EX-99.2 3 d438989dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

SHINHAN FINANCIAL GROUP CO., LTD.

AND SUBSIDIARIES

June 30, 2017

(Unaudited)

(With Independent Auditors’ Review Report Thereon)


Contents

 

     Page  

Independent Auditors’ Review Report

     1  

Consolidated Interim Statements of Financial Position

     3  

Consolidated Interim Statements of Comprehensive Income

     4  

Consolidated Interim Statements of Changes in Equity

     6  

Consolidated Interim Statements of Cash Flows

     8  

Notes to the Condensed Consolidated Interim Financial Statements

     10  


Independent Auditors’ 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 condensed consolidated interim financial statements of Shinhan Financial Group Co., Ltd. and its subsidiaries (collectively the “Group”), which comprise the consolidated interim statement of financial position as of June 30, 2017, the consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2017 and 2016, the consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2017 and 2016 and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of 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 condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the 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 Korean Standards on Auditing 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 condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting.

 

1


Other matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

The consolidated statement of financial position of the Group as of December 31, 2016, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 8, 2017, expressed an unqualified opinion. The accompanying consolidated statement of financial position of the Group as of December 31, 2016, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

KPMG Samjong Accounting Corp.

Seoul, Korea

August 14, 2017

 

This report is effective as of August 14, 2017, 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 condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

2


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Financial Position

As of June 30, 2017 and December 31, 2016

 

(In millions of won)    Note      2017
(Unaudited)
    2016  

Assets

       

Cash and due from banks

     4,7      W 20,424,044       19,181,165  

Trading assets

     4,8        31,389,614       26,695,953  

Financial assets designated at fair value through profit or loss

     4,9        3,594,760       3,416,102  

Derivative assets

     4,10        1,670,477       3,002,859  

Loans

     4,11        262,448,970       259,010,575  

Available-for-sale financial assets

     4,12        40,287,582       37,662,691  

Held-to-maturity financial assets

     4,12        21,928,681       19,805,084  

Property and equipment

        3,005,687       3,145,613  

Intangible assets

        4,238,392       4,226,512  

Investments in associates

     13        619,540       353,600  

Current tax receivable

        13,442       12,587  

Deferred tax assets

        485,093       641,061  

Investment property

        449,925       353,175  

Other assets

     4        23,306,592       18,168,408  

Assets held for sale

        48,072       4,939  
     

 

 

   

 

 

 

Total assets

      W 413,910,871       395,680,324  
     

 

 

   

 

 

 

Liabilities

       

Deposits

     4      W 238,010,007       235,137,958  

Trading liabilities

     4,14        2,353,756       1,976,760  

Financial liabilities designated at fair value through profit or loss

     4,15        9,145,279       9,233,642  

Derivative liabilities

     4,10        1,887,602       3,528,244  

Borrowings

     4        28,755,963       25,294,241  

Debt securities issued

     4,16        47,714,024       44,326,785  

Liabilities for defined benefit obligations

     17        150,553       130,879  

Provisions

     18        437,703       728,888  

Current tax payable

        334,219       272,728  

Deferred tax liabilities

        10,309       10,638  

Liabilities under insurance contracts

     19        23,468,447       22,377,434  

Other liabilities

     4        28,954,027       20,917,147  
     

 

 

   

 

 

 

Total liabilities

        381,221,889       363,935,344  
     

 

 

   

 

 

 

Equity

     20       

Capital stock

        2,645,053       2,645,053  

Hybrid bonds

        199,455       498,316  

Capital surplus

        9,887,335       9,887,335  

Capital adjustments

        (397,056     (458,461

Accumulated other comprehensive loss

        (252,980     (102,583

Retained earnings

        19,769,446       18,640,038  
     

 

 

   

 

 

 

Total equity attributable to equity holders of Shinhan Financial Group Co., Ltd.

        31,851,253       31,109,698  

Non-controlling interests

        837,729       635,282  
     

 

 

   

 

 

 

Total equity

        32,688,982       31,744,980  
     

 

 

   

 

 

 

Total liabilities and equity

      W 413,910,871       395,680,324  
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

3


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Comprehensive Income

For the three-month and six-month periods ended June 30, 2017 and 2016

(Unaudited)

 

(In millions of won)    Note      2017     2016  
            Three-
month

period
    Six-
month

period
    Three-
month

period
    Six-
month

period
 

Interest income

      W 2,879,228       5,698,367       2,792,612       5,561,059  

Interest expense

        (964,533     (1,914,461     (1,020,579     (2,074,351
     

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     21        1,914,695       3,783,906       1,772,033       3,486,708  

Fees and commission income

        1,020,103       1,985,178       955,413       1,864,333  

Fees and commission expense

        (583,016     (1,160,501     (540,194     (1,076,201
     

 

 

   

 

 

   

 

 

   

 

 

 

Net fees and commission income

     22        437,087       824,677       415,219       788,132  

Insurance income

        1,145,238       2,317,362       1,136,652       2,274,053  

Insurance expenses

        (1,259,335     (2,539,744     (1,250,385     (2,486,458
     

 

 

   

 

 

   

 

 

   

 

 

 

Net insurance loss

     19        (114,097     (222,382     (113,733     (212,405

Dividend income

        73,234       150,450       53,590       136,591  

Net trading income (loss)

        96,889       458,404       (54,575     (43,375

Net foreign currency transaction gain

        93,353       210,998       82,285       178,580  

Net gain (loss) on financial instruments designated at fair value through profit or loss

        (116,782     (537,949     7,484       40,984  

Net gain on disposal of available-for-sale financial assets

     12        197,208       250,931       302,596       354,572  

Impairment losses on financial assets

     23        (159,637     (248,783     (332,550     (660,719

General and administrative expenses

     24        (1,078,364     (2,143,167     (1,089,167     (2,161,401

Other operating expenses, net

        (188,050     (73,289     (152,999     (362,058
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

        1,155,536       2,453,796       890,183       1,545,609  

Equity method income

     13        14,044       13,649       1,196       3,760  

Other non-operating income, net

        19,937       27,787       14,070       39,187  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income taxes

        1,189,517       2,495,232       905,449       1,588,556  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

     26        287,615       586,076       205,021       100,436  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

      W 901,902       1,909,156       700,428       1,488,120  
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

4


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Comprehensive Income (Continued)

For the three-month and six-month periods ended June 30, 2017 and 2016

(Unaudited)

 

(In millions of won, except earnings per share data)    Note      2017     2016  
            Three-
month

period
    Six-
month

period
    Three-
month

period
    Six-
month

period
 

Other comprehensive income (loss) for the period, net of income tax

     20           

Items that are or may be reclassified to profit or loss:

           

Foreign currency translation adjustments for foreign operations

      W 43,133       (66,461     14,955       14,394  

Net change in unrealized fair value of available-for-sale financial assets

        (79,842     (79,097     (130,970     21,932  

Equity in other comprehensive loss of associates

        979       (11,425     (473     (1,255

Net change in unrealized fair value of cash flow hedges

        995       2,437       (6,789     (12,848

Other comprehensive income of separate account

        (704     (291     3,313       5,927  
     

 

 

   

 

 

   

 

 

   

 

 

 
        (35,439     (154,837     (119,964     28,150  

Items that will never be reclassified to profit or loss:

           

Remeasurements of the defined benefit liability

        4,148       3,117       (79,553     (79,893

Equity in other comprehensive income (loss) of associates

        (5     158       11       10  
     

 

 

   

 

 

   

 

 

   

 

 

 
        4,143       3,275       (79,542     (79,883
     

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss, net of income tax

        (31,296     (151,562     (199,506     (51,733
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      W 870,606       1,757,594       500,922       1,436,387  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit attributable to:

           

Equity holders of Shinhan Financial Group Co., Ltd.

     20      W 892,032       1,889,130       683,467       1,454,791  

Non-controlling interests

        9,870       20,026       16,961       33,329  
     

 

 

   

 

 

   

 

 

   

 

 

 
      W 901,902       1,909,156       700,428       1,488,120  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to:

           

Equity holders of Shinhan Financial Group Co., Ltd.

      W 861,327       1,738,733       485,467       1,404,057  

Non-controlling interests

        9,279       18,861       15,455       32,330  
     

 

 

   

 

 

   

 

 

   

 

 

 
      W 870,606       1,757,594       500,922       1,436,387  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

     27           

Basic and diluted earnings per share in won

      W 1,871       3,961       1,413       2,987  
     

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

5


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity

For the six-month period ended June 30, 2017

(Unaudited)

 

    Equity attributable to equity holders of Shinhan Financial Group Co., Ltd.     Non-
controlling
interests
    Total  
(In millions of won)   Capital
stock
    Hybrid
bonds
    Capital
surplus
    Capital
adjustments
    Accumulated
other compre-
hensive income
    Retained
earnings
    Sub-total      

Balance at January 1, 2016

 

W

 2,645,053

 

    736,898       9,887,335       (423,536     304,771       17,689,134       30,839,655       973,401       31,813,056  

Total comprehensive income for the period

                 

Profit for the period

    —         —         —         —         —         1,454,791       1,454,791       33,329       1,488,120  

Other comprehensive income (loss),

net of income tax:

                 

Foreign currency translation adjustments

    —         —         —         —         14,486       —         14,486       (92     14,394  

Net change in unrealized fair value of available-for-sale financial assets

    —         —         —         —         21,231       —         21,231       701       21,932  

Equity in other comprehensive loss of associates

    —         —         —         —         (1,245     —         (1,245     —         (1,245

Net change in unrealized fair value of cash flow hedges

    —         —         —         —         (12,848     —         (12,848     —         (12,848

Other comprehensive income of separate account

    —         —         —         —         5,927       —         5,927       —         5,927  

Remeasurements of defined benefit plans

    —         —         —         —         (78,285     —         (78,285     (1,608     (79,893
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

    —         —         —         —         (50,374     —         (50,374     (999     (51,733
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

    —         —         —         —         (50,374     1,454,791       1,404,417       32,330       1,436,387  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other changes in equity

                 

Dividends

    —         —         —         —         —         (630,978     (630,978     —         (630,978

Dividends to hybrid bonds

    —         —         —         —         —         (19,314     (19,314     —         (19,314

Change in other capital adjustments

    —         —         —         30,537       362       (30,899     —         —         —    

Redemption of preferred stock

    —         —         —         —         —         (1,125,906     (1,125,906     —         (1,125,906

Change in other non-controlling interests

    —         —         —         —         —         —         —         (35,017     (35,017
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    —         —         —         30,537       362       (1,807,097     (1,776,198     (35,017     (1,811,215
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2016

  W  2,645,053       736,898       9,887,335       (392,999     254,399       17,336,828       30,467,514       970,714       31,438,228  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

6


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Changes in Equity (Continued)

For the six-month period ended June 30, 2017

(Unaudited)

 

    Equity attributable to equity holders of Shinhan Financial Group Co., Ltd.     Non-
controlling
interests
    Total  
(In millions of won)   Capital
stock
    Hybrid
bonds
    Capital
surplus
    Capital
adjustments
    Accumulated
other compre-
hensive income
    Retained
earnings
    Sub-total      

Balance at January 1, 2017

  W 2,645,053       498,316       9,887,335       (458,461     (102,583     18,640,038       31,109,698       635,282       31,744,980  

Total comprehensive income for the period

                 

Profit for the period

    —         —         —         —         —         1,889,130       1,889,130       20,026       1,909,156  

Other comprehensive income (loss),

net of income tax:

                 

Foreign currency translation adjustments

    —         —         —         —         (66,034     —         (66,034     (427     (66,461

Net change in unrealized fair value of available-for-sale financial assets

    —         —         —         —         (79,070     —         (79,070     (27     (79,097

Equity in other comprehensive loss of associates

    —         —         —         —         (11,267     —         (11,267     —         (11,267

Net change in unrealized fair value of cash flow hedges

    —         —         —         —         2,437       —         2,437       —         2,437  

Other comprehensive income of separate account

    —         —         —         —         (291     —         (291     —         (291

Remeasurements of defined benefit plans

    —         —         —         —         3,828       —         3,828       (711     3,117  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

    —         —         —         —         (150,397     —         (150,397     (1,165     (151,562
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

    —         —         —         —         (150,397     1,889,130       1,738,733       18,861       1,757,594  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other changes in equity

                 

Dividends (note 20)

    —         —         —         —         —         (687,589     (687,589     —         (687,589

Dividends to hybrid bonds

    —         —         —         —         —         (10,621     (10,621     —         (10,621

Redemption of hybrid bond

    —         (298,861     —         (1,139     —         —         (300,000     —         (300,000

Change in other capital adjustments

    —         —         —         62,544       —         (61,512     1,032       —         1,032  

Change in other non-controlling interests

    —         —         —         —         —         —         —         183,586       183,586  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    —         (298,861     —         61,405       —         (759,722     (997,178     183,586       (813,592
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2017

  W 2,645,053       199,455       9,887,335       (397,056     (252,980     19,769,446       31,851,253       837,729       32,688,982  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

7


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Cash Flows

For the six-month periods ended June 30, 2017 and 2016

(Unaudited)

 

(In millions of won)    Note      2017     2016  

Cash flows from operating activities

       

Profit before income taxes

      W 2,495,232       1,588,556  

Adjustments for:

       

Interest income

     21        (5,698,367     (5,561,059

Interest expense

     21        1,914,461       2,074,351  

Dividend income

        (150,450     (136,591

Net fees and commission expense

        83,705       77,749  

Net insurance loss

        1,313,734       1,369,590  

Net trading loss (gain)

        (312,281     231,379  

Net foreign currency translation loss

        43,557       72,865  

Net loss (gain) on financial instruments designated at fair value through profit or loss

        312,966       (170,986

Net gain on disposal of available-for-sale financial assets

     12        (250,931     (354,572

Provision for credit losses

     11        229,799       593,639  

Impairment losses on other financial assets

     23        18,984       67,080  

Employee costs

        95,392       102,524  

Depreciation and amortization

     24        126,854       134,201  

Other operating income

        (574,731     (84,897

Equity method income, net

     13        (13,649     (3,760

Other non-operating expense (income), net

        1,597       (2,961
     

 

 

   

 

 

 
        (2,859,360     (1,591,448
     

 

 

   

 

 

 

Changes in assets and liabilities:

       

Due from banks

        (1,240,397     647,884  

Trading assets and liabilities

        (4,030,032     (5,004,620

Financial instruments designated at fair value through profit or loss

        (549,987     426,945  

Derivative instruments

        (195,164     (241,518

Loans

        (3,626,374     (2,500,004

Other assets

        (6,108,925     (9,933,809

Deposits

        3,437,097       8,712,324  

Liabilities for defined benefit obligations

        (63,492     (152,015

Provisions

        (40,004     (138,050

Other liabilities

        8,407,148       6,277,205  
     

 

 

   

 

 

 
        (4,010,130     (1,905,658
     

 

 

   

 

 

 

Income taxes paid

        (370,237     (194,231

Interest received

        5,566,410       5,505,952  

Interest paid

        (2,214,018     (2,014,929

Dividends received

        156,568       164,997  
     

 

 

   

 

 

 

Net cash provided by (used in) operating activities

        (1,235,535     1,553,239  
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

8


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Consolidated Interim Statements of Cash Flow (Continued)

For the six-month periods ended June 30, 2017 and 2016

(Unaudited) )

 

(In millions of won)    Note      2017     2016  

Cash flows from investing activities

       

Proceeds from disposal of available-for-sale financial assets

      W 17,686,334       9,614,368  

Acquisition of available-for-sale financial assets

        (20,527,205     (10,964,630

Proceeds from maturity of held-to-maturity financial assets

        376,680       6,663,584  

Acquisition of held-to-maturity financial assets

        (2,509,425     (7,306,770

Proceeds from disposal of property and equipment

        7,007       1,800  

Acquisition of property and equipment

        (59,832     (175,760

Proceeds from disposal of intangible assets

        5,736       6,289  

Acquisition of intangible assets

        (46,266     (30,090

Proceeds from disposal of investments in associates

        15,028       53,117  

Acquisition of investments in associates

        (265,397     (26,868

Proceeds from disposal of investment property

        —         14,214  

Acquisition of investment property

        (644     (94,666

Proceeds from disposal of assets held for sale

        3,146       13,202  

Proceeds from settlement of hedging derivative financial

instruments for available-for-sale financial assets

        57,648       1,929  

Settlement of hedging derivative financial instruments for available-for-sale financial assets

        (12,358     (48,784

Other, net

        15,810       65,806  
     

 

 

   

 

 

 

Net cash used in investing activities

        (5,253,738     (2,213,259
     

 

 

   

 

 

 

Cash flows from financing activities

       

Net increase in borrowings

        3,732,584       2,340,504  

Proceeds from debt securities issued

        10,288,590       6,756,775  

Repayments of debt securities issued

        (6,488,341     (5,633,918

Dividends paid

        (699,846     (649,598

Proceeds from settlement of hedging derivative financial instruments for debt securities issued

        25,700       10,269  

Settlement of hedging derivative financial instruments for debt securities issued

        —         (971

Redemption of hybrid bond

        (300,000     —    

Redemption of preferred stock

        —         (1,125,906

Increase (decrease) in non-controlling interests

        181,779       (21,556

Other, net

        4,136       (28,945
     

 

 

   

 

 

 

Net cash provided by financing activities

        6,744,602       1,646,654  
     

 

 

   

 

 

 

Effect of exchange rate fluctuations on cash and cash equivalents held

        (26,340     18,636  
     

 

 

   

 

 

 

Increase in cash and cash equivalents

        228,989       1,005,270  

Cash and cash equivalents at beginning of period

     29        5,632,536       4,607,251  
     

 

 

   

 

 

 

Cash and cash equivalents at end of period

     29      W 5,861,525       5,612,521  
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

9


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

1. Reporting entity

Shinhan Financial Group Co., Ltd., the controlling company, and its subsidiaries included in consolidation (collectively the “Group”) are summarized as follows:

 

  (a) Controlling company

Shinhan Financial Group Co., Ltd. (the “Shinhan Financial Group” or the “Company”) was incorporated on September 1, 2001. Shinhan Financial Group’s shares has been listed on the Korea Exchange since September 10, 2001 and Shinhan Financial Group’s American Depository Shares were listed on the New York Stock Exchange since September 16, 2003.

 

  (b) Ownership of Shinhan Financial Group and its major consolidated subsidiaries as of June 30, 2017 and December 31, 2016 are as follows:

 

               Date of financial
information
   Ownership (%)

Investor

  

Investee (*1)

   Location       2017    2016

Shinhan Financial Group Co., Ltd.

  

Shinhan Bank Co., Ltd.

   Korea    June 30    100.0    100.0

  

Shinhan Card Co., Ltd.

         100.0    100.0

  

Shinhan Investment Corp.

         100.0    100.0

  

Shinhan Life Insurance Co., Ltd.

         100.0    100.0

  

Shinhan Capital Co., Ltd.

         100.0    100.0

  

Jeju Bank

         68.9    68.9

  

Shinhan Credit Information Co., Ltd.

         100.0    100.0

  

Shinhan Private Equity Inc.

         100.0    100.0

  

Shinhan BNP Paribas Asset Management Co., Ltd.

         65.0    65.0

  

SHC Management Co., Ltd.

         100.0    100.0

  

Shinhan Data System

         100.0    100.0

  

Shinhan Savings Bank

         100.0    100.0

  

Shinhan AITAS Co., Ltd.

         99.8    99.8

Shinhan Bank Co., Ltd.

  

Shinhan Asia Limited

   Hong Kong       99.9    99.9

  

Shinhan Bank America

   USA       100.0    100.0

  

Shinhan Bank Europe GmbH

   Germany       100.0    100.0

  

Shinhan Khmer Bank PLC (*2)

   Cambodia       94.34    90.0

  

Shinhan Bank Kazakhstan Limited

   Kazakhstan       100.0    100.0

  

Shinhan Bank Canada

   Canada       100.0    100.0

  

Shinhan Bank (China) Limited

   China       100.0    100.0

  

Shinhan Bank Japan

   Japan       100.0    100.0

  

Shinhan Bank Vietnam Ltd.

   Vietnam       100.0    100.0

  

Banco Shinhan de Mexico

   Mexico       99.9    99.9

  

PT Bank Shinhan Indonesia (*3)

   Indonesia       99.00    98.98

Shinhan Card Co., Ltd.

  

LLP MFO Shinhan Finance

   Kazakhstan       100.0    100.0

  

PT. Shinhan Indo Finance

   Indonesia       50.0    50.0

  

Shinhan Microfinance Co., Ltd.

   Myanmar       100.0    100.0

Shinhan Investment Corp.

  

Shinhan Investment Corp. USA Inc.

   USA       100.0    100.0

  

Shinhan Investment Corp. Asia Ltd.

   Hong Kong       100.0    100.0

 

10


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

1. Reporting entity (continued)

 

               Date of financial
information
   Ownership (%)

Investor

  

Investee (*1)

   Location       2017    2016

Shinhan Investment Corp.

  

Shinhan Securities Vietnam Co., Ltd.

   Vietnam    June 30    100.0    100.0

  

PT. Shinhan Sekuritas Indonesia

   Indonesia       99.0    99.0

Shinhan BNP Paribas Asset Management Co., Ltd.

  

Shinhan BNP Paribas Asset Management (Hong Kong) Limited

   Hong Kong       100.0    100.0

 

  (*1) Subsidiaries such as trust, beneficiary certificate, corporate restructuring fund and private equity fund which are not actually operating their own business are excluded.
  (*2) As a result of unequal capital increase, the equity interest in Shinhan Khmer Bank PLC was changed. Shinhan Savings Bank’s interest of 1.37% in Shinhan Khmer Bank PLC is not included.
  (*3) As a result of unequal capital increase, the equity interest in PT Bank Shinhan Indonesia was changed.

 

  (c) Consolidated structured entities

Consolidated structured entities are as follows:

 

Category

  

Consolidated

structured entities

 

Description

Trust    18 trusts managed by Shinhan Bank including development trust   A trust is consolidated when the Group as a trustee is exposed to variable returns, for example, if principle or interest amounts of the entrusted properties falls below guaranteed amount, the Group should compensate it; and the Group has the ability to affect those returns.

Asset-Backed Securitization

   MPC Yulchon Green I and 75 others   An entity for asset backed securitization is consolidated when the Group has the ability to dispose assets or change the conditions of the assets, is exposed to variable returns and has the ability to affect the variable returns providing credit enhancement and purchases of subordinated securities.

Structured Financing

   SHPE Holdings One Co., Ltd. and 2 others   An entity established for structured financing relating to real estate, shipping, or mergers and acquisitions is consolidated, when the Group has granted credit to the entity, has sole decision-making authority of these entities due to the entities default, and is exposed to, or has rights to related variable returns.

Investment Fund

   KoFC Shinhan Frontier Champ 2010-4 PEF and 56 others   An investment fund is consolidated, when the Group manages or invests assets of the investment funds on behalf of other investors, or has the ability to dismiss the manager of the investment funds, and is exposed to, or has rights to, the variable returns.

 

11


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

1. Reporting entity (continued)

 

  (d) Summarized financial information of the subsidiaries

 

  i) Condensed financial position for the Group’s subsidiaries as of June 30, 2017 and December 31, 2016 are as follows:

 

    2017     2016  
    Total
assets
    Total
liabilities
    Total
equities
    Total
assets
    Total
liabilities
    Total
equities
 

Shinhan Financial Group (Separate)

  W 27,656,403       7,591,437       20,064,966       27,195,607       6,977,746       20,217,861  

Shinhan Bank Co., Ltd.

    314,375,647       292,168,675       22,206,972       302,854,623       281,387,650       21,466,973  

Shinhan Card Co., Ltd.

    25,549,163       19,496,233       6,052,930       24,419,886       18,537,340       5,882,546  

Shinhan Investment Corp.

    28,414,856       25,265,638       3,149,218       25,554,489       22,478,057       3,076,432  

Shinhan Life Insurance Co., Ltd.

    28,735,531       26,996,579       1,738,952       27,499,836       25,814,288       1,685,548  

Shinhan Capital Co., Ltd.

    4,950,746       4,269,058       681,688       4,506,750       3,862,388       644,362  

Jeju Bank

    5,411,382       5,064,828       346,554       5,184,831       4,849,180       335,651  

Shinhan Credit Information Co., Ltd.

    22,423       8,425       13,998       23,077       8,897       14,180  

Shinhan Private Equity Inc.

    104,273       92,784       11,489       114,853       103,358       11,495  

Shinhan BNP Paribas Asset
Management Co., Ltd.

    157,885       11,497       146,388       161,161       13,354       147,807  

SHC Management Co., Ltd.

    8,486       187       8,299       8,474       262       8,212  

Shinhan Data System

    34,302       19,457       14,845       34,403       21,565       12,838  

Shinhan Savings Bank

    1,112,290       973,451       138,839       970,146       839,328       130,818  

Shinhan AITAS Co., Ltd.

    58,151       9,109       49,042       53,886       8,434       45,452  

 

(*1) Condensed financial information of the subsidiaries is based on the subsidiaries’ consolidated financial information, if applicable.
(*2) Subsidiaries such as trust, beneficiary certificate, corporate restructuring fund and private equity fund which are not actually operating their own business are excluded.

