 2010 were wholly comprised of the deposits.

(g) Actuarial assumptions

Actuarial assumptions as of June 30, 2011 and December 31, 2010 were as follows;

		Details	Description
Discount rate		5.91%	AA corporate bond yields
Expected return on plan assets		3.70%	Weighted average yield for the past
Future salary increasing rate		2.14% + Upgrade rate	Average for 5 years
Retirement rate		6.44% ~ 22.99%
Mortality rate	Male	0.023% ~ 0.130%	Mortality published tables by KIDI
	Female	0.010% ~ 0.068%

16. Other liabilities

Other liabilities as of June 30, 2011 and December 31, 2010 were as follows:

	2011		2010
Accounts payable	(Won)	3,094		4,286
Accrued expense (Note 24)		123,924		144,178
Income taxes payable		442,822		165,871
Dividends payable		3,662		2,920
Advance receipts		21		111
Taxes withheld		2,591		3,076
	(Won)	576,114		320,442

30

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

17. Equity

(a) Equity as of June 30, 2011 and December 31, 2010 were as follows:

	2011			2010
Capital stock
Common stock	(Won)	2,370,998			2,370,998
Preferred stock		274,055			218,555
		2,645,053			2,589,553
Capital surplus
Capital in excess of per value		9,494,769			8,444,105
Other		73			73
		9,494,842			8,444,178
Accumulated other comprehensive income
Valuation loss on derivation		(432	)		(1,702	)
Retained earnings
Legal reserve		1,390,625			1,152,507
Unappropriated retained earnings		8,840,132			8,568,424
		10,230,757			9,720,931
	(Won)	22,370,220			20,752,960

(b) Capital stock

i) As of June 30, 2011, preferred stock issued by the Company were as follows:

	Number of shares		Predetermined dividend rate (%) (*)			Redeemable period
Redeemable preferred stock:
Series 10 (**)		28,990,000		7.00	%	January 25, 2012 - January 25, 2027
Convertible redeemable preferred stock:
Series 11 (***)		14,721,000		3.25	%	January 25, 2012 - January 25, 2027
Redeemable preferred stock:
Series 12 (**)		11,100,000		5.58	%	April 21, 2016 - April 21, 2031
		54,811,000

(*) Based on issue price

(**) The Company maintains the right to redeem Series 10 redeemable preferred stock in part or in its entirety within the redeemable period.

(***) Details with respect to the conversion right of the Company are as follows:

  Conversion period: January 26, 2008—January 25, 2012

  Conversion ratio: One common stock per one preferred stock

  Conversion price in won: (Won)57,806

31

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won, except per share data)

17. Equity (continued)

The following redeemable preferred stocks classified as financial liabilities were redeemed as of June 30, 2011. As a result, the amount of capital stock in accordance with the Commercial Law differs from the total par value of the outstanding capital stock.

Redemption year	Redeemable preferred stock	Number of shares		Redemption amount
2010	Series 5		9,316,793	(Won)	46,584
	Series 8		66,666		333
2009	Series 4		9,316,792		46,584
2008	Series 3		9,316,792		46,584
	Series 7		2,433,334		12,167
2007	Series 2		9,316,792		46,584
2006	Series 1		9,316,792		46,584
	Series 6		3,500,000		17,500
			52,583,961	(Won)	262,920
	Preferred stock			(Won)	274,055
	Commercial Law capital			(Won)	536,975

(c) Changes in accumulated other comprehensive income for the six-month period ended June 30, 2011 and for the year ended December 31, 2010 were as follows:

	2011			2010
Balance at the beginning of period	(Won)	(1,702	)		(4,277	)
Cash flow hedge accounting		1,677			2,031
Income tax effects		(407	)		544
Balance at the end of period	(Won)	(432	)		(1,702	)

(d) Regulatory reserve for loan loss

In accordance with Regulations for the Supervision of Financial Institutions, the Company reserves the difference between allowance for credit losses by K-IFRS and Regulations for the Supervision of Financial Institutions at the account of regulatory reserve for loan loss.

