UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
Under the Securities Exchange Act of 1934
For the Month of March 2019
SHINHAN FINANCIAL GROUP CO., LTD.
(Translation of registrant's name into English)
20, Sejong-daero 9-gil, Jung-gu, Seoul 04513, Korea
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F √ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No___√___
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- n/a .
Submission of Audit Report (Shinhan Bank)
On March 11, 2019, Shinhan Bank, our wholly-owned bank subsidiary, filed its audit report with the Financial Supervisory Service and the Korea Exchange of the Republic of Korea pursuant to the Act of External Audit of Stock Companies and KOSPI Market Disclosure Regulation.
Please refer to Exhibit 99.1 and 99.2 for Independent Audit Reports with separate and consolidated financial statements.
EXHIBIT INDEX
Exhibit No. |
|
Description |
99.1 |
|
Independent Auditor’s Report (Separate Financial Statements) of Shinhan Bank as of December 31, 2018 |
99.2 |
|
Independent Auditor’s Report (Consolidated Financial Statements) of Shinhan Bank as of December 31, 2018 |
|
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SHINHAN FINANCIAL GROUP CO., LTD.
By: /s/ Yu Sung-hun
Name: Yu Sung-hun
Title: Chief Financial Officer
Date: March 11, 2019
Exhibit 99.1
SHINHAN BANK
Separate Financial Statements
December 31, 2018 and 2017
(With Independent Auditors’ Report Thereon)
Contents
|
|
Page |
|
|
|
Independent Auditors’ Report |
|
1 |
|
|
|
Separate Statements of Financial Position |
|
3 |
|
|
|
Separate Statements of Comprehensive Income |
|
4 |
|
|
|
Separate Statements of Changes in Equity |
|
6 |
|
|
|
Separate Statements of Cash Flows |
|
8 |
|
|
|
Notes to the Separate Financial Statements |
|
10 |
Independent Auditors’ Review Report on Internal Accounting Control System |
|
164 |
Report on the Operations of Internal Accounting Control System |
|
165 |
|
|
|
|
|
|
Independent Auditors’ Report
(Based on a report originally issued in Korean)
To the Board of Directors and Stockholder of
Shinhan Bank:
Opinion
We have audited the separate financial statements of Shinhan Bank (“the Bank”), which comprise the separate statements of financial position as of December 31, 2018 and 2017, the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Bank as of December 31, 2018 and 2017, and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing (KSAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Separate Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements that are relevant to our audit of the separate financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Matter
The procedures and practices utilized in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and applied in other countries.
Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the separate financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.
As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• |
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, |
|
1
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
|
• |
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. |
|
• |
Evaluate the appropriateness of accounting policies used in the preparation of the separate financial statements and the reasonableness of accounting estimates and related disclosures made by management. |
|
• |
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Bank to cease to continue as a going concern. |
|
• |
Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
|
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
KPMG Samjong Accounting Corp.
Seoul, Korea
March 11, 2019
This report is effective as of March 11, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
2
SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2018 and 2017
|
Notes |
|
December 31, 2018 (*1) |
|
December 31, 2017 (*1) |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and due from banks |
|
4,6,9,40,41 |
|
9,405,839 |
|
14,712,506 |
Securities at fair value through profit or loss |
|
4,7,41 |
|
12,811,266 |
|
- |
Trading assets |
|
4,7,41 |
|
- |
|
8,834,871 |
Derivative assets |
|
4,8,41 |
|
1,488,548 |
|
2,602,689 |
Loans at amortized cost |
|
4,9,41 |
|
233,246,276 |
|
- |
Loans at fair value through profit or loss |
|
4,9 |
|
645,237 |
|
- |
Loans |
|
4,9,41 |
|
- |
|
216,985,347 |
Securities at fair value through other comprehensive income |
|
4,10,17 |
|
30,731,281 |
|
- |
Available-for-sale financial assets |
|
4,10,17 |
|
- |
|
31,126,397 |
Securities at amortized cost |
|
4,10,17 |
|
16,230,964 |
|
- |
Held-to-maturity financial assets |
|
4,10,17 |
|
- |
|
14,358,584 |
Property and equipment |
|
11,16,17 |
|
1,942,867 |
|
1,988,437 |
Intangible assets |
|
12 |
|
204,308 |
|
186,757 |
Investments in subsidiaries and associates |
|
13 |
|
2,351,986 |
|
2,246,214 |
Investment properties |
|
14 |
|
571,130 |
|
598,125 |
Defined benefit assets |
|
23 |
|
- |
|
34,120 |
Current tax assets |
|
37 |
|
1,872 |
|
3,527 |
Deferred tax assets |
|
37 |
|
174,574 |
|
361,913 |
Other assets |
|
4,9,15,41,42 |
|
14,069,306 |
|
8,892,567 |
Non-current assets held for sale |
|
16 |
|
79 |
|
4,498 |
Total assets |
|
|
|
323,875,533 |
|
302,936,552 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits |
|
4,19,41 |
|
237,451,779 |
|
223,975,037 |
Financial liabilities at fair value through profit or loss |
|
4,20 |
|
479,559 |
|
- |
Trading liabilities |
|
4,20 |
|
- |
|
434,586 |
Derivative liabilities |
|
4,8,41 |
|
1,771,313 |
|
2,996,958 |
Borrowings |
|
4,21,40,41 |
|
15,876,442 |
|
14,471,720 |
Debt securities issued |
|
4,22,40 |
|
29,294,584 |
|
23,929,723 |
Defined benefit liabilities |
|
23 |
|
65,472 |
|
- |
Provisions |
|
24,39,41 |
|
289,311 |
|
274,762 |
Current tax liabilities |
|
37 |
|
276,388 |
|
183,673 |
Other liabilities |
|
4,25,41,42 |
|
14,799,302 |
|
14,481,589 |
Total liabilities |
|
|
|
300,304,150 |
|
280,748,048 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Capital stock |
|
26 |
|
7,928,078 |
|
7,928,078 |
Hybrid bonds |
|
26 |
|
698,660 |
|
668,938 |
Capital surplus |
|
26 |
|
398,080 |
|
398,080 |
Capital adjustments |
|
26,37 |
|
4,596 |
|
643 |
Accumulated other comprehensive loss |
|
26,37 |
|
(334,064) |
|
(225,695) |
Retained earnings |
|
26,27 |
|
14,876,033 |
|
13,418,460 |
Total equity |
|
|
|
23,571,383 |
|
22,188,504 |
Total liabilities and equity |
|
|
|
323,875,533 |
|
302,936,552 |
(*1) The separate statement of financial position as of December 31, 2018 was prepared in accordance with K- IFRS No.1109 and K-IFRS No.1115. However, the comparative separate statement of financial position as of December 31, 2017 was not retrospectively restated.
3
SHINHAN BANK
Separate Statements of Financial Position
As of December 31, 2018 and 2017
See accompanying notes to the separate financial statements.
3
SHINHAN BANK
Separate Statements of Comprehensive Income
For the years ended December 31, 2018 and 2017
|
Notes |
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
36 |
|
8,725,960 |
|
7,449,277 |
|
Financial assets at fair value through profit or loss |
|
|
|
185,180 |
|
- |
|
Trading assets |
|
|
|
- |
|
140,216 |
|
Financial assets at fair value through other comprehensive income and amortized cost |
|
|
|
8,540,780 |
|
- |
|
Loans and receivables and investment securities |
|
|
|
- |
|
7,309,061 |
|
Interest expense |
|
|
|
(3,695,812) |
|
(2,928,039) |
|
Net interest income |
|
4,28,41 |
|
5,030,148 |
|
4,521,238 |
|
|
|
|
|
|
|
|
|
Fees and commission income |
|
36 |
|
1,197,938 |
|
1,126,425 |
|
Fees and commission expense |
|
|
|
(192,008) |
|
(169,417) |
|
Net fees and commission income |
|
4,29,41 |
|
1,005,930 |
|
957,008 |
|
|
|
|
|
|
|
|
|
Dividend income |
|
30,36 |
|
10,230 |
|
114,100 |
|
Net gain on financial instruments at fair value through profit or loss |
|
31,36 |
|
343,614 |
|
- |
|
Net trading gain (loss) |
|
31,36 |
|
- |
|
(125,798) |
|
Net foreign currencies transaction gain |
|
36 |
|
87,037 |
|
501,511 |
|
Net loss on financial instruments designated at fair value through profit or loss |
|
18,36 |
|
- |
|
(43) |
|
Net gain on disposal of financial asset at fair value through other comprehensive income |
|
10,36 |
|
9,826 |
|
- |
|
Net gain on sale of available-for-sale financial assets |
|
10,36 |
|
- |
|
186,711 |
|
Provision for credit loss allowance |
|
4,9,41 |
|
(225,894) |
|
- |
|
Impairment loss on financial assets |
|
4,9,41 |
|
- |
|
(660,359) |
|
General and administrative expenses |
|
32,41 |
|
(2,758,591) |
|
(2,867,479) |
|
Net other operating expenses |
|
34,36,41 |
|
(667,467) |
|
(582,294) |
|
Operating income |
|
|
|
2,834,833 |
|
2,044,595 |
|
|
|
|
|
|
|
|
|
Net non-operating income (expense) |
|
35 |
|
55,663 |
|
(41,707) |
|
|
|
|
|
|
|
|
|
Profit before income tax |
|
|
|
2,890,496 |
|
2,002,888 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
37 |
|
(773,890) |
|
(395,127) |
|
Profit for the period |
|
27 |
|
2,116,606 |
|
1,607,761 |
|
4
SHINHAN BANK
Separate Statements of Comprehensive Income (Continued)
For the years ended December 31, 2018 and 2017
(In millions of won, except for earnings per share) |
Notes |
|
2018 (*1) |
|
2017 (*1) |
|
||
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) for the period: Items that are or may be reclassified subsequently to profit or loss |
|
4,26,37
|
|
|
|
|
|
|
Foreign currency translation differences for foreign operations |
|
|
|
(2,074) |
|
(21,045) |
|
|
Unrealized net change in fair value of financial assets at fair value through other comprehensive income |
|
|
|
117,780 |
|
- |
|
|
Unrealized net change in fair value of available-for-sale financial assets |
|
|
|
- |
|
(123,676) |
|
|
|
|
|
|
115,706 |
|
(144,721) |
|
|
Items that will not be reclassified to profit or loss |
|
|
|
|
|
|
|
|
Remeasurements of defined benefit plans |
|
|
|
(70,330) |
|
73,817 |
|
|
Unrealized net change in fair value of financial assets at fair value through other comprehensive income |
|
|
|
17,670 |
|
- |
|
|
|
|
|
|
(52,660) |
|
73,817 |
|
|
Other comprehensive income (loss) for the year, net of income tax |
|
|
|
63,046 |
|
(70,904) |
|
|
Total comprehensive income for the period |
|
|
|
2,179,652 |
|
1,536,857 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
38 |
|
|
|
|
|
|
Basic and diluted earnings per share in won |
|
|
|
1,319 |
|
995 |
|
(*1) The separate statement of comprehensive income for the year ended December 31, 2018 was prepared in accordance with K-IFRS No.1109 and K-IFRS No.1115. However, the comparative separate statement of comprehensive income for the year ended December 31, 2017 was not retrospectively restated.