 

12


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

1. Reporting entity (continued)

 

  ii) Condensed comprehensive income statement for the Group’s subsidiaries for the six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017     2016  
     Operating
income
     Net
income
(loss)
    Total
comprehensive
income
(loss)
    Operating
income
     Net
income
(loss)
     Total
comprehensive
income
(loss)
 

Shinhan Financial Group

(separate)

   W 968,498        845,610       845,315       1,699,364        1,559,094        1,557,254  

Shinhan Bank Co., Ltd.

     10,697,142        1,104,402       1,030,151       7,858,144        1,026,633        968,930  

Shinhan Card Co., Ltd.

     2,703,426        629,706       570,362       2,270,110        355,167        270,514  

Shinhan Investment Corp.

     3,080,879        93,782       92,688       2,271,102        50,552        58,633  

Shinhan Life Insurance

Co., Ltd.

     3,059,401        75,701       53,298       2,767,464        87,584        174,919  

Shinhan Capital Co., Ltd.

     169,320        46,144       58,393       146,339        20,302        23,830  

Jeju Bank

     100,879        15,541       13,109       91,976        13,437        10,188  

Shinhan Credit Information

Co., Ltd.

     14,045        (91     (188     12,299        29        (66

Shinhan Private Equity Inc.

     11,725        (63     (5     12,310        852        1,142  

Shinhan BNP Paribas Asset Management Co., Ltd.

     36,714        9,956       9,960       34,927        6,801        6,798  

SHC Management Co., Ltd.

     126        87       87       62        406        406  

Shinhan Data System

     37,267        427       1,996       38,575        1,308        1,100  

Shinhan Savings Bank.

     36,465        8,218       8,000       31,902        7,183        5,784  

Shinhan AITAS Co., Ltd.

     20,112        3,575       3,575       18,094        3,845        3,845  

 

(*1) Condensed financial information of the subsidiaries is based on the subsidiaries’ consolidated financial information, if applicable.
(*2) Subsidiaries such as trust, beneficiary certificate, corporate restructuring fund and private equity fund which are not actually operating their own business are excluded.

 

13


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

2. Basis of preparation

(a) Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Corporations.

These condensed consolidated interim financial statements were prepared in accordance with K-IFRS No. 1034, Interim Financial Reporting as part of the period covered by the Group’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as of and for the year ended December 31, 2016. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

(b) Use of estimates and judgments

The preparation of the condensed consolidated 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.

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2016, except for the changes below.

The credit card segment of consolidated entities has accumulated sufficient experience to properly calculate probability of default, loss given default and credit conversion factors by considering the characteristics of borrowers, or its homogeneous borrowing groups, with credit evaluation system and risk evaluation system based on BASEL II; and based on this newly accumulated experience, the calculation methodology of loan losses has been changed from roll rate analysis model to internal model approach. As the result of changes in accounting estimates described above, allowances for loan losses and provision for unused credit lines decreased by W80,383 million and W296,630 million, respectively. The effects of the changes in accounting estimates were recognized prospectively.

 

14


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

3. Significant accounting policies

Except for the amendments to K-IFRS No. 1007, Cash flow statement, which are applied from January 1, 2017, the accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2016. The impact of the amendments on the Group’s consolidated financial statements is not significant.

(a) New standards and interpretations not yet adopted

The following new standards and amendments to existing standards have been published and are mandatory for the Group to adopt for annual periods beginning on or after January 1, 2018, and the Group has not early adopted them.

 

  i) K-IFRS No. 1109, ‘Financial Instruments’

K-IFRS No. 1109, Financial Instruments which was published on September 25, 2015, is effective for periods beginning on or after January 1, 2018, with early adoption permitted. K-IFRS No. 1109 will replace the current K-IFRS No. 1039, Financial Instruments: recognition and measurement. The Group plans to adopt K-IFRS No. 1109 for the year starting on January 1, 2018.

In principle, the new K-IFRS No. 1109 should be applied retrospectively. However, there are clauses that exempt restating comparable information with respect to classification, measurement and impairment of financial instruments. For hedge accounting, the new standard will be applied prospectively except for certain cases such as accounting for the time value of options. K-IFRS No. 1109 permits the use of either retrospective or cumulative effect transition method and the Group will use cumulative effect transition method.

The main characteristics of K-IFRS No. 1109 are the followings: classification and measurement of financial instruments based on characteristics of contractual cash flows and business model for financial instrument management, impairment model based on expected credit losses, changes in qualification requirement of hedged items, expansion of the types of qualifying hedging instruments and changes in hedge effectiveness tests.

As there are additional requirements for a financial asset to be classified as measured at amortized costs or at fair value through other comprehensive income under K-IFRS No. 1109 compared to the existing guidance in K-IFRS No. 1039, the adoption of K-IFRS No. 1109 would potentially increase the proportion of financial assets that are measured at fair value through profit or loss, increasing volatility in the Group’s profit or loss.

The fair value change attributable to changes in the credit risk of the liability which was recognized in profit or loss under the existing standard, K-IFRS No. 1039, will be presented in other comprehensive income under K-IFRS No. 1109.

Under K-IFRS No. 1109, credit losses are likely to be recognized earlier than using the incurred loss model under the existing guidance in K-IFRS No. 1039 as loss allowances will be measured on either of the 12-month or lifetime expected credit losses based on the extent of credit risks as shown in the below table.

 

15


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

3. Significant accounting policies (continued)

 

The following table presents the measurement methods for credit losses according to K-IFRS No. 1109.

 

Category   

Description

   12-month expected credit loss :

Credit risk has not increased significantly since the initial recognition

  

Expected credit loss from possible default of financial products for 12 months after reporting date

Credit risk has increased significantly since the initial recognition

  

Lifetime expected credit loss :

Expected credit loss from possible default of

Credit-impaired financial assets

  

financial products for the expected life of the financial products

  

When applying hedge accounting under K-IFRS No. 1109, the hedge accounting can be applied to certain transactions that do not meet the requirements for hedge accounting under K-IFRS No. 1039 and volatility of the profit or loss can be decreased.

For smooth implementation of K-IFRS No. 1109, financial impact analysis, accounting policy development, accounting system development and the system test are necessary. Starting from November 2015, the Group has performed financial impact analysis and established accounting policies, and is developing accounting systems as of June 30, 2017. The Group plans to complete the system in 2017.

The actual impact of adopting K-IFRS No. 1109 on the financial statements in 2018 is being assessed and can be subject to change because it will be dependent on the financial instruments that the Group will hold and economic conditions at the time as well as accounting policy election and judgments that it will be make in the future. The Group plans to analyze financial impact once the system development and stabilization process is completed by no later than the end of 2017.

ii) K-IFRS No. 1115, ‘Revenue from Contracts with Customers’

K-IFRS No. 1115, published in January 2016, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including K-IFRS No. 1018, Revenue, K-IFRS No. 1011, Construction Contracts and K-IFRS No. 2113, Customer Loyalty Programmes. K-IFRS No. 1115 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The Group will adopt K-IFRS No. 1115 from January 1, 2018. K-IFRS No. 1115 permits the use of either retrospective or cumulative effect transition method and the Group has not yet selected a transition method. The Group is in the process of evaluating the impact of K-IFRS No. 1115 on the Group’s consolidated financial statements, if any.

 

16


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

4. Financial risk management

(a) Overview

As a financial services provider, the Group is exposed to various risks relating to lending, credit card, insurance, securities investment, trading and leasing businesses, its deposit taking and borrowing activities in addition to the operating environment.

The principal risks to which the Group is exposed are credit risk, market risk, interest rate risk, liquidity risk and operational risk. These risks are recognized, measured, controlled and reported in accordance with risk management guidelines established at the company level and at the subsidiary level.

 

  i) Risk management organization

The Group risk management system is organized along with the following hierarchy: from the top and at the Company level, the Group Risk Management Committee, the Group Risk Management Council, the Chief Risk Officer and the Group Risk Management Team, and at the subsidiary level, the Risk Management Committees and the Risk Management Team of the relevant subsidiary.

The Group Risk Management Committee, which is under the supervision of the controlling company’s Board of Directors, sets the basic group wide risk management policies and strategies. The controlling company’s Chief Risk Officer reports to the Group Risk Management Committee, and the Group Risk Management Council, whose members consist of the controlling company’s Chief Risk Officer and the risk management team heads of each of subsidiaries, coordinates the risk management policies and strategies at the group level as well as at the subsidiary level among each of subsidiaries.

Each of subsidiaries also has a separate Risk Management Committee, Risk Management Working Committee and Risk Management Team, whose tasks are to implement the group wide risk management policies and strategies at the subsidiary level as well as to set risk management policies and strategies specific to such subsidiary in line with the group wide guidelines. The Group also has the Group Risk Management Team, which supports the controlling company’s Chief Risk Officer in his or her risk management and supervisory role.

In order to maintain the group wide risk at an appropriate level, the Group use a hierarchical risk limit system under which the Group Risk Management Committee assigns reasonable risk limits for the entire group and each of subsidiaries, and the Risk Management Committee and the Risk Management Council of each of subsidiaries manage the subsidiary-specific risks by establishing and managing risk limits in more details by type of risk and type of product for each department and division within such subsidiary.

 

17


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

 

4. Financial risk management (continued)

 

  ii) Risk management framework

The Group takes the following steps to implement the foregoing risk management principles:

 

    Risk capital management – Risk capital refers to capital necessary to compensate for losses in case of a potential risk being realized, and risk capital management refers to the process of asset management based on considerations of risk exposure and risk appetite among total assets so that the Group can maintain an appropriate level of risk capital. As part of the Group’s risk capital management, the Group has adopted and maintains various risk planning processes and reflects such risk planning in the Group’s business and financial planning. The Group also has adopted and maintains a risk limit management system to ensure that risks in the Group’s business do not exceed prescribed limits.

 

    Risk monitoring – The Group proactively, preemptively and periodically review risks that may impact our overall operations, including through a multidimensional risk monitoring system. Currently, each of subsidiaries is required to report to the controlling company any factors that could have a material impact on the group wide risk management, and the controlling company reports to the Group’s Chief Risk Officer and other members of the Group’s senior management the results of risk monitoring on a weekly, monthly and continual basis. In addition, the Group performs preemptive risk management through a “risk dashboard system” under which the Group closely monitors any increase in asset size, risk levels and sensitivity to external factors with respect to the major asset portfolios of each of subsidiaries, and to the extent such monitoring yields any warning signals, the Group promptly analyze the causes and, if necessary, formulates and implements actions in response to these warning signals.

 

    Risk review – Prior to entering any new business, offering any new products or changing any major policies, the Group reviews any relevant risk factors based on a prescribed risk management checklist and, in the case of changes for which assessment of risk factors is difficult, promotes reasonable decision-making in order to avoid taking any unduly risky action. The risk management departments of all subsidiaries are required to review all new businesses, products and services prior to their launch and closely monitor the development of any related risks following their launch, and in the case of any action that involves more than one subsidiary, the relevant risk management departments are required to consult with the risk management team at the controlling company level prior to making any independent risk reviews.

 

    Risk management – The Group maintain a group wide risk management system to detect the signals of any risk crisis and, in the event of a crisis actually happening, to respond on a timely, efficient and flexible basis so as to ensure the Group’s survival as a going concern. Each subsidiary maintains crisis planning for three levels of contingencies, namely, “alert”, “imminent crisis” and “crisis”, determination of which is made based on quantitative and qualitative monitoring and consequence analysis, and upon the happening of any such contingency, is required to respond according to a prescribed contingency plan. At the controlling company level, the Group maintains and installs crisis detection and response system which is applied consistently group wide, and upon the happening of any contingency at two or more subsidiary level, the Group directly takes charge of the situation so that the Group manages it on a concerted group wide basis.

 

18


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

(b) Credit risk

Credit risk is the risk of potential economic loss that may be caused if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and the largest risk which the Group is facing. The Group’s credit risk management encompasses all areas of credit that may result in potential economic loss, including not just transactions that are recorded on balance sheets, but also off-balance-sheet transactions such as guarantees, loan commitments and derivative transactions.

 

  i) Maximum exposure to credit risk

The Group’s maximum exposure to credit risk without taking account of any collateral held or other credit enhancements as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Due from banks and loans (*1)(*3):

     

Banks

   W 13,354,418        13,922,969  

Retail

     117,342,813        115,972,280  

Government

     13,321,745        11,776,346  

Corporations

     117,390,311        116,001,132  

Card receivable

     19,062,123        18,704,516  
  

 

 

    

 

 

 
     280,471,410        276,377,243  
  

 

 

    

 

 

 

Trading assets

     24,418,111        22,638,409  

Financial assets designated at FVTPL (*4)

     2,329,472        2,228,186  

AFS financial assets (*5)

     35,316,353        32,822,071  

HTM financial assets (*6)

     21,928,681        19,805,084  

Derivative assets

     1,670,477        3,002,859  

Other financial assets (*1)(*2)

     18,527,988        13,975,889  

Financial guarantee contracts

     3,032,450        3,424,022  

Loan commitments and other credit liabilities

     74,254,279        76,055,306  
  

 

 

    

 

 

 
   W   461,949,221        450,329,069  
  

 

 

    

 

 

 

 

(*1) The maximum exposure amounts for due from banks, loans and other financial assets are recorded as net of allowances.
(*2) The credit quality of other financial assets are not included in the details of our main credit quality disclosures as other financial assets mainly comprise brokerage, securities and spot transaction related receivables, accrued interest receivables, secured key money deposits and domestic exchange settlement debit settled in a day.
(*3) Due from banks and loans were classified as similar credit risk group when calculating the BIS ratio under new Basel Capital Accord (Basel III).
(*4) FVTPL : fair value through profit or loss
(*5) AFS : available-for-sale
(*6) HTM : held-to-maturity

 

19


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

  ii) Due from banks and loans by past due or impairment

 

    Due from banks and loans as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Banks     Retail     Government     Corporations     Card     Total  

Neither past due nor impaired

   W   13,368,929       116,973,286       13,324,891       117,314,215       18,895,614       279,876,935  

Past due but not impaired

     —         429,592       —         230,289       398,448       1,058,329  

Impaired

     —         324,239       —         1,013,726       422,140       1,760,105  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     13,368,929       117,727,117       13,324,891       118,558,230       19,716,202       282,695,369  

Less : allowance

     (14,511     (384,304     (3,146     (1,167,919     (654,079     (2,223,959
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 13,354,418       117,342,813       13,321,745       117,390,311       19,062,123       280,471,410  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     2016  
     Banks     Retail     Government     Corporations     Card     Total  

Neither past due nor impaired

   W   13,946,898       115,668,247       11,778,472       115,911,309       18,590,689       275,895,615  

Past due but not impaired

     —         392,002       270       264,354       397,417       1,054,043  

Impaired

     —         285,929       —         1,098,081       420,079       1,804,089  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     13,946,898       116,346,178       11,778,742       117,273,744       19,408,185       278,753,747  

Less : allowance

     (23,929     (373,898     (2,396     (1,272,612     (703,669     (2,376,504
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 13,922,969       115,972,280       11,776,346       116,001,132       18,704,516       276,377,243  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Credit quality of due from banks and loans that are neither past due nor impaired as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Banks     Retail     Government     Corporations     Card     Total  

Grade 1 (*1)

   W   13,368,929       109,724,286       13,324,891       81,482,633       15,590,047       233,490,786  

Grade 2 (*1)

     —         7,249,000       —         35,831,582       3,305,567       46,386,149  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     13,368,929       116,973,286       13,324,891       117,314,215       18,895,614       279,876,935  

Less : allowance (collective)

     (14,511     (194,516     (3,146     (678,193     (270,076     (1,160,442
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 13,354,418       116,778,770       13,321,745       116,636,022       18,625,538       278,716,493  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mitigation of credit risk due to
collateral (*2)

   W 210       73,508,884       —         59,716,779       5,782       133,231,655  

 

     2016  
     Banks     Retail     Government     Corporations     Card     Total  

Grade 1 (*1)

   W   13,946,898       108,798,683       11,778,472       78,556,918       15,156,750       228,237,721  

Grade 2 (*1)

     —         6,869,564       —         37,354,391       3,433,939       47,657,894  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     13,946,898       115,668,247       11,778,472       115,911,309       18,590,689       275,895,615  

Less : allowance (collective)

     (23,929     (205,135     (2,395     (740,349     (374,708     (1,346,516
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 13,922,969       115,463,112       11,776,077       115,170,960       18,215,981       274,549,099  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mitigation of credit risk due to
collateral (*2)

   W 35,581       76,943,059       —         59,271,190       6,200       136,256,030  

 

20


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

  (*1) Credit quality of due from banks and loans was classified based on the internal credit rating as follows:

 

Type of Borrower

  

Grade 1

  

Grade 2

Banks and governments (*)    OECD sovereign credit rating of 6 or above (as applied to the nationality of the banks and governments)    OECD sovereign credit rating of below 6 (as applied to the nationality of the banks and governments)
Retail    Pool of retail loans with probability of default of less than 2.25%    Pool of retail loans with probability of default of 2.25% or more
Corporations    Internal credit rating of BBB+ or above   

Internal credit rating of below BBB+

(Probability of default for loans with internal credit rating of BBB is 2.25%)

Credit cards   

For individual card holders, score of 7 or higher in Shinhan Card’s internal behavior scoring system

 

For corporate cardholders, same as corporate loans

  

For individual card holders, score of below 7 in Shinhan Card’s internal behavior scoring system

 

For corporate cardholders, same as corporate loans

 

(*) In the case of loans to banks and governments that are neither past due nor impaired, Shinhan Bank classified loans with a sovereign rating of 6 or above as Grade 1 and those with a sovereign rating of below 6 as Grade 2. Under the guidelines set forth by the Financial Supervisory Commission of Korea, all major commercial banks in Korea, including Shinhan Bank, follow the standardized approach under Basel III for purposes of computing Bank of International Settlement (BIS) ratios for risk classifications of loans to banks and governments. Under this standardized approach under Basel III, risk classification for loans to banks and governments are determined on the basis of sovereign credit ratings, and not internal credit ratings assigned by the lending bank that are specific to the individual banks and governments. More specifically, this approach involves classifying loans to banks and governments in a given jurisdiction as either Grade 1 or Grade 2 based on the sovereign credit ratings for the government of such jurisdiction as determined by the Organization for Economic Co-operation and Development (“OECD”). As for our subsidiaries other than Shinhan Bank, risk classification of loans to banks and governments is made based on their respective internal credit ratings as these subsidiaries are not subject to the aforesaid guidelines of the Financial Supervisory Commission relating to Basel III risk classification.
(*2) The Group holds collateral against due from banks and loans to customers in the form of mortgage interests over property, other registered securities over assets, and guarantees. Estimates of quantification of the extent to which collateral mitigate credit risk are based on the fair value of collateral.

 

21


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

    Aging analyses of due from banks and loans that are past due but not impaired as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Banks      Retail     Government      Corporations     Card     Total  

Less than 30 days

   W —          322,616       —          131,944       311,784       766,344  

31~60 days

     —          56,781       —          54,337       52,504       163,622  

61~90 days

     —          36,113       —          35,407       33,870       105,390  

More than 90 days

     —          14,082       —          8,601       290       22,973  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     —          429,592       —          230,289       398,448       1,058,329  

Less : allowance (collective)

     —          (43,211     —          (12,654     (74,388     (130,253
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   W —          386,381       —          217,635       324,060       928,076  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Mitigation of credit risk due to collateral (*)

   W   —          268,857       —          98,983       29       367,869  

 

     2016  
     Banks      Retail     Government     Corporations     Card     Total  

Less than 30 days

   W —          297,889       270       190,133       321,913       810,205  

31~60 days

     —          49,582       —         50,881       53,379       153,842  

61~90 days

     —          31,072       —         20,305       21,899       73,276  

More than 90 days

     —          13,459       —         3,035       226       16,720  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          392,002       270       264,354       397,417       1,054,043  

Less : allowance (collective)

     —          (35,627     (1     (12,377     (66,413     (114,418
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W —          356,375       269       251,977       331,004       939,625  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mitigation of credit risk due to collateral (*)

   W   —          249,309       —         101,334       112       350,755  

 

    Due from banks and loans that are impaired as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Banks      Retail     Government      Corporations     Card     Total  

Impaired

   W —          324,239       —          1,013,726       422,140       1,760,105  

Less : allowance

     —          (146,577     —          (477,072     (309,615     (933,264
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   W —          177,662       —          536,654       112,525       826,841  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Mitigation of credit risk due to collateral (*)

   W   —          119,532       —          437,848       24       557,404  

 

     2016  
     Banks      Retail     Government      Corporations     Card     Total  

Impaired

   W —          285,929       —          1,098,081       420,079       1,804,089  

Less : allowance

     —          (133,136     —          (519,886     (262,548     (915,570
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   W —          152,793       —          578,195       157,531       888,519  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Mitigation of credit risk due to collateral (*)

   W   —          101,730       —          437,891       3       539,624  

 

(*) The Group holds collateral against due from banks and loans to customers in the form of mortgage interests over property, other registered securities over assets, and guarantees. Estimates of quantification of the extent to which collateral mitigate credit risk are based on the fair value of collateral.

 

22


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

 

  iii) Credit rating

 

    Credit ratings of debt securities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Trading assets      Financial assets
designated at
FVTPL
     Available-for-
sale financial
assets
     Held-to-
maturity
financial assets
     Total  

AAA

   W   10,351,319        789,541        22,513,232        17,372,604        51,026,696  

AA- to AA+

     4,092,393        443,969        5,502,290        3,567,484        13,606,136  

A- to A+

     5,907,039        805,485        4,068,933        451,506        11,232,963  

BBB- to BBB+

     1,581,076        204,670        1,295,490        168,755        3,249,991  

Lower than BBB-

     250,806        —          434,563        164,508        849,877  

Unrated

     2,044,959        85,807        1,501,845        203,824        3,836,435  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     W  24,227,592        2,329,472        35,316,353        21,928,681        83,802,098  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2016  
     Trading assets      Financial assets
designated at
FVTPL
     Available-for-
sale financial
assets
     Held-to-
maturity
financial assets
     Total  

AAA

   W 9,777,845        535,684        19,781,580        16,188,459        46,283,568  

AA- to AA+

     4,075,181        402,946        5,561,165        2,584,304        12,623,596  

A- to A+

     5,310,796        1,097,395        4,257,161        535,889        11,201,241  

BBB- to BBB+

     1,441,783        192,161        1,348,073        137,240        3,119,257  

Lower than BBB-

     144,612        —          469,615        148,894        763,121  

Unrated

     1,640,347        —          1,404,477        210,298        3,255,122  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     W  22,390,564        2,228,186        32,822,071        19,805,084        77,245,905  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

    The credit quality of securities (debt securities) according to the credit ratings by external rating agencies is as follows:

 

Internal credit ratings   

KIS (*1)

   KR (*2)    S&P    Fitch    Moody’s
AAA    —      —      AAA    AAA    Aaa
AA- to AA+    AAA    AAA    AA- to AA+    AA- to AA+    Aa3 to Aa1
A- to A+    AA- to AA+    AA- to AA+    A- to A+    A- to A+    A3 to A1
BBB- to BBB+    BBB- to A    BBB- to A    BBB- to BBB+    BBB- to BBB+    Baa3 to Baa1
Lower than BBB-    Lower than BBB-    Lower than BBB-    Lower than BBB-    Lower than BBB-    Lower than Baa3
Unrated    Unrated    Unrated    Unrated    Unrated    Unrated

 

(*1) KIS : Korea Investors Service
(*2) KR : Korea Ratings

 

    Credit status of debt securities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Neither past due nor impaired

   W 83,799,875        77,244,537  

Impaired

     2,223        1,368  
  

 

 

    

 

 

 
   W   83,802,098        77,245,905  
  

 

 

    

 

 

 

The Group has no collaterals for the debt securities.