i) Changes in regulatory reserve for loan loss for the six-month period ended June 30, 2011 were as follows:

	2011
Balance at the beginning of period	(Won)	12,181
Provision for regulatory reserve for loan loss		2,801
Balance at the end of period	(Won)	14,982

ii) Income for the period adjusted for regulatory reserve and earnings per share adjusted for regulatory reserve for loan loss for the six-month period ended June 30, 2011 were as follows:

	2011
Income for the period	(Won)	1,096,062
Provision for reserve for bad debt		(2,801	)
Income adjusted for regulatory reserve		1,093,261
Basic earnings per share adjusted for regulatory reserve in won		2,039
Diluted earnings per share adjusted for regulatory reserve in won		2,006

32

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

18. Net interest income

Net interest income for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011						2010
	Three-month Period			Six-month Period			Three-month Period			Six-month Period
In Interest income
Cash and due from banks	(Won)	6,183			6,621			1,080			2,534
Loans		21,030			42,444			23,328			47,244
Others		155			302			139			261
		27,368			49,367			24,547			50,039
Interest expense
Borrowings in won		45			89			8,319			19,091
Debentures in won		90,198			176,578			75,258			150,357
Debentures in foreign currency		2,661			5,267			2,630			5,232
		92,904			181,934			86,207			174,680
Net interest income	(Won)	(65,536	)		(132,567	)		(61,660	)		(124,641	)

19. Net fees and commission income

Net fees and commission income for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011				2010
	Three-month Period		Six-month Period		Three-month Period		Six-month Period
Fees and commission income
Royalty	(Won)	30,304		60,606		26,619		60,641
Fees and commission expense
Other		43		234		39		104
Net fees and commission income	(Won)	30,261		60,372		26,580		60,537

20. Dividend income

Dividend income for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011				2010
	Three-month Period		Six-month Period		Three-month Period		Six-month Period
Dividend income from subsidiaries	(Won)	93,223		1,187,470		66,361		817,312

33

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

21. Net trading income

Net trading income for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011				2010
	Three-month Period		Six-month Period		Three-month Period			Six-month Period
Securities
Gain (loss) on valuation	(Won)	4,477		8,134		(54	)		74
Gain on sale		10,995		13,818		1,166			1,517
	(Won)	15,472		21,952		1,112			1,591

22. Provision for (reversal of) credit losses

Provision for (reversal of) credit losses for the three-month and six-month periods ended June 30, 2011 and 2010 was as follows:

	2011				2010
	Three-month Period		Six-month Period		Three-month Period			Six-month Period
Provision for (reversal of) credit losses on loans	(Won)	215		66		(20	)		42

23. General and administrative expenses

General and administrative expenses for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011				2010
	Three-month Period		Six-month Period		Three-month Period		Six-month Period
Salaries
Salaries expense and bonuses	(Won)	4,238		5,057		5,772		11,055
Severance benefits		335		671		260		520
		4,573		5,728		6,032		11,575
Other employee benefits		501		1,197		1,092		1,278
Rent		633		1,219		525		1,052
Entertainment		385		755		442		895
Depreciation		152		297		149		298
Amortization		158		303		182		364
Taxes and dues		131		346		192		258
Advertising		8,243		11,491		7,994		12,144
Other		7,766		12,150		4,496		8,144
	(Won)	22,542		33,486		21,104		36,008

34

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

24. Share-based payments

(a) Stock options granted as of June 30, 2011 were as follows:

	4th grant	5th grant	6th grant	7th grant
Grant date	March 30, 2005	March 21, 2006	March 20, 2007	March 19,2008
Exercise price in won	(Won)28,006	(Won)38,829	(Won)54,560	(Won)49,053
Number of shares granted	2,695,200	3,296,200	1,301,050	808,700
Contractual exercise period	Within four years after three years from grant date	Within four years after three years from grant date	Within four years after three years from grant date	Within four years after three years from grant date
Changes in number of shares granted:
Balance at January 1, 2011	1,582,484	2,526,903	1,082,469	661,804
Exercised or canceled	(326,703)	(259,826)	(56,613)	(42,026)
Balance at June 30, 2011(*)	1,255,781	2,267,077	1,025,856	619,778
Assumptions used to determine the fair value of options:
Risk-free interest rate	3.50%	3.50%	3.53%	3.58%
Expected exercise period	5 months	11 months	17 months	23 months
Expected stock price volatility	26.59%	24.98%	24.53%	25.68%
Expected dividend yield	1.41%	1.41%	1.41%	1.41%
Fair value per share	(Won)22,991	(Won)13,124	(Won)4,825	(Won)8,641

(*) The equity instruments granted are wholly vested as of June 30, 2011.

The weighted average share price for 5,168,492 stock options outstanding at June 30, 2011 is (Won)40,548.

(b) Performance shares granted as of June 30, 2011 were as follows:

Type	Cash-settled
Performance conditions	Increase rate of stock price and achievement of target ROE
Number of shares estimated at June 30, 2011	311,059
Fair value per share in won	(Won)50,900

The amount of cash payment for the Company’s cash-settled share-based payment arrangements with performance conditions is determined at the fourth anniversary date from the grant date based on the share price which is an arithmetic mean of weighted average share prices of the past two-months, past one-month and past one-week. The fair value of cash payment is estimated using the closing share price at the end of reporting period. For share-based payment transactions among the Company and its subsidiaries, the Company and its subsidiaries receiving the services shall measure the services received as a cash-settled and an equity-settled share-based payment transaction, respectively.

35

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

24. Share-based payments (continued)

(c) Share-based compensation costs

Share-based compensation costs for the six-month period ended June 30, 2011 were as follows:

	Employee of
	Shinhan Financial Group			Subsidiaries(*1)			Total
Stock options granted:
4th	(Won)	(810	)		(2,786	)		(3,596	)
5th		(1,200	)		(4,729	)		(5,929	)
6th		(668	)		(1,927	)		(2,595	)
7th		(1,116	)		(3,077	)		(4,193	)
Performance share		36			5,056			5,092
	(Won)	(3,758	)		(7,463	)		(11,221	)

(*1) The Company has granted the above share-based payment arrangements to its employees and those of its subsidiaries and the Company requires the subsidiaries to reimburse the compensation costs for their employees. As of June 30, 2011, the Company recognized the corresponding accounts receivable from the subsidiaries in the amount of (Won)72,928 million.

(*2) Includes (Won)1,474 million of reversal of share-based compensation costs.

(d) Accrued expenses and the intrinsic value as of June 30, 2011 were as follows:

	Employee of
	Shinhan Financial Group		Subsidiaries		Total
Stock options granted:
4th	(Won)	4,645		24,227		28,872
5th		4,069		25,684		29,753
6th		614		4,335		4,949
7th		852		4,503		5,355
Performance share		1,654		14,179		15,833
	(Won)	11,834		72,928		84,762

(*) The intrinsic value of share-based payments is (Won)73,094 million based on the quoted market price (Won)50,900 per share for stock options and performance shares.

36

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

25. Other operating income and expense

Other operating income and expense for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows;

	2011						2010
	Three-month Period			Six-month Period			Three-month Period		Six-month Period
Other operating income	(Won)	336			353			23,640		16,751
Other operating expense		1,511			10,094			72		133
	(Won)	(1,175	)		(9,741	)		23,568		16,618

26. Income taxes

(a) Income tax expense (benefit) for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011					2010
	Three-month Period		Six-month Period			Three-month Period			Six-month Period
Current income tax	(Won)	2,324		2,324			—			—
Changes in deferred tax arising from temporary differences		60		5,777			(2,015	)		(3,910	)
Income tax expense reflected directly in equity		90		(407	)		181			1,260
	(Won)	2,474		7,694			(1,834	)		(2,650	)