See accompanying notes to the separate financial statements.
5
SHINHAN BANK
Separate Statements of Changes in Equity (Continued)
For the year ended December 31, 2018
|
Capital stock |
|
Hybrid bonds |
|
Capital surplus |
|
Capital adjustments |
|
Accumulated other comprehensive income (loss) |
|
Retained earnings |
|
Total |
|
Balance at January 1, 2017 |
|
7,928,078 |
|
469,393 |
|
398,080 |
|
(60,664) |
|
(154,791) |
|
12,380,650 |
|
20,960,746 |
Total comprehensive income (loss), net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,607,761 |
|
1,607,761 |
Foreign currency translation differences for foreign operations |
|
- |
|
- |
|
- |
|
- |
|
(21,045) |
|
- |
|
(21,045) |
Unrealized net changes in fair values of available-for-sale financial assets |
|
- |
|
- |
|
- |
|
- |
|
(123,676) |
|
- |
|
(123,676) |
Remeasurements of defined benefit plans |
|
- |
|
- |
|
- |
|
- |
|
73,817 |
|
- |
|
73,817 |
Total comprehensive income (loss) for the year |
|
- |
|
- |
|
- |
|
- |
|
(70,904) |
|
1,607,761 |
|
1,536,857 |
Transactions with owners, recognized directly in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends to equity holder |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(480,000) |
|
(480,000) |
Dividends to hybrid bond holders |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(29,857) |
|
(29,857) |
Redemption of hybrid bonds |
|
- |
|
199,545 |
|
- |
|
- |
|
- |
|
- |
|
199,545 |
Share-based payment transactions |
|
- |
|
- |
|
- |
|
1,213 |
|
- |
|
- |
|
1,213 |
Disposal of other capital adjustments |
|
- |
|
- |
|
- |
|
60,094 |
|
- |
|
(60,094) |
|
- |
Total transactions with owners |
|
- |
|
199,545 |
|
- |
|
61,307 |
|
- |
|
(569,951) |
|
(309,099) |
Balance at December 31, 2017 |
|
7,928,078 |
|
668,938 |
|
398,080 |
|
643 |
|
(225,695) |
|
13,418,460 |
|
22,188,504 |
See accompanying notes to the separate financial statements.
7
SHINHAN BANK
Separate Interim Statements of Changes in Equity (Continued)
For the nine-month period ended September 30, 2018
(Unaudited)
|
Capital stock |
|
Hybrid bonds |
|
Capital surplus |
|
Capital adjustments |
|
Accumulated other comprehensive income (loss) (*1) |
|
Retained earnings (*1) |
|
Total (*1) |
|
Balance at January 1, 2018 |
|
7,928,078 |
|
668,938 |
|
398,080 |
|
643 |
|
(225,695) |
|
13,418,460 |
|
22,188,504 |
Adjustments on initial application of K-IFRS No.1109 and K-IFRS No.1115, net of income tax (Note 43) |
|
- |
|
- |
|
- |
|
- |
|
(174,604) |
|
(90,616) |
|
(265,220) |
Balance at January 1, 2018 (adjusted) |
|
7,928,078 |
|
668,938 |
|
398,080 |
|
643 |
|
(400,299) |
|
13,327,844 |
|
21,923,284 |
Total comprehensive income (loss), net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2,116,606 |
|
2,116,606 |
Foreign currency translation differences for foreign operations |
|
- |
|
- |
|
- |
|
- |
|
(2,074) |
|
- |
|
(2,074) |
Unrealized net changes in fair values of financial assets at fair value through other comprehensive income |
|
- |
|
- |
|
- |
|
- |
|
138,639 |
|
(3,189) |
|
135,450 |
Remeasurements of defined benefit plans |
|
- |
|
- |
|
- |
|
- |
|
(70,330) |
|
- |
|
(70,330) |
Total comprehensive income for the period |
|
- |
|
- |
|
- |
|
- |
|
66,235 |
|
2,113,417 |
|
2,179,652 |
Transactions with owners, recognized directly in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends to equity holder |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(540,000) |
|
(540,000) |
Dividends to hybrid bond holders |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(25,228) |
|
(25,228) |
Issuance of hybrid bonds |
|
- |
|
199,547 |
|
- |
|
- |
|
- |
|
- |
|
199,547 |
Redemption of hybrid bonds |
|
- |
|
(169,825) |
|
- |
|
(175) |
|
- |
|
- |
|
(170,000) |
Share-based payment transactions |
|
- |
|
- |
|
- |
|
4,128 |
|
- |
|
- |
|
4,128 |
Total transactions with owners |
|
- |
|
29,722 |
|
- |
|
3,953 |
|
- |
|
(565,228) |
|
(531,553) |
Balance at December 31, 2018 |
|
7,928,078 |
|
698,660 |
|
398,080 |
|
4,596 |
|
(334,064) |
|
14,876,033 |
|
23,571,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) The separate statement of changes in equity for the year ended December 31, 2018 was prepared in accordance with K- IFRS No.1109 and K-IFRS No.1115. However, the comparative separate statement of changes in equity for the year ended December 31, 2017 was not retrospectively restated.
7
SHINHAN BANK
Separate Interim Statements of Changes in Equity (Continued)
For the nine-month period ended September 30, 2018
(Unaudited)
See accompanying notes to the separate financial statements.
7
SHINHAN BANK
Separate Statements of Cash Flows
For the years ended December 31, 2018 and 2017
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Profit before income tax |
|
2,890,496 |
|
2,002,888 |
Adjustments for: |
|
|
|
|
Net interest income |
|
(5,030,148) |
|
(4,521,238) |
Dividend income |
|
(10,230) |
|
(117,852) |
Net gain on financial assets at fair value through profit or loss |
|
(271,115) |
|
- |
Net non-cash trading gain |
|
- |
|
(52,660) |
Net non-cash foreign currencies transaction loss (gain) |
|
154,783 |
|
(263,125) |
Net gain on sale of financial assets at fair value through other comprehensive income |
|
(9,826) |
|
- |
Net gain on sale of available-for-sale financial assets |
|
- |
|
(186,711) |
Provision for credit loss allowance |
|
241,402 |
|
- |
Net impairment loss on financial assets at fair value through other comprehensive income |
|
- |
|
482,131 |
Net impairment loss on available-for-sale financial assets |
|
- |
|
178,228 |
Non-cash employee benefits |
|
107,448 |
|
139,128 |
Depreciation and amortization |
|
177,524 |
|
144,713 |
Net non-cash other operating income |
|
(29,373) |
|
(24,091) |
Net non-cash non-operating income |
|
(80,948) |
|
(24,379) |
|
|
(4,750,483) |
|
(4,245,856) |
Changes in assets and liabilities: |
|
|
|
|
Due from banks |
|
6,326,862 |
|
(4,129,350) |
Securities at fair value through profit or loss |
|
(1,612,173) |
|
- |
Trading assets |
|
- |
|
443,142 |
Derivative assets |
|
2,759,373 |
|
3,008,890 |
Loans at amortized cost |
|
(18,503,793) |
|
- |
Loans at fair value through profit or loss |
|
(34,732) |
|
- |
Loans |
|
- |
|
(11,853,249) |
Other assets |
|
(4,933,310) |
|
3,248,311 |
Financial liabilities designated at fair value through profit or loss |
|
- |
|
(6,282) |
Deposits |
|
13,943,933 |
|
13,485,577 |
Financial liabilities at fair value through profit or loss |
|
28,844 |
|
- |
Trading liabilities |
|
- |
|
(52,803) |
Derivative liabilities |
|
(2,688,290) |
|
(2,976,855) |
Defined benefit liabilities |
|
(93,646) |
|
(125,139) |
Provisions |
|
102 |
|
(22,537) |
Other liabilities |
|
540,004 |
|
2,061,741 |
|
|
(4,285,826) |
|
3,081,446 |
|
|
|
|
|
Income tax paid |
|
(418,247) |
|
(279,327) |
Interest received |
|
8,764,416 |
|
7,346,398 |
Interest paid |
|
(3,787,461) |
|
(2,706,045) |
Dividends received |
|
131,622 |
|
117,852 |
Net cash provided by (used in) operating activities |
|
(1,455,483) |
|
5,317,356 |
8
SHINHAN BANK
Separate Statements of Cash Flows (Continued)
For the years ended December 31, 2018 and 2017
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Proceeds from sale of securities at fair value through profit or loss |
|
925,774 |
|
- |
Acquisition of securities at fair value through profit or loss |
|
(925,116) |
|
- |
Proceeds from sale of securities at fair value through other comprehensive income |
|
22,785,691 |
|
- |
Acquisition of securities at fair value through other comprehensive income |
|
(23,600,909) |
|
- |
Proceeds from sale of available-for-sale financial assets |
|
- |
|
23,304,969 |
Acquisition of available-for-sale financial assets |
|
- |
|
(28,274,563) |
Proceeds from sale of securities at amortized cost |
|
1,792,087 |
|
- |
Acquisition of securities at amortized cost |
|
(3,567,093) |
|
- |
Proceeds from redemption of held-to-maturity financial assets |
|
- |
|
1,380,375 |
Acquisition of held-to-maturity financial assets |
|
- |
|
(4,664,112) |
Proceeds from sale of property and equipment |
|
31,223 |
|
10,564 |
Acquisition of property and equipment |
|
(77,401) |
|
(76,920) |
Proceeds from sale of intangible assets |
|
2,648 |
|
4,757 |
Acquisition of intangible assets |
|
(88,986) |
|
(70,910) |
Proceeds from sale of investments in associates |
|
13,712 |
|
69,257 |
Acquisition of investments in associates |
|
(162,196) |
|
(282,278) |
Proceeds from sale of investment properties |
|
15,274 |
|
3,507 |
Acquisition of investment properties |
|
(1,132) |
|
(2,120) |
Proceeds from sale of non-current assets held for sale |
|
3,175 |
|
10,466 |
Proceeds from sale of other assets |
|
945,794 |
|
930,097 |
Acquisition of other assets |
|
(944,870) |
|
(914,571) |
Net cash used in investing activities |
|
(2,852,325) |
|
(8,571,482) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from borrowings, net |
|
1,167,078 |
|
999,425 |
Proceeds from issuance of debt securities |
|
13,238,301 |
|
9,895,857 |
Repayment of debt securities |
|
(8,427,449) |
|
(6,303,167) |
Dividends paid |
|
(563,999) |
|
(509,798) |
Issuance of hybrid bonds |
|
199,547 |
|
199,545 |
Redemption of hybrid bonds |
|
(170,000) |
|
- |
Acquisition of other liabilities |
|
95,417 |
|
140,454 |
Proceeds from sale of other liabilities |
|
(94,621) |
|
(132,265) |
Net cash provided by financing activities |
|
5,444,274 |
|
4,290,051 |
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents held |
|
(6,688) |
|
(8,411) |
Net increase in cash and cash equivalents |
|
1,129,778 |
|
1,027,514 |
|
|
|
|
|
Cash and cash equivalents at beginning of the period (Note 40) |
|
3,332,539 |
|
2,305,025 |
Cash and cash equivalents at end of the period (Note 40) |
|
4,462,317 |
|
3,332,539 |
|
|
|
|
|
(*1) The separate statement of cash flows for the year ended December 31, 2018 was prepared in accordance with K- IFRS No.1109 and K-IFRS No.1115. However, the comparative separate statement of cash flows for the year ended December 31, 2017 was not retrospectively restated.