 

23


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

  iv) Concentration by industry sector

An analysis of concentration by industry sector of due from banks and loans, net of allowance, as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Finance and
insurance
     Manu-
facturing
     Retail and
wholesale
     Real estate
and service
     Other      Retail
customers
     Total  

Due from banks and loans:

                    

Banks

   W 10,851,556        53        11,097        11,097        2,491,712        —          13,354,418  

Retail

     —          —          —          —          —          117,342,813        117,342,813  

Government

     12,428,211        1,314        —          —          892,220        —          13,321,745  

Corporations

     4,797,497        40,862,614        20,890,231        20,890,231        34,756,928        —          117,390,311  

Card

     38,545        268,708        30,741        30,741        416,089        18,185,738        19,062,123  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     28,115,809        41,132,689        20,932,069        20,932,069        38,556,949        135,528,551        280,471,410  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trading assets

     16,855,941        1,372,847        1,033,523        373,914        4,781,886        —          24,418,111  

Financial assets designated at FVTPL

     1,210,827        179,577        36,620        50,797        851,651        —          2,329,472  

AFS financial assets

     22,603,938        1,163,152        239,262        684,341        10,625,660        —          35,316,353  

HTM financial assets

     5,485,223        52,260        —          775,942        15,615,256        —          21,928,681  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   74,271,738        43,900,525        17,514,748        22,817,063        70,431,402        135,528,551        364,464,027  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     2016  
     Finance and
insurance
     Manu-
facturing
     Retail and
wholesale
     Real estate
and service
     Other      Retail
customers
     Total  

Due from banks and loans:

                    

Banks

   W 10,875,077        68        —          110,443        2,937,381        —          13,922,969  

Retail

     —          —          —          —          —          115,972,280        115,972,280  

Government

     10,906,097        3,991        —          3,315        862,943        —          11,776,346  

Corporations

     5,094,455        40,544,250        15,560,280        20,460,662        34,341,485        —          116,001,132  

Card

     38,574        194,630        131,956        37,495        371,497        17,930,364        18,704,516  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     26,914,203        40,742,939        15,692,236        20,611,915        38,513,306        133,902,644        276,377,243  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Trading assets

     14,783,780        1,262,042        1,079,631        307,115        5,205,841        —          22,638,409  

Financial assets designated at FVTPL

     1,450,512        144,019        26,385        20,000        587,270        —          2,228,186  

AFS financial assets

     22,615,359        1,009,045        129,261        613,265        8,455,141        —          32,822,071  

HTM financial assets

     5,261,874        44,915        —          786,345        13,711,950        —          19,805,084  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   71,025,728        43,202,960        16,927,513        22,338,640        66,473,508        133,902,644        353,870,993  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

24


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

(c) Market risk

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

Interest rate risk from non-trading positions is the risk of loss resulting from interest rate fluctuations that adversely affect the financial condition and results of operations of the Group and affects the earnings and the economic value of net assets of the Group.

Foreign exchange risk arises from the Group’s assets and liabilities which are denominated in currencies other than Korean won.

 

  i) Market risk management from trading positions

Trading activities are to realize short-term trading profits in debt and stock markets and foreign exchange markets based on short-term forecast of changes in market situation and profits from arbitrage transactions in derivatives such as swap, forward, futures and option transactions. The Group manages market risk related to its trading positions using VaR and market value-based tool.

An analysis of market risk for trading positions of the major subsidiaries as of and for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

i-1) Shinhan Bank

The analyses of the ten-day 99.9% confidence level-based VaR for managing market risk for trading positions of Shinhan Bank as of and for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

 

     2017  
     Average      Maximum      Minimum      June 30  

Interest rate

   W 46,014        52,547        39,804        45,858  

Stock price

     4,212        4,945        3,446        3,447  

Foreign exchange (*)

     43,893        49,917        39,608        49,917  

Option volatility

     73        151        25        109  

Commodity

     27        84        1        20  

Portfolio diversification

              (47,401
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   48,828        53,542        44,531        51,950  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2016  
     Average      Maximum      Minimum      December 31  

Interest rate

   W 33,246        48,851        18,764        44,447  

Stock price

     5,161        5,787        4,815        5,484  

Foreign exchange (*)

     56,089        61,389        53,678        60,088  

Option volatility

     149        256        101        221  

Commodity

     13        35        —          21  

Portfolio diversification

              (49,278
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   55,981        61,648        53,086        60,983  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Both trading and non-trading accounts are included since Shinhan Bank manages foreign exchange risk on a total position basis.

 

25


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

i-2) Shinhan Card

The analyses of Shinhan Card’s requisite capital in light of the market risk for trading positions as of and for the six-month period ended June 30, 2017 and the year ended December 31, 2016, based on the standard guidelines for risk management promulgated by the Financial Supervisory Service, are as follows:

 

     2017  
     Average      Maximum      Minimum      June 30  

Interest rate

   W 1,650        2,450        1,050        2,450  

Foreign exchange

     16,831        19,368        9,670        9,670  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   18,481        21,818        10,720        12,120  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2016  
     Average      Maximum      Minimum      December 31  

Interest rate

   W 875        1,700        550        1,700  

Foreign exchange

     27,738        34,909        17,062        17,062  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   28,613        36,609        17,612        18,762  
  

 

 

    

 

 

    

 

 

    

 

 

 

Shinhan Card fully hedges all the cash flows from foreign currency liabilities by swap transactions and is narrowly exposed to foreign exchange risk relating to foreign currency equity securities held for non-trading purposes.

i-3) Shinhan Investment

The analyses of the ten-day 99.9% confidence level-based VaR for managing market risk for trading positions of Shinhan Investment as of and for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

 

     2017  
     Average      Maximum      Minimum      June 30  

Interest rate

   W 13,613        18,111        9,852        13,713  

Stock price

     11,485        19,850        6,647        12,768  

Foreign exchange

     8,512        16,576        4,911        7,710  

Option volatility

     6,248        13,669        2,150        7,007  

Portfolio diversification

              (19,643
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   22,946        34,384        16,050        21,555  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2016  
     Average      Maximum      Minimum      December 31  

Interest rate

   W 9,040        18,149        5,380        15,491  

Stock price

     13,339        24,276        6,413        7,403  

Foreign exchange

     6,849        19,976        1,017        7,001  

Option volatility

     6,564        18,680        1,477        7,799  

Portfolio diversification

              (14,569
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   24,393        34,546        16,679        23,125  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

26


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

i-4) Shinhan Life Insurance

The analyses of the ten-day 99.9% confidence level-based VaR for managing market risk for trading positions of Shinhan Life Insurance as of and for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

 

     2017  
     Average      Maximum      Minimum      June 30  

Interest rate

   W 6,150        16,598        85        6,512  

Stock price

     1,724        3,368        111        1,668  

Foreign exchange

     1,132        3,568        4        1,592  

Option volatility

     4,800        7,041        3,158        7,041  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   13,806        30,575        3,358        16,813  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2016  
     Average      Maximum      Minimum      December 31  

Interest rate

   W 483        1,114        213        800  

Stock price

     231        1,585        —          130  

Foreign exchange

     1,278        2,238        54        1,221  

Option volatility

     1,115        3,044        71        3,044  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,107        7,981        338        5,195  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  ii) Interest rate risk management from non-trading positions

Principal market risk from non-trading activities of the Group is interest rate risk, which affects the Group’s earnings and the economic value of the Group’s net assets:

 

    Earnings: interest rate fluctuations have an effect on the Group’s net interest income by affecting its interest-sensitive operating income and expenses and EaR (Earnings at Risk) is a commonly used risk management technique.

 

    Economic value of net assets: interest rate fluctuations influence the Group’s net worth by affecting the present value of cash flows from the assets, liabilities and other transactions of the Group and VaR is a commonly used risk management technique.

Interest rate VaR represents the maximum anticipated loss in a net present value calculation, whereas interest rate EaR represents the maximum anticipated loss in a net earnings calculation for the immediately following one-year period, in each case, as a result of negative movements in interest rates.

Accordingly, the Group measures and manages interest rate risk for non-trading activities by taking into account effects of interest rate changes on both its income and net asset value.

 

27


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

Non-trading positions for interest rate VaR and EaR as of June 30, 2017 and December 31, 2016 are as follows:

ii-1) Shinhan Bank

 

     2017      2016  

VaR (*1)

   W   174,630        231,133  

EaR (*2)

     142,527        58,091  

ii-2) Shinhan Card

 

     2017      2016  

VaR (*1)

   W   112,698        89,348  

EaR (*2)

     10,501        11,905  

ii-3) Shinhan Investment

 

     2017      2016  

VaR (*1)

   W   44,475        27,822  

EaR (*2)

     96,400        104,423  

ii-4) Shinhan Life Insurance

 

     2017      2016  

VaR (*1)

   W   264,757        287,912  

EaR (*2)

     76,026        58,062  

 

(*1) The interest rate VaR represents the maximum anticipated loss in a net asset value in one year under confidence level of 99.9% and is measured by the internal model with one year look-back period.
(*2) The interest rate EaR was calculated by the Financial Supervisory Service regulations based on the “middle of time band” and interest shocks by 200 basis points for each time bucket as recommended under the Basel Accord.

 

  iii) Foreign exchange risk

Exposure to foreign exchange risk can be defined as the difference (net position) between assets and liabilities presented in foreign currency, including derivative financial instruments linked to foreign exchange rate. Foreign exchange risk is a factor that causes market risk of the trading position and is managed by the Group under the market risk management system.

The management of Shinhan Bank’s foreign exchange position is centralized at the FX & Derivatives Department. Dealers in the FX & Derivatives Department manage Shinhan Bank’s overall position within the set limits through spot trading, forward contracts, currency options, futures and swaps and foreign exchange swaps. Shinhan Bank sets a limit for net open positions by currency and the limits for currencies other than the U.S. dollars, Japanese yen, Euros and Chinese yuan are set in order to minimize exposures from the other foreign exchange trading.

 

28


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

(d) Liquidity risk

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

Each subsidiary seeks to minimize liquidity risk through early detection of risk factors related to the sourcing and managing of funding that may cause volatility in liquidity and by ensuring that it maintains an appropriate level of liquidity through systematic management. At the group level, the Group manages liquidity risk by conducting monthly stress tests that compare liquidity requirements under normal situations against those under three types of stress situations, namely, the group-specific internal crisis, crisis in the external market and a combination of internal and external crisis.

Contractual maturities for financial instruments including cash flows of principal and interest and off balance as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Less than
1 month
    1~3
months
    3~6
months
    6 months
~ 1 year
    1~5
years
    More
than 5
years
    Total  

Non-derivative financial instruments:

              

Liabilities:

              

Deposits (*2)

   W 126,682,640       25,967,194       31,082,297       42,211,576       14,285,056       2,379,853       242,608,616  

Trading liabilities

     2,353,756       —         —         —         —         —         2,353,756  

Financial liabilities designated at fair value through profit or loss

     15,891,492       2,687,710       2,647,374       2,122,788       3,551,705       2,145,076       29,046,145  

Borrowings

     1,767,231       3,143,050       3,333,516       7,736,691       30,350,865       4,856,888       51,188,241  

Debt securities issued

     457,397       313,565       880,042       2,207,625       4,203,788       1,082,865       9,145,282  

Other financial liabilities

     23,453,195       138,408       158,162       174,023       374,686       60,071       24,358,545  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 170,605,711       32,249,927       38,101,391       54,452,703       52,766,100       10,524,753       358,700,585  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off balance (*3):

              

Financial guarantee contracts

   W 3,032,450       —         —         —         —         —         3,032,450  

Loan commitments and other

     74,452,228       —         —         —         —         —         74,452,228  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 77,484,678       —         —         —         —         —         77,484,678  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives (*4):

              

Cash inflows

   W 1,929,033       1,188,004       1,078,672       1,143,568       2,724,535       88,410       8,152,222  

Cash outflows

     (1,771,406     (970,595     (1,000,249     (984,878     (2,554,121     (28,289     (7,309,538
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 157,627       217,409       78,423       158,690       170,414       60,121       842,684  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

     2016  
     Less than
1 month
    1~3
months
    3~6
months
    6 months
~ 1 year
    1~5
years
    More
than
5 years
    Total  

Non-derivative financial instruments:

              

Liabilities:

              

Deposits (*2)

   W 121,707,981       22,583,391       29,620,700       49,624,644       14,144,690       3,032,191       240,713,597  

Trading liabilities

     1,976,760       —         —         —         —         —         1,976,760  

Financial liabilities designated at fair value through profit or loss

     429,578       452,306       475,221       1,380,011       5,412,373       1,084,419       9,233,908  

Borrowings

     13,697,990       1,914,573       1,293,030       2,715,323       4,191,730       1,692,283       25,504,929  

Debt securities issued

     1,394,163       2,435,353       4,597,809       7,371,729       26,138,646       5,492,930       47,430,630  

Other financial liabilities

     15,926,502       42,045       307,056       126,355       367,888       59,365       16,829,211  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 155,132,974       27,427,668       36,293,816       61,218,062       50,255,327       11,361,188       341,689,035  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off balance (*3):

              

Financial guarantee contracts

   W 3,424,022       —         —         —         —         —         3,424,022  

Loan commitments and other

     76,173,506       —         —         —         —         —         76,173,506  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 79,597,528       —         —         —         —         —         79,597,528  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives (*4):

              

Cash inflows

   W 2,952,185       514,990       819,654       1,979,609       1,361,541       117,374       7,745,353  

Cash outflows

     (3,161,870     (513,356     (798,321     (1,884,914     (1,128,730     (26,054     (7,513,245
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W (209,685     1,634       21,333       94,695       232,811       91,320       232,108  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) These amounts include cash flows of principal and interest on financial assets and financial liabilities.
(*2) Demand deposits amounting to W99,268,674 million and W93,639,192 million as of June 30, 2017 and December 31, 2016 are included in the ‘Less than 1 month’ category, respectively.
(*3) Financial guarantees such as financial guarantee contracts and loan commitments and others provided by the Group are classified based on the earliest date at which the Group should fulfill the obligation under the guarantee when the counterparty requests payment.
(*4) Derivatives held for trading are presented as less than one month because contractual maturities are not essential for an understanding of the timing of the cash flows. Derivatives entered into for the purpose of hedging are presented by maturity.

 

30


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

(e) Capital risk management

The controlling company, 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 Common Equity Tier 1 capital (including common stock, share premium resulting from the issue of instruments classified as common equity Tier 1, retained earnings, etc.), Additional Tier 1 capital (with the minimum set of criteria for an instrument issued by the Group to meet, i.e. ‘perpetual’) and Tier 2 capital (to provide loss absorption on a gone-concern basis) 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.

The capital adequacy ratio as of June 30, 2017 was 15.15% (unreviewed).

(f) Measurement of fair value

The fair values of financial instruments being traded in an active market are determined by the published market prices of each period end. The published market prices of financial instruments being held by the Group are based on the trading agencies’ notifications. If the market for a financial instrument is not active, such as OTC (Over The Counter market) derivatives, fair value is determined either by using a valuation technique or independent third-party valuation service.

The Group uses various valuation techniques and is setting rational assumptions based on the present market situations. Such valuation techniques may include using recent arm’s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

The Group classifies and discloses fair value of financial instruments into the following three-level hierarchy:

 

    Level 1: Financial instruments measured at quoted prices from active markets are classified as fair value level 1.

 

    Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.

 

    Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.

 

31


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

  i) Financial instruments measured at fair value

 

    The fair value hierarchy of financial assets presented at their fair values in the statements of financial position as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Level 1      Level 2      Level 3      Total  

Financial assets:

           

Trading assets

   W 9,829,754        21,422,338        137,522        31,389,614  

Financial assets designated at fair value through profit or loss

     613,865        2,393,352        587,543        3,594,760  

Derivative assets

     40,830        1,480,833        148,814        1,670,477  

Available-for-sale financial assets

     10,469,890        25,674,202        4,143,490        40,287,582  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 20,954,339        50,970,725        5,017,369        76,942,433  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

           

Trading liabilities

   W 2,353,756        —          —          2,353,756  

Financial liabilities designated at fair value through profit or loss

     43,592        1,167,397        7,934,290        9,145,279  

Derivative liabilities

     44,231        1,501,336        342,035        1,887,602  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,441,579        2,668,733        8,276,325        13,386,637  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     2016  
     Level 1      Level 2      Level 3      Total  

Financial assets:

           

Trading assets

   W 10,257,241        16,356,235        82,477        26,695,953  

Financial assets designated at fair value through profit or loss

     397,617        2,404,446        614,039        3,416,102  

Derivative assets

     17,316        2,873,194        112,349        3,002,859  

Available-for-sale financial assets

     9,024,940        24,754,310        3,883,441        37,662,691  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 19,697,114        46,388,185        4,692,306        70,777,605  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

           

Trading liabilities

   W 1,976,760        —          —          1,976,760  

Financial liabilities designated at fair value through profit or loss

     10,134        1,649,181        7,574,327        9,233,642  

Derivative liabilities

     14,130        2,909,629        604,485        3,528,244  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,001,024        4,558,810        8,178,812        14,738,646  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

32


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

    Changes in carrying values of financial instruments classified as Level 3 for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

 

     2017  
     Trading assets     Financial assets
designated at
FVTPL
    Available-for-
sale financial
assets
    Derivative
assets and
liabilities, net
    Financial
liabilities
designated at
FVTPL
 

Beginning balance

   W 82,477       614,039       3,883,441       (492,136     (7,574,327

Recognized in total comprehensive income for the year:

          

Recognized in profit (loss) for the year (*1)

     240       3,039       (13,214     420,399       (514,214

Recognized in other comprehensive income (loss) for the year

     —         —         (20,041     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     240       3,039       (33,255     420,399       (514,214

Purchase

     90,000       145,825       530,017       15,961       —    

Issue

     —         —         —         2,980       (3,795,822

Settlement

     (35,195     (175,360     (239,701     (140,420     3,950,073  

Transfer in (*2)

     —         —         2,988       —         —    

Transfer out (*2)

     —         —         —         (5     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   W 137,522       587,543       4,143,490       (193,221     (7,934,290
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     2016  
     Trading assets     Financial assets
designated at
FVTPL
    Available-for-
sale financial
assets
    Derivative
assets and
liabilities, net
    Financial
liabilities
designated at
FVTPL
 

Beginning balance

   W 201,603       451,124       2,979,058       (703,841     (6,444,621

Recognized in total comprehensive income for the year:

          

Recognized in profit (loss) for the year (*1)

     5,026       6,020       28,645       141,080       (508,916

Recognized in other comprehensive income (loss) for the year

     —         —         (81,812     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     5,026       6,020       (53,167     141,080       (508,916

Purchase

     76,810       337,012       1,308,840       10,226       —    

Issue

     —         —         —         —         (5,402,714

Settlement

     (200,962     (180,117     (359,694     40,710       4,781,924  

Transfer in (*2)

     —         —         20,382       19,689       —    

Transfer out (*2)

     —         —         (11,978     —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   W 82,477       614,039       3,883,441       (492,136     (7,574,327
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

33


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

  (*1) Recognized profit or loss of the changes in carrying value of financial instruments classified as Level 3 for the six-month period ended June 30, 2017 and the year ended December 31, 2016, are included in the accounts of the statements of comprehensive income, of which the amounts and the related accounts are as follows:

 

     2017     2016  
     Amounts
recognized in
profit or loss
    Recognized
profit or loss
from the
financial
instruments
held as of
June 30
    Amounts
recognized in
profit or loss
    Recognized
profit or loss
from the
financial
instruments held
as of
December 31
 

Trading income

   W 437,217       233,202       332,400       37,466  

Loss on financial instruments designated at FVTPL

     (511,175     (291,130     (502,896     (169,424

Gain on disposal of available-for-sale financial assets

     9,337       703       25,546       354  

Impairment losses on financial assets

     (6,516     (6,232     (6,685     (5,964

Other operating expenses

     (32,613     (36,428     (176,510     (176,359
  

 

 

   

 

 

   

 

 

   

 

 

 
   W (103,750     (99,885     (328,145     (313,927
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (*2) Changes in levels for the financial instruments occurred due to the change in the availability of observable market data. The Group reviews the levels of financial instruments as of the end of the reporting period considering the related events and circumstances in the reporting period.

 

34


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

    Valuation techniques and inputs used in measuring the fair value of financial instruments classified as level 2 as of June 30, 2017 are as follows:

 

Type of financial instrument

  

Valuation
technique

   Carrying
value
    

Significant inputs

Assets

        

Trading assets:

        

Debt securities

   DCF(*1)    W 15,926,848      Discount rate

Equity securities

   NAV(*2)      5,495,490     

Discount rate,

Price of underlying assets

     

 

 

    
        21,422,338     
     

 

 

    

Financial assets designated at fair value through profit or loss:

        

Debt securities

   DCF(*1)      1,445,294      Discount rate

Equity securities

   NAV(*2)      948,059     

Discount rate,

Price of underlying assets

     

 

 

    
        2,393,353     
     

 

 

    

Derivative assets:

        

Trading

  

Option model,

DCF(*1)

     1,388,147      Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc.

Hedging

        92,686     
     

 

 

    
        1,480,833     
     

 

 

    

Available-for-sale financial assets:

        

Debt securities

   DCF(*1)      25,171,908      Discount rate, growth rate

Equity securities

   NAV(*2)      502,294      Price of underlying assets
     

 

 

    
        25,674,202     
     

 

 

    
      W 50,970,726     
     

 

 

    

Liabilities

        

Financial liabilities designated at fair value through profit or loss:

        

Borrowings

   DCF(*1)    W 1,167,397      Discount rate

Derivative liabilities:

        

Trading

  

Option model,

DCF(*1)

     1,347,619      Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc.

Hedging

        153,717     
     

 

 

    
        1,501,336     
     

 

 

    
      W 2,668,733     
     

 

 

    

(*1) DCF : Discounted cash flow

(*2) NAV : Net asset value

 

35


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

    Valuation techniques and significant inputs, but not observable, used in measuring the fair value of financial instruments classified as level 3 as of June 30, 2017 are as follows:

 

Type of financial instrument

  

Valuation
technique

   Carrying
value (*2)
    

Significant unobservable

inputs

  

Range

Financial assets

           

Financial assets designated at fair value through profit or loss:

           

Debt securities and other securities

   DCF      587,543      The volatility of the underlying asset Correlations   

0.75%~45.73%

0.00%~89.36%

Derivative assets:

           

Equity and foreign exchange related

   Option model (*1)      119,851      The volatility of the underlying asset Correlations   

1.48%~45.73%

(0.10)%~82.15%

Interest rates related

   Option model (*1)      23,306     

The volatility of the underlying asset Regression coefficient

Correlations

  

0.51%~8.65%

0.02%~2.05%

0.00%~90.81%

Credit and commodity related

   Option model (*1)      5,657      The volatility of the underlying asset Correlations   

17.25%~26.78%

(49.26)%~52.24%

     

 

 

       
        148,814        
     

 

 

       

Available-for-sale financial assets:

           

Debt securities

   DCF      425,176      Discount rate    1.73%~24.78%

Equity securities

   NAV      3,718,314      Discount rate, growth rate    0.00%~2.00%
     

 

 

       
        4,143,490        
     

 

 

       
      W 4,879,847        
     

 

 

       

 

(*1) Option model that the Group uses in derivative valuation includes Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
(*2) Valuation techniques and inputs are not disclosed when the carrying amount is a reasonable approximation of fair value.

 

36


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

Type of financial instrument

  

Valuation

technique

   Carrying value
(*2)
    

Significant unobservable

inputs

  

Range

Financial liabilities

           

Financial liabilities designated at fair value through profit or loss:

           

Equity related

   Option model (*1)    W 7,934,290      The volatility of the underlying asset Correlations   

11.96%~14.49%

20.17%~49.87%

Derivative liabilities:

           

Equity and foreign exchange related

   Option model (*1)      40,971      The volatility of the underlying asset Correlations   

1.48%~62.96%

(0.10)%~82.52%

Interest rates related

   Option model (*1)      271,401     

The volatility of the underlying asset Regression coefficient

Correlations

  

00.51%~0.88%

0.02%~2.05%

34.19%~90.81%

Credit and commodity related

   Option model (*1)      29,663      The volatility of the underlying asset Correlations   

9.95%~36.35%

(21.55)%~100%

     

 

 

       
        342,035        
     

 

 

       
        W8,276,325        
     

 

 

       

 

(*1) Option model that the Group uses in derivative valuation includes Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
(*2) Valuation techniques and inputs are not disclosed when the carrying amount is a reasonable approximation of fair value.

 

37


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

    Sensitivity analysis for fair value measurements in Level 3

Although the Group believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value.

For level 3 fair value measurement, changing one or more of the unobservable inputs used to reasonably possible alternative assumptions would have the following effects on profit or loss, or other comprehensive income as of June 30, 2017 and December 31, 2016.

 

     2017  
     Favorable
changes
     Unfavorable
changes
 

Financial assets:

     

Effects on profit or loss for the period (*1):

     

Financial assets designated at fair value through profit or loss

   W 1,935        (2,160

Derivative assets

     18,115        (18,445
  

 

 

    

 

 

 
     20,050        (20,605

Effects on other comprehensive income for the period:

     

Available-for-sale financial assets (*2)

     57,926        (33,267
  

 

 

    

 

 

 
   W 77,976        (53,872
  

 

 

    

 

 

 

Financial liabilities:

     

Effects on profit or loss for the period (*1):

     

Financial liabilities designated at fair value through profit or loss

   W 79,848        (67,679

Derivative liabilities

     52,747        (52,206
  

 

 

    

 

 

 
   W 132,595        (119,885
  

 

 

    

 

 

 
     2016  
     Favorable
changes
     Unfavorable
changes
 

Financial assets:

     

Effects on profit or loss for the period (*1):

     

Financial assets designated at fair value through profit or loss

   W 2,737        (3,260

Derivative assets

     38,746        (17,927
  

 

 

    

 

 

 
     41,483        (21,187

Effects on other comprehensive income for the period:

     

Available-for-sale financial assets (*2)

     59,782        (34,830
  

 

 

    

 

 

 
   W 101,265        (56,017
  

 

 

    

 

 

 

Financial liabilities:

     

Effects on profit or loss for the period (*1):

     

Financial liabilities designated at fair value through profit or loss

   W 80,057        (108,955

Derivative liabilities

     80,589        (49,740
  

 

 

    

 

 

 
   W 160,646        (158,695
  

 

 

    

 

 

 

 

  (*1) Fair value changes are calculated by increasing or decreasing the volatility of the underlying asset (-10~10%) or correlations (-10~10%).
  (*2) Fair value changes are calculated by increasing or decreasing discount rate (-1~1%) or growth rate (0~1%).