(b) Income tax expense (benefit) is calculated by multiplying net income before tax with the tax rate for the six-month periods ended June 30, 2011 and 2010 was as follows:

	2011			2010
Income before income tax expense (A)	(Won)	1,103,756			719,089
Income tax calculated at the statutory tax rate		267,109			174,020
Adjustment:
Income exempted for tax purposes		(265,250	)		(176,972	)
Expenses not deductible for tax purposes		167			2,104
Other		5,668			(1,802	)
Income tax expenses (benefits) (B)	(Won)	7,694			(2,650	)
Effective income tax rate (B/A)		0.70	%		(0.37	)%

37

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

26. Income taxes (continued)

(c) Deferred tax assets and liabilities that were directly charged or credited to equity for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011
	Temporary differences			Deferred tax assets (liabilities)
Accumulated other comprehensive income:
Valuation gain on derivatives	(Won)	1,677			(407	)
	2010
	Temporary differences			Deferred tax assets (liabilities)
Accumulated other comprehensive income:
Valuation loss on derivatives	(Won)	(931	)		1,260

38

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won, except per share data)

27. Earning per Share

(a) Basic earnings per share

Basic earnings per share for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011					2010
	Three-month Period			Six-month Period		Three-month Period			Six-month Period
Net income for the period	(Won)	46,406			1,096,062		13,210			721,739
Less: dividends on preferred stock		69,537			126,394		57,489			114,346
Net income (loss) available for common stock		(23,131	)		969,668		(44,279	)		607,393
Weighted average number of common shares outstanding		474,199,587			474,199,587		474,199,587			474,199,587
Earnings (loss) per share in won	(Won)	(49	)		2,045		(93	)		1,281

(b) Diluted earnings per share

Diluted earnings per share due to dilutive effect for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011					2010
	Three-month Period			Six-month Period		Three-month Period			Six-month Period
Ordinary income available for common stock	(Won)	(23,131	)		969,668		(44,279	)		607,393
Add: dividends on redeemable convertible preferred stock		6,895			13,714		6,895			13,714
Diluted net earnings		(16,236	)		983,382		(37,384	)		621,107
Weighted average number of common shares outstanding after adjustment for the effects of dilutive potential common shares(*)		488,920,587			488,920,587		488,920,587			488,920,587
Diluted earnings per share in won	(Won)	(33	)		2,011		(76	)		1,270

(*) Weighted average number of common shares outstanding after adjustment for the effects of dilutive potential common shares for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

	2011				2010
	Three-month Period		Six-month Period		Three-month Period		Six-month Period
Weighted average number of common shares		474,199,587		474,199,587		474,199,587		474,199,587
Effect of conversion of convertible redeemable preferred stock		14,721,000		14,721,000		14,721,000		14,721,000
Weighted average number of common shares outstanding after adjustment for the effects of dilutive potential common shares		488,920,587		488,920,587		488,920,587		488,920,587

39

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

28. Operating income and expense

(a) Operating income and expense for the six-month periods ended June 30, 2011 and 2010 by K-IFRS and previous K-GAAP were as follows:

	2011
	K-IFRS		Previous K-GAAP
Dividend income	(Won)	1,187,470		1,187,470
Royalty		60,606		60,606
Interest income		49,367		49,367
Gains on foreign currency transaction		9,822		9,822
Gains on financial assets held for trading		21,952		21,952
Other		353		—
	(Won)	1,329,570		1,329,217
	2010
	K-IFRS		Previous K-GAAP
Dividend income	(Won)	817,312		817,312
Royalty		60,641		60,641
Interest income		50,039		50,039
Gains on derivatives		16,278		16,278
Gains on financial assets held for trading		1,591		1,591
Other		472		—
	(Won)	946,333		945,861

(b) Reconciliations of operating income reported under previous K-GAAP to K-IFRS for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011			2010
Previous K-GAAP	(Won)	1,103,675			718,750
Addition: miscellaneous income		353			472
Less: contributions, etc		(272	)		(133	)
K-IFRS	(Won)	1,103,756			719,089