See accompanying notes to the separate financial statements.
9
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
Shinhan Bank (the “Bank”) was established on October 1, 1943 under the name of Chohung Bank, through the merger of Hanseung Bank and Dongil Bank, which were established on February 19, 1897 and August 8, 1906, respectively, to engage in commercial banking and trust operations. The Bank is headquartered at 20, Sejong-daero9-gil, Jung-gu, Seoul, Republic of Korea.
The Bank acquired Chungbuk Bank and Kangwon Bank in 1999, and the former Shinhan Bank on April 1, 2006, and subsequently changed its name to Shinhan Bank. As of December 31, 2018, the Bank has 1,585,615,506 outstanding common shares with par value of W7,928,078 million which Shinhan Financial Group Co., Ltd. (“Shinhan Financial Group”) owns 100% of those. As of December 31, 2018, the Bank operates through 741 domestic branches, 135 depositary offices, 30 premises and 14 overseas branches.
2.Basis of preparation
(a) |
Statement of compliance |
|
The separate financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies.
This is the first set of the Bank’s annual separate financial statements where K-IFRS No.1109 and K-IFRS No.1115 have been applied.
These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027, ‘Separate Financial Statements’ presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.
The Bank’s separate financial statements have been prepared in accordance with the accounting policies stated below.
(b) |
Basis of measurement |
|
The separate financial statements have been prepared on the historical cost basis except for the following material items in the separate statements of financial position:
|
|
derivative financial instruments are measured at fair value |
|
|
|
financial instruments at fair value through profit or loss (“FVTPL”) are measured at fair value |
|
|
|
financial instruments at fair value through other comprehensive income (“FVOCI”) are measured at fair value |
|
|
|
share-based payment arrangements are initially measured at fair value on grant date |
|
|
|
changes in fair value attributable to the risk being hedged for financial instruments designated as hedged items in qualifying fair value hedge relationships are recognized in profit or loss |
|
|
|
liabilities for defined benefit plans are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets |
|
(c) |
Functional and presentation currency |
|
The separate financial statements of the Bank are prepared in functional currency of the respective operation. These separate financial statements are presented in Korean won, which is the Bank’s functional currency and the currency of the primary economic environment in which the Bank operates.
10
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
2.Basis of preparation (continued)
(d) |
Use of estimates and judgements |
|
The preparation of the separate 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.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the significant effect on the amount recognized in the separate financial statements is described in Note 5.
The Bank recognizes credit loss allowance for expected credit losses on debt instruments, loans and receivables that are measured at amortized cost or at FVOCI, loan commitments and financial guarantee contracts upon adoption of K-IFRS No.1109, ‘Financial Instruments’. The measurement of such allowance is determined by techniques, assumptions and input variables used by the Bank to measure expected future cash flows of individual financial instruments and to measure expected credit losses in a collective manner. The details of techniques, assumptions and input variables used to measure the credit loss allowance for expected credit losses as of December 31, 2018 are described in Note 4.
3.Significant accounting policies
In preparing these separate financial statements, the Bank has consistently applied the accounting policies as listed below with those applied by the Bank in its separate financial statements as of and for the year ended December 31, 2017, except for the changes in accounting policies as explained in (a), which are effective for annual periods beginning on January 1, 2018.
(a) Changes in accounting policies
i) K-IFRS No.1109, ‘Financial Instruments’
The Bank has applied K-IFRS No.1109 ‘Financial Instruments’, which was published on September 25, 2015, from the year beginning on January 1, 2018. K-IFRS No.1109 replaced K-IFRS No.1039, ‘Financial Instruments: Recognition and Measurement’. The accounting policies related to K-IFRS No.1039 are presented in Note 3 (y).
The main characteristics of K-IFRS No.1109 are: classification and measurement of financial instruments based on characteristics of contractual cash flows and business model, impairment model based on expected credit losses, the expansion of the types of qualifying hedging instruments and hedged items, and changes in hedge effectiveness tests, etc.
In principle, K-IFRS No.1109 should be applied retrospectively. However, there are clauses exempting the Bank from restating the comparative information with respect to classification, measurement of financial instruments, and impairment. In addition, for hedge accounting, the new standard will be applied prospectively except for certain cases such as accounting for the time value of options.
11
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(a) Changes in accounting policies (continued)
The Bank’s separate financial statements as of and for the year ended December 31, 2018 have been prepared in accordance with K-IFRS No.1109, and the accompanying comparative separate financial statements as of and for the year ended December 31, 2017 have not been retrospectively adjusted.
Details on the adjustments to the carrying amounts of financial assets and financial liabilities, the adjustments to credit loss allowance, and the effects on equity as a result of initial application of K-IFRS No.1109 are presented in Note 43.
ii) K-IFRS No.1115, ‘Revenue from Contracts with Customers’
The Bank has applied K-IFRS No.1115, ‘Revenue from Contracts with Customers’, which was published on November 6, 2015, from the year starting on January 1, 2018. K-IFRS No.1115 replaces existing revenue recognition guidance, including K-IFRS No.1018, ‘Revenue’, K-IFRS No.1011, ‘Construction Contracts’, K-IFRS No.2031, ‘Revenue-Barter Transactions Involving Advertising Services’, K-IFRS No.2113, ‘Customer Loyalty Programmes’, K-IFRS No.2115, ‘Agreement for the Construction of Real Estate’, and K-IFRS No.2118, ‘Transfers of Assets from Customers.’
According to K-IFRS No.1115, all types of contracts recognize revenue through five-step revenue recognition model (① ‘Identifying the contract’ → ② ‘Identifying performance obligations’ → ③ ‘Determining the transaction price’ → ④ ‘Allocating the transaction price to performance obligations’ → ⑤ ‘Recognizing the revenue by satisfying performance obligations’).
The Bank elected to retrospectively apply K-IFRS No.1115 and reflected the cumulative financial effect of the initial application of K-IFRS No.1115 at the date of initial recognition, in accordance with the transitional provision of K-IFRS No.1115. The accompanying comparative separate financial statements as of and for the year ended December 31, 2017 have not been retrospectively adjusted. Effects on equity as a result of initial application of K-IFRS No.1115 are presented in Note 43.
iii) Amendments to K-IFRS No.1040, 'Investment Property'
The Bank has applied the amendments on K-IFRS No.1040, ‘Investment Property' from the year beginning on January 1, 2018. The amendments clarify that an entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. And it is clarified that the provisions on the transfers of investment property is applied to the properties that are being constructed or developed. The amendments did not have a significant impact on the Bank’s separate financial statements.
iv) Amendments to K-IFRS No.1102, 'Share-based Payment'
The Bank has applied the amendments on K-IFRS No.1102, ‘Share-based Payment' from the year beginning on January 1, 2018.
Amendments to K-IFRS No.1102 clarify accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. The amendments also clarify that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The amendments did not have a significant impact on the Bank’s separate financial statements.
v) Approval of separate financial statements
The separate financial statements were authorized for issue by the Board of Directors on February 11, 2019.
12
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(b) Investments in subsidiaries and associates
The accompanying separate financial statements have been prepared on a stand-alone basis in accordance with K-IFRS No.1027, ‘Separate Financial Statements’. The Bank’s investments in subsidiaries and associates are recorded at cost in accordance with K-IFRS No.1027. However, the investments in subsidiaries and associates subject to K-IFRS No.1101, ‘First-time Adoption of K-IFRS’ are recorded at previous GAAP carrying amount at the date of transition to K-IFRS. Dividend received from its subsidiaries and associates is recognized in profit or loss when the Bank is entitled to receive the dividend.
(c) Foreign currencies
i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Bank at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency using the reporting date’s exchange rate. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedging instrument of the net investment in a foreign operation, or a qualifying cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
ii) Foreign operations
If the presentation currency of the Bank is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation and are translated using the exchange rate at the reporting date.
When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal.
iii) Net investment in a foreign operation
If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, then foreign currency differences arising on the item form part of the net investment in the foreign operation and are recognized in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.
13
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(d) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Bank in the management of its short-term commitments. Equity instruments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date. However, the Bank’s account overdraft is included in borrowings.
(e) Non-derivative financial assets
Financial assets are recognized when the Bank becomes a party to the contractual provisions of the instrument. In addition, a regular way purchase or sale (a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market concerned) is recognized on the trade date.
A financial asset is measured initially at its fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition of the financial asset. Transaction costs on the financial assets at FVTPL that are directly attributable to the acquisition are recognized in profit or loss as incurred.
i) Financial assets designated at FVTPL
Financial assets can be irrevocably designated as measured at FVTPL despite of classification standards stated below, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases.
ii) Equity instruments
For the equity instruments that are not held for trading, at initial recognition, the Bank may make an irrevocable election to present subsequent changes in fair value in other comprehensive income. Equity instruments that are not classified as financial assets at FVOCI are classified as financial assets at FVTPL.
The Bank subsequently measures all equity investments at fair value. Valuation gains or losses of the equity instruments that are classified as financial assets at FVOCI previously recognized as other comprehensive income is not reclassified as profit or loss on derecognition. The Bank recognizes dividends in profit or loss when the Bank’s right to receive payments of the dividend is established.
Valuation gains or losses due to changes in fair value of the financial assets at FVTPL are recognized as gains or losses on financial assets at FVTPL. Impairment loss (reversal) on equity instruments at FVOCI is not recognized separately.
iii) Debt instruments
Subsequent measurement of debt instruments depends on the Bank’s business model in which the asset is managed and the contractual cash flow characteristics of the asset. Debt instruments are classified as financial assets at amortized cost, at FVOCI, or at FVTPL. Debt instruments are reclassified only when the Bank’s business model changes.
14
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(e) Non-derivative financial assets (continued)
ⓐ Financial assets at amortized cost
Assets that are held within a business model whose objective is to hold assets to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Impairment losses, and gains or losses on derecognition of the financial assets at amortized cost are recognized in profit or loss. Interest income on the effective interest method is included in the ‘Interest income’ in the separate statement of comprehensive income.
ⓑ Financial assets at FVOCI
Assets that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Other than impairment losses, interest income amortized using effective interest method and foreign exchange differences, gains or losses of the financial assets at FVOCI are recognized as other comprehensive income in equity. On derecognition, gains or losses accumulated in other comprehensive income are reclassified to profit or loss. The interest income on the effective interest method is included in the ‘Interest income’ in the separate statement of comprehensive income. Foreign exchange differences and impairment losses are included in the ‘Net foreign currency transaction gain’ and ‘Impairment loss on financial assets’ in the separate statement of comprehensive income, respectively.