 

38


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

  ii) Financial instruments measured at amortized cost

 

    The method of measuring the fair value of financial instruments measured at amortized cost is as follows:

 

Type

  

Measurement methods of fair value

Cash and due from banks    The carrying amount and the fair value for cash are identical and most of deposits are floating interest rate deposits or next day deposits of a short-term instrument. For this reason, the carrying value approximates fair value.
Loans    The fair value of the loans is measured by discounting the expected cash flow at the market interest rate and credit risk.
Held-to-maturity financial assets    The fair value of held-to-maturity financial assets is based on the published price quotations in an active market. In case there is no observable market price, it is measured by discounting the contractual cash flows at the market interest rate that takes into account the residual risk.
Deposits and borrowings    The carrying amount and the fair value for demand deposits, cash management account deposits, call money as short-term instrument are identical. The fair value of others is measured by discounting the contractual cash flow at the market interest rate that takes into account the residual risk.
Debt securities issued    Where available, the fair value of deposits and borrowings is based on the published price quotations in an active market. In case there is no data for an active market price, it is measured by discounting the contractual cash flow at the market interest rate that takes into account the residual risk.

 

    The carrying value and the fair value of financial instruments measured at amortized cost as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  
     Carrying
value
     Fair
value
     Carrying
value
     Fair
value
 

Assets:

           

Loans

   W 262,448,970        264,113,631        259,010,575        260,900,185  

Held-to-maturity financial assets

     21,928,681        22,711,563        19,805,084        20,732,400  

Other financial assets

     18,527,988        18,551,738        13,975,889        13,994,180  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 302,905,639        305,376,932        292,791,548        295,626,765  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Deposits

   W 238,010,007        237,983,253        235,137,958        235,175,778  

Borrowings

     28,755,963        28,781,690        25,294,241        25,340,042  

Debt securities issued

     47,714,024        47,934,353        44,326,785        44,651,811  

Other financial liabilities

     24,408,071        24,385,514        16,848,941        16,813,145  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 338,888,065        339,084,810        321,607,925        321,980,776  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

39


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

    The fair value hierarchy of financial assets and liabilities which are not measured at their fair values in the statements of financial position but with their fair value disclosed as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Level 1      Level 2      Level 3      Total  

Assets:

           

Loans

   W 10,974        2,491,740        261,610,917        264,113,631  

Held-to-maturity financial assets

     7,748,207        14,963,356        —          22,711,563  

Other financial assets

     338,693        13,020,166        5,192,879        18,551,738  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,097,874        30,475,262        266,803,796        305,376,932  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Deposits

   W 2,756,823        101,797,506        133,428,924        237,983,253  

Borrowings

     6,271,978        844,391        21,665,321        28,781,690  

Debt securities issued in won

     —          31,244,509        16,689,844        47,934,353  

Other financial liabilities

     346,174        10,117,642        13,921,698        24,385,514  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   9,374,975        144,004,048        185,705,787        339,084,810  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     2016  
     Level 1      Level 2      Level 3      Total  

Assets:

           

Loans

   W 11,236        2,019,178        258,869,771        260,900,185  

Held-to-maturity financial assets

     7,658,696        13,073,704        —          20,732,400  

Other financial assets

     32,952        9,882,610        4,078,618        13,994,180  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 7,702,884        24,975,492        262,948,389        295,626,765  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Deposits

   W 2,584,682        95,123,504        137,467,592        235,175,778  

Borrowings

     6,116,774        812,184        18,411,084        25,340,042  

Debt securities issued in won

     —          28,927,528        15,724,283        44,651,811  

Other financial liabilities

     37,061        4,741,882        12,034,202        16,813,145  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   8,738,517        129,605,098        183,637,161        321,980,776  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

40


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

(g) Classification by categories of financial instruments

Financial assets and liabilities are measured at fair value or amortized cost. The financial instruments measured at fair value or amortized costs are measured in accordance with the Group’s valuation methodologies, which are described in Note 4.(f) Measurement of fair value.

The carrying amounts of each category of financial assets and financial liabilities as June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Trading assets      FVTPL
assets
     AFS      HTM      Loans and
receivable
     Derivatives held
for hedging
     Total  

Assets:

                    

Cash and due from banks

   W —          —          —          —          20,424,044        —          20,424,044  

Trading assets

     31,389,614        —          —          —          —          —          31,389,614  

Financial assets designated at FVTPL

     —          3,594,760        —          —          —          —          3,594,760  

Derivatives

     1,573,472        —          —          —          —          97,005        1,670,477  

Loans

     —          —          —          —          262,448,970        —          262,448,970  

AFS financial assets

     —          —          40,287,582        —          —          —          40,287,582  

HTM financial assets

     —          —          —          21,928,681        —          —          21,928,681  

Other

     —          —          —          —          18,527,988        —          18,527,988  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   32,963,086        3,594,760        40,287,582        21,928,681        301,401,002        97,005        400,272,116  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     2017  
     Trading liabilities      FVTPL
liabilities
     Financial
liabilities
measured at
amortized cost
     Derivatives held
for hedging
     Total  

Liabilities:

              

Deposits

   W —          —          238,010,007        —          238,010,007  

Trading liabilities

     2,353,756        —          —          —          2,353,756  

Financial liabilities designated at FVTPL

     —          9,145,279        —          —          9,145,279  

Derivatives

     1,464,772        —          —          422,830        1,887,602  

Borrowings

     —          —          28,755,963        —          28,755,963  

Debt securities issued

     —          —          47,714,024        —          47,714,024  

Other

     —          —          24,408,071        —          24,408,071  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   3,818,528        9,145,279        338,888,065        422,830        352,274,702  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

41


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

4. Financial risk management (continued)

 

     2016  
     Trading assets      FVTPL
assets
     AFS      HTM      Loans and
receivable
     Derivatives held
for hedging
     Total  

Assets:

                    

Cash and due from banks

   W —          —          —          —          19,181,165        —          19,181,165  

Trading assets

     26,695,953        —          —          —          —          —          26,695,953  

Financial assets designated at FVTPL

     —          3,416,102        —          —          —          —          3,416,102  

Derivatives

     2,826,642        —          —          —          —          176,217        3,002,859  

Loans

     —          —          —          —          259,010,575        —          259,010,575  

AFS financial assets

     —          —          37,662,691        —          —          —          37,662,691  

HTM financial assets

     —          —          —          19,805,084        —          —          19,805,084  

Other

     —          —          —          —          13,975,889        —          13,975,889  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   29,522,595        3,416,102        37,662,691        19,805,084        292,167,629        176,217        382,750,318  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     2016  
     Trading
liabilities
     FVTPL
liabilities
     Financial
liabilities
measured at
amortized cost
     Derivatives held
for hedging
     Total  

Liabilities:

              

Deposits

   W —          —          235,137,958        —          235,137,958  

Trading liabilities

     1,976,760        —          —          —          1,976,760  

Financial liabilities designated at FVTPL

     —          9,233,642        —          —          9,233,642  

Derivatives

     3,074,814        —          —          453,430        3,528,244  

Borrowings

     —          —          25,294,241        —          25,294,241  

Debt securities issued

     —          —          44,326,785        —          44,326,785  

Other

     —          —          16,848,941        —          16,848,941  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   5,051,574        9,233,642        321,607,925        453,430        336,346,571  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

42


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

5. Change in subsidiaries

(a) Change in consolidated subsidiaries for the year ended December 31, 2016 are as follows:

 

    

Company

  

Description

Included

  

Shinhan Microfinance Co., Ltd.

   Newly established subsidiary

    ”

  

PT Shinhan Sekuritas Indonesia

   Acquisition

Excluded

  

PT Centratama Nasional Bank

   Business combination under common control

    ”

  

HKC&T Co., Ltd.

   Liquidation

There were no changes in 2017. Subsidiaries such as trust, beneficiary certificate, corporate restructuring fund and private equity fund which are not actually operating their own business are excluded.

 

6. Operating segments

(a) Segment information

The general descriptions by operating segments as of June 30, 2017 are as follows:

 

Segment

  

Description

Banking

   The banking segment offers commercial banking services such as lending to and receiving deposits from corporations and individuals and also includes securities investing and trading and derivatives trading primarily through domestic and overseas bank branches and subsidiaries.

Credit card

   The credit card segment primarily consists of the credit card business of Shinhan Card, including its installment finance and automobile leasing businesses.

Securities

   Securities segment comprise securities trading, underwriting and brokerage services.

Life insurance

   Life insurance segment consists of life insurance services provided by Shinhan Life Insurance.

Others

   Leasing, assets management and other businesses

 

43


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

6. Operating segments (continued)

 

  (b) The following tables provide information of income and expense for each operating segment for the six-month periods ended June 30, 2017 and 2016.

 

     2017  
     Banking     Credit card     Securities     Life
insurance
    Others     Consolidation
adjustment
    Total  

Net interest income

   W 2,437,596       739,379       224,126       353,819       25,904       3,082       3,783,906  

Net fees and commission income

     388,851       187,551       137,978       23,098       87,252       (53     824,677  

Impairment losses on financial assets

     (134,539     (103,947     (2,637     (943     (10,856     4,139       (248,783

General and administrative expenses

     (1,373,684     (364,791     (217,836     (108,515     (109,239     30,898       (2,143,167

Other income (expense), net

     19,595       438,127       (31,420     (168,448     33,050       (53,741     237,163  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     1,337,819       896,319       110,211       99,011       26,111       (15,675     2,453,796  

Equity method income (loss)

     2,816       —         5,858       (477     5,337       115       13,649  

Income tax expense

     304,606       211,087       28,628       21,513       17,713       2,529       586,076  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

   W 1,064,340       685,309       93,782       75,701       14,926       (24,902     1,909,156  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Controlling interest

   W 1,064,260       686,781       93,776       75,701       14,926       (46,314     1,889,130  

Non-controlling interests

     80       (1,472     6       —         —         21,412       20,026  

 

     2016  
     Banking     Credit card     Securities     Life
insurance
    Others     Consolidation
adjustment
    Total  

Net interest income (loss)

   W 2,211,426       729,093       194,207       352,344       (3,909     3,547       3,486,708  

Net fees and commission income

     343,343       221,281       128,104       10,554       83,937       913       788,132  

Impairment losses on financial assets

     (467,936     (152,799     (3,699     (4,620     (31,033     (632     (660,719

General and administrative expenses

     (1,358,616     (402,480     (212,813     (111,689     (103,942     28,139       (2,161,401

Other income (expense), net

     199,233       117,342       (45,593     (170,441     24,033       (31,685     92,889  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     927,450       512,437       60,206       76,148       (30,914     282       1,545,609  

Equity method income (loss)

     2,670       —         (205     (604     2,360       (461     3,760  

Income tax expense (benefit)

     (26,059     115,889       12,972       (11,517     7,701       1,450       100,436  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

   W 994,795       400,442       50,552       87,584       (37,011     (8,242     1,488,120  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Controlling interest

   W 994,852       400,460       50,552       87,584       (37,011     (41,646     1,454,791  

Non-controlling interests

     (57     (18     —         —         —         33,404       33,329  

 

44


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

6. Operating segments (continued)

 

 

  (c) The following tables provide information of net interest income (expense) of each operating segment for the six-month periods ended June 30, 2017 and 2016.

 

     2017  
     Banking     Credit card     Securities     Life
insurance
     Others     Consolidation
adjustment
     Total  

Net interest income from:

                

External customers

   W 2,440,426       748,211       221,821       353,634        19,814       —          3,783,906  

Internal transactions

     (2,830     (8,832     2,305       185        6,090       3,082        —    
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   W   2,437,596       739,379       224,126       353,819        25,904       3,082        3,783,906  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     2016  
     Banking     Credit card     Securities     Life
insurance
     Others     Consolidation
adjustment
     Total  

Net interest income from:

                

External customers

   W   2,214,746       741,964       196,938       352,141        (19,081     —          3,486,708  

Internal transactions

     (3,320     (12,871     (2,731     203        15,172       3,547        —    
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   W 2,211,426       729,093       194,207       352,344        (3,909     3,547        3,486,708  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

  (d) The following tables provide information of net fees and commission income of each operating segment for the six-month periods ended June 30, 2017 and 2016.

 

     2017  
     Banking     Credit card     Securities     Life
insurance
    Others      Consolidation
adjustment
    Total  

Net fees and commission income from:

               

External customers

   W   417,810       181,419       142,066       26,688       56,694        —         824,677  

Internal transactions

     (28,959     6,132       (4,088     (3,590     30,558        (53     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   W 388,851       187,551       137,978       23,098       87,252        (53     824,677  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     2016  
     Banking     Credit card     Securities     Life
insurance
    Others      Consolidation
adjustment
    Total  

Net fees and commission income from:

               

External customers

   W 356,450       230,845       131,795       14,349       54,693        —         788,132  

Internal transactions

     (13,107     (9,564     (3,691     (3,795     29,244        913       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   W 343,343       221,281       128,104       10,554       83,937        913       788,132  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

45


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

7. Restricted due from banks

 

  (a) Restricted due from banks as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Deposits denominated in won:

     

Reserve deposits

   W 6,382,344        2,857,672  

Other (*)

     3,120,635        4,868,867  
  

 

 

    

 

 

 
     9,502,979        7,726,539  
  

 

 

    

 

 

 

Deposits denominated in foreign currency

     1,043,456        1,379,514  
  

 

 

    

 

 

 
   W     10,546,435        9,106,053  
  

 

 

    

 

 

 

 

(*) Pursuant to the Regulation on Financial Investment Business, the Group is required to deposit certain portions of customers’ deposits with the Korean Securities Finance Corporation (“KSFC”) or banks to ensure repayment of customer deposits and the deposits may not be pledged as collateral.

 

8. Trading assets

Trading assets as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Debt securities:

     

Governments

   W 4,232,838        4,337,224  

Financial institutions

     7,436,061        7,461,375  

Corporations

     5,406,476        4,342,496  

Commercial papers

     4,312,834        4,350,252  

CMA (*)

     2,430,063        1,793,312  

Others

     409,320        105,905  
  

 

 

    

 

 

 
     24,227,592        22,390,564  

Equity securities:

     

Stocks

     973,448        703,467  

Equity investments

     24,449        —    

Beneficiary certificates

     5,852,465        3,233,937  

Others

     121,141        120,140  
  

 

 

    

 

 

 
     6,971,503        4,057,544  

Other

     

Gold deposits

     190,519        247,845  
  

 

 

    

 

 

 
   W     31,389,614        26,695,953  
  

 

 

    

 

 

 

 

(*) CMA : Cash management account deposits

 

46


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

9. Financial asset designated at fair value through profit or loss

Financial asset designated at fair value through profit or loss as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016      Reason for designation  

Debt securities

   W     2,118,420        1,908,342       
Evaluation and management on a fair value basis,
accounting mismatch
 
 

Equity securities (*)

     1,265,288        1,187,916       
Evaluation and management on a fair value basis,
accounting mismatch
 
 

Others

     211,052        319,844        Combined instrument  
  

 

 

    

 

 

    
   W 3,594,760        3,416,102     
  

 

 

    

 

 

    

 

(*) Restricted reserve for claims of customers’ deposits (trusts) as of June 30, 2017 and December 31, 2016 are W958,077 million and W862,837 million, respectively.

 

47


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

10. Derivatives

 

  (a) The notional amounts of derivatives as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Foreign currency related:

     

Over the counter:

     

Currency forwards

   W 94,094,220        92,309,997  

Currency swaps

     29,013,199        27,460,485  

Currency options

     942,446        1,210,658  
  

 

 

    

 

 

 
     124,049,865        120,981,140  

Exchange traded:

     

Currency futures

     904,095        739,186  
  

 

 

    

 

 

 
     124,953,960        121,720,326  
  

 

 

    

 

 

 

Interest rates related:

     

Over the counter:

     

Interest rate swaps

     32,486,452        53,104,809  

Interest rate options

     700,000        1,014,000  
  

 

 

    

 

 

 
     33,186,452        54,118,809  

Exchange traded:

     

Interest rate futures

     1,617,872        2,099,017  

Interest rate swaps (*)

     47,207,688        27,658,703  
  

 

 

    

 

 

 
     48,825,560        29,757,720  
  

 

 

    

 

 

 
     82,012,012        83,876,529  
  

 

 

    

 

 

 

Credit related:

     

Over the counter:

     

Credit swaps

     1,588,051        1,244,502  

Equity related:

     

Over the counter:

     

Equity swaps and forwards

     4,708,758        12,187,176  

Equity options

     1,389,490        1,228,114  
  

 

 

    

 

 

 
     6,098,248        13,415,290  

Exchange traded:

     

Equity futures

     594,639        492,562  

Equity options

     4,907,268        2,213,162  
  

 

 

    

 

 

 
     5,501,907        2,705,724  
  

 

 

    

 

 

 
     11,600,155        16,121,014  
  

 

 

    

 

 

 

Commodity related:

     

Over the counter:

     

Commodity swaps and forwards

     1,207,683        892,003  

Commodity options

     84        11,876  
  

 

 

    

 

 

 
     1,207,767        903,879  

Exchange traded:

     

Commodity futures

     425,960        114,927  
  

 

 

    

 

 

 
     1,633,727        1,018,806  
  

 

 

    

 

 

 

 

48


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

10. Derivatives (continued)

 

  (a) The notional amounts of derivatives as of June 30, 2017 and December 31, 2016 are as follows (continued):

 

     2017      2016  

Hedge:

     

Currency forwards

   W 2,175,978        2,036,187  

Currency swaps

     3,528,205        2,765,653  

Interest rate swaps

     8,396,258        7,631,505  
  

 

 

    

 

 

 
     14,100,441        12,433,345  
  

 

 

    

 

 

 
   W   235,888,346        236,414,522  
  

 

 

    

 

 

 

 

(*) The notional amount of derivatives which is settled in the ‘Central Counter Party (CCP)’ system.

 

49


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

10. Derivatives (continued)

 

  (b) Fair values of derivative instruments as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  
     Assets      Liabilities      Assets      Liabilities  

Foreign currency related:

           

Over the counter:

           

Currency forwards

   W 766,220        679,788        1,722,096        1,623,325  

Currency swaps

     377,414        387,978        698,220        766,252  

Currency options

     3,082        6,707        12,347        9,422  
  

 

 

    

 

 

    

 

 

    

 

 

 
       1,146,716        1,074,473        2,432,663        2,398,999  

Exchange traded:

           

Currency futures

     1,201        1,706        —          4  
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,147,917        1,076,179        2,432,663        2,399,003  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest rates related:

           

Over the counter:

           

Interest rate swaps

     229,022        243,358        290,074        340,409  

Interest rate options

     1,129        2,710        7,807        8,367  
  

 

 

    

 

 

    

 

 

    

 

 

 
     230,151        246,068        297,881        348,776  

Exchange traded:

           

Interest rate futures

     1,000        427        1,439        212  
  

 

 

    

 

 

    

 

 

    

 

 

 
     231,151        246,495        299,320        348,988  
  

 

 

    

 

 

    

 

 

    

 

 

 

Credit related:

           

Over the counter:

           

Credit swaps

     14,580        4,867        13,365        6,095  

Equity related:

           

Over the counter:

           

Equity swaps and forwards

     66,458        57,665        25,378        250,879  

Equity options

     73,101        8,103        38,156        6,212  
  

 

 

    

 

 

    

 

 

    

 

 

 
     139,559        65,768        63,534        257,091  

Exchange traded:

           

Equity futures

     1,619        49        683        57  

Equity options

     32,298        40,730        13,084        12,215  
  

 

 

    

 

 

    

 

 

    

 

 

 
     33,917        40,779        13,767        12,272  
  

 

 

    

 

 

    

 

 

    

 

 

 
     173,476        106,547        77,301        269,363  
  

 

 

    

 

 

    

 

 

    

 

 

 

Commodity related:

           

Over the counter:

           

Commodity swaps and forwards

     1,636        29,366        1,778        49,702  

Commodity options

     —          —          105        22  
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,636        29,366        1,883        49,724  

Exchange traded:

           

Commodity futures

     4,712        1,318        2,110        1,641  
  

 

 

    

 

 

    

 

 

    

 

 

 
     6,348        30,684        3,993        51,365  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

50


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

10. Derivatives (continued)

 

  (b) Fair values of derivative instruments as of June 30, 2017 and December 31, 2016 are as follows (continued):

 

     2017      2016  
     Assets      Liabilities      Assets      Liabilities  

Hedge:

           

Currency forwards

   W 15,921        19,327        5,646        81,829  

Currency swaps

     67,227        77,601        155,386        36,077  

Interest rate swaps

     13,857        325,902        15,185        335,524  
  

 

 

    

 

 

    

 

 

    

 

 

 
     97,005        422,830        176,217        453,430  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   1,670,477        1,887,602        3,002,859        3,528,244  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

51


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

10. Derivatives (continued)

 

  (c) Gain or loss on valuation of derivatives for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Foreign currency related:

           

Over the counter:

           

Currency forwards

   W (60,396      49,462        4,370        24,386  

Currency swaps

     10,033        (1,120      (7,335      24,806  

Currency options

     11,794        (225      1,371        (1,740
  

 

 

    

 

 

    

 

 

    

 

 

 
     (38,569      48,117        (1,594      47,452  

Exchange traded:

           

Currency futures

     (325      (505      54        (38
  

 

 

    

 

 

    

 

 

    

 

 

 
     (38,894      47,612        (1,540      47,414  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest rates related:

           

Over the counter:

           

Interest rate swaps

     (64,061      871        (19,052      (22,294

Interest rate options

     (241      851        (749      (1,667
  

 

 

    

 

 

    

 

 

    

 

 

 
     (64,302      1,722        (19,801      (23,961

Exchange traded:

           

Interest rate futures

     1,963        2,758        (3,622      (3,850
  

 

 

    

 

 

    

 

 

    

 

 

 
     (62,339      4,480        (23,423      (27,811
  

 

 

    

 

 

    

 

 

    

 

 

 

Credit related:

           

Over the counter:

           

Credit swaps

     (8,192      (808      9,570        10,345  

Equity related:

           

Over the counter:

           

Equity swap and forwards

     7,968        208,046        (139,235      (306,623

Equity options

     14,226        24,962        5,397        4,290  
  

 

 

    

 

 

    

 

 

    

 

 

 
     22,194        233,008        (133,838      (302,333

Exchange traded:

           

Equity futures

     1,437        1,554        (2,327      1,159  

Equity options

     4,883        2,984        52        (2,983
  

 

 

    

 

 

    

 

 

    

 

 

 
     6,320        4,538        (2,275      (1,824
  

 

 

    

 

 

    

 

 

    

 

 

 
       28,514        237,546        (136,113      (304,157
  

 

 

    

 

 

    

 

 

    

 

 

 

Commodity related:

           

Over the counter:

           

Commodity swaps and forwards

     (13,396      (3,015      2,668        17,441  

Commodity options

     —          (11      6        (76
  

 

 

    

 

 

    

 

 

    

 

 

 
     (13,396      (3,026      2,674        17,365  

Exchange traded:

           

Commodity futures

     (53      3,392        2,083        (42

Commodity options

     2        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     (51      3,392        2,083        (42
  

 

 

    

 

 

    

 

 

    

 

 

 
     (13,447      366        4,757        17,323  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

52


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

10. Derivatives (continued)

 

  (c) Gain or loss on valuation of derivatives for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows (continued):

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Hedge:

           

Currency forwards

   W (69,211      52,948        (11,351      6,141  

Currency swaps

       12,025        (132,634      9,652        (39,391

Interest rate swaps

     (3,428      (9,503      4,960        63,808  
  

 

 

    

 

 

    

 

 

    

 

 

 
     (60,614      (89,189      3,261        30,558  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W (154,972      200,007        (143,488      (226,328
  

 

 

    

 

 

    

 

 

    

 

 

 

 

53


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

11. Loans

 

  (a) Loans as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Household loans

   W 105,093,833        104,184,270  

Corporate loans

     131,592,329        130,485,094  

Public and other

     2,106,138        2,153,888  

Loans to banks

     5,874,441        4,729,836  

Card receivables

     19,661,448        19,450,421  
  

 

 

    

 

 

 
     264,328,189        261,003,509  

Discount

     (40,442      (27,533

Deferred loan origination costs and fees

     374,206        395,394  
  

 

 

    

 

 

 
     264,661,953        261,371,370  

Allowance for credit losses

     (2,212,983      (2,360,795
  

 

 

    

 

 

 
   W   262,448,970        259,010,575  
  

 

 

    

 

 

 

 

  (b) Changes in the allowance for credit losses for the six-month period ended June 30, 2017 and the year ended December 31, 2016 were as follows:

 

     2017     2016  
     Loans     Other (*2)     Total     Loans     Other (*2)     Total  

Beginning balance

   W 2,360,795       66,896       2,427,691       2,318,416       79,839       2,398,255  

Provision for allowance

     225,418       4,381       229,799       1,102,781       4,851       1,107,632  

Write-offs

     (424,551     (8,440     (432,991     (1,290,831     (16,204     (1,307,035

Effect of discounting (*1)

     (8,062     —         (8,062     (24,150     —         (24,150

Disposal

     (45,128     —         (45,128     (78,268     —         (78,268

Recoveries

     151,747       552       152,299       336,665       2,227       338,892  

Others (*3)

     (47,236     (5     (47,241     (3,818     (3,817     (7,635
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   W   2,212,983       63,384       2,276,367       2,360,795       66,896       2,427,691  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) Interest income from impaired financial assets
(*2) Included allowance for due from banks and other assets
(*3) Other changes were due to debt restructuring, debt-equity swap, and foreign exchange rate, etc.