40

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

29. Statements of cash flows

(a) Cash and cash equivalents reported in the accompanying separate statements of cash flows for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011		2010
Due from banks with a short maturity of three months or less from date of acquisition	(Won)	1,153,928		484,828

(b) The Company reports cash flows from operating activities using the indirect method. Interest paid and interest and dividends received are classified as operating cash flows. Cash flows from interest, dividends and income taxes received and paid for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011		2010
Income taxes paid	(Won)	225,793		—
Interests received		42,555		47,951
Interests paid		174,656		164,375
Dividends received		1,187,470		795,951

(c) Significant non-cash activities for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011		2010
Share-based payment arrangements to the employees of subsidiaries	(Won)	13,817		612
Payment of consolidated corporate income tax		442,617		223,375

41

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

30. Related party transactions

(a) Details of transactions

Significant transactions with the related parties for the three-month and six-month periods ended June 30, 2011 and 2010 were as follows:

Related party	Account	2011				2010
		Three-month Period		Six-month Period		Three-month Period		Six-month Period
Revenue:
Shinhan Bank	Interest income	(Won)	6,300		6,885		163		277
〃	Fees and commission income		20,891		41,787		21,336		49,125
〃	Dividend income		—		478,033		—		149,733
〃	Other operating income		—		8		9		19
Shinhan Card	Intesrest income		13,191		27,230		12,447		24,888
〃	Fees and commission income		3,693		7,387		1,901		4,376
〃	Dividend income		—		600,018		—		600,018
〃	Reversal of credit losses		32		13		—		—
Shinhan Investment	Interest income		1,448		2,858		2,310		4,658
〃	Fees and commission income		1,578		3,148		754		2,012
〃	Dividend income		20,000		20,000		15,000		15,000
〃	Reversal of credit losses		—		183		—		—
Shinhan Life Insurance	Fees and commission income		3,473		6,946		2,219		4,188
〃	Dividend income		50,000		50,000		30,000		30,000
〃	Other operating income		—		—		4		4
Shinhan Capital	Interest income		6,384		12,304		8,503		17,600
〃	Fees and commission income		351		702		231		532
〃	Dividend income		—		14,996		—		—
〃	Reversal of credit losses		—		—		20		20
Jeju Bank	Fees and commission income		171		342		97		224
Shinhan Credit Information	Fees and commission income		31		61		18		42
〃	Dividend income		—		1,200		—		1,200
Shinhan PE	Interest income		45		90		50		99
〃	Fees and commission income		6		12		4		10

42

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

30. Related party transactions (continued)

Related party	Account	2011				2010
		Three-month Period		Six-month Period		Three-month Period		Six-month Period
Revenue:
Shinhan BNP Paribas AMC	Dividend income		23,223		23,223		21,361		21,361
〃	Fees and commission income		54		109		31		72
Shinhan Data System	Fees and commission income		36		73		15		34
Shinhan Aitas	Fees and commission income		20		39		11		23
		(Won)	150,927		1,297,647		116,484		925,515
Expense:
Shinhan Bank	General and administrative expenses	(Won)	190		374		171		287
〃	Impaired loss on investments		190		218		—		25
Shinhan Investment	Interest expenses		1,763		2,203		460		510
〃	Impaired loss on investments		—		—		—		37
Shinhan Life Insurance	General and administrative expenses		—		—		—		4
〃	Impaired loss on investments		3		4		—		—
Shinhan Capital	Impaired loss on investments		54		40		—		—
Shinhan Data System	General and administrative expenses		437		437		19		166
		(Won)	2,637		3,276		650		1,029

43

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

30. Related party transactions (continued)

(b) Account balances

Significant balances with the related parties as of June 30, 2011 and December 31, 2010 were as follows:

Creditor	Debtor	Account	2011		2010
<Assets>
Shinhan Financial Group	Shinhan Bank	Cash and due from banks	(Won)	1,153,725		787
〃	〃	Other assets		354,195		143,364
〃	Shinhan Card	Loans		799,859		899,840
〃	〃	Other assets		137,153		108,663
〃	Shinhan Investment	Loans		99,960		99,960
〃	〃	Other assets		16,881		9,684
〃	Shinhan Life Insurance	Other assets		27,011		5,315
〃	Shinhan Capital	Loans		549,782		449,822
〃	〃	Other assets		6,136		5,736
〃	Jeju Bank	Other assets		434		281
〃	Shinhan Credit Information	Other assets		1,010		1,107
〃	Shinhan PE	Loans		4,993		4,993
〃	〃	Other assets		106		151
〃	Shinhan BNP Paribas AMC	Other assets		73		93
〃	SHC Management	Other assets		75		95
〃	Shinhan Data System	Other assets		438		212
			(Won)	3,151,831		1,730,103
<Liabilities>
Shinhan Card	Shinhan Financial Group	Other liabilities	(Won)	528		270
Shinhan Life Insurance	〃	Other liabilities		—		1,212
Shinhan Capital	〃	Other liabilities		428		706
Shinhan PE	〃	Other liabilities		21		111
Shinhan Data System	〃	Other liabilities		7		102
			(Won)	984		2,401

44

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

(In millions of won)

30. Related party transactions (continued)

(c) Compensation of key management personnel for the six-month periods ended June 30, 2011 and 2010 were as follows:

	2011		2010
Salaries	(Won)	1,644		3,397
Retirement and severance allowance		50		—
Share-based payment		481		731
	(Won)	2,175		4,128

31. Implementation of K-IFRS

(a) First-time adoption of K-IFRS

As stated in note 2(a), these are the Compny’s first separate financial statements prepared in accordance with K-IFRS.

The accounting policies set out in note 3 have been applied in preparing the separate interim financial statements for the six-month period ended June 30, 2011, the comparative information presented in these separate financial statements for the year ended December 31, 2010 and in the preparation of an opening K-IFRS statement of financial position at January 1, 2010 (the Company’s date of transition).

In preparing its opening K-IFRS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous K-GAAP. An explanation of how the transition from previous K-GAAP to K-IFRSs has affected the Company’s financial position and financial performance is set out in the following tables and the notes that accompany the tables.

45

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

31. Implementation of K-IFRS (continued)

(b) Significant differences between K-IFRS and previous K-GAAP

The areas of accounting under the current financial statements, for which the application of K-IFRS is expected to give rise to significant differences, include the scope of consolidation, goodwill, loss provision, revenue recognition, derecognition of financial instruments and employee benefits, among others. The details of significant differences are as follows:

		K-IFRS	Previous K-GAAP
First-time adoption of K-IFRS	Business combinations	K-IFRS 1103 Business Combinations will not be applied retrospectively to business combinations occurring prior to the date of transition.	—
	Deemed cost	The Company elected to measure land and buildings at fair value at the date of transition and use those fair values as their deemed costs.	—
	Cumulative translation differences	The cumulative translation difference of foreign operations as of the date of transition will be regarded as nil	—
	Derecognition of financial assets and financial liabilities	The derecognition requirements in K-IFRS 1039 Financial Instruments: Recognition and Measurement were applied prospectively for transactions occurred on or before the date of transition.	.—
	Financial asset designated as available for sale or financial instrument designated as a financial asset or financial liability at fair value through profit or loss	Although K-IFRS 1039 Financial Instruments: Recognition and Measurement permits a financial asset to be designated on initial recognition as available for sale or a financial instrument (provided it meets certain criteria) to be designated as a financial asset or financial liability at fair value through profit or loss, those designations are permitted at the date of transition. The Company elected to use these exemptions.	—
	Share-based payment transactions	K-IFRS 1102 Share-based Payment was applied retrospectively to equity instruments that were granted on or before the date of transition.	—