ⓒ Financial assets at FVTPL
Debt securities other than financial assets at amortized costs or FVOCI are classified at FVTPL. Unless hedge accounting is applied, gains or losses from financial assets at FVTPL are recognized as profit or loss and are included in ‘Net gain on financial assets at fair value through profit or loss’ in the separate statement of comprehensive income.
iv) Embedded derivatives
Financial assets with embedded derivatives are classified regarding the entire hybrid contract, and the embedded derivatives are not separately recognized. The entire hybrid contract is considered when it is determined whether the contractual cash flows represent solely payments of principal and interest.
v) Derecognition of financial assets
The Bank derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Bank is recognized as a separate asset or liability.
If the Bank retains substantially all the risks and rewards of ownership of the transferred financial assets, the Bank continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.
vi) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the separate statement of financial position only when the Bank currently has a legally enforceable right to set off the recognized amounts, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
15
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(f) Expected credit loss on financial assets
As for financial assets at amortized cost and financial assets at FVOCI, the expected credit loss is evaluated at the end of each period and recognized as loss allowances.
Since initial recognition, a loss allowance shall be measured by the three stages in the table below depending on the extent of significant increase in credit risk.
Stage |
|
Category |
|
Description |
Stage 1 |
|
Credit risk has not increased significantly since initial recognition |
|
12 month expected credit losses: Expected credit loss resulting from potential default of financial instruments occurring over 12 months from the end of reporting period
|
Stage 2 |
|
Credit risk has increased significantly since initial recognition
|
|
Lifetime expected credit losses: Expected credit loss resulting from all potential default of financial instruments occurring over the expected life
|
Stage 3 |
|
Credit-impaired financial assets |
|
However, as for the financial assets whose credit is impaired at the initial recognition, only the cumulative change in the lifetime expected credit loss is recognized as the loss allowance.
The ‘lifetime’ refers to the expected life to the contractual maturity of the financial asset.
i) Forward looking information
The Bank determines a material increase on credit risk and estimates the expected credit loss on a forward looking basis.
The measuring factors of the expected credit loss are assumed to have certain relationship with the economic cycle. Through relationship analysis between the macroeconomic variables and the credit risk measuring factors, the forward looking information is reflected in the expected credit loss estimation.
ii) Financial assets at amortized cost
The expected credit loss on the financial assets at amortized cost is recognized as the difference between the present value of the contractual cash flow and the present value of the expected cash flow. The expected cash flow is estimated separately for the individually material financial assets.
For the financial assets which are not individually material, they are included in a group of assets with a similar credit risk and expected credit loss is estimated collectively.
16
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(f) Expected credit loss on financial assets (continued)
The expected credit losses of financial assets measured as amortized cost are presented net of loss allowance, and the allowance is derecognized together with the asset when it is determined to be unrecoverable. When the loan previously written-off is subsequently collected, it is recognized as an increase in loss allowance. At each reporting date, the Bank recognizes in profit or loss the amount of the change in lifetime expected credit losses.
iii) Financial assets at FVOCI
The expected credit loss on the financial assets at FVOCI is calculated using the same method as that on the financial assets at amortized cost, however the changes in loss allowance are recognized as other comprehensive income. As for disposal and repayment, the loss allowance is reclassified from other comprehensive income to profit or loss.
(g) Derivative financial instruments
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
i) Hedge accounting
The Bank holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Bank designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge), and foreign currency risk of net investment in foreign operation (net investment hedges).
On initial designation of the hedge, the Bank formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
ii) Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the separate statement of comprehensive income.
The Bank discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.
17
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(g) Derivative financial instruments (continued)
iii) Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the separate statements of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
Once hedge accounting is discontinued, any cumulative gain or loss existing in equity at that time and is recognized over the period the forecast transaction occurs as profit or loss. However, when a forecast transaction is no longer expected to occur, the cumulative gain or loss recognized in equity is immediately recognized in the profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
iv) Hedge of net investment
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the accumulated other comprehensive income is transferred to profit or loss as part of the profit or loss on disposal in accordance with K-IFRS No.1021, ‘The Effects of Changes in Foreign Exchange Rates’.
v) Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately only if the economic characteristics and risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the combined instrument is not designated at FVTPL. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
vi) Derivative financial instruments held for trading
Changes in the fair value of derivative financial instruments not designated as a hedging instrument are recognized immediately in profit or loss.
18
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(g) Derivative financial instruments (continued)
vii) Day one profit or loss
If the Bank uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there may be a difference between the transaction price and the amount determined using that valuation technique. As for these circumstances, the difference between the fair value at the initial recognition and the transaction price is not recognized as profit or loss but deferred. The deferred difference is amortized by using straight line method over the life of the financial instruments.
(h) Property and equipment
Property and equipment are initially measured at cost and after initial recognition. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Certain land and buildings are measured at fair value at the date of transition to K-IFRS, which is deemed cost, in accordance with K-IFRS No.1101, ‘First-time Adoption of K-IFRS’. Dividend from relevant revaluation surplus is prohibited in accordance with the resolution of the board of directors.
The Bank recognizes in the carrying amount of an item of property and equipment the cost of replacing part of property and equipment when that cost is incurred if it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.
Land is not depreciated. Other property and equipment are depreciated on a straight-line basis over the estimated useful lives, which most closely reflect the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives for the current and comparative periods are as follows:
Descriptions |
|
Useful lives |
Buildings |
|
40 years |
Other properties |
|
4~5 years |
The gain or loss arising from the derecognition of an item of property and equipment, which is included in profit or loss, is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Depreciation methods, useful lives and residual values are reassessed at each fiscal year-end and any adjustment is accounted for as a change in accounting estimate.
19
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(i) Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets as below from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as having indefinite useful lives and not amortized.
Descriptions |
|
Useful lives |
Software and capitalized development cost |
|
5 years |
Other intangible assets |
|
5 years or contract periods, whichever the shorter |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.
Expenditures on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Bank intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
(j) Investment properties
Investment property is property held either to earn rental income or for capital appreciation or both. An investment property is initially recognized at cost including any directly attributable expenditure. Subsequent to initial recognition, the asset is measured at cost less accumulated depreciation and accumulated impairment losses, if any.
The depreciation method and the estimated useful lives for the current and comparative periods were as follows:
Descriptions |
|
Depreciation method |
|
Useful lives |
Buildings |
|
Straight-line |
|
40 years |
Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as changes in accounting estimates.
20
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(k) Leases
The Bank classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the Bank assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
i) Finance leases
At the commencement of the lease term, the Bank recognizes as finance assets and finance liabilities in its separate statements of financial position, the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. The Bank reviews to determine whether the leased asset may be impaired.
ii) Operating leases
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the period of the lease.
(l) Non-current assets held for sale
Assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.
The Bank recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.
An asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
21
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(m) Impairment of non-financial assets
The carrying amounts of the Bank’s non-financial assets, other than assets arising from employee benefits, deferred tax assets and non-current assets held for sale, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.
The Bank estimates the recoverable amount of an individual asset, if it is impossible to measure the individual recoverable amount of an asset, then the Bank estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or the CGU.
An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(n) Non-derivative financial liabilities
The Bank recognizes financial liabilities in the separate statement of financial position when the Bank becomes a party to the contractual provisions of the financial liability in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.
Transaction costs on the financial liabilities at FVTPL are recognized in profit or loss as incurred.
i) Financial liabilities designated at FVTPL
Financial liabilities can be irrevocably designated as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases, or a group of financial instruments is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. The amount of change in the fair value of the financial liabilities designated at FVTPL that is attributable to changes in the credit risk of that liabilities shall be presented in other comprehensive income.
22
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(n) Non-derivative financial liabilities (continued)
ii) Financial liabilities at FVTPL
Since initial recognition, financial liabilities at FVTPL is measured at fair value, and changes in the fair value are recognized as profit or loss.
iii) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
The Bank derecognizes a financial liability from the separate statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
(o) Equity capital
i) Capital stock
Capital stock is classified as equity. Incremental costs directly attributable to the transaction of stock are deducted from equity, net of any tax effects.
ii) Hybrid bonds
The Bank classifies an issued financial instrument, or its component parts, as a financial liability or an equity instrument depending on the substance of the contractual arrangement of such financial instrument. Hybrid bonds where the Bank has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation are classified as an equity instrument and presented in equity.
(p) Employee benefits
i) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Bank during an accounting period, the Bank recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
ii) Other long-term employee benefits
The Bank’s net obligation in respect of other long-term employee benefits that are not expected to be settled wholly before 12 months after the end of the annual reporting period, in which the employees render the related service, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
23
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(p) Employee benefits (continued)
iii) Retirement benefits: defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Bank’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method.
The discount rate is the yield at the reporting date on high-quality corporate bonds that have maturity dates approximating the terms of the Bank’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Bank recognizes service cost and net interest on the net defined benefit liability (asset) in profit or loss and remeasurements of the net defined benefit liability (asset) in other comprehensive income.
iv) Retirement benefits: defined contribution plans
The Bank recognizes the contribution expense as an account of severance payments in profit or loss in the period according to the defined contribution plans.
ⅴ) Termination benefits
Termination benefits are expensed at the earlier of when the Bank can no longer withdraw the offer of those benefits and when the Bank recognizes costs for a restructuring. If benefits are not expected to be wholly settled within 12 months of the reporting date, then they are discounted.
(q) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.
The Bank has granted share-based payment based on Shinhan Financial Group’s share to the employees. In accordance with a repayment arrangement with Shinhan Financial Group, the Bank is required to pay Shinhan Financial Group for the provision of the share-based payments. The Bank recognizes the costs as expenses and accrued expenses in liabilities for the service period. When vesting conditions are not satisfied because of death, retirement or dismissal of employees during the specified service period, no amount is recognized for goods or services received on a cumulative basis. Share-based payment arrangements in which the Bank has no obligation to settle the share-based payment transaction are accounted for as equity-settled share-based payment transactions, regardless of the repayment arrangement with Shinhan Financial Group.
24
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(r) Provisions
Provisions are recognized when the Bank has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
Provisions shall be used only for expenditures for which the provisions are originally recognized.
(s) Financial guarantee contract
A financial guarantee contract is a contract that requires the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contracts are recognized initially at their fair value, and the initial fair value is amortized over the life of the financial guarantee contract. The financial guarantee liability is subsequently measured at the higher of the amount of the best estimate of the expenditure required to settle the present obligation at the end of reporting period; and the amount initially recognized less, cumulative amortization recognized on a straight-line basis over the guarantee period. Financial guarantee liabilities are included within other liabilities.
From January 1, 2018, after initial recognition, financial guarantee contracts are measured at the higher of:
- Loss allowance in accordance with K-IFRS No.1109, ‘Financial Instruments’
- The amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of K-IFRS No.1115, ‘Revenue from Contracts with Customers’
(t) Recognition of revenues and expenses
Other than those under the scope of K-IFRS No.1017, ‘Leases’, K-IFRS No.1109, ‘Financial Instruments’, K-IFRS No.1110, ‘Consolidated Financial Statements’, and K-IFRS No.1111, ‘Joint Arrangements’, the Bank’s revenues are recognized using five-step revenue recognition model as follows: ① ‘Identifying the contract’ → ② ‘Identifying performance obligations’ → ③ ‘Determining the transaction price’ → ④ ‘Allocating the transaction price to performance obligations’ → ⑤ ‘Recognizing the revenue by satisfying performance obligations’.