 

54


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

12. Available-for-sale financial assets and held-to-maturity financial assets
  (a) Available-for-sale financial assets and held-to-maturity financial assets as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Available-for-sale financial assets:

     

Debt securities:

     

Government bonds

   W 7,179,350        5,308,247  

Financial institution bonds

     16,851,511        17,224,603  

Corporate bonds and others

     11,285,492        10,289,221  
  

 

 

    

 

 

 
     35,316,353        32,822,071  

Equity securities (*1):

     

Stocks

     1,376,625        1,663,951  

Equity investments

     698,500        625,632  

Beneficiary certificates

     2,853,982        2,470,555  

Others

     42,122        80,482  
  

 

 

    

 

 

 
     4,971,229        4,840,620  
  

 

 

    

 

 

 
     40,287,582        37,662,691  
  

 

 

    

 

 

 

Held-to-maturity financial assets:

     

Debt securities:

     

Government bonds

     12,710,710        11,514,671  

Financial institutions bonds

     2,370,093        2,092,476  

Corporate bonds

     6,847,878        6,197,937  
  

 

 

    

 

 

 
     21,928,681        19,805,084  
  

 

 

    

 

 

 
   W   62,216,263        57,467,775  
  

 

 

    

 

 

 

 

(*1) Equity securities with no quoted market prices in active markets and for which the fair value cannot be measured reliably are recorded at cost were W118,543 million and W131,143 million as of June 30, 2017 and December 31, 2016, respectively.

 

  (b) Gain or loss on sale of available-for-sale financial assets for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Gain on sale of available-for-sale financial assets

   W 201,074        267,834        309,882        386,432  

Loss on sale of available-for-sale financial assets

     (3,866      (16,903      (7,286      (31,860
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   197,208        250,931        302,596        354,572  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

55


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates
  (a) Investments in associates as of June 30, 2017 and December 31, 2016 are as follows:

 

Investees

   Country    Reporting
date
   Ownership (%)  
         2017      2016  

BNP Paribas Cardif Life Insurance (*1)(*3)

   Korea    March 31      14.99        14.99  

Aju Capital Co., Ltd. (*9)

      —        —          12.85  

Pohang TechnoPark 2PFV (*2)

      June 30      14.90        14.90  

Daewontos Co., Ltd. (*1)(*4)

      March 31      36.33        36.33  

Inhee Co., Ltd. (*1)(*4)

           15.36        15.36  

DAEGY Electrical Construction Co., LTD. (*1)(*4)

           27.45        27.45  

YEONWOONG SYSTEM (*1)(*4)

           21.77        21.77  

DOODOO LOGITECH (*1)(*4)

           27.96        27.96  

Neoplux Technology Valuation Investment Fund (*1)

           33.33        33.33  

EQP Global Energy Infrastructure Private Equity Fund (*9)

      —        —          22.64  

JAEYOUNG SOLUTEC CO., LTD. (*1)(*4)(*5)

      March 31      9.61        10.45  

Partners 4th Growth Investment Fund (*1)

           25.00        25.00  

PSA 1st Fintech Private Equity Fund (*1)

           25.00        25.00  

KTB Newlake Global Healthcare PEF (*1)

           30.00        30.00  

JAEYANG INDUSTRY (*1)(*4)

           25.90        25.90  

Tigris-Aurum Fund I (*1)

           27.27        27.27  

Treenkid (*10)

      —        —          23.72  

Chungyoung INC (*1)(*4)

      March 31      18.94        18.94  

Semantic (*10)

      —        —          19.25  

DAEKWANG SEMICONDUCTOR CO., LTD. (*1)(*4)

      March 31      20.94        20.94  

Branbuil CO., LTD. (*4)(*11)

      December 31      15.53        15.53  

Songrim Co., Ltd. (*1)(*4)

      March 31      35.34        —    

Shinhan-Albatross Technology Investment Fund

      June 30      50.00        —    

Loggia (*6)(*11)

      December 31      16.29        —    

SHC-IMM New Growth Fund (*7)

      June 30      64.52        64.52  

QCP New Technology Fund 20th

           47.17        47.17  

STI-New Growth Engines Investment Partnership

           50.00        50.00  

Shinhan K2 Secondary Fund (*9)

      —        —          10.75  

TS2013-6 M&A Investment Fund

      June 30      25.00        25.00  

Dream High Fund III (*7)

           54.55        54.55  

SP New Technology Business investment Fund I

           23.26        23.26  

Albatross Growth Fund

           36.36        36.36  

Asia Pacific No.39 Ship Investment Co., Ltd.

           50.00        50.00  

Midas Dong-A Snowball Venture Fund (*7)

           53.33        53.33  

IBKS-Shinhan Creative Economy New Technology Fund (*6)

           5.00        5.00  

SM New Technology Business Investment Fund I

           36.36        36.36  

SHC-Aju 4th

           21.98        21.98  

KCLAVIS Meister Fund No.4

           20.00        20.00  

KCLAVIS Meister Fund No.5

           23.26        23.26  

KCLAVIS Meister Fund No.2

           38.83        38.83  

Midas Dong-A Snowball Venture Fund 2

           25.00        25.00  

EN-Tigris Fund 1

           47.62        47.62  

IBKS-Shinhan Creative Economy New Technology Fund II (*6)

           4.55        4.55  

 

56


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

 

Investees

   Country    Reporting
date
   Ownership (%)  
         2017      2016  

KCLAVIS Meister Fund No.10

   Korea    June 30      21.28        21.28  

KCLAVIS Meister Fund No.9

           34.48        34.48  

KCLAVIS Meister Fund No.14

           33.33        33.33  

KCLAVIS Meister Fund No.17

           26.09        26.09  

Richmond Private Yong in Retail Facility Real Estate Fund No.1

           42.00        —    

House Eco Private Placement Special Asset Fund No.1

           26.67        —    

KTB Confidence Private Placement

           25.08        —    

JBUS Fintech Income Professional Private Trust No.2

           20.00        —    

Meritz AI-SingA330-A Investment Type Private Placement Special Asset Fund

           23.89        —    

Meritz AI-SingA330-B Investment Type Private Placement Special Asset Fund

           20.16        —    

Korea Alternative Source Professional Private Investment Trust No.6

           20.00        —    

Hyundai Season Mezzanine Professional Private Investment Trust No.4

           29.60        —    

Pine Asia Unsecured Individual Rehabilitation Bond Fund 9

           49.84        —    

Brain Professional Private Trust No.6

           21.05        —    

Pine Asia Unsecured Individual Rehabilitation Bond Fund 15 (*7)

           97.94        —    

Korea Investment Mezzanine Professional Private Investment Trust No.1

           50.00        —    

Brain Professional Private Trust No.12

           48.19        —    

Hyundai Invest BMC Professional Private Trust No.18

           20.00        —    

Pine Asia Unsecured Individual Rehabilitation Bond Fund 8

           22.85        —    

Hana UBS Professional Private Trust

           43.63        —    

SG No.9 Corporate Recovery Private Equity Fund

           26.49        26.49  

Plutus-SG Private Equity Fund

           26.67        26.67  

SG ARGES Private Equity Fund No.1

           24.06        24.06  

OST Progress- 2 Fund

           27.62        27.62  

Eum Private Equity Fund No.3

           20.76        20.76  

Smart 2nd Private Equity Fund

           20.00        —    

APC Fund

   Cayman
Islands
        25.18        25.18  

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

   Korea         50.00        50.00  

Shinhan Praxis K-Growth Global Private Equity Fund (*6)

           18.87        18.87  

Credian Healthcare Private Equity Fund II

           34.07        34.07  

Kiwoom Milestone Professional Private Real Estate Trust 19

           50.00        50.00  

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

           21.28        21.28  

Brain Professional Private Trust No.4

           27.50        27.49  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

           44.84        44.84  

Brain KS Qualified Privately Placed Fund No.6

           30.00        50.00  

M360 CRE Income Fund(*7)

   USA    May 31      81.64        42.83  

 

57


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

 

Investees

   Country    Reporting
date
   Ownership (%)  
         2017      2016  

Shinhan Ninetree Fund 1

   Korea    June 30      21.81        —    

JB POWER Fund 6 (*7)

           55.45        —    

Shinhan Global Healthcare Fund 1 (*6)

           10.83        —    

Brain Asset Management PN Private Investment Trust Fund 13

           41.10        —    

Orion Mezzanine Private Investment Trust 4

           41.67        —    

JB Power TL Investment Type Private Placement Special Asset Fund 7

           33.33        —    

Bros Investment O Hedge Fund 1 (*7)

           94.34        —    

BNP Paribas Cardif General Insurance (*1)(*2)

      March 31      10.00        10.00  

SHBNPP Private Korea Equity Long-Short Professional Feeder

      June 30      26.15        15.88  

SHBNPP Private Multi Strategy Professional Feeder No.1 (*9)

      —        —          29.55  

Shinhan-Stonebridge Petro PEF (*6)

      June 30      1.82        1.82  

Lodestone 1st Private Equity Fund (*8)

      —        26.06        —    

Axis Global Growth New Technology Investment Association

      June 30      31.85        —    

Quantum-Nvestor Fund No.1

           25.00        —    

 

(*1) Financial statements as of March 31, 2017 were used for the equity method since the financial statements as of June 30, 2017 were not available. Significant trades and events occurred within the period were properly reflected.
(*2) The Group applies the equity method accounting as the Group has significant influence on the financial and operating policies of the investee through the ability to elect investees’ board members and representation in decision making bodies of the investee.
(*3) The Group has a significant influence on the investees through important business transactions.
(*4) The shares of the investees were acquired by debt-equity swap. The Group reclassified available-for-sale financial assets to investments in associates as the reorganization procedures were completed and now the Group can normally exercise its voting rights to the investees.
(*5) Although the ownership interests in JAEYOUNG SOLUTEC CO., LTD. were less than 15%, the Group used the equity method as the investee should consult with the Group when the investee decides major management decision such as dividend, business planning or business transfer.
(*6) As a managing partner, the Group has a significant influence over the investees.
(*7) As a limited partner, the Group does not have an ability to participate in policy-making processes to obtain economic benefit from the investees that would allow the Group to control the entity.
(*8) The acquisition amount were used for the equity method since the financial statements as of June 30, 2017 were not available.
(*9) The associates were disposed or reclassified.
(*10) The associate was excluded from the equity method accounting due to bankruptcy proceedings.
(*11) The latest financial statements were used for the equity method since the financial statements as of March 31, 2017 were not available. Significant trades and events occurred within the period were properly reflected.

 

58


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

  (b) Changes in investments in associates for the six-month period ended June 30, 2017 and December 31, 2016 were as follows:

 

     2017  

Investees

   Beginning
balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
     Transfer
out
    Ending
balance
 

BNP Paribas Cardif Life Insurance

   W 60,213        (254     2,366       (8,334     —          —         53,991  

Aju Capital Co., Ltd.

     40,836        (1,849     437       158       —          (39,582     —    

Pohang TechnoPark 2PFV

     1,975        —         —         —         —          —         1,975  

Daewontos Co., Ltd. (*2)

     —          —         —         —         —          —         —    

Inhee Co., Ltd.

     215        —         60       —         —          —         275  

DAEGY Electrical Construction Co., LTD.

     128        —         (9     —         —          —         119  

YEONWOONG SYSTEM

     77        —         —         —         —          —         77  

DOODOO LOGITECH

     247        —         (66     —         —          —         181  

Neoplux Technology Valuation Investment Fund

     7,526        1,890       1,747       —         —          —         11,163  

EQP Global Energy Infrastructure Private Equity Fund

     —          —         —         —         —          —         —    

JAEYOUNG SOLUTEC CO., LTD. (*1)

     5,736        —         (188     269       —          —         5,817  

Partners 4th Growth Investment Fund

     4,555        4,240       (209     —         —          —         8,586  

PSA 1st Fintech Private Equity Fund

     2,456        —         (25     —         —          —         2,431  

KTB Newlake Global Healthcare PEF

     1,168        —         (129     —         —          —         1,039  

JAEYANG INDUSTRY (*2)

     —          —         —         —         —          —         —    

Tigris-Aurum Fund I

     1,481        —         (22     —         —          —         1,459  

Treenkid

     79        —         —         (79     —          —         —    

Chungyoung INC (*2)

     —          —         —         —         —          —         —    

Semantic

     249        —         (462     213       —          —         —    

DAEKWANG SEMICONDUCTOR CO., LTD.

     4,776        —         (679     —         —          —         4,097  

Branbuil CO., LTD. (*2)

     —          —         —         —         —          —         —    

Songrim Co., Ltd.

     —          11       57       —         —          —         68  

Shinhan-Albatross Technology Investment Fund

     —          3,000       (153     —         —          —         2,847  

Loggia

     —          37       —         —         —          —         37  

SHC-IMM New Growth Fund

     2,295        (115     64       —         —          —         2,244  

QCP New Technology Fund 20th

     2        —         —         —         —          —         2  

STI-New Growth Engines Investment Partnership

     1,973        —         (43     —         —          —         1,930  

Shinhan K2 Secondary Fund

     938        (727     (211     —         —          —         —    

TS2013-6 M&A Investment Fund

     1,874        (3,560     1,686       —         —          —         —    

Dream High Fund III

     3,144        —         (100     (711     —          —         2,333  

 

59


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017  

Investees

   Beginning
balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
     Transfer
out
     Ending
balance
 

SP New Technology Business investment Fund I

   W 1,954        —         (11     —         —          —          1,943  

Albatross Growth Fund

     1,572        (1,381     574       (765     —          —          —    

Asia Pacific No.39 Ship Investment Co., Ltd.

     5,176        (405     149       8       —          —          4,928  

Midas Dong-A Snowball Venture Fund

     1,258        (83     (7     —         —          —          1,168  

IBKS-Shinhan Creative Economy New Technology Fund

     259        —         —         —         —          —          259  

SM New Technology Business Investment Fund I

     1,846        —         3       —         —          —          1,849  

SHC-Aju 4th

     2,085        (320     103       22       —          —          1,890  

KCLAVIS Meister Fund No.4

     511        —         6       —         —          —          517  

KCLAVIS Meister Fund No.5

     494        —         (4     —         —          —          490  

KCLAVIS Meister Fund No.2

     1,984        —         (10     —         —          —          1,974  

Midas Dong-A Snowball Venture Fund 2

     1,787        —         (26     —         —          —          1,761  

EN-Tigris Fund 1

     1,971        —         502       —         —          —          2,473  

IBKS-Shinhan Creative Economy New Technology Fund II

     90        —         (1     —         —          —          89  

KCLAVIS Meister Fund No.10

     995        (584     66       —         —          —          477  

KCLAVIS Meister Fund No.9

     468        —         11       —         —          —          479  

KCLAVIS Meister Fund No.14

     499        (522     23       —         —          —          —    

KCLAVIS Meister Fund No.17

     2,989        —         (29     —         —          —          2,960  

Richmond Private Yong in Retail Facility Real Estate Fund No.1

     —          7,514       445       —         —          —          7,959  

House Eco Private Placement Special Asset Fund No.1

     —          1,086       155       —         —          —          1,241  

KTB Confidence Private Placement

     —          5,093       207       —         —          —          5,300  

JBUS Fintech Income Professional Private Trust No.2

     —          1,934       71       —         —          —          2,005  

Meritz AI-SingA330-A Investment Type Private Placement Special Asset Fund

     —          7,278       153       —         —          —          7,431  

Meritz AI-SingA330-B Investment Type Private Placement Special Asset Fund

     —          8,189       202       —         —          —          8,391  

Korea Alternative Source Professional Private Investment Trust No.6

     —          550       50       —         —          —          600  

Hyundai Season Mezzanine Professional Private Investment Trust No.4

     —          2,000       (1     —         —          —          1,999  

 

60


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017  

Investees

   Beginning
balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
     Transfer
out
     Ending
balance
 

Pine Asia Unsecured Individual Rehabilitation Bond Fund 9

   W —          1,920       194       —         —          —          2,114  

Brain Professional Private Trust No.6

     —          2,000       61       —         —          —          2,061  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 15

     —          2,318       71       —         —          —          2,389  

Korea Investment Mezzanine Professional Private Investment Trust No.1

     —          4,802       73       —         —          —          4,875  

Brain Professional Private Trust No.12

     —          2,000       —         —         —          —          2,000  

Hyundai Invest BMC Professional Private Trust No.18

     —          2,930       18       —         —          —          2,948  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 8

     —          5,973       25       —         —          —          5,998  

Hana UBS Professional Private Trust

     —          5,000       182       —         —          —          5,182  

SG No.9 Corporate Recovery Private Equity Fund

     3,982        (44     39       —         —          —          3,977  

Plutus-SG Private Equity Fund

     4,299        (66     28       —         —          —          4,261  

SG ARGES Private Equity Fund No.1

     8,976        (144     94       —         —          —          8,926  

OST Progress- 2 Fund

     1,460        1,500       (32     —         —          —          2,928  

Eum Private Equity Fund No.3

     5,933        (254     297       —         —          —          5,976  

Smart 2nd Private Equity Fund

     —          3,000       (47     —         —          —          2,953  

APC Fund

     11,579        160       (199     (742     28        —          10,826  

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     464        (1     1       —         —          —          464  

Shinhan Praxis K-Growth Global Private Equity Fund

     13,533        3,774       (315     331       —          —          17,323  

Credian Healthcare Private Equity Fund II

     4,087        —         4       (70     —          —          4,021  

Kiwoom Milestone Professional Private Real Estate Trust 19

     10,761        (55     (216     —         —          —          10,490  

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     21,237        (575     1,157       (272     —          —          21,547  

Brain Professional Private Trust No.4

     5,316        —         131       2       —          —          5,449  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     25,764        (857     1,090       (496     —          —          25,501  

 

61


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017  

Investees

   Beginning
balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
     Transfer
out
    Ending
balance
 

Brain KS Qualified Privately Placed Fund No.6

   W   4,896        (2,000     (11     25       —          —         2,910  

M360 CRE Income Fund

     23,167        130,208       2,677       (1,635     —          —         154,417  

Shinhan Ninetree Fund 1

     —          10,141       34       —         —          —         10,175  

JB POWER Fund 6

     —          62,237       381       —         —          —         62,618  

Shinhan Global Healthcare Fund 1

     —          2,940       —         —         —          —         2,940  

Brain Asset Management PN Private Investment Trust Fund 13

     —          1,500       54       —         —          —         1,554  

Orion Mezzanine Private Investment Trust 4

     —          1,500       6       —         —          —         1,506  

JB Power TL Investment Type Private Placement Special Asset Fund 7

     —          18,762       21       —         —          —         18,783  

Bros Investment O Hedge Fund 1

     —          5,000       (6     —         —          —         4,994  

BNP Paribas Cardif General Insurance

     2,584        2,770       (477     9       —          —         4,886  

SHBNPP Private Korea Equity Long-Short Professional Feeder

     14,180        —         1,082       —         —          —         15,262  

SHBNPP Private Multi Strategy Professional Feeder No.1

     5,014        (5,049     35       —         —          —         —    

Shinhan-Stonebridge Petro PEF

     18,487        —         523       —         —          —         19,010  

Lodestone 1st Private Equity Fund

     —          3,000       —         —         —          —         3,000  

Axis Global Growth New Technology Investment Association

     —          5,000       (75     —         —          —         4,925  

Quantum-Nvestor Fund No.1

     —          1,500       (3     —         —          —         1,497  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   W   353,600        303,912       13,649       (12,067     28        (39,582     619,540  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

(*1) The market value of the investment is W10,618 million as of June 30, 2017 based on the quoted market price.
(*2) The Group has stopped recognizing its equity method income or loss due to the investees’ cumulative loss.

 

62


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2016  

Investees

   Beginning
balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
     Ending
balance
 

BNP Paribas Cardif Life Insurance

   W   57,280        —         (2,495     5,428       —          60,213  

Aju Capital Co., Ltd. (*1)

     34,444        (2,588     9,038       (58     —          40,836  

UAMCO., Ltd.

     125,822        (128,827     2,882       123       —          —    

Pohang TechnoPark 2PFV

     1,976        —         (1     —         —          1,975  

Daewontos Co., Ltd. (*3)

     —          —         —         —         —          —    

Inhee Co., Ltd.

     254        —         (39     —         —          215  

DAEGY Electrical Construction Co., LTD.

     149        —         (21     —         —          128  

Kukdong Engineering & Construction Co., LTD

     —          3,478       —         (3,478     —          —    

YEONWOONG SYSTEM

     106        —         (29     —         —          77  

DOODOO LOGITECH

     384        —         (137     —         —          247  

Neoplux Technology Valuation Investment Fund

     1,993        4,768       765       —         —          7,526  

EQP Global Energy Infrastructure Private Equity Fund (*3)

     —          105       (105     —         —          —    

JAEYOUNG SOLUTEC CO., LTD. (*2)

     6,238        —         (504     2       —          5,736  

Partners 4th Growth Investment Fund

     1,800        3,080       (325     —         —          4,555  

PSA 1st Fintech Private Equity Fund

     2,000        500       (44     —         —          2,456  

KTB Newlake Global Healthcare PEF

     —          1,383       (215     —         —          1,168  

JAEYANG INDUSTRY (*3)

     —          —         —         —         —          —    

Tigris-Aurum Fund I

     —          1,500       (19     —         —          1,481  

Treenkid

     —          92       (13     —         —          79  

Chungyoung INC

     —          —         —         —         —          —    

Semantic

     —          249       —         —         —          249  

DAEKWANG SEMICONDUCTOR CO., LTD.

     —          4,776       —         —         —          4,776  

Branbuil CO., LTD.

     —          183       (183     —         —          —    

SHC-IMM New Growth Fund

     3,175        (1,189     309       —         —          2,295  

QCP New Technology Fund 20th

     2        —         —         —         —          2  

STI-New Growth Engines Investment Partnership

     2,763        (1,100     643       (333     —          1,973  

Shinhan K2 Secondary Fund

     2,576        (2,063     863       (438     —          938  

TS2013-6 M&A Investment Fund

     2,116        (213     (29     —         —          1,874  

Dream High Fund III

     1,556        —         171       1,417       —          3,144  

OCEAN SUCCESS SHIPPING LIMITED

     1,228        (1,592     443       (79     —          —    

SHC-EN Fund

     4,312        (4,942     630       —         —          —    

SP New Technology Business investment Fund I

     1,974        —         (20     —         —          1,954  

Albatross Growth Fund

     3,341        (727     347       (1,389     —          1,572  

Asia Pacific No.39 Ship Investment Co., Ltd.