46

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

31. Implementation of K-IFRS (continued)

		K-IFRS	Previous K-GAAP
First-time adoption of K-IFRS	Decommissioning liabilities included in the cost of property, plant and equipment	The amount that would have been included in the cost of the related asset when the liability first arose is estimated by discounting the liability to that date using its best estimate of the historical risk-adjusted discount rate(s) that would have applied for that liability over the intervening period.	—
	Leases	K-IFRS 1017 Leases will be applied retrospectively to leases occurring prior to the date of transition.	—
	Investments in subsidiaries, jointly controlled entities and associates	When the Company prepares separate financial statements in accordance with K-IFRS No. 1027 Consolidated and Separate Financial Statements and measures its investments in subsidiaries, jointly controlled entities and associates at cost, the deemed cost for such investments is the K-GAAP carrying amount at the date of transition..	—
Basis of financial statement preparation		Consolidated financial statements	Individual financial statements
Consolidation scope		If the Group has dominant influence or control over the subsidiary including special purpose vehicle(s) “SPV”, the subsidiary is included in the Group’s consolidation scope regardless of the size of the subsidiary.	Based on the Act on External Audit of Corporations, a stock company, whose total value of assets is less than W 10 billion as of the end of the immediate preceding fiscal year, shall not be considered a subsidiary. Consolidation of an SPV is not stipulated in K-GAAP.
Goodwill		Goodwill acquired in a business combination is not amortized and is allocated to cash-generating units “CGUs” or groups of CGUs and tested for impairment annually whenever there is any indication that they may be impaired.	Goodwill acquired in a business combination is amortized on a straight-line basis over its estimated useful life not to exceed 20 years.

47

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

31. Implementation of K-IFRS (continued)

	K-IFRS	Previous K-GAAP
Allowance for loan losses	Allowance for loan losses that has been incurred but not yet identified are estimated at a specific asset and collective level using the historical experience.	Allowance for loan losses is estimated at the greater of the amount resulting from the expected loss method reasonably estimated using the historical experience and the amount estimated based on the asset classification guidelines of the Financial Services Commission in accordance with the Regulations for the Supervision of Financial Institutions.
Revenue recognition	All fees associated with origination of loans are deferred and recognized over the expected life of the loan using the effective interest method as an adjustment to the loan balance and interest income.	Fees directly associated with origination of loans are deferred and recognized over the maturity of the loan using the effective interest method as an adjustment to the loan balance and interest income.
Financial instrument: measurement	The appropriate fair value for an asset held or liability to be issued is usually the current bid price and, for an asset to be acquired or liability held, the asking price. Bid-ask adjustment is applied when measuring financial instrument at fair value. The fair value is measured reflecting credit risk.	Bid price and asking price are not reflected in the fair value of financial instruments. Credit risk is not required to be considered in measuring fair value. In accordance with Best practice for business process of derivative transactions provided by Financial Supervisory Service, counterparty’s credit risk is considered in measuring fair value of OTC derivatives.
Derecognition of financial instruments	Dependent on the extent to which it retains the risks and rewards of ownership of the financial asset, the transferred asset continues to be recognized, is derecognized or continues to be recognized to the extent of its continuing involvement in the financial asset.	Dependent on whether or not the Company retains control over the financial assets, the transferred asset continues to be recognized or derecognized.

48

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(Unaudited)

31. Implementation of K-IFRS (continued)

	K-IFRS	Previous K-GAAP
Change in depreciation method	The depreciation method applied to an asset shall be reviewed at least at each fiscal year-end and, if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the method shall be changed to reflect the changed pattern. Such a change shall be accounted for as a change in an accounting estimate.	The depreciation method shall be applied consistently from period to period unless there are justifiable reasons. The depreciation method for the same kind of property and equipment is applied to newly acquired assets.
Employee benefits	Under the Projected Unit Credit Method, the Company recognizes a defined benefit obligation calculated using an actuarial technique and a discount rate based on the present value of the projected benefit obligation.	The Company establishes an allowance for severance liability equal to the amount which would be payable if all employees left at the end of the reporting period.
Customer loyalty program	The Company allocates some of the consideration received or receivable from the sales transaction to the award credits and defers the recognition of revenue.	The Company recognizes as provision or accounts payable.
Classification of investment property	A property that is held to earn rentals or for capital appreciation or both is classified as investment property.	A property that is held to earn rentals or for capital appreciation or both is classified as property, plant and equipment.
Valuation method of property, plant and equipment and investment property	An entity shall choose either the cost model or the revaluation model and shall apply that policy to an entire class of property, plant and equipment. The Company chooses the cost model.	An entity shall choose either the cost model or the revaluation model as its accounting policy. The Company chooses the cost model.
Presentation of liabilities and equity	The issuer of a financial instrument shall classify the instrument, or its component parts, on initial recognition as a financial liability, a financial asset or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument.	Classified under Commercial Law