25
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(t) Recognition of revenues and expenses (continued)
i) Interest income and expense
Interest income and expense are in the scope of K-IFRS No.1109 and recognized in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument, but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, and all other premiums or discounts. When it is not possible to estimate reliably the cash flows or the expected life of a financial instrument, the Bank uses the contractual cash flows over the full contractual term of the financial instrument.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
ii) Fees and commission
The recognition of revenue for financial service fees depends on the purposes for which the fees are assessed and the basis of accounting for any associated financial instrument.
ⓐ Fees that are an integral part of the effective interest rate of a financial instrument.
Such fees are generally treated as an adjustment to the effective interest rate. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, preparing and processing documents, closing the transaction and the origination fees received on issuing financial liabilities. However, when the financial instrument is measured at fair value with the change in fair value recognized in profit or loss, the fees are recognized as revenue when the instrument is initially recognized.
ⓑ Fees earned as services are provided
Fees and commission income, including investment management fees, sales commission, and account servicing fees, are recognized as the related services are provided.
ⓒ Fees that are earned on the execution of a significant act
The fees that are earned on the execution of a significant act including commission on the allotment of shares or other securities to a client, placement fee for arranging a loan between a borrower and an investor and sales commission, are recognized as revenue when the significant act has been completed.
iii) Dividends
Dividends income is recognized when the shareholder’s right to receive payment is established. Usually this is the ex-dividend date for equity securities.
26
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(u) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Shinhan Financial Group, the parent company, files its national income tax return with the Korean tax authorities under the consolidated corporate tax system, which allows it to make national income tax payments based on the consolidated profits or losses of the Shinhan Financial Group and its wholly owned domestic subsidiaries including the Bank. Deferred taxes are measured based on the future tax benefits expected to be realized in consideration of the expected profits or losses of eligible companies in accordance with the consolidated corporate tax system. Consolidated corporate tax amounts, once determined, are allocated to each of the subsidiaries and are used as a basis for the income taxes to be recorded in their stand-alone financial statements.
The Bank recognizes deferred tax liabilities for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Bank is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Bank recognizes deferred tax assets for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduced the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.
If any additional income tax expense exists by payment of dividends, the Bank recognizes it when the liability relating to the payment is recognized
(v) Accounting for trust accounts
The Bank accounts for trust accounts separately from its bank accounts under the Financial Investment Services and Capital Markets Act and thus the trust accounts are not included in the accompanying separate financial statements. Borrowings from trust accounts are included in other liabilities. Trust fees and commissions in relation to the service provided to trust accounts by the Bank are recognized as fees and commission income.
27
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(w) Earnings per share
The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholder of the Bank by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.
(x) New standards and interpretations not yet adopted
The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Bank for annual period beginning after January 1, 2018, and the Bank has not early adopted them.
The Bank is currently evaluating the effects from the application of these new standards on the separate financial statements.
i) K-IFRS No.1116, ‘Leases’
K-IFRS No.1116, published on May 22, 2017, replaces existing standards including K-IFRS No.1017, ‘Leases’, K-IFRS No.2104, ‘Determining whether an Arrangement contains a Lease’, K-IFRS No.2015, ‘Operating Leases - Incentives’ and K-IFRS No.2027, ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’.
At inception of a contract, an entity shall assess whether the contract is, or contains, a lease. However, as a practical expedient, for the contracts previously identified as leases or not, an entity is not required to reassess whether the contract is, or contains, a lease at the date of initial application.
For a contract that is, or contains, a lease, a lessee or a lessor shall account for each lease component within the contract as a lease separately from non-lease components of the contract.
A lessee shall recognize a right-of-use asset, which indicates an asset that represents a lessee’s right to use an underlying asset for the lease term, and a lease liability, which indicates obligation to make lease payments. However, a lessee may elect not to apply the requirements to short-term leases and leases for which the underlying asset is of low value. Also, as a practical expedient, a lessee may elect, by class of underlying asset, not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component.
There has not been a material change in the accounting treatments for a lessor from the existing standard K-IFRS No.1017. K-IFRS No.1116 is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted.
28
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(x) New standards and interpretations not yet adopted (continued)
ⓐ Transition method of K-IFRS No.1116, ‘Lease’
The lessee is required to apply either retrospective application (full retrospective approach) to each past reporting period presented in accordance with K-IFRS No.1008, ‘Accounting Policies, Changes in Accounting Estimates and Errors’ or recognize the cumulative effect of the initial application at the date of initial application (cumulative effect of batch reconciliation action).
The Bank plans to apply K-IFRS No.1116 for the first time by applying cumulative effect of the initial application as of January 1, 2019. Accordingly, the cumulative effect of applying K-IFRS No.1116 is adjusted in the retained earnings (or, where appropriate, other components of equity) at the date of initial application and the comparative financial statements are not going to be restated.
ⓑ Financial effect of K-IFRS No.1116, ‘Lease’
The Bank assessed the impact on the separate financial statements based on the situation and available information as of December 31, 2018, in order to assess the financial impact of the initial adoption of K-IFRS No.1116.
As of December 31, 2018, the aggregate amount of the minimum lease payments prior to the present value discount for the assets currently used as operating leases is approximately W417 billion and the discounted amount is approximately W404 billion if discounted by the incremental borrowing rate of the lessee. However, the Bank will account for each lease element and associated non-lease element as a single lease element, using the simplified method of accounting for contracts that include all or part of the lease.
As a result of a detailed analysis of the effect on the financial statements, the Bank expects the right-to-use assets and lease liabilities as of December 31, 2018 to increase by approximately W408 billion and approximately W367 billion, respectively.
ii) Amendment of K-IFRS No.1109, ‘Financial instruments’
Financial assets that are redeemable with reimbursable financial assets are remeasured to be measured at amortized cost. When the financial liabilities measured at amortized cost are changed but not eliminated, the effect of the change should be recognized in profit or loss. These amendments will be effective from the fiscal year beginning on or after January 1, 2019 and are subject to early adoption.
iii) Amendment of K-IFRS No.1019, ‘Employee benefits’
If the change in the defined benefit plan results in the revision, reduction or settlement of the plan, the assumptions used in remeasurement of the net defined benefit obligation (asset) to estimate the current service cost and net interest for the remaining period of the period after the adjustments in the plan. In addition, the decrease in excess of the amount of unrecognized actuarial gain or loss is reflected in profit or loss as a part of past service cost or settlement profit or loss. The amendments are applied prospectively to the amendment, reduction, and settlement of systems that have occurred since the fiscal year beginning on or after January 1, 2019.
iv) Amendment of K-IFRS No.1028, ‘Investment in associates and joint ventures’
The clarification has been conducted that other financial instruments (financial instruments that do not apply the equity method) to the related companies or joint ventures are subject to K-IFRS No.1109, and that the long-term investment interests that form part of the net investment in the related companies or joint ventures was revised accordingly with the K-IFRS No.1109. These amendments will be effective from the fiscal year beginning on or after January 1, 2019 and are subject to early adoption. In addition, the first-time adoption of this standard does not require reclassification of comparative information by
29
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
applying the transitional provisions of K-IFRS No.1109, and the effect of retroactive application is reflected in the beginning retained earnings (or other appropriate capital elements) at the date of initial application.
3.Significant accounting policies (continued)
(x) New standards and interpretations not yet adopted (continued)
v) Establishment of K-IFRS No.2123, ‘Uncertainty over income tax treatments’
The interpretation is applied to the recognition and measurement of deferred tax and deferred income tax if there is uncertainty about whether or not the tax treatment applied by the entity will be recognized by the taxing authority. Guidance on accounting units of uncertainty in taxation and circumstances requiring reevaluation Includes. The interpretation is effective from January 1, 2019, and it can choose between retroactively reclassifying comparative financial statements or reflect the effect of the change on the basis of the first year of adoption.
vi) Annual amendments through year 2015 – 2017
vi-i) K-IFRS No.1103, ‘Business combination’
The business combination that is held in stages to acquire control over the joint business (meeting the definition of the business) while retaining the rights and liabilities for the assets related to the joint business. Therefore, Remeasurement should be conducted for all underlying assets and liabilities. The amendments are effective for annual periods beginning on or after January 1, 2019, or reflect the effect of the change on the basis of the first year of adoption.
vi-ii) K-IFRS No.1012, ‘Income taxes’
The provisions of paragraph 57A of K-IFRS No.1012 (defining the timing and recognition of dividend tax effects) apply to all income tax effects of dividends and are recognized in profit or loss, other comprehensive income or capital. This amendment is effective for fiscal years beginning on or after January 1, 2019, but may be applied early.
(y) Accounting policies in accordance with K-IFRS No.1039
The following accounting policies are applied to the comparative separate statements of financial position as of December 31, 2017, and the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes.
i) Non-derivative financial assets
Financial assets are classified into financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets and held-to-maturity financial assets. Financial assets are recognized when the Bank becomes a party to the contractual provisions of the instrument. In addition, a regular way purchase or sale (a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market concerned) is recognized on the trade date.
A financial asset is measured initially at its fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition of the financial asset.
ⓐ Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit or loss if it is held for trading or is designated at fair value through profit or loss. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
30
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(y) Accounting policies in accordance with K-IFRS No.1039 (continued)
ⓑ Held-to-maturity financial assets
A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Bank has the positive intention and ability to hold to maturity, is classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method.
ⓒ Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method.
ⓓ Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. Subsequent to initial recognition, they are measured at fair value, which changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives those are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.
ii) Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized.
If any objective evidence of impairment exists, impairment losses should be measured by the following categories of financial assets and recognized in profit or loss.
ⓐ Loans
The Bank first assesses whether objective evidence of impairment exists individually for loans that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e., the effective interest rate computed at initial recognition).
31
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(y) Accounting policies in accordance with K-IFRS No.1039 (continued)
If the interest rate of loans is a floating rate, the discount rate used to evaluate impairment is the current effective interest rate defined in the agreement. The present value of estimated future cash flows of secured financial assets is calculated by including cash flows from collateral after deducting costs to acquire and sell the collateral, regardless of probability of realization of such collateral.
In assessing collective impairment, the Bank classifies loans, based on credit risk assessment or a credit rating assessment process that takes into account asset type, industry, regional location, collateral type, delinquency and other relative factors.
Future cash flows of loans subject to collective impairment assessment are estimated by using statistical modelling of historical trends of the probability of default, timing of recoveries and the amount of losses incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the impairment losses are likely to be greater or less than suggested by historical modelling. In adjusting the future cash flows by historical modelling, the result has to be in line with changes and trends of observable data (e.g., impairment losses of collective assets and unemployment rates, asset prices, commodity prices, payment status and other variables representing the size of impairment losses). Methodologies and assumptions used to estimate future cash flow are reviewed on a regular basis in order to reduce discrepancy between estimated impairment losses and actual loss.