     5,085        (837     342       586       —          5,176  

 

63


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2016  

Investees

   Beginning
Balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
    Ending
balance
 

Midas Dong-A Snowball Venture Fund

   W   1,202        —         56       —         —         1,258  

IBKS-Shinhan Creative Economy New Technology Fund

     148        74       37       —         —         259  

SH RENTAL SERVICE

     61        (62     1       —         —         —    

SM New Technology Business Investment Fund I

     1,931        (50     (35     —         —         1,846  

SHC-Aju 4th

     2,000        (920     322       683       —         2,085  

KCLAVIS Meister Fund No.4

     —          500       11       —         —         511  

KCLAVIS Meister Fund No.5

     —          500       (6     —         —         494  

KCLAVIS Meister Fund No.2

     —          2,000       (16     —         —         1,984  

Midas Dong-A Snowball Venture Fund 2

     —          1,825       (38     —         —         1,787  

EN-Tigris Fund 1

     —          2,000       (29     —         —         1,971  

IBKS-Shinhan Creative Economy New Technology Fund II

     —          90       —         —         —         90  

KCLAVIS Meister Fund No.11

     —          (16     16       —         —         —    

KCLAVIS Meister Fund No.10

     —          1,000       (5     —         —         995  

KCLAVIS Meister Fund No.9

     —          500       (32     —         —         468  

KCLAVIS Meister Fund No.14

     —          500       (1     —         —         499  

KCLAVIS Meister Fund No.17

     —          3,000       (11     —         —         2,989  

SG No.9 Corporate Recovery Private Equity Fund

     —          3,886       96       —         —         3,982  

Plutus-SG Private Equity Fund

     —          4,338       (39     —         —         4,299  

SG ARGES Private Equity Fund No.1

     —          8,955       21       —         —         8,976  

OST Progress- 2 Fund

     —          1,500       (40     —         —         1,460  

Eum Private Equity Fund No.3

     —          5,982       (49     —         —         5,933  

APC Fund

     33,715        (4,419     (7,506     (2,872     (7,339     11,579  

BNH-CJ Bio Healthcare Fund

     9,095        (12,892     3,797       —         —         —    

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     28,010        (28,631     1,085       —         —         464  

Shinhan Praxis K-Growth Global Private Equity Fund

     8,614        4,624       (205     500       —         13,533  

Credian Healthcare Private Equity Fund II

     —          4,148       (61     —         —         4,087  

Kiwoom Milestone Professional Private Real Estate Trust 19

     —          10,944       (183     —         —         10,761  

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     —          19,144       461       1,632       —         21,237  

Brain Professional Private Trust No.4

     —          5,000       316       —         —         5,316  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     —          25,000       747       17       —         25,764  

Brain KS Qualified Privately Placed Fund No.6

     —          5,001       (13     (92     —         4,896  

M360 CRE Income Fund

     —          22,992       —         175       —         23,167  

 

64


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2016  

Investees

   Beginning
Balance
     Investment
and
dividend
    Equity
method
income
(loss)
    Change in
other
comprehensive
income
    Impairment
loss
    Ending
balance
 

BNP Paribas Cardif General Insurance

   W   1,739        2,045       (1,189     (11     —         2,584  

SHBNPP Private Korea Equity Long-Short Professional Feeder

     28,076        (13,467     (429     —         —         14,180  

SHBNPP Private Multi Strategy Professional Feeder No.1

     —          5,000       14       —         —         5,014  

Shinhan-Stonebridge Petro PEF

     17,841        (2     648       —         —         18,487  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W   393,006        (43,875     9,995       1,813       (7,339     353,600  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1) The market value of the investment is W51,543 million as of December 31, 2016 based on the quoted market price.
(*2) The market value of the investment is W10,466 million as of December 31, 2016 based on the quoted market price.
(*3) The Group has stopped recognizing its equity method income or loss due to the investees’ cumulative loss.

 

65


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

  (c) Condensed statement of financial position information of associates as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Investees

   Asset      Liability      Asset      Liability  

BNP Paribas Cardif Life Insurance

   W   4,198,043        3,836,790        4,182,208        3,779,257  

Aju Capital Co., Ltd.

     —          —          6,543,737        5,744,415  

Pohang TechnoPark 2PFV

     14,658        1,401        14,660        1,401  

Daewontos Co., Ltd.

     400        2,492        399        2,492  

Inhee Co., Ltd.

     10,234        8,443        10,713        9,310  

DAEGY Electrical Construction Co., LTD.

     570        134        659        191  

YEONWOONG SYSTEM

     498        147        497        146  

DOODOO LOGITECH

     742        95        891        6  

Neoplux Technology Valuation Investment Fund

     33,488        —          22,577        —    

EQP Global Energy Infrastructure Private Equity Fund

     —          —          1        1,376  

JAEYOUNG SOLUTEC CO., LTD.

     152,723        113,657        155,368        120,184  

Partners 4th Growth Investment Fund

     34,723        379        18,478        257  

PSA 1st Fintech Private Equity Fund

     9,770        46        9,825        —    

KTB Newlake Global Healthcare PEF

     3,158        260        3,805        478  

JAEYANG INDUSTRY

     2,146        4,717        2,146        4,717  

Tigris-Aurum Fund I

     5,349        —          5,431        —    

Treenkid

     —          —          1,193        859  

Chungyoung INC

     1,637        6,705        2,341        6,753  

Semantic

     —          —          3,098        1,804  

DAEKWANG SEMICONDUCTOR CO., LTD.

     30,413        10,845        35,204        12,392  

Branbuil CO., LTD.

     1,944        2,451        2,177        2,870  

Songrim Co., Ltd.

     1,782        1,590        —          —    

Shinhan-Albatross Technology Investment Fund

     5,875        180        —          —    

Loggia

     1,390        1,160        —          —    

SHC-IMM New Growth Fund

     3,478        —          3,675        117  

QCP New Technology Fund 20th

     5        —          5        —    

STI-New Growth Engines Investment Partnership

     3,905        46        3,945        —    

Shinhan K2 Secondary Fund

     —          —          8,894        172  

TS2013-6 M&A Investment Fund

     1,080        1,076        7,651        151  

Dream High Fund III

     4,282        4        5,765        —    

SP New Technology Business investment Fund I

     8,355        2        8,418        20  

Albatross Growth Fund

     —          —          5,237        915  

Asia Pacific No.39 Ship Investment Co., Ltd.

     9,912        57        10,379        28  

Midas Dong-A Snowball Venture Fund

     2,192        —          2,379        19  

IBKS-Shinhan Creative Economy New Technology Fund

     5,184        —          5,201        13  

SM New Technology Business Investment Fund I

     5,089        —          5,083        3  

SHC-Aju 4th

     8,621        18        9,508        18  

KCLAVIS Meister Fund No.4

     2,592        11        2,583        30  

KCLAVIS Meister Fund No.5

     2,117        10        2,150        26  

KCLAVIS Meister Fund No.2

     5,098        16        5,150        42  

Midas Dong-A Snowball Venture Fund 2

     7,046        —          7,199        50  

EN-Tigris Fund 1

     5,194        —          4,140        1  

IBKS-Shinhan Creative Economy New Technology Fund II

     1,959        —          1,979        8  

KCLAVIS Meister Fund No.10

     2,247        1        4,714        37  

KCLAVIS Meister Fund No.9

     1,400        13        1,362        6  

KCLAVIS Meister Fund No.14

     —          —          1,507        9  

KCLAVIS Meister Fund No.17

     11,503        156        11,500        42  

 

66


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017      2016  

Investees

   Asset      Liability      Asset      Liability  

Richmond Private Yong in Retail Facility Real Estate Fund No.1

   W   47,571        28,622        —          —    

House Eco Private Placement Special Asset Fund No.1

     4,659        5        —          —    

KTB Confidence Private Placement

          42,182        21,052        —          —    

JBUS Fintech Income Professional Private Trust No.2

     10,023        —          —          —    

Meritz AI-SingA330-A Investment Type Private Placement Special Asset Fund

     31,106        2        —          —    

Meritz AI-SingA330-B Investment Type Private Placement Special Asset Fund

     41,623        2        —          —    

Korea Alternative Source Professional Private Investment Trust No.6

     3,005        5        —          —    

Hyundai Season Mezzanine Professional Private Investment Trust No.4

     6,792        40        —          —    

Pine Asia Unsecured Individual Rehabilitation Bond Fund 9

     4,241        1        —          —    

Brain Professional Private Trust No.6

     9,793        —          —          —    

Pine Asia Unsecured Individual Rehabilitation Bond Fund 15

     2,440        1        —          —    

Korea Investment Mezzanine Professional Private Investment Trust No.1

     9,749        —          —          —    

Brain Professional Private Trust No.12

     4,156        6        —          —    

Hyundai Invest BMC Professional Private Trust No.18

     14,747        5        —          —    

Pine Asia Unsecured Individual Rehabilitation Bond Fund 8

     26,264        13        —          —    

Hana UBS Professional Private Trust

     11,958        83        —          —    

SG No.9 Corporate Recovery Private Equity Fund

     15,050        37        15,069        38  

Plutus-SG Private Equity Fund

     16,044        68        16,188        68  

SG ARGES Private Equity Fund No.1

     37,184        90        37,392        91  

OST Progress- 2 Fund

     10,875        273        5,437        150  

Eum Private Equity Fund No.3

     28,793        4        28,584        4  

Smart 2nd Private Equity Fund

     14,814        51        —          —    

APC Fund

     43,052        60             46,043        65  

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     927        —          928        1  

Shinhan Praxis K-Growth Global Private Equity Fund

     92,181        372        72,075        350  

Credian Healthcare Private Equity Fund II

     11,845        47        12,040        47  

Kiwoom Milestone Professional Private Real Estate Trust 19

     57,315        36,336        57,692             36,169  

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     101,332        85        99,794        3  

Brain Professional Private Trust No.4

     20,973        1,159        19,384        46  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     57,946        1,077        59,781        2,327  

Brain KS Qualified Privately Placed Fund No.6

     9,702        —          9,794        1  

M360 CRE Income Fund

     189,382        67        60,261        6,167  

Shinhan Ninetree Fund 1

     144,303             97,646        —          —    

JB POWER Fund 6

     116,232        3,309        —          —    

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     57,946        1,077        59,781        2,327  

Shinhan Global Healthcare Fund 1

     27,144        —          —          —    

Brain Asset Management PN Private Investment Trust Fund 13

     3,786        4        —          —    

Orion Mezzanine Private Investment Trust 4

     3,615        —          —          —    

JB Power TL Investment Type Private Placement Special Asset Fund 7

     169,274        112,924        —          —    

 

67


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017      2016  

Investees

   Asset      Liability      Asset      Liability  

Bros Investment O Hedge Fund 1

   W   6,261        967        —          —    

BNP Paribas Cardif General Insurance

     36,534        15,378        40,581        14,742  

SHBNPP Private Korea Equity Long-Short Professional Feeder

     67,507        9,164        105,775        16,519  

SHBNPP Private Multi Strategy Professional Feeder No.1

     —          —          20,325        3,340  

Shinhan-Stonebridge Petro PEF

     1,044,321        1,127        1,015,299        804  

Lodestone 1st Private Equity Fund

     —          —          —          —    

Axis Global Growth New Technology Investment Association

     15,464        —          —          —    

Quantum-Nvestor Fund No.1

     5,987        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   7,276,900        4,324,061        12,856,274        9,771,547  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

68


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

Condensed income statement information for the six-month period ended June 30, 2017 and the year ended December 31, 2016 were as follows:

 

     2017  

Investees

   Operating
revenue
     Net profit
(loss)
    Other
comprehensive
income

(loss)
    Total
comprehensive
income

(loss)
 

BNP Paribas Cardif Life Insurance

   W   48,974        15,564       (55,563     (39,999

Pohang TechnoPark 2PFV

     —          (2     —         (2

Daewontos Co., Ltd.

     —          —         —         —    

Inhee Co., Ltd.

     2,442        (9     —         (9

DAEGY Electrical Construction Co., LTD.

     17        (32     —         (32

YEONWOONG SYSTEM

     38        1       —         1  

DOODOO LOGITECH

     145        (209     —         (209

Neoplux Technology Valuation Investment Fund

     5,863        5,241       —         5,241  

JAEYOUNG SOLUTEC CO., LTD.

     70,700        (3,801     2,872       (929

Partners 4th Growth Investment Fund

     51        (837     —         (837

PSA 1st Fintech Private Equity Fund

     2        (101     —         (101

KTB Newlake Global Healthcare PEF

     —          (429     —         (429

JAEYANG INDUSTRY

     —          —         —         —    

Tigris-Aurum Fund I

     —          (82     —         (82

Chungyoung INC

     3,760        (657     —         (657

DAEKWANG SEMICONDUCTOR CO., LTD.

     10,571        (3,244     —         (3,244

Branbuil CO., LTD.

     —          —         —         —    

Songrim Co., Ltd.

     2,469        162       —         162  

Shinhan-Albatross Technology Investment Fund

     22        (305     —         (305

Loggia

     —          —         —         —    

SHC-IMM New Growth Fund

     103        98       —         98  

QCP New Technology Fund 20th

     —          —         —         —    

STI-New Growth Engines Investment Partnership

     —          (85     —         (85

TS2013-6 M&A Investment Fund

     6,720        6,741       —         6,741  

Dream High Fund III

     14        (183     (1,303     (1,486

SP New Technology Business investment Fund I

     —          (45     —         (45

Albatross Growth Fund

     1,938        1,578       (2,104     (526

Asia Pacific No.39 Ship Investment Co., Ltd.

     338        298       32       330  

Midas Dong-A Snowball Venture Fund

     24        (13     —         (13

IBKS-Shinhan Creative Economy New Technology Fund

     20        (4     —         (4

SM New Technology Business Investment Fund I

     70        9       —         9  

SHC-Aju 4th

     505        467       102       569  

KCLAVIS Meister Fund No.4

     48        27       —         27  

KCLAVIS Meister Fund No.5

     —          (17     —         (17

KCLAVIS Meister Fund No.2

     —          (26     —         (26

Midas Dong-A Snowball Venture Fund 2

     —          (103     —         (103

EN-Tigris Fund 1

     1,098        1,054       —         1,054  

IBKS-Shinhan Creative Economy New Technology Fund II

     5        (11     —         (11

KCLAVIS Meister Fund No.10

     339        310       —         310  

KCLAVIS Meister Fund No.9

     39        31       —         31  

KCLAVIS Meister Fund No.14

     80        68       —         68  

KCLAVIS Meister Fund No.17

     4        (111     —         (111

Richmond Private Yong in Retail Facility Real Estate Fund No.1

     1,059        1,059       —         1,059  

 

69


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017  

Investees

   Operating
revenue
    Net profit
(loss)
    Other
comprehensive
income

(loss)
    Total
comprehensive
income

(loss)
 

House Eco Private Placement Special Asset Fund No.1

   W   583       582       —         582  

KTB Confidence Private Placement

     825       824       —         824  

JBUS Fintech Income Professional Private Trust No.2

     353       353       —         353  

Meritz AI-SingA330-A Investment Type Private Placement Special Asset Fund

     641       640       —         640  

Meritz AI-SingA330-B Investment Type Private Placement Special Asset Fund

     1,000       999       —         999  

Korea Alternative Source Professional Private Investment Trust No.6

     251       251       —         251  

Hyundai Season Mezzanine Professional Private Investment Trust No.4

     (5     (4     —         (4

Pine Asia Unsecured Individual Rehabilitation Bond Fund 9

     389       388       —         388  

Brain Professional Private Trust No.6

     292       291       —         291  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 15

     73       72       —         72  

Korea Investment Mezzanine Professional Private Investment Trust No.1

     145       145       —         145  

Brain Professional Private Trust No.12

     —         —         —         —    

Hyundai Invest BMC Professional Private Trust No.18

     91       90       —         90  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 8

     112       111       —         111  

Hana UBS Professional Private Trust

     416       416       —         416  

SG No.9 Corporate Recovery Private Equity Fund

     —         148       —         148  

Plutus-SG Private Equity Fund

     —         105       —         105  

SG ARGES Private Equity Fund No.1

     —         392       —         392  

OST Progress- 2 Fund

     97       (114     —         (114

Eum Private Equity Fund No.3

     1,656       1,406       —         1,406  

Smart 2nd Private Equity Fund

     1       (237     —         (237

APC Fund

     —         (687     —         (687

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     2       1       —         1  

Shinhan Praxis K-Growth Global Private Equity Fund

     227       (1,668     1,752       84  

Credian Healthcare Private Equity Fund II

     105       10       (205     (195

Kiwoom Milestone Professional Private Real Estate Trust 19

     998       (432     —         (432

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     6,218       5,437       (1,280     4,157  

Brain Professional Private Trust No.4

     1,103       475       —         475  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     5,698       2,432       (1,107     1,325  

Brain KS Qualified Privately Placed Fund No.6

     2       (54     (37     (91

M360 CRE Income Fund

     5       4,197       —         4,197  

Shinhan Ninetree Fund 1

     1,485       158       —         158  

JB POWER Fund 6

     4,779       686       —         686  

Shinhan Global Healthcare Fund 1

     —         —         —         —    

Brain Asset Management PN Private Investment Trust Fund 13

     136       131       —         131  

 

70


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017  

Investees

   Operating
revenue
     Net profit
(loss)
    Other
comprehensive
income

(loss)
    Total
comprehensive
income

(loss)
 

Orion Mezzanine Private Investment Trust 4

   W 15        15       —         15  

JB Power TL Investment Type Private Placement Special Asset Fund 7

     608        64       —         64  

Bros Investment O Hedge Fund 1

     9        (6     —         (6

BNP Paribas Cardif General Insurance

     3,121        (1,586     —         (1,586

SHBNPP Private Korea Equity Long-Short Professional Feeder

     19,058        5,514       —         5,514  

Shinhan-Stonebridge Petro PEF

     3        (1,646     —         (1,646

Lodestone 1st Private Equity Fund

     —          —         —         —    

Axis Global Growth New Technology Investment Association

     —          (236     —         (236

Quantum-Nvestor Fund No.1

     1        (13     —         (13
  

 

 

    

 

 

   

 

 

   

 

 

 
   W   207,951        42,052       (56,841     (14,789
  

 

 

    

 

 

   

 

 

   

 

 

 

 

 

71


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2016  

Investees

   Operating
revenue
     Net profit
(loss)
    Other
comprehensive income

(loss)
    Total
comprehensive income

(loss)
 

BNP Paribas Cardif Life Insurance

   W 144,583        (16,706     36,189       19,483  

Aju Capital Co., Ltd.

       757,345        70,598       (458     70,140  

Pohang TechnoPark 2PFV

     —          (4     —         (4

Daewontos Co., Ltd.

     517        (624     —         (624

Inhee Co., Ltd.

     3,135        (253     —         (253

DAEGY Electrical Construction Co., LTD.

     —          (76     —         (76

YEONWOONG SYSTEM

     25        (135     —         (135

DOODOO LOGITECH

     213        (609     —         (609

Neoplux Technology Valuation Investment Fund

     3,441        2,295       —         2,295  

EQP Global Energy Infrastructure Private Equity Fund

     —          (1,842     —         (1,842

JAEYOUNG SOLUTEC CO., LTD.

     137,920        (7,095     (614     (7,709

Partners 4th Growth Investment Fund

     113        (1,300     —         (1,300

PSA 1st Fintech Private Equity Fund

     —          (175     —         (175

KTB Newlake Global Healthcare PEF

     —          (716     —         (716

JAEYANG INDUSTRY

     212        (69     —         (69

Tigris-Aurum Fund I

     —          (69     —         (69

Treenkid

     325        (54     —         (54

Chungyoung INC (*2)

     —          —         —         —    

Semantic

     —          —         —         —    

DAEKWANG SEMICONDUCTOR CO., LTD.

     —          —         —         —    

Branbuil CO., LTD. (*2)

     —          —         —         —    

SHC-IMM New Growth Fund

     855        479       —         479  

QCP New Technology Fund 20th

     —          —         —         —    

STI-New Growth Engines Investment Partnership

     —          1,285       (667     618  

Shinhan K2 Secondary Fund

     15,284        8,019       (4,072     3,947  

TS2013-6 M&A Investment Fund

     237        (115     —         (115

Dream High Fund III

     535        313       2,597       2,910  

SP New Technology Business investment Fund I

     —          (87     —         (87

Albatross Growth Fund

     1,024        957       (3,821     (2,864

Asia Pacific No.39 Ship Investment Co., Ltd.

     730        681       1,172       1,853  

Midas Dong-A Snowball Venture Fund

     183        105       —         105  

IBKS-Shinhan Creative Economy New Technology Fund

     798        746       —         746  

SM New Technology Business Investment Fund I

     24        (95     —         (95

SHC-Aju 4th

     1,565        1,466       3,111       4,577  

KCLAVIS Meister Fund No.4

     85        53       —         53  

KCLAVIS Meister Fund No.5

     —          (26     —         (26

KCLAVIS Meister Fund No.2

     —          (42     —         (42

Midas Dong-A Snowball Venture Fund 2

     1        (151     —         (151

EN-Tigris Fund 1

     —          (61     —         (61

IBKS-Shinhan Creative Economy New Technology Fund II

     13        (9     —         (9

 

72


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2016  

Investees

   Operating
revenue
     Net profit
(loss)
    Other
comprehensive income

(loss)
    Total
comprehensive income

(loss)
 

KCLAVIS Meister Fund No.10

   W 20        (23     —         (23

KCLAVIS Meister Fund No.9

     34        (95     —         (95

KCLAVIS Meister Fund No.14

     7        (2     —         (2

KCLAVIS Meister Fund No.17

     —          (42     —         (42

SG No.9 Corporate Recovery Private Equity Fund

     —          428       —         428  

Plutus-SG Private Equity Fund

     5        (148     —         (148

SG ARGES Private Equity Fund No.1

     —          87       —         87  

OST Progress- 2 Fund

     34        (143     —         (143

Eum Private Equity Fund No.3

     85        (235     —         (235

APC Fund

     —          (29,768     (13,407     (43,175

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     2,170        2,170       —         2,170  

Shinhan Praxis K-Growth Global Private Equity Fund

     513        (1,084     2,656       1,572  

Credian Healthcare Private Equity Fund II

     190        (180     —         (180

Kiwoom Milestone Professional Private Real Estate Trust 19

     924        (367     —         (367

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     10,321        2,210       7,669       9,879  

Brain Professional Private Trust No.4

     2,158        1,148       —         1,148  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     5,199        1,667       37       1,704  

Brain KS Qualified Privately Placed Fund No.6

     1        (26     (182     (208

M360 CRE Income Fund

     —          —         —         —    

BNP Paribas Cardif General Insurance

     7,913        (9,432     (39     (9,471

SHBNPP Private Korea Equity Long-Short Professional Feeder

     25,736        (396     —         (396

SHBNPP Private Multi Strategy Professional Feeder No.1

     4,510        70       —         70  

Shinhan-Stonebridge Petro PEF

     38,898        35,559       —         35,559  
  

 

 

    

 

 

   

 

 

   

 

 

 
   W   1,167,881        58,082       30,171       88,253  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

73


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

  (d) Reconciliation of the financial information to the carrying values of its interests in the associates as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  

Investees

   Net
assets (a)
    Ownership
(%)

(b)
     Interests
in the net
assets

(a)*(b)
    Intra-group
transactions
    Other      Carrying
value
 

BNP Paribas Cardif Life Insurance

   W   361,253       14.99        54,188       (197     —          53,991  

Pohang TechnoPark 2PFV

     13,257       14.90        1,975       —         —          1,975  

Daewontos Co., Ltd. (*1)

     (2,092     36.33        (760     —         760        —    

Inhee Co., Ltd.

     1,791       15.36        275       —         —          275  

DAEGY Electrical Construction Co., LTD.

     436       27.45        119       —         —          119  

YEONWOONG SYSTEM

     351       21.77        77       —         —          77  

DOODOO LOGITECH

     647       27.96        181       —         —          181  

Neoplux Technology Valuation Investment Fund

     33,488       33.33        11,163       —         —          11,163  

JAEYOUNG SOLUTEC CO., LTD. (*2)

     37,968       9.61        3,648       —         2,169        5,817  

Partners 4th Growth Investment Fund

     34,344       25.00        8,586       —         —          8,586  

PSA 1st Fintech Private Equity Fund

     9,724       25.00        2,431       —         —          2,431  

KTB Newlake Global Healthcare PEF (*3)

     2,898       30.00        869       —         170        1,039  

JAEYANG INDUSTRY (*4)

     (2,571     25.90        (666     —         666        —    

Tigris-Aurum Fund I

     5,349       27.27        1,459       —         —          1,459  

Chungyoung INC (*4)

     (5,068     18.94        (961     —         961        —    

DAEKWANG SEMICONDUCTOR CO., LTD.

     19,568       20.94        4,097       —         —          4,097  

Branbuil CO., LTD. (*3)

     (507     15.53        (79     —         79        —    

Songrim Co., Ltd.

     192       35.34        68       —         —          68  

Shinhan-Albatross Technology Investment Fund

     5,695       50.00        2,847       —         —          2,847  

Loggia

     230       16.29        37       —         —          37  

SHC-IMM New Growth Fund

     3,478       64.52        2,244       —         —          2,244  

QCP New Technology Fund 20th

     5       47.17        2       —         —          2  

STI-New Growth Engines Investment Partnership

     3,859       50.00        1,930       —         —          1,930  

TS2013-6 M&A Investment Fund

     4       25.00        —         —         —          —    

Dream High Fund III

     4,278       54.55        2,333       —         —          2,333  

SP New Technology Business investment Fund I

     8,353       23.26        1,943       —         —          1,943  

Albatross Growth Fund

     —         36.36        —         —         —          —    

Asia Pacific No.39 Ship Investment Co., Ltd.