49

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(In millions of won)

31. Implementation of K-IFRS (continued)

(c) Summary of the effects of the adoption of K-IFRS on the Company’s financial position and the results of its operation

This summary of the effects on the Company’s financial position and the results of its operation described below are based on the separate financial statements, and may change in the future as a result of additional analysis, revised standards, etc.

i) The effects on the Company’s financial position due to the adoption of K-IFRS as of the date of transition to K-IFRS, January 1, 2010 are as follows:

	Total assets		Total liabilities			Total equity
Previous K-GAAP	(Won)	27,120,706		6,392,345			20,728,361
Adjustment for:
Change in method of recognizing allowance		7,748		—			7,748
Actuarial valuation of defined benefit obligations		—		(141	)		141
Share-based payment		14,577		17,435			(2,858	)
Reclassification of preferred stock		—		180,463			(180,463	)
Others		97		—			97
Total adjustment		22,422		197,757			(175,335	)
K-IFRS	(Won)	27,143,128		6,590,102			20,553,026

ii) The effects on the Company’s results of operations for the three-month and six-month period ended June 30, 2010 are as follows:

	Net income						Total comprehensive income
	Three-month Period			Six-month Period			Three-month Period			Six-month Period
Previous K-GAAP	(Won)	583,549			1,364,841			332,959			1,187,792
Adjustment for:
Conversion to the cost method for equity method investments		(568,418	)		(635,419	)		(318,396	)		(458,041	)
Change in method of recognizing allowance		509			953			509			953
Actuarial valuation of definite benefit obligations		(111	)		(168	)		(111	)		(168	)
Share-based payment		281			(982	)		281			(982	)
Reclassification of preferred stock		(3,910	)		(7,776	)		(3,910	)		(7,776	)
Others		1,310			290			1,310			290
Total adjustment		(570,339	)		(643,102	)		(320,317	)		(465,724	)
K-IFRS	(Won)	13,210			721,739			12,642			722,068

50

SHINHAN FINANCIAL GROUP CO., LTD.

Notes to the Separate Interim Financial Statements

June 30, 2011

(In millions of won)

31. Implementation of K-IFRS (continued)

iii) The effects on the Company’s financial position due to the adoption of K-IFRS as of December 31, 2010 and results of its operations for the year ended December 31, 2010 are as folows:

	Total assets			Total liabilities		Total equity			Net income			Total comprehensive income
Previous K-GAAP	(Won)	29,616,670			6,891,917		22,724,753			2,381,184			2,580,618
Adjustment for:
Conversion to the cost method for equity method investments		(1,978,514	)		—		(1,978,514	)		(1,755,227	)		(1,952,086	)
Change in method of recognizing allowance		7,874			—		7,874			126			126
Actuarial valuation of defined benefit obligations		—			57		(57	)		(199	)		(199	)
Share-based payment		12,883			15,662		(2,779	)		78			78
Reclassification of preferred stock		—			—		—			(9,924	)		(9,924	)
Others		1,683			—		1,683			1,587			1,587
Total adjustment		(1,956,074	)		15,719		(1,971,793	)		(1,763,559	)		(1,960,418	)
K-IFRS	(Won)	27,660,596			6,907,636		20,752,960			617,625			620,200

51