Impairment losses are recognized in profit or loss and reflected in an allowance account against loans. When a subsequent event causes the amount of impairment losses to decrease, and the decrease can be related objectively to an event occurring after the impairment is recognized, the decrease in impairment losses is reversed through profit or loss of the period.
ⓑ Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss is recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.
ⓒ Held-to-maturity financial assets
An impairment loss in respect of held-to-maturity financial assets measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate and is recognized in profit or loss. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
32
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(y) Accounting policies in accordance with K-IFRS No.1039 (continued)
iii) Derivative financial instruments
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
ⓐ Hedge Accounting
The Bank holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Bank designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge), and foreign currency risk of net investment in foreign operation (net investment hedges).
On initial designation of the hedge, the Bank formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
ⓑ Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the separate statement of comprehensive income.
The Bank discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.
ⓒ Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the separate statements of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
33
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(y) Accounting policies in accordance with K-IFRS No.1039 (continued)
iii) Derivative financial instruments (continued)
ⓓ Hedge of net investment
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the accumulated other comprehensive income is transferred to profit or loss as part of the profit or loss on disposal in accordance with K-IFRS No.1021, ‘The Effects of Changes in Foreign Exchange Rates’.
ⓔ Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately only if the economic characteristics and risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
ⓕ Other derivative financial instruments
Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.
34
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
4-1.Credit risk
Credit risk is the risk of financial loss of the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arises principally from due from banks, the lending process related to loans, investment activities in debt securities and off balance sheet items including loan commitments, etc. Credit risk management is critical to the Bank’s business activities; thus, the Bank carefully manages the credit risk exposure.
(a) Credit risk management |
|
Major policies of the credit risk management are determined by the Risk Policy Committee, which is the Bank’s executive decision-making body for credit risk management. The Risk Policy Committee is led by the Bank’s Deputy President and Head of Risk Management Group. The Risk Policy Committee also consists of chief officers from eight different business units. The Credit Review Committee performs credit review evaluations and operates separately from the Risk Policy Committee.
Each business unit is required to implement the Bank’s risk management policies and procedures. Risk Management Department reviews compliance of business units with agreed exposure limits established by the Risk Policy Committee, including those for selected industries, country risk and product types.
The Bank established the authorization structure for the approval and renewal of credit facilities. Authorization limits are allocated to the business unit credit officer. Larger facilities require approval by the Credit Committee. The Bank assesses all credit exposures in excess of designated limits, prior to facilities being committed to customers by the business unit concerned. Renewals and review of facilities are subject to the same review process.
The Bank is responsible for limiting concentrations of exposures to counterparties, geographies and industries, and by issuers, credit rating band, market liquidity and country.
The Bank develops and maintains the risk grading system in order to categorize exposures according to the degree of risk of financial loss faced and to focus management on the attendant risks. The risk grading system is used in determining credit approvals, credit renewals, credit pricing, credit limits, or where impairment provisions may be required against specific credit exposures for existing loans.
Each business unit is responsible for the quality and performance of its credit portfolio and for monitoring and controlling all credit risks in its portfolio, including those subject to central approval. In addition to periodic loan reviews by credit officers, the Bank also utilizes an automated monitoring tool which conducts searches for companies with high probability of default. Regular reports on the credit quality of local portfolios are provided to the Credit Administration Department who may require appropriate corrective action to be taken.
35
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(b) Risk management and risk mitigation policy
In order to control the credit risk of the Bank at an appropriate level, the following risk management system is established and operated.
- Credit risk limits are set and managed by business sector, customer, product, industry, etc. based on credit VaR (Value at Risk) and maximum exposure amount.
- The risk department establishes and manages limits for credit VaR, and maximum exposure limits. The credit planning department and the credit assessment department conduct maximum exposure limits.
- The risk engineering department and risk engineering department establishes a credit risk limit operation plan for the entire bank at least once a year, and commits it to the risk policy committee.
- Each business unit monitors and adheres to credit risk limits assigned to each business unit.
- Identify and manage by individual and corporate customers, industry and nationality for identified credit risk.
- Set limits on acceptable risks for individual borrowers or borrowers, and by geographical sectors.
- The risk is reviewed on an annual basis or within a period when it is deemed necessary, and the limits of risks by product, industry and country are approved by the Board on a quarterly basis.
- The maximum amount of exposure by the borrower, including the institution, is managed separately by the lower level limit for the accounts in the consolidated financial statements and the other accounts, and the limit of the risk is also determined for daily transactions related to commodity transactions such as foreign currency forward transactions.
- Actual maximum exposure limits is managed on a daily basis.
- Maximum credit risk exposure is managed in the process of analyzing the interest and principal repayment ability of the borrower, and if necessary, changes the loan limit in the process.
Other risk management measures are as follows.
i) Collateral
The Bank has adopted policies and procedures to mitigate credit risk. In connection with credit risk, collateral is generally used, and the Bank has adopted a policy for pledging certain types of assets. The main types of collateral are as follows:
- Mortgage
- Real estate, inventories, accounts receivable, etc.
- Financial instruments such as debt securities and equity securities
Long-term loans are generally collateralized. On the other hand, revolving personal loans are generally unsecured. In addition, in order to minimize losses due to credit risk, the Bank establishes additional collateral for the counterparty in the event of an indication of impairment of the asset.
Collateral for financial assets other than loans is subject to the nature of the products. Except for special cases such as Asset Backed Securities (ABS), unsecured securities are common in the case of debt securities.
ii) Derivative financial instruments
The Bank maintains a credit limit on the amount and duration of derivative financial instruments that are in between the disposal agreements after purchase.
36
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
iii) Collective offsetting contract
The Bank limits its maximum exposure to credit losses by engaging in collective offsetting contracts with counterparties in performing significant number of transactions.
Collective offsetting contracts generally do not result from offsetting assets and liabilities in the consolidated financial statements, as transactions are usually set at a gross amount basis. However, when all amounts to the counterparty are set on a net basis, the credit risk associated with a favorable contract is reduced by collective offsetting contracts if losses are incurred.
The Bank's overall maximum exposure to credit risk that is part of a collective offsetting contract can vary substantially within a short period of time because it is affected by each transaction.
iv) Credit related contracts
Warranties and credit guarantees have credit risks similar to credit. Credit (which guarantees credit on behalf of the customer by issuing a note to a third party for the amount requested under specific terms and conditions) is secured by the underlying commodities associated with them, it involves less risk. The credit enhancement arrangements represent the unused portion of the credit limit in the form of a credit, guarantee or letter of credit. In relation to the credit risk of a credit enhancement arrangement, the Bank is potentially exposed to the same amount as the total unused arrangements. Long-term contracts generally have a greater degree of credit risk than short-term, and the Bank monitors the maturity of credit arrangements.
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model)
i) Determining significant increases in credit risk since initial recognition
At each reporting date, the Bank assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Bank uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Bank compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. The supportable information also includes historical default data held by the Bank and the analysis by internal credit risk rating specialists.
ⓐ Measuring the risk of default
The Bank assigns an internal credit risk rating to each individual exposure based on observable data and historical experiences that have been found to have a reasonable correlation with the risk of default. The internal credit risk rating is determined by considering both qualitative and quantitative factors that indicate the risk of default, which may vary depending on the nature of the exposure and the type of borrower.
The internal credit risk rating based on the borrower’s information related to each individual exposures on initial recognition, may change depending on the results of continuing monitoring and reviews.
37
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
ⓑ Measuring term structure of probability of default
The Bank accumulates information after analyzing the information regarding exposure to credit risk and default information by the type of product and borrower and results of internal credit risk assessment. For some portfolios, the Bank uses information obtained from external credit rating agencies when performing these analyses.
The Bank applies statistical techniques to estimate the probability of default for the remaining life of the exposure from the accumulated data and to estimate changes in the estimated probability of default over time.
ⓒ Significant increases in credit risk
The Bank uses the indicators defined as per portfolio to determine the significant increase in credit risk and such indicators generally consist of changes in the risk of default estimated from changes in the internal credit risk rating, qualitative factors, days of delinquency, and others. The method used to determine whether credit risk of financial instruments has significantly increased after the initial recognitions is summarized as follows:
38
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
Corporate exposures |
|
Retail exposures |
|
|
|
Significant change in credit ratings |
|
Significant change in credit ratings |
Continued past due more than 30 days |
|
Continued past due more than 30 days |
Loan classification of precautionary and below |
|
Loan classification of precautionary and below |
Borrower with early warning signals |
|
Borrower with early warning signals |
Negative net assets |
|
Specific pool segment |
Adverse audit opinion or disclaimer of opinion |
|
Collective loans for housing for which the constructors are insolvent |
Interest coverage ratios of below 1 for consecutive three years |
|
|
Negative cash flows from operating activities for consecutive two years |
|
|
The Bank considers the credit risk of financial instrument has been significantly increased since initial recognition if a specific exposure is past due more than 30 days (however, for a specific portfolio if it is past due more than 7 days). The Bank counts the number of days past due from the earliest date on which the Bank has not received the contractual payments in full from the borrower and does not consider the grace period granted to the borrower.
The Bank regularly reviews the criteria for determining if there have been significant increases in credit risk from the following perspective.
- A significant increase in credit risk shall be identified prior to the occurrence of default.
- The criteria established to judge the significant increase in credit risk shall have a more predictive power than the criteria for days of delinquency.
- As a result of applying the judgment criteria, financial instruments shall not be to move too frequently between the 12-months expected credit losses measurement and the lifetime expected credit losses measurement.
ii) Modified financial assets
If the contractual cash flows on a financial asset have been renegotiated or modified and the financial asset was not derecognized, the Bank assesses whether there has been a significant increase in the credit risk of the financial instrument by comparing the risk of a default occurring at initial recognition based on the original, unmodified contractual terms and the risk of a default occurring at the reporting date based on the modified contractual terms.
The Bank may adjust the contractual cash flows of loans to customers who are in financial difficulties in order to manage the risk of default and enhance the collectability (hereinafter referred to as ‘debt restructuring’). These adjustments generally involve extension of maturity, changes in interest payment schedule, and changes in other contractual terms.
Debt restructuring is a qualitative indicator of a significant increase in credit risk and the Bank recognizes lifetime expected credit losses for the exposure expected to be the subject of such adjustments. If a borrower faithfully makes payments of contractual cash flows that were modified in accordance with the debt restructuring or if the borrower's internal credit rating has recovered to the level prior to the recognition of the lifetime expected credit losses, the Bank recognizes the 12-months expected credit losses for that exposure again.