     9,855       50.00        4,928       —         —          4,928  

Midas Dong-A Snowball Venture Fund

     2,192       53.33        1,168       —         —          1,168  

IBKS-Shinhan Creative Economy New Technology Fund

     5,184       5.00        259       —         —          259  

SM New Technology Business Investment Fund I

     5,089       36.36        1,849       —         —          1,849  

SHC-Aju 4th

     8,603       21.98        1,890       —         —          1,890  

KCLAVIS Meister Fund No.4

     2,581       20.00        517       —         —          517  

KCLAVIS Meister Fund No.5

     2,107       23.26        490       —         —          490  

 

74


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2017  

Investees

   Net
assets
(a)
     Ownership
(%)

(b)
     Interests
in the net
assets

(a)*(b)
     Intra-group
transactions
     Other      Carrying
value
 

KCLAVIS Meister Fund No.2

   W 5,082        38.83        1,974        —          —          1,974  

Midas Dong-A Snowball Venture Fund 2

     7,046        25.00        1,761        —          —          1,761  

EN-Tigris Fund 1

     5,194        47.62        2,473        —          —          2,473  

IBKS-Shinhan Creative Economy New Technology Fund II

     1,959        4.55        89        —          —          89  

KCLAVIS Meister Fund No.10

     2,246        21.28        477        —          —          477  

KCLAVIS Meister Fund No.9

     1,387        34.48        479        —          —          479  

KCLAVIS Meister Fund No.14

     —          33.33        —          —          —          —    

KCLAVIS Meister Fund No.17

       11,347        26.09        2,960        —          —          2,960  

Richmond Private Yong in Retail Facility Real Estate Fund No.1

     18,949        42.00        7,959        —          —          7,959  

House Eco Private Placement Special Asset Fund No.1

     4,654        26.67        1,241        —          —          1,241  

KTB Confidence Private Placement

     21,130        25.08        5,300        —          —          5,300  

JBUS Fintech Income Professional Private Trust No.2

     10,023        20.00        2,005        —          —          2,005  

Meritz AI-SingA330-A Investment Type Private Placement Special Asset Fund

     31,104        23.89        7,431        —          —          7,431  

Meritz AI-SingA330-B Investment Type Private Placement Special Asset Fund

     41,621        20.16        8,391        —          —          8,391  

Korea Alternative Source Professional Private Investment Trust No.6

     3,000        20.00        600        —          —          600  

Hyundai Season Mezzanine Professional Private Investment Trust No.4

     6,752        29.60        1,999        —          —          1,999  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 9

     4,240        49.84        2,114        —          —          2,114  

Brain Professional Private Trust No.6

     9,793        21.05        2,061        —          —          2,061  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 15

     2,439        97.94        2,389        —          —          2,389  

Korea Investment Mezzanine Professional Private Investment Trust No.1

     9,749        50.00        4,875        —          —          4,875  

Brain Professional Private Trust No.12

     4,150        48.19        2,000        —          —          2,000  

Hyundai Invest BMC Professional Private Trust No.18

     14,742        20.00        2,948        —          —          2,948  

Pine Asia Unsecured Individual Rehabilitation Bond Fund 8

     26,251        22.85        5,998        —          —          5,998  

Hana UBS Professional Private Trust

     11,875        43.63        5,182        —          —          5,182  

SG No.9 Corporate Recovery Private Equity Fund

     15,013        26.49        3,977        —          —          3,977  

Plutus-SG Private Equity Fund

     15,976        26.67        4,261        —          —          4,261  

SG ARGES Private Equity Fund No.1

     37,094        24.06        8,926        —          —          8,926  

OST Progress- 2 Fund

     10,602        27.62        2,928        —          —          2,928  

Eum Private Equity Fund No.3

     28,789        20.76        5,976        —          —          5,976  

Smart 2nd Private Equity Fund

     14,763        20.00        2,953        —          —          2,953  

 

75


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

 

     2017  

Investees

   Net
assets
(a)
     Ownership
(%)

(b)
     Interests
in the net
assets

(a)*(b)
     Intra-group
transactions
    Other      Carrying
value
 

APC Fund

   W   42,992        25.18        10,826        —         —          10,826  

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     927        50.00        464        —         —          464  

Shinhan Praxis K-Growth Global Private Equity Fund

     91,809        18.87        17,323        —         —          17,323  

Credian Healthcare Private Equity Fund II

     11,798        34.07        4,021        —         —          4,021  

Kiwoom Milestone Professional Private Real Estate Trust 19

     20,979        50.00        10,490        —         —          10,490  

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     101,247        21.28        21,547        —         —          21,547  

Brain Professional Private Trust No.4

     19,814        27.50        5,449        —         —          5,449  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     56,869        44.84        25,501        —         —          25,501  

Brain KS Qualified Privately Placed Fund No.6

     9,702        30.00        2,910        —         —          2,910  

M360 CRE Income Fund

     189,315        81.64        154,417        —         —          154,417  

Shinhan Ninetree Fund 1

     46,657        21.81        10,175        —         —          10,175  

JB POWER Fund 6

     112,923        55.45        62,618        —         —          62,618  

Shinhan Global Healthcare Fund 1

     27,144        10.83        2,940        —         —          2,940  

Brain Asset Management PN Private Investment Trust Fund 13

     3,782        41.10        1,554        —         —          1,554  

Orion Mezzanine Private Investment Trust 4

     3,615        41.67        1,506        —         —          1,506  

JB Power TL Investment Type Private Placement Special Asset Fund 7

     56,350        33.33        18,783        —         —          18,783  

Bros Investment O Hedge Fund 1

     5,294        94.34        4,994        —         —          4,994  

BNP Paribas Cardif General Insurance (*5)

     21,156        10.00        2,116        —         2,770        4,886  

SHBNPP Private Korea Equity Long-Short Professional Feeder

     58,343        26.15        15,262        —         —          15,262  

Shinhan-Stonebridge Petro PEF

     1,043,194        1.82        19,010        —         —          19,010  

Lodestone 1st Private Equity Fund (*5)

     —          26.06        —          —         3,000        3,000  

Axis Global Growth New Technology Investment Association

     15,464        31.85        4,925        —         —          4,925  

Quantum-Nvestor Fund No.1

     5,987        25.00        1,497        —         —          1,497  
  

 

 

       

 

 

    

 

 

   

 

 

    

 

 

 
   W   2,894,872           609,162        (197     10,575        619,540  
  

 

 

       

 

 

    

 

 

   

 

 

    

 

 

 

 

76


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

 

(*1) Other adjustments represent the unrecognized equity method losses because the Group has stopped recognizing its equity method losses as the balance of the investment has been reduced to zero.
(*2) Net assets do not include non-controlling interests and other adjustments represent the difference between the cost of the investment and the Group’s interests in the net carrying value of the investee’s assets and liabilities at the investment date.
(*3) Other adjustments represent the difference between the cost of the investment and the Group’s interests in the net carrying value of the investee’s assets and liabilities at the investment date.
(*4) Other adjustments represent the unrecognized equity method losses because the Group has stopped recognizing its equity method losses as the balance of the investment has been reduced to zero and the difference between the cost of the investment and the Group’s interests in the net carrying value of the investee’s assets and liabilities at the investment date.
(*5) Other adjustments represent additional investments, for which the financial statements as of June 30, 2017 were not available.

 

77


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

 

     2016  

Investees

   Net
assets
(a)
    Ownership
(%)

(b)
     Interests
in the net
assets

(a)*(b)
    Intra-group
transactions
    Other     Carrying
Value
 

BNP Paribas Cardif Life Insurance

   W   402,951       14.99        60,443       (230     —         60,213  

Aju Capital Co., Ltd. (*1)

     749,882       12.85        96,365       —         (55,529     40,836  

Pohang TechnoPark 2PFV

     13,259       14.90        1,975       —         —         1,975  

Daewontos Co., Ltd. (*2)

     (2,093     36.33        (760     —         760       —    

Inhee Co., Ltd.

     1,403       15.36        215       —         —         215  

DAEGY Electrical Construction Co., LTD.

     468       27.45        128       —         —         128  

YEONWOONG SYSTEM

     351       21.77        77       —         —         77  

DOODOO LOGITECH

     885       27.96        247       —         —         247  

Neoplux Technology Valuation Investment Fund

     22,577       33.33        7,526       —         —         7,526  

EQP Global Energy Infrastructure Private Equity Fund (*2)

     (1,375     22.64        (311     —         311       —    

JAEYOUNG SOLUTEC CO., LTD. (*3)

     34,147       10.45        3,567       —         2,169       5,736  

Partners 4th Growth Investment Fund

     18,221       25.00        4,555       —         —         4,555  

PSA 1st Fintech Private Equity Fund

     9,825       25.00        2,456       —         —         2,456  

KTB Newlake Global Healthcare PEF (*4)

     3,327       30.00        998       —         170       1,168  

JAEYANG INDUSTRY (*5)

     (2,571     25.90        (666     —         666       —    

Tigris-Aurum Fund I

     5,431       27.27        1,481       —         —         1,481  

Treenkid

     334       23.72        79       —         —         79  

Chungyoung INC (*4)

     (4,412     18.94        (836     —         836       —    

Semantic

     1,294       19.25        249       —         —         249  

DAEKWANG SEMICONDUCTOR CO., LTD.

     22,812       20.94        4,776       —         —         4,776  

Branbuil CO., LTD. (*4)

     (693     15.53        (108     —         108       —    

SHC-IMM New Growth Fund

     3,559       64.52        2,295       —         —         2,295  

QCP New Technology Fund 20th

     5       47.17        2       —         —         2  

STI-New Growth Engines Investment Partnership

     3,945       50.00        1,973       —         —         1,973  

Shinhan K2 Secondary Fund

     8,722       10.75        938       —         —         938  

TS2013-6 M&A Investment Fund

     7,500       25.00        1,874       —         —         1,874  

Dream High Fund III

     5,765       54.55        3,144       —         —         3,144  

SP New Technology Business investment Fund I

     8,398       23.26        1,954       —         —         1,954  

Albatross Growth Fund

     4,322       36.36        1,572       —         —         1,572  

Asia Pacific No.39 Ship Investment Co., Ltd.

     10,351       50.00        5,176       —         —         5,176  

Midas Dong-A Snowball Venture Fund

     2,360       53.33        1,258       —         —         1,258  

IBKS-Shinhan Creative Economy New Technology Fund

     5,188       5.00        259       —         —         259  

SM New Technology Business Investment Fund I

     5,080       36.36        1,846       —         —         1,846  

 

78


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

     2016  

Investees

   Net
assets
(a)
     Ownership
(%)

(b)
     Interests
in the net
assets

(a)*(b)
     Intra-group
transactions
    Other     Carrying
value
 

SHC-Aju 4th

   W   9,490        21.98        2,085        —         —         2,085  

KCLAVIS Meister Fund No.4

     2,553        20.00        511        —         —         511  

KCLAVIS Meister Fund No.5

     2,124        23.26        494        —         —         494  

KCLAVIS Meister Fund No.2

     5,108        38.83        1,984        —         —         1,984  

Midas Dong-A Snowball Venture Fund 2

     7,149        25.00        1,787        —         —         1,787  

EN-Tigris Fund 1

     4,139        47.62        1,971        —         —         1,971  

SM New Technology Business Investment Fund II

     1,971        4.55        90        —         —         90  

KCLAVIS Meister Fund No.10

     4,677        21.28        995        —         —         995  

KCLAVIS Meister Fund No.9

     1,356        34.48        468        —         —         468  

KCLAVIS Meister Fund No.14

     1,498        33.33        499        —         —         499  

KCLAVIS Meister Fund No.17

     11,458        26.09        2,989        —         —         2,989  

SG No.9 Corporate Recovery Private Equity Fund

     15,031        26.49        3,982        —         —         3,982  

Plutus-SG Private Equity Fund

     16,120        26.67        4,299        —         —         4,299  

SG ARGES Private Equity Fund No.1

     37,301        24.06        8,976        —         —         8,976  

OST Progress- 2 Fund

     5,287        27.62        1,460        —         —         1,460  

Eum Private Equity Fund No.3

     28,580        20.76        5,933        —         —         5,933  

APC Fund

     45,978        25.18        11,579        —         —         11,579  

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     927        50.00        464        —         —         464  

Shinhan Praxis K-Growth Global Private Equity Fund

     71,725        18.87        13,533        —         —         13,533  

Credian Healthcare Private Equity Fund II

     11,993        34.07        4,087        —         —         4,087  

Kiwoom Milestone Professional Private Real Estate Trust 19

     21,523        50.00        10,761        —         —         10,761  

FG EURO GREEN PRIVATE REAL ESTATE TRUST No.3

     99,791        21.28        21,237        —         —         21,237  

Brain Professional Private Trust No.4

     19,338        27.49        5,316        —         —         5,316  

Hanhwa US Equity Strategy Private Real Estate Fund No.1

     57,454        44.84        25,764        —         —         25,764  

Brain KS Qualified Privately Placed Fund No.6

     9,793        50.00        4,896        —         —         4,896  

M360 CRE Income Fund

     54,094        42.83        23,167        —         —         23,167  

BNP Paribas Cardif General Insurance

     25,839        10.00        2,584        —         —         2,584  

SHBNPP Private Korea Equity Long-Short Professional Feeder

     89,256        15.88        14,180        —         —         14,180  

SHBNPP Private Multi Strategy Professional Feeder No.1

     16,985        29.55        5,014        —         —         5,014  

Shinhan-Stonebridge Petro PEF

     1,014,495        1.82        18,487        —         —         18,487  
  

 

 

       

 

 

    

 

 

   

 

 

   

 

 

 
   W   3,034,251           404,339        (230     (50,509     353,600  
  

 

 

       

 

 

    

 

 

   

 

 

   

 

 

 

 

79


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

13. Investments in associates (continued)

 

 

(*1) Net assets do not include non-controlling interests and other adjustments represent the cumulative impairment.
(*2) Other adjustments represent the unrecognized equity method losses because the Group has stopped recognizing its equity method losses as the balance of the investment has been reduced to zero.
(*3) Net assets do not include non-controlling interests; and other adjustments represent the difference between the cost of the investment and the Group’s interests in the net carrying value of the investee’s assets and liabilities at the investment date and the cumulative impairment.
(*4) Other adjustments represent the difference between the cost of the investment and the Group’s interests in the net carrying value of the investee’s assets and liabilities at the investment date.
(*5) Other adjustments represent the unrecognized equity method losses because the Group has stopped recognizing its equity method losses as the balance of the investment has been reduced to zero and the difference between the cost of the investment and the Group’s interests in the net carrying value of the investee’s assets and liabilities at the investment date.

 

  (e) The unrecognized equity method losses for the six-month period ended June 30, 2017 and the cumulative unrecognized equity method losses as of June 30, 2017 are as follows:

 

     2017  

Investees

   Unrecognized equity
method losses
     Cumulative unrecognized
equity method losses
 

Daewontos Co., Ltd.

   W   —          (760

JAEYANG INDUSTRY

     —          (18

Chungyoung INC

     (124      (124
  

 

 

    

 

 

 
   W   (124      (902
  

 

 

    

 

 

 

 

80


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

14. Trading liabilities

Trading liabilities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Securities sold

   W 1,868,117        1,490,765  

Gold deposits

     485,639        485,995  
  

 

 

    

 

 

 
   W   2,353,756        1,976,760  
  

 

 

    

 

 

 

 

15. Financial liabilities designated at fair value through profit or loss

Financial liabilities designated at fair value through profit or loss as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016      Reason for designation

Deposits

   W 84        6,282      Combined instrument

Equity-linked securities sold

     6,593,104        7,024,194      Combined instrument

Securities sold with embedded derivatives

     2,508,499        2,193,032      Combined instrument

Securities sold

     43,592        10,134      Evaluation and management

on a fair value basis

  

 

 

    

 

 

    
   W   9,145,279        9,233,642     
  

 

 

    

 

 

    

 

16. Debt securities issued

Debt securities issued as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Interest
rate (%)
     Amount  

Debt securities issued in won:

     

Debt securities issued

     0.00~8.00      W   36,862,731  

Subordinated debt securities issued

     1.78~4.60        3,500,480  

Gain and loss on fair value hedges

        (148,796

Bond issuance cost

        (44,455
     

 

 

 
        40,169,960  
     

 

 

 

Debt securities issued in foreign currencies:

     

Debt securities issued

     0.02~4.38        6,423,625  

Subordinated debt securities issued

     3.88        1,130,872  

Gain and loss on fair value hedges

        19,418  

Bond issuance cost

        (29,851
     

 

 

 
        7,544,064  
     

 

 

 
      W 47,714,024  
     

 

 

 

 

81


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

16. Debt securities issued (continued)

 

 

     2016  
     Interest
rate (%)
     Amount  

Debt securities issued in won:

     

Debt securities issued

     0.00~8.00      W   33,838,495  

Subordinated debt securities issued

     2.20~4.69        3,991,056  

Loss on fair value hedges

        (147,208

Bond issuance cost

        (38,178
     

 

 

 
        37,644,165  
     

 

 

 

Debt securities issued in foreign currencies:

     

Debt securities issued

     0.03~4.38        5,526,809  

Subordinated debt securities issued

     3.88        1,189,067  

Loss on fair value hedges

        (9,977

Bond issuance cost

        (23,279
     

 

 

 
        6,682,620  
     

 

 

 
      W 44,326,785  
     

 

 

 

 

17. Defined benefit liabilities

(a) Defined benefit obligations and plan assets

Defined benefit obligations and plan assets as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Present value of defined benefit obligations

   W 1,729,865        1,689,980  

Fair value of plan assets

     (1,579,312      (1,559,101
  

 

 

    

 

 

 

Recognized liabilities for defined benefit obligations

   W 150,553        130,879  
  

 

 

    

 

 

 

(b) Expenses recognized in profit or loss for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Current service costs

   W   42,752        86,024        44,776        90,576  

Net interest expense on the net defined benefit liabilities

     713        1,524        1,415        3,252  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   43,465        87,548        46,191        93,828  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

82


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

18. Provisions

Provisions as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Asset retirement obligations

   W   50,052        50,738  

Expected loss related to litigation (*)

     33,792        34,471  

Unused credit commitments

     167,562        450,997  

Bonus card point reward program

     25,011        25,425  

Financial guarantee contracts issued

     77,983        79,238  

Others

     83,303        88,019  
  

 

 

    

 

 

 
   W   437,703        728,888  
  

 

 

    

 

 

 

 

(*) Refer to the note 28. Commitments and contingencies.

 

19. Liabilities under insurance contracts

 

  (a) Insurance liabilities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Policy reserve

   W   23,461,489        22,366,865  

Policyholder’s equity adjustment

     6,958        10,569  
  

 

 

    

 

 

 
   W 23,468,447        22,377,434  
  

 

 

    

 

 

 

 

  (b) Income or expenses on insurance contracts for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Insurance income:

           

Premium income

   W 1,135,631        2,291,659        1,131,507        2,262,813  

Reinsurance income

     1,079        2,177        790        1,762  

Reversal of policy reserves

     1,677        2,698        —          —    

Separate account income

     6,851        20,828        4,355        9,478  
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,145,238        2,317,362        1,136,652        2,274,053  

Insurance expenses:

           

Claims paid

     (536,170      (1,081,663      (517,420      (1,005,881

Reinsurance premium expenses

     (3,417      (6,262      (1,615      (3,189

Provision for policy reserves

     (545,794      (1,097,322      (563,169      (1,148,115

Separate account expenses

     (6,849      (20,827      (4,354      (9,478

Discount charge

     (162      (315      (137      (265

Acquisition costs

     (139,393      (283,046      (142,902      (285,170

Collection expenses

     (3,934      (7,816      (3,826      (7,580

Deferred acquisition costs

     83,604        173,919        93,776        194,695  

Amortization of deferred acquisition costs

     (107,220      (216,412      (110,738      (221,475
  

 

 

    

 

 

    

 

 

    

 

 

 
     (1,259,335      (2,539,744      (1,250,385      (2,486,458
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss on insurance

   W (114,097      (222,382      (113,733      (212,405
  

 

 

    

 

 

    

 

 

    

 

 

 

 

83


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

20. Equity

 

  (a) Equity as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Capital stock:

     

Common stock

   W 2,370,998        2,370,998  

Preferred stock

     274,055        274,055  
  

 

 

    

 

 

 
     2,645,053        2,645,053  
  

 

 

    

 

 

 

Hybrid bond

     199,455        498,316  

Capital surplus:

     

Share premium

     9,494,769        9,494,769  

Others

     392,566        392,566  
  

 

 

    

 

 

 
     9,887,335        9,887,335  
  

 

 

    

 

 

 

Capital adjustments

     (397,056      (458,461

Accumulated other comprehensive income, net of tax:

     

Valuation gain on available-for-sale financial assets

     315,112        394,183  

Equity in other comprehensive income of associates

     9,991        21,258  

Foreign currency translation adjustments for foreign operations

     (217,760      (151,726

Net loss from cash flow hedges

     (11,027      (13,464

Other comprehensive income of separate account

     4,175        4,466  

Actuarial losses

     (353,471      (357,300
  

 

 

    

 

 

 
     (252,980      (102,583
  

 

 

    

 

 

 

Retained earnings

     19,769,446        18,640,038  

Non-controlling interest

     837,729        635,282  
  

 

 

    

 

 

 
   W   32,688,982        31,744,980  
  

 

 

    

 

 

 

 

  (b) Hybrid bonds

Hybrid bonds classified as other equity instruments as of June 30, 2017 and December 31, 2016 are as follows:

 

Issue date

  

Maturity date

   Interest rate
(%)
     2017      2016  
May 22, 2012    May 22, 2042      5.34      W —          298,861  
June 25, 2015    June 25, 2045      4.38        199,455        199,455  
        

 

 

    

 

 

 
         W     199,455        498,316  
        

 

 

    

 

 

 

The hybrid bonds above can be repaid early at value after 5 or 10 years from the date of issuance, and the Group has an unconditional right to extend the maturity under the same condition. In addition, if no dividend is to be paid for common shares, the agreed interest is also not paid. On May 22, 2017, the Group exercised the early redemption right and redeemed all the hybrid bonds issued on May 22, 2012.

 

84


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

20. Equity (continued)

 

 

  (c) Accumulated other comprehensive income

Changes in accumulated other comprehensive income for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

 

    2017  
    Unrealized
gain (loss) on
available-for-sale
financial assets
    Equity in other
comprehensive
income of
associates
    Foreign currency
translation
adjustments
for foreign
operations
    Net loss
from cash
flow
hedges
    Other comprehensive
income of separate
account
    Remeasurements of
the defined benefit
plans
    Total  

Beginning balance

  W 394,182       21,258       (151,725     (13,464     4,466       (357,300     (102,583

Change due to fair value

    58,756       (12,205     —         —         —         —         46,551  

Reclassification:

             

Change due to impairment or disposal

    (139,706     —         —         —         —         —         (139,706

Effect of hedge accounting

    —         —         —         107,662       —         —         107,662  

Hedging

    (898     —         40,174       (104,447     —         —         (65,171

Effects from exchange rate fluctuations

    (18,990     —         (101,098     —         —         —         (120,088

Remeasurements of the defined benefit plans

    —         —         —         —         —         5,093       5,093  

Deferred income taxes

    21,741       938       (5,538     (778     (291     (1,975     14,097  

Non-controlling interests

    27       —         427       —         —         711       1,165  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  W     315,112       9,991       (217,760     (11,027     4,175       (353,471     (252,980
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

85


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

20. Equity (continued)

 

 

     2016  
     Unrealized gain
(loss) on
available-for-sale
financial assets
    Equity in other
comprehensive
income of
associates
     Foreign currency
translation
adjustments
for foreign
operations
    Net loss
from cash
flow
hedges
    Other comprehensive
income of separate
account
    Remeasurements of
the defined benefit
plans
    Total  

Beginning balance

   W 826,712       18,569        (163,737     (12,202     8,795       (373,366     304,771  

Change due to fair value

     (123,415     1,813        —         —         (5,712     —         (127,314

Reclassification:

               

Change due to impairment or disposal

     (445,040     —          —         —         —         —         (445,040

Effect of hedge accounting

     —         —          —         (44,348     —         —         (44,348

Hedging

     2,289       —          (54,393     42,683       —         —         (9,421

Effects from exchange rate fluctuations

     (1,395     —          52,936       —         —         —         51,541  

Remeasurements of the defined benefit plans

     —         —          —         —         —         20,513       20,513  

Deferred income taxes

     133,904       876        13,560       403       1,383       (4,845     145,281  

Non-controlling interests

     1,127       —          (91     —         —         398       1,434  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   W 394,182       21,258        (151,725     (13,464     4,466       (357,300     (102,583
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

86


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won, except per share data)

 

20. Equity (continued)

 

  (d) Regulatory reserve for loan losses

In accordance with Regulations for the Supervision of Financial Institutions, the Group reserves the difference between allowance for credit losses by K-IFRS and that as required by the Regulations at the account of regulatory reserve for loan losses in retained earnings.

 

  i) Changes in regulatory reserve for loan losses including non-controlling interests for the six-month period ended June 30, 2017 and the year ended December 31, 2016 are as follows:

 

     2017      2016  

Beginning balance

   W   2,252,771        2,192,635  

Planned regulatory reversal of loan losses

     488,783        60,136  
  

 

 

    

 

 

 

Ending balance

   W 2,741,554        2,252,771  
  

 

 

    

 

 

 

 

  ii) Profit for the period and earnings per share after adjusted for regulatory reserve for loan losses for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017     2016  
     Three-month
period
    Six-month
period
    Three-month
period
    Six-month
period
 

Profit attributable to equity holders of Shinhan Financial Group

   W 892,032       1,889,130       683,467       1,454,791  

Provision for (reversal of) regulatory reserve for loan losses

     (101,480     (486,727     (75,266     (144,617
  

 

 

   

 

 

   

 

 

   

 

 

 

Profit attributable to equity holders of Shinhan Financial Group adjusted for regulatory reserve

   W 790,552       1,402,403       608,201       1,310,174  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings per share adjusted for regulatory reserve in won (*)

   W 1,658       2,935       1,255       2,682  

 

(*) Dividends for preferred stocks and hybrid bonds are deducted.