39
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
iii) Risk of default
The Bank considers a financial asset to be in default if it meets one or more of the following conditions:
- if a borrower is overdue 90 days or more from the contractual payment date,
- if the Bank judges that it is not possible to recover principal and interest without enforcing the collateral on a financial asset
The Bank uses the following indicators when determining whether a borrower is in default:
- qualitative factors (e.g. breach of contract terms),
- quantitative factors (e.g. if the same borrower does not perform more than one payment obligations to the Bank, the number of days past due per payment obligation. However, in the case of a specific portfolio, the Bank uses the number of days past due for each financial instrument)
- internal data and external data
The definition of default applied by the Bank generally conforms to the definition of default defined for regulatory capital management purposes; however, depending on the situations, the information used to determine whether a default has incurred and the extent thereof may vary.
iv) Reflection of forward-looking information
The Bank reflects forward-looking information presented by internal experts based on a variety of sources when measuring expected credit losses. For the purpose of estimating these forward-looking information, the Bank utilizes the economic outlook published by domestic and overseas research institutes or government and public agencies.
The Bank reflects future macroeconomic conditions anticipated from a neutral standpoint that is free from bias in measuring expected credit losses. Expected credit losses in this respect reflect conditions that are most likely to occur and are based on the same assumptions that the Bank used in its business plan and management strategy.
The Bank identified the key macroeconomic variables relevant to forecast credit risk and credit losses for each portfolio as follows by analyzing past experience data and drew correlations across credit risk for each variable.
Key macroeconomic variables |
|
Correlation with credit risk |
|
|
|
Economic growth |
|
Negative |
Consumer price change rates |
|
Positive |
Benchmark rate |
|
Positive |
3-year Korea Treasury Bond |
|
Positive |
3-year Corporate Bond |
|
Positive |
KOSPI |
|
Negative |
The predicted correlations between the macroeconomic variables and the risk of default, used by the Bank, were derived based on data from the past nine years.
40
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
v) Measurement of expected credit losses
Key variables used in measuring expected credit losses are as follows:
- Probability of default (PD)
- Loss given default (LGD)
- Exposure at default (EAD)
These variables have been estimated from historical experience data by using the statistical techniques developed internally by the Bank and have been adjusted to reflect forward-looking information.
Estimates of PD over a specified period are estimated by reflecting characteristics of counterparties and their exposure, based on a statistical model at a specific point of time. The Bank uses its own information to develop a statistical credit assessment model used for the estimation, and additional information observed in the market is considered for some portfolios such as a group of large corporates. When a counterparty or exposure is concentrated in specific grades, the method of measuring PD for that grades would be adjusted, and the PD by grade is estimated by considering contract expiration of the exposure.
LGD refers to the expected loss if a borrower defaults. The Bank calculates LGD based on the experience recovery rate measured from past default exposures. The model for measuring LGD is developed to reflect type of collateral, seniority of collateral, type of borrower, and cost of recovery. In particular, LGD for retail loan products uses loan to value (LTV) as a key variable. The recovery rate reflected in the LGD calculation is based on the present value of recovery amount, discounted at the effective interest rate.
EAD refers to the expected exposure at the time of default. The Bank derives EAD reflecting a rate at which the current exposure is expected to be used additionally up to the point of default within the contractual limit. EAD of financial assets is equal to the total carrying amount of the asset, and EAD of loan commitments or financial guarantee contracts is calculated as the sum of the amount expected to be used in the future.
When measuring expected credit losses on financial assets, the Bank reflects a period of expected credit loss measurement based on a contractual maturity. The Bank takes into consideration of the extension rights held by a borrower when deciding the contractual maturity.
Risk factors such as PD, LGD and EAD are collectively estimated according to the following criteria:
- Type of products
- Internal credit risk rating
- Type of collateral
- Loan to value (LTV)
- Industry that the borrower belongs to
- Location of the borrower or collateral
- Days of delinquency
41
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
The criteria for classification of groups are periodically reviewed to maintain homogeneity of the group and adjusted if necessary. The Bank uses external benchmark information to supplement internal information for a particular portfolio that did not have sufficient internal data accumulated from the past experience.
42
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
vi) Write-off of financial assets
The Bank writes off a portion of or entire loan or debt security that is not expected to receive its principal and interest. In general, the Bank conducts write-off when it is deemed that the borrower has no sufficient resources or income to repay the principal and interest. Such determination on write-off is carried out in accordance with the internal rules of the Bank and is carried out with the approval of an external institution, if necessary. Apart from write-off, the Bank may continue to exercise its right of collection under its own recovery policy even after the write-off of financial assets.
43
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(d) Maximum exposure to credit risk
The Bank’s maximum exposure to credit risk without taking account of any collateral held or other credit enhancements as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
Due from banks (*1)(*2): |
|
|
Banks |
|
3,247,581 |
Governments |
|
3,691,184 |
|
|
6,938,765 |
Loans at amortized cost (*1)(*2): |
|
|
Banks |
|
8,651,580 |
Retail |
|
|
Mortgage lending |
|
44,366,805 |
Others |
|
74,916,473 |
|
|
119,283,278 |
Governments |
|
690,658 |
Corporate |
|
|
Large enterprises |
|
25,970,091 |
Small and medium-sized enterprises |
|
74,418,254 |
Special finance |
|
4,231,473 |
Others |
|
942 |
|
|
104,620,760 |
|
|
233,246,276 |
Loans at FVTPL: |
|
|
Banks |
|
|
Corporate |
|
20,004 |
Large enterprises |
|
319,918 |
Small and medium-sized enterprises |
|
305,315 |
|
|
625,233 |
|
|
645,237 |
Securities at FVTPL: |
|
|
Debt securities |
|
12,607,677 |
Gold/silver deposits |
|
154,881 |
|
|
12,762,558 |
Securities at FVOCI (*1) |
|
30,293,475 |
Securities at amortized cost (*1) |
|
16,230,964 |
Derivative assets |
|
1,488,548 |
Other financial assets (*1)(*3) |
|
13,931,897 |
Off balance sheet items: |
|
|
Financial guarantee contracts |
|
8,334,092 |
Loan commitments and other liabilities for credit |
|
87,175,322 |
|
|
95,509,414 |
|
|
411,047,134 |
|
(*1) |
The maximum exposure amounts for due from banks and loans and other financial assets are measured as the amount net of allowances. |
(*2) Due from banks and loans were classified as similar credit risk group to be with consistent calculating capital adequacy ratio under New Basel Capital Accord (Basel III).
44
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(*3) Other financial assets comprise accounts receivable, accrued income, guarantee deposits, domestic exchange settlements receivables, suspense receivables, etc.
4.Financial risk management (continued)
4-1.Credit risk (continued)
(d) Maximum exposure to credit risk (continued)
|
|
December 31, 2017 |
Due from banks and loans (*1)(*2): |
|
|
Banks |
|
8,097,495 |
Retail |
|
|
Mortgage lending |
|
45,041,694 |
Others |
|
64,766,924 |
|
|
109,808,618 |
Governments |
|
12,676,706 |
Corporate |
|
|
Large enterprises |
|
26,373,770 |
Small and medium-sized enterprises |
|
69,394,851 |
Special finance |
|
3,687,709 |
Others |
|
465 |
|
|
99,456,795 |
|
|
230,039,614 |
Trading assets: |
|
|
Debt securities |
|
8,341,580 |
Gold/silver deposits |
|
189,297 |
|
|
8,530,877 |
|
|
|
Derivative assets |
|
2,602,689 |
Available-for-sale financial assets: |
|
|
Debt securities |
|
28,423,684 |
Held-to-maturity financial assets: |
|
|
Debt securities |
|
14,358,584 |
Other financial assets (*1)(*3) |
|
8,764,314 |
Off balance sheet items: |
|
|
Financial guarantee contracts |
|
6,452,931 |
Loan commitments and other liabilities for credit |
|
70,271,358 |
|
|
76,724,289 |
|
|
369,444,051 |
|
(*1) |
The maximum exposure amounts for due from banks and loans and other financial assets are measured as the amount net of allowances. |
(*2) Due from banks and loans were classified as similar credit risk group to be with consistent calculating capital adequacy ratio under New Basel Capital Accord (Basel III).
(*3) Other financial assets comprise accounts receivable, accrued income, guarantee deposits, domestic exchange settlements receivables, suspense receivables, etc.
45
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade |
|
i) The maximum exposure of financial instruments to credit risk by credit risk grade as of December 31, 2018 was as follows:
|
|
12-month expected loss |
|
Life time expected loss |
|
Total |
|
Allowances |
|
Net |
|
Mitigation of credit risk due to collateral |
||||||
Grade 1 (*2) |
|
Grade 2 (*2) |
Grade 1 (*2) |
|
Grade 2 (*2) |
|
Impaired |
|||||||||||
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
3,250,553 |
|
- |
|
2,060 |
|
- |
|
- |
|
3,252,613 |
|
(5,032) |
|
3,247,581 |
|
- |
Governments |
|
3,693,500 |
|
- |
|
- |
|
- |
|
- |
|
3,693,500 |
|
(2,316) |
|
3,691,184 |
|
- |
|
|
6,944,053 |
|
- |
|
2,060 |
|
- |
|
- |
|
6,946,113 |
|
(7,348) |
|
6,938,765 |
|
- |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
7,320,003 |
|
1,221,132 |
|
91,050 |
|
36,650 |
|
- |
|
8,668,835 |
|
(17,255) |
|
8,651,580 |
|
52,699 |
Retail |
|
107,433,391 |
|
4,136,924 |
|
4,816,542 |
|
2,897,068 |
|
339,582 |
|
119,623,507 |
|
(340,229) |
|
119,283,278 |
|
70,422,264 |
Governments |
|
688,758 |
|
2,399 |
|
- |
|
- |
|
- |
|
691,157 |
|
(499) |
|
690,658 |
|
- |
Corporate |
|
70,283,143 |
|
16,834,444 |
|
9,028,895 |
|
8,939,500 |
|
667,266 |
|
105,753,248 |
|
(1,132,488) |
|
104,620,760 |
|
64,752,435 |
|
|
185,725,295 |
|
22,194,899 |
|
13,936,487 |
|
11,873,218 |
|
1,006,848 |
|
234,736,747 |
|
(1,490,471) |
|
233,246,276 |
|
135,227,399 |
Securities at FVOCI (*1) |
|
26,035,479 |
|
4,155,354 |
|
- |
|
102,642 |
|
- |
|
30,293,475 |
|
- |
|
30,293,475 |
|
- |
Securities at amortized cost |
|
15,957,707 |
|
276,857 |
|
- |
|
- |
|
- |
|
16,234,564 |
|
(3,600) |
|
16,230,964 |
|
- |
|
|
234,662,534 |
|
26,627,110 |
|
13,938,547 |
|
11,975,860 |
|
1,006,848 |
|
288,210,899 |
|
(1,501,419) |
|
286,709,480 |
|
135,227,399 |
(*1) Provision for credit loss allowance recognized in other comprehensive income on securities at FVOCI is W18,228 million.