 

  (e) Details of dividends paid by the Group in accordance with the resolutions of the general meeting of shareholders for the six months ended June 30, 2017 are as follows:

 

     2017  

Common stock (W1,450 per share)

   W   687,589  

 

87


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

21. Net interest income

Net interest income for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017     2016  
     Three-month
period
    Six-month
period
    Three-month
period
    Six-month
period
 

Interest income:

        

Cash and due from banks

   W 42,249       84,039       46,013       98,947  

Trading assets

     123,267       250,557       121,152       228,090  

Financial assets designated at fair value through profit or loss

     16,429       29,489       10,190       23,555  

Available-for-sale financial assets

     159,215       317,990       156,323       312,978  

Held-to-maturity financial assets

     158,350       309,487       138,590       276,140  

Loans

     2,358,592       4,663,203       2,293,646       4,567,321  

Others

     21,126       43,602       26,698       54,028  
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,879,228       5,698,367       2,792,612       5,561,059  

Interest expense:

        

Deposits

     (602,592     (1,208,130     (650,489     (1,326,345

Borrowings

     (86,244     (162,293     (75,414     (148,093

Debt securities issued

     (266,342     (521,418     (272,050     (553,043

Others

     (9,355     (22,620     (22,626     (46,870
  

 

 

   

 

 

   

 

 

   

 

 

 
     (964,533     (1,914,461     (1,020,579     (2,074,351
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Net interest income

   W   1,914,695       3,783,906       1,772,033       3,486,708  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

88


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

22. Net fees and commission income

Net fees and commission income for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Fees and commission income:

           

Credit placement fees

   W 13,524        28,350        15,060        30,668  

Commission received as electronic charge receipt

     35,898        70,756        34,525        67,961  

Brokerage fees

     93,686        178,694        88,604        169,956  

Commission received as agency

     48,449        84,028        30,919        64,094  

Investment banking fees

     11,468        21,670        20,477        32,665  

Commission received in foreign exchange activities

     49,708        97,154        45,827        91,293  

Asset management fees

     45,659        83,652        26,678        50,144  

Credit card fees

     596,922        1,176,933        585,063        1,146,563  

Others

     124,789        243,941        108,260        210,989  
  

 

 

    

 

 

    

 

 

    

 

 

 
     1,020,103        1,985,178        955,413        1,864,333  

Fees and commission expense:

           

Credit-related fee

     (8,268      (13,685      (8,570      (15,299

Credit card fees

     (499,488      (995,632      (454,840      (907,880

Others

     (75,260      (151,184      (76,784      (153,022
  

 

 

    

 

 

    

 

 

    

 

 

 
     (583,016      (1,160,501      (540,194      (1,076,201
  

 

 

    

 

 

    

 

 

    

 

 

 

Net fees and commission income

   W 437,087        824,677        415,219        788,132  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

89


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

23. Net impairment loss on financial assets

Net impairment loss on financial assets for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Impairment losses on:

           

Loans

   W (138,937      (225,418      (291,578      (578,505

Available-for-sale financial assets

     (13,636      (21,528      (37,052      (72,552

Other financial assets

     (8,753      (4,381      (9,392      (15,134
  

 

 

    

 

 

    

 

 

    

 

 

 
     (161,326      (251,327      (338,022      (666,191

Reversal of impairment losses on:

           

Available-for-sale financial assets

     1,689        2,544        5,472        5,472  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W (159,637      (248,783      (332,550      (660,719
  

 

 

    

 

 

    

 

 

    

 

 

 

 

24. General and administrative expenses

General and administrative expenses for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Employee benefits:

        

Salaries

   W 626,937        1,261,905        610,999        1,235,914  

Severance benefits:

           

Defined contribution

     4,753        10,308        5,178        10,940  

Defined benefit

     42,387        85,403        45,102        91,642  

Termination benefits

     —          1,853        —          2,339  
  

 

 

    

 

 

    

 

 

    

 

 

 
     674,077        1,359,469        661,279        1,340,835  

Rent

     83,148        164,779        86,207        166,742  

Entertainment

     5,766        12,521        6,950        14,260  

Depreciation

     42,540        89,144        45,140        91,218  

Amortization

     16,602        33,470        19,377        38,547  

Taxes and dues

     46,952        88,084        45,889        90,454  

Advertising

     55,546        105,590        74,830        133,937  

Research

     3,358        7,005        3,474        7,070  

Others

     150,375        283,105        146,021        278,338  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   1,078,364        2,143,167        1,089,167        2,161,401  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

90


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won, except per share data)

 

25. Share-based payments

(a) Stock options granted as of June 30, 2017 are as follows:

 

     4th grant(*1)      5th grant(*1)      6th grant(*1)      7th grant(*1)(*2)  

Grant date

     March 30, 2005        March 21, 2006        March 20, 2007        March 19, 2008  

Exercise price in won

   W 28,006      W 38,829      W 54,560      W 49,053  

Number of shares granted

     2,695,200        3,296,200        1,301,050        808,700  

Options expiry dates

     August 30, 2018        August 21, 2019        August 19, 2020        May 17, 2021  

Changes in number of shares granted:

           

Balance at January 1, 2017

     102,389        108,356        58,764        45,628  

Exercised

     80,000        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2017

     22,389        108,356        58,764        45,628  
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value per share in won

   W 21,294      W 10,471      W 3,665      W 5,875  

 

(*1) The weighted average exercise price for 235,137 stock options outstanding at June 30, 2017 is W43,714.
(*2) As of June 30, 2017, the exercise of 38,604 options of the 7th grant are temporarily suspended.

 

91


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won, except per share data)

 

25. Share-based payments (continued)

 

(b) Performance shares granted as of June 30, 2017 are as follows:

 

     Expired      Not expired  

Type

     Cash-settled share-based payment  

Performance conditions

    

Increase rate of the stock price and

achievement of target ROE

 

 

Operating period (*)

     4 or 5 years  

Estimated number of shares vested at June 30, 2017

     17,184        1,266,449  

Fair value per share in won

   W 45,926      W 49,300  

 

(*) Four-year period is applied from the beginning of the year that the grant date belongs while five-year period for the shares with deferred payment.

The amount of cash payment for the Group’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. As such, the fair value of number of shares expired is estimated using the arithmetic mean of weighted average share prices at the day after expiration date and the fair value of number of shares non-expired is estimated using the closing share price at the end of reporting year.

 

92


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

25. Share-based payments (continued)

 

(c) Share-based compensation costs for the six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017  
     Employees of         
     The controlling
company
     The subsidiaries      Total  

Stock options granted:

        

4th

   W 36        375        411  

5th

     26        413        439  

6th

     30        185        215  

7th

     5        46        51  

Performance share

     1,043        8,318        9,361  
  

 

 

    

 

 

    

 

 

 
   W 1,140        9,337        10,477  
  

 

 

    

 

 

    

 

 

 

 

     2016  
     Employees of         
     The controlling
company
     The subsidiaries      Total  

Stock options granted:

        

4th

   W (14      (145      (159

5th

     (5      (73      (78

6th

     —          —          —    

7th

     —          —          —    

Performance share

     839        7,281        8,120  
  

 

 

    

 

 

    

 

 

 
   W 820        7,063        7,883  
  

 

 

    

 

 

    

 

 

 

 

93


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

25. Share-based payments (continued)

 

  (d) Accrued expenses and the intrinsic value as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Employees of         
     The controlling
company
     The subsidiaries      Total  

Stock options granted:

        

4th

   W 191        286        477  

5th

     67        1,068        1,135  

6th

     30        185        215  

7th

     5        46        51  

Performance share

     7,856        55,369        63,225  
  

 

 

    

 

 

    

 

 

 
   W 8,149        56,954        65,103  
  

 

 

    

 

 

    

 

 

 

The intrinsic value of share-based payments is W64,848 million as of June 30, 2017. For calculating, the quoted market price W49,300 per share was used for stock options and the fair value was considered as intrinsic value for performance shares, respectively.

 

     2016  
     Employees of         
     The controlling
company
     The subsidiaries      Total  

Stock options granted:

        

4th

   W 155        1,611        1,766  

5th

     41        655        696  

6th

     —          —          —    

7th

     —          —          —    

Performance share

     7,433        57,638        65,071  
  

 

 

    

 

 

    

 

 

 
   W 7,629        59,904        67,533  
  

 

 

    

 

 

    

 

 

 

The intrinsic value of share-based payments is W67,533 million as of December 31, 2016. For calculating, the quoted market price W45,250 per share was used for stock options and the fair value was considered as intrinsic value for performance shares, respectively.

 

94


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won, except per share data)

 

26. Income tax expense

Income tax expense for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Current income tax expense

   W 232,692        415,081        224,687        311,451  

Origination and reversal of temporary differences (*)

     31,694        156,820        (96,399      (247,503

Income tax recognized in other comprehensive income

     23,229        14,175        76,733        36,488  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expenses

   W 287,615        586,076        205,021        100,436  
  

 

 

    

 

 

    

 

 

    

 

 

 

Effective tax rate

     %24.18        23.49        22.64        6.32  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) The Group had not previously recognized the deferred tax asset relating to the expired unused tax losses as the utilization of the expired unused tax losses had been assessed remote. In prior year, based on the new tax interpretation issued by Korea National Tax Service which allows utilization of expired unused tax losses against extinguishment of deposit and insurance liabilities and the relating recent tax refund, the Group recognized the deferred tax asset after factoring in future taxable profits and the expected future extinguishment of deposit and insurance liabilities.

 

27. Earnings per share

Basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  
     Three-month
period
     Six-month
period
     Three-month
period
     Six-month
period
 

Profit attributable to equity holders of Shinhan Financial Group

   W 892,032        1,889,130        683,467        1,454,791  

Less:

           

Dividends on preferred stock

     —          —          3,563        18,836  

Dividends to hybrid bond

     4,461        10,621        9,657        19,314  
  

 

 

    

 

 

    

 

 

    

 

 

 
     4,461        10,621        13,220        38,150  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net profit available for common stock

   W 887,571        1,878,509        670,247        1,416,641  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of common shares outstanding

     474,199,587        474,199,587        474,199,587        474,199,587  

Basic and diluted earnings per share in won

   W 1,871        3,961        1,413        2,987  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

95


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

28. Commitments and contingencies

 

  (a) Guarantees, acceptances and credit commitments as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Guarantees:

     

Guarantees outstanding

   W 7,730,322        9,324,734  

Contingent guarantees

     2,927,123        2,997,553  
  

 

 

    

 

 

 
     10,657,445        12,322,287  
  

 

 

    

 

 

 

Commitments to extend credit:

     

Loan commitments in won

     53,633,407        54,077,528  

Loan commitments in foreign currency

     19,228,089        20,464,242  

ABS and ABCP commitments

     2,024,467        2,060,089  

Others

     1,259,857        1,362,433  
  

 

 

    

 

 

 
     76,145,820        77,964,292  
  

 

 

    

 

 

 

Endorsed bills:

     

Secured endorsed bills

     59,465        32,187  

Unsecured endorsed bills

     9,033,095        8,822,654  
  

 

 

    

 

 

 
     9,092,560        8,854,841  
  

 

 

    

 

 

 

Loans sold with recourse

     2,099        2,099  
  

 

 

    

 

 

 
   W   95,897,924        99,143,519  
  

 

 

    

 

 

 

 

  (b) Legal contingencies

As of June 30, 2017, the Group was involved in 209 pending lawsuits as a defendant (total claim amount: W289,426 million) and recorded a provision of W33,792 million and a reserve (liabilities under insurance contracts) of W1,386 million, respectively, with respect to these lawsuits. Additional losses might be incurred from these legal actions, but the result of such the lawsuits cannot be predicted. The management believes that the result of the lawsuits would not have significant impact on the financial position.

 

29. Statement of cash flows

 

  Cash and cash equivalents in the consolidated statements of cash flows as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017     2016  

Cash and due from banks

   W 20,435,020       19,165,875  

Adjustments:

    

Due from financial institutions with a maturity over three months from date of acquisition

     (4,027,060     (4,458,286

Restricted due from banks

     (10,546,435     (9,106,053
  

 

 

   

 

 

 
   W 5,861,525       5,632,536  
  

 

 

   

 

 

 

 

96


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

30. Related parties

Intra-group balances, and income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

 

  (a) Balances with the related parties as of June 30, 2017 and December 31, 2016 are as follows:

 

Related party

   Account      2017     2016  

Investments in associates:

       

Aju Capital Co., Ltd.

     Trading assets      W 50,000       49,990  

     Loans        160,000       210,000  

     Credit card loans        2,519       1,922  

     Allowances        (489     (627

     Deposits        1,100       692  

     Provisions        127       73  

Pohang TechnoPark2PFV

     Deposits        —         14,658  

BNP Paribas Cardif Life Insurance

     Credit card loans        142       127  

     Other assets        108       112  

     Allowances        (1     (1

     Accrued expenses        —         29  

     Deposits        —         353  

     Provisions        —         1  

JAEYOUNG SOLUTEC CO., LTD.

     Loans        14,356       14,356  

     Allowances        (113     (70

     Credit card loans        41       42  

     Deposits        9,500       7,638  

     Provisions        11       7  

Partners 4th Growth Investment Fund

     Deposits        6,052       2,160  

BNP Paribas Cardif General Insurance

     Credit card loans        42       44  

     Allowances        —         (1

     Deposits        6       13  

Shinhan Praxis K-Growth Global Private Equity Fund

     Other assets        172       175  

Dream High Fund III

     Deposits        —         1  

Midas Dong-A Snowball Venture Fund

     Deposits        240       427  

IBKS-Shinhan Creative Economy New Technology Fund

     Accounts receivable        —         12  

     Deposits        1,982       1,751  

EQP Global Energy Infrastructure Private Equity Fund

     Deposits        —         1  

Albatross Growth Fund

     Accounts receivable        —         326  

Credian Healthcare Private Equity Fund II

     Deposits        69       7  

Midas Dong-A Snowball Venture Fund 2

     Deposits        89       242  

IBKS-Shinhan Creative Economy New Technology Fund II

     Accounts receivable        —         8  

     Deposits        157       179  

PSA 1st Fintech Private Equity Fund

     Deposits        428       525  

Eum Private Equity Fund No.3

     Deposits        71       80  

Semantic

     Credit card loans        —         1  

Branbuil CO., LTD.

     Loans        —         15  

     Credit card loans        3       3  

     Allowances        —         (1

     Deposits        136       28  

 

97


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

30. Related parties (continued)

 

Related party

   Account    2017      2016  

SHBNPP Private Korea Equity Long-Short Professional Feeder

   Other assets    W 114        175  

SHBNPP Private Multi Strategy Professional Feeder No.1

   Other assets      —          43  

Shinhan-Albatross Technology Investment Fund

   Deposits      4,975        —    

Key management personnel and their immediate relatives:

   Loans      2,217        1,877  
  

 

  

 

 

    

 

 

 
   Assets    W   229,111        278,527  
   Liabilities      24,943        28,865  
  

 

  

 

 

    

 

 

 

 

98


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

30. Related parties (continued)

 

  (b) Transactions with the related parties for the three-month and six-month periods ended June 30, 2017 and 2016 were as follows:

 

Related party

   Account      2017     2016  
            Three-month
period
    Six-month
period
    Three-month
period
    Six-month
period
 

Investments in associates

           

Aju Capital Co., Ltd

     Interest income      W   1,867       3,840       1,980       3,866  

     Fees and commission income        54       110       66       139  

     Interest expense        (1     (1     (1     (1

     Fees and commission expense        —         —         (115     (238

     Other operating expenses        (29     (55     —         —    

     Provision for credit losses        (24     137       (15     (6

Pohang TechnoPark2PFV

     Interest expense        —         —         (3     (7

BNP Paribas Cardif Life Insurance

     Fees and commission income        350       693       460       980  

     Provision for credit losses        (1     —         —         (1

     General and administrative expenses        (2     (4     (1     (3

Shinhan Praxis K-Growth Global Private Equity Fund

     Fees and commission income        172       342       170       344  

Shinhan K2 Secondary Fund

     Fees and commission income        1       922       —         170  

BNP Paribas Cardif General Insurance

     Fees and commission income        1       2       1       2  

     Provision for credit losses        1       —         —         (1

Korea Investment Gong-pyeong Office Real Estate Investment Trust 2nd

     Fees and commission income        —         —         50       55  

Midas Dong-A Snowball Venture Fund

     Fees and commission income        9       28       9       19  

     Interest expense        (1     (2     (1     (2

SHC-EN Fund

     Fees and commission income        —         —         5       15  

SP New Technology Business investment Fund I

     Fees and commission income        10       30       18       36  

IBKS-Shinhan Creative Economy New Technology Fund

     Fees and commission income        24       24       —         12  

     Interest expense        (1     (1     (1     (1

IBKS-Shinhan Creative Economy New Technology Fund II

     Fees and commission income        16       16       5       5  

SM New Technology Business Investment Fund I

     Fees and commission income        16       55       —         —    

APC Fund

     Fees and commission income        42       86       89       89  

JAEYOUNG SOLUTEC CO., LTD.

     Interest income        161       321       164       332  

     Fees and commission income        1       1       1       1  

     Other operating income        —         —         12       12  

     Reversal of credit losses        —         —         76       75  

     Interest expense        (1     (2     (24     (57

     Provision for credit losses        (46     (45     —         —    

     Other operating expenses        (3     (3     —         —    

 

99


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

30. Related parties (continued)

 

Related party

   Account    2017     2016  
          Three-month
period
    Six-month
period
    Three-month
period
    Six-month
period
 

Partners 4th Growth Investment Fund

   Interest expense    W (2     (3     —         (1

Albatross Growth Fund

   Interest expense      —         —         (5     (5

PSA 1st Fintech Private Equity Fund

   Interest expense      (1     (2     (2     (2

SHBNPP Private Korea Equity Long-Short Professional Feeder

   Fees and commission income      139       312       209       431  

SHBNPP Private Multi Strategy Professional Feeder No.1

   Fees and commission income      7       48       74       74  

Branbuil CO., LTD.

   Fees and commission income      1       1       —         —    

Shinhan-Albatross Technology Investment Fund

   Fees and commission income      43       43       —         —    

   Interest expense      (11     (22     —         —    

STI-New Growth Engines Investment Partnership

   Fees and commission income      —         29       —         —    

Key management personnel and their immediate relatives

   Interest income      12       28       15       34  
     

 

 

   

 

 

   

 

 

   

 

 

 
      W    2,804       6,928       3,236       6,366  
     

 

 

   

 

 

   

 

 

   

 

 

 

 

  (c) Key management personnel compensation

Key management personnel compensation for the six-month periods ended June 30, 2017 and 2016 were as follows:

 

     2017      2016  

Short-term employee benefits

   W 10,430        9,989  

Severance benefits

     198        207  

Share-based payment transactions

     3,381        2,904  
  

 

 

    

 

 

 
   W   14,009        13,100  
  

 

 

    

 

 

 

 

100


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

30. Related parties (continued)

 

  (d) The guarantees provided between the related parties as of June 30, 2017 and December 31, 2016 were as follows:

 

            Amount of guarantees         

Guarantor

   Guaranteed Parties      2017      2016      Account  

Shinhan Bank

     Aju Capital Co., Ltd.      W 50,000        50,000        Unused credit line  
     BNP Paribas Cardif Life Insurance        10,000        10,000        Unused credit line  
    
Neoplux Technology Valuation
Investment Fund
 
 
     8,000        12,000       
Security underwriting
commitment
 
 
     JAEYOUNG SOLUTEC CO., LTD.        600        600        Unused credit  
             ”        456        483        Import letter of credit  
     

 

 

    

 

 

    
      W   69,056        73,083     
     

 

 

    

 

 

    

 

  (e) Details of collaterals provided by the related parties as of June 30, 2017 and December 31, 2016 were as follows:

 

Provided to

   Provided by      Pledged assets      2017      2016  

Shinhan Bank

     Aju Capital Co., Ltd.       

Beneficiary

certificate

 

 

   W   160,000        160,000  
     BNP Paribas Cardif Life Insurance       

Government

bonds

 

 

     13,627        13,699  
     Treenkid        Properties        —          200  
     JAEYOUNG SOLUTEC CO., LTD.        Properties        20,814        20,814  
             ”       
Guarantee
insurance policy
 
 
     7,037        7,037  
        

 

 

    

 

 

 
         W 201,478        201,750  
        

 

 

    

 

 

 

 

101


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

31. Interests in unconsolidated structured entities

 

  (a) The nature and extent of interests in unconsolidated structured entities

The Group involved in assets-backed securitization, structured financing, beneficiary certificates (primarily investment funds) and other structured entities and characteristics of these structured entities are as follows:

 

    

Description

Assets-backed securitization

  

Securitization vehicles are established to buy assets from originators and issue asset-backed securities in order to facilitate the originators’ funding activities and enhance their financial soundness. The Group is involved in the securitization vehicles by purchasing (or committing to purchase) the asset-backed securities issued and/or providing other forms of credit enhancement.

 

The Group does not consolidate a securitization vehicle if (i) the Group is unable to make or approve decisions as to the modification of the terms and conditions of the securities issued by such vehicle or disposal of such vehicles’ assets, (ii) (even if the Group is so able) if the Group does not have the exclusive or primary power to do so, or (iii) if the Group does not have exposure, or right, to a significant amount of variable returns from such entity due to the purchase (or commitment to purchase) of asset-backed securities so issued or subordinated obligations or by providing other forms of credit support.

Structured financing

   Structured entities for project financing are established to raise funds and invest in a specific project such as M&A (mergers and acquisitions), BTL (build-transfer-lease), shipping finance, etc. The Group is involved in the structured entities by originating loans, investing in equity, or providing credit enhancement.

Investment fund

   Investment fund means an investment trust, a PEF (private equity fund) or a partnership which invests in a group of assets such as stocks or bonds by issuing a type of beneficiary certificates to raise funds from the general public, and distributes its income and capital gains to their investors. The Group manages assets by investing in shares of investment fund or playing a role of an operator or a GP (general partner) of investment fund, on behalf of other investors.

The size of unconsolidated structured entities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017      2016  

Total assets:

     

Asset-backed securitization

   W 127,985,705        108,649,039  

Structured financing

     71,194,301        66,759,795  

Investment fund

     38,733,654        33,891,120  
  

 

 

    

 

 

 
   W   237,913,660        209,299,954  
  

 

 

    

 

 

 

 

102


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

31. Interests in unconsolidated structured entities (continued)

 

  (b) Nature of risks

i) The carrying amounts of the assets and liabilities relating to its interests in unconsolidated structured entities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Assets-backed
securitization
     Structured
financing
     Investment
fund
     Total  

Assets:

           

Loans

   W 1,115,431        5,530,140        91,048        6,736,619  

Trading assets

     2,588,065        59,392        171,302        2,818,759  

Derivative assets

     16,824        —          —          16,824  

Available-for-sale financial assets

     2,019,356        598,337        2,955,899        5,573,592  

Held-to-maturity financial assets

     2,916,304        —          —          2,916,304  

Other assets

     914        44,215        233        45,362  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 8,656,894        6,232,084        3,218,482        18,107,460  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative liabilities

   W 243        —          —          243  

Other

     1,099        739        1,748        3,586  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,342        739        1,748        3,829  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     2016  
     Assets-backed
securitization
     Structured
financing
     Investment
fund
     Total  

Assets:

           

Loans

   W 380,961        5,791,745        106,234        6,278,940  

Trading assets

     2,082,684        30,266        31,791        2,144,741  

Derivative assets

     19,144        —          —          19,144  

Available-for-sale financial assets

     2,648,304        559,990        2,711,666        5,919,960  

Held-to-maturity financial assets

     2,612,564        —          —          2,612,564  

Other assets

     13,253        21,705        170        35,128  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 7,756,910        6,403,706        2,849,861        17,010,477  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative liabilities

   W 137        —          —          137  

Borrowings

     —          1,318        —          1,318  

Other

     1,006        264        —          1,270  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,143        1,582        —          2,725  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

103


SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Interim Financial Statements

June 30, 2017

(Unaudited)

(In millions of won)

 

31. Interests in unconsolidated structured entities (continued)

 

ii) Exposure to risk relating to its interests in unconsolidated structured entities as of June 30, 2017 and December 31, 2016 are as follows:

 

     2017  
     Assets-backed
securitization
     Structured
financing
     Investment
fund
     Total  

Assets held

   W 8,656,894        6,232,084        3,218,482        18,107,460  

ABS and ABCP commitments

     1,281,419        46,000        —          1,327,419  

Loan commitments

     744,758        689,627        7,487        1,441,872  

Guarantees

     83,000        14,157        —          97,157  

Others

     3,200        —          —          3,200  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   10,769,271        6,981,868        3,225,969        20,977,108  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     2016  
     Assets-backed
securitization
     Structured
financing
     Investment
fund
     Total  

Assets held

   W 7,756,910        6,403,706        2,849,861        17,010,477  

ABS and ABCP commitments

     1,108,282        30,000        —          1,138,282  

Loan commitments

     977,383        328,236        47,246        1,352,865  

Guarantees

     83,000        28,060        —          111,060  

Others

     61,400        —          —          61,400  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   9,986,975        6,790,002        2,897,107        19,674,084  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

104