(*2) 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 |
Governments |
|
OECD sovereign credit rating of 6 or above (as applied to the nationality of the governments) |
|
OECD sovereign credit rating of below 6 (as applied to the nationality of the 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 |
Banks and 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%)
|
46
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
ii) Credit risk exposure per credit grade of off-balance sheet items as of December 31, 2018 was as follows:
|
|
December 31, 2018 |
||||||
|
|
12-month expected credit loss |
|
Life time expected credit loss |
|
Impaired |
|
Total |
Financial guarantee: |
|
|
|
|
|
|
|
|
Grade 1 |
|
3,467,118 |
|
237,277 |
|
- |
|
3,704,395 |
Grade 2 |
|
4,512,789 |
|
114,001 |
|
- |
|
4,626,790 |
Impaired |
|
- |
|
- |
|
2,907 |
|
2,907 |
|
|
7,979,907 |
|
351,278 |
|
2,907 |
|
8,334,092 |
Loan commitment and |
|
|
|
|
|
|
|
|
Grade 1 |
|
69,013,564 |
|
2,942,543 |
|
- |
|
71,956,107 |
Grade 2 |
|
14,308,173 |
|
911,042 |
|
- |
|
15,219,215 |
Impaired |
|
- |
|
- |
|
- |
|
- |
|
|
83,321,737 |
|
3,853,585 |
|
- |
|
87,175,322 |
|
|
91,301,644 |
|
4,204,863 |
|
2,907 |
|
95,509,414 |
47
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
iii) Credit risk exposure per collateral of financial instruments as of December 31, 2018 was as follows:
|
|
December 31, 2018 |
||||||
|
|
12-month expected credit loss |
|
Life time expected credit loss |
|
Impaired |
|
Total |
Guarantees |
|
11,938,869 |
|
3,776,603 |
|
50,050 |
|
15,765,522 |
Deposits and savings |
|
482,588 |
|
168,852 |
|
677 |
|
652,117 |
Property and equipment |
|
1,057,611 |
|
244,824 |
|
18,766 |
|
1,321,201 |
Real estate |
|
108,171,262 |
|
13,232,976 |
|
242,851 |
|
121,647,089 |
|
|
121,650,330 |
|
17,423,255 |
|
312,344 |
|
139,385,929 |
iv) Credit risk exposure per LTV of mortgage loans as of December 31, 2018 was as follows:
|
|
December 31, 2018 |
|
Total |
||||||||
|
|
40% or less |
|
Above 40% ~ 60% |
|
Above 60% ~ 80% |
|
Above 80% ~ 100% |
|
Other |
|
|
Loans at amortized cost |
|
16,673,201 |
|
14,676,043 |
|
12,155,973 |
|
437,967 |
|
432,378 |
|
44,375,562 |
Less: allowance |
|
(1,049) |
|
(1,947) |
|
(4,699) |
|
(728) |
|
(334) |
|
(8,757) |
|
|
16,672,152 |
|
14,674,096 |
|
12,151,274 |
|
437,239 |
|
432,044 |
|
44,366,805 |
v) Due from banks and loans as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||||||
|
|
Banks |
|
Retail |
|
Governments |
|
Corporate |
|
Total |
Neither past due nor impaired |
|
8,105,667 |
|
109,455,034 |
|
12,678,684 |
|
99,444,170 |
|
229,683,555 |
Past due but not impaired |
|
- |
|
402,755 |
|
- |
|
126,385 |
|
529,140 |
Impaired |
|
- |
|
305,237 |
|
- |
|
848,178 |
|
1,153,415 |
|
|
8,105,667 |
|
110,163,026 |
|
12,678,684 |
|
100,418,733 |
|
231,366,110 |
Less: allowance |
|
(8,172) |
|
(354,408) |
|
(1,978) |
|
(961,938) |
|
(1,326,496) |
|
|
8,097,495 |
|
109,808,618 |
|
12,676,706 |
|
99,456,795 |
|
230,039,614 |
48
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
|
vi) |
Credit quality of due from banks and loans that were neither past due nor impaired as of December 31, 2017 was as follows: |
|
|
|
December 31, 2017 |
||||||||
|
|
Banks |
|
Retail |
|
Governments |
|
Corporate |
|
Total |
Grade 1 |
|
8,100,310 |
|
103,412,359 |
|
12,678,684 |
|
74,167,105 |
|
198,358,458 |
Grade 2 |
|
5,357 |
|
6,042,675 |
|
- |
|
25,277,065 |
|
31,325,097 |
|
|
8,105,667 |
|
109,455,034 |
|
12,678,684 |
|
99,444,170 |
|
229,683,555 |
Less: allowance |
|
(8,172) |
|
(173,564) |
|
(1,978) |
|
(463,242) |
|
(646,956) |
|
|
8,097,495 |
|
109,281,470 |
|
12,676,706 |
|
98,980,928 |
|
229,036,599 |
Mitigation of credit risk due to collateral |
|
96,660 |
|
71,056,560 |
|
- |
|
55,353,502 |
|
126,506,722 |
vii) Aging analysis of due from banks and loans that were past due but not impaired as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||
|
|
Retail |
|
Corporate |
|
Total |
Less than 30 days |
|
300,567 |
|
83,575 |
|
384,142 |
30 days ~ less than 60 days |
|
50,390 |
|
27,397 |
|
77,787 |
60 days ~ less than 90 days |
|
36,402 |
|
15,268 |
|
51,670 |
90 days or more |
|
15,396 |
|
145 |
|
15,541 |
|
|
402,755 |
|
126,385 |
|
529,140 |
Less: allowance |
|
(41,594) |
|
(6,648) |
|
(48,242) |
|
|
361,161 |
|
119,737 |
|
480,898 |
Mitigation of credit risk due to collateral |
|
295,663 |
|
79,790 |
|
375,453 |
49
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
viii) Mitigation of credit risk due to the collateral of impaired due from banks and loans, net of allowance, as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||
|
|
Retail |
|
Corporate |
|
Total |
Impaired |
|
305,237 |
|
848,178 |
|
1,153,415 |
Less: allowance |
|
(139,250) |
|
(492,048) |
|
(631,298) |
|
|
165,987 |
|
356,130 |
|
522,117 |
Mitigation of credit risk due to collateral |
|
117,008 |
|
325,415 |
|
442,423 |
ix) Credit ratings of debt securities as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||||
|
|
Trading assets |
|
Available-for-sale financial assets |
|
Held-to-maturity financial assets |
|
Total |
AAA |
|
1,526,987 |
|
21,647,229 |
|
13,789,641 |
|
36,963,857 |
AA- to AA+ |
|
297,378 |
|
2,849,486 |
|
241,138 |
|
3,388,002 |
A- to A+ |
|
2,578,469 |
|
2,003,773 |
|
130,293 |
|
4,712,535 |
BBB- to BBB+ |
|
660,258 |
|
1,146,510 |
|
152,212 |
|
1,958,980 |
Lower than BBB- |
|
37,979 |
|
99,848 |
|
- |
|
137,827 |
Unrated |
|
3,240,509 |
|
676,838 |
|
45,300 |
|
3,962,647 |
|
|
8,341,580 |
|
28,423,684 |
|
14,358,584 |
|
51,123,848 |
x) The credit quality of debt securities according to the credit ratings by external rating agencies as of December 31, 2017 was as follows:
|
|
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
xi) Information related to impairment for debt securities as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
|
Neither past due nor impaired |
|
51,123,848 |
|
50
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(f) Nature and effect of modification in contractual cash flows
i) For the financial assets for which the loss allowances have been measured at amounts equal to the lifetime credit losses, and the contractual cash flows were modified during the year ended December 31, 2018, the amortized costs before modification amounted to W45,178 million and the net losses resulting from the modification amounted to W14,953 million.
ii) As of December 31, 2018, the book value of financial asset, for which contractual cash flows have been modified while the loss allowance was measured at an amount equal to lifetime expected credit losses at initial recognition, and the loss allowance reverted to being measured at an amount equal to 12-month expected credit losses during the year ended December 31, 2018, is W1,159 million.
(g) The contractual amounts outstanding on financial assets that were written-off but were still subject to enforcement activity as of December 31, 2018, were W5,826,359 million.
(h) As of December 31, 2018 and 2017, there were no assets acquired by the execution of collateral.
(i) Concentration by geographic location
An analysis of concentration by geographic location for financial assets excluding equity securities, net of allowance, as of December 31, 2018 and 2017 was as follows:
|
|
December 31, 2018 |
||||||||||||
|
|
Korea |
|
U.S.A |
|
Japan |
|
Vietnam |
|
China |
|
Other |
|
Total |
Due from banks: (*1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
21,987 |
|
1,371,202 |
|
403,993 |
|
200 |
|
995,133 |
|
455,066 |
|
3,247,581 |
Governments |
|
3,165,755 |
|
406,066 |
|
- |
|
- |
|
- |
|
119,363 |
|
3,691,184 |
|
|
3,187,742 |
|
1,777,268 |
|
403,993 |
|
200 |
|
995,133 |
|
574,429 |
|
6,938,765 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Banks |
|
4,745,630 |
|
- |
|
330,246 |
|
616,566 |
|
770,744 |
|
2,188,394 |
|
8,651,580 |
Retail |
|
118,292,044 |
|
200,879 |
|
10,314 |
|
2,440 |
|
505,280 |
|
272,321 |
|
119,283,278 |
Governments |
|
688,261 |
|
- |
|
- |
|
- |
|
- |
|
2,397 |
|
690,658 |
Corporate |
|
98,435,820 |
|
1,335,026 |
|
28,599 |
|
744,997 |
|
426,835 |
|
3,649,483 |
|
104,620,760 |
|
|
222,161,755 |
|
1,535,905 |
|
369,159 |
|
1,364,003 |
|
1,702,859 |
|
6,112,594 |
|
233,246,276 |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Loans at FVTPL |
|
645,237 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
645,237 |
Securities at FVTPL |
|
12,385,509 |
|
53,863 |
|
27,064 |
|
- |
|
38,992 |
|
257,140 |
|
12,762,558 |
Securities at FVOCI |
|
28,819,245 |
|
594,247 |
|
131,092 |
|
- |
|
258,461 |
|
490,430 |
|
30,293,475 |
Securities at amortized cost |
|
16,037,112 |
|
2,233 |
|
- |
|
- |
|
- |
|
191,619 |
|
16,230,964 |
|
|
283,236,600 |
|
3,963,516 |
|
931,308 |
|
1,364,203 |
|
2,995,445 |
|
7,626,203 |
|
300,117,275 |
|
|
December 31, 2017 |
||||||||||||
|
|
Korea |
|
U.S.A |
|
Japan |
|
Vietnam |
|
China |
|
Other |
|
Total |
Due from banks and loans: (*1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
2,645,432 |
|
900,005 |
|
394,473 |
|
186,427 |
|
2,058,805 |
|
1,912,353 |
|
8,097,495 |
Retail |
|
109,126,084 |
|
191,600 |
|
9,275 |
|
1,149 |
|
297,004 |
|
183,506 |
|
109,808,618 |
Governments |
|
12,481,972 |
|
75,194 |
|
- |
|
- |
|
- |
|
119,540 |
|
12,676,706 |
Corporate |
|
94,146,599 |
|
1,081,928 |
|
250 |
|
542,682 |
|
421,512 |
|
3,263,824 |
|
99,456,795 |
|
|
218,400,087 |
|
2,248,727 |
|
403,998 |
|
730,258 |
|
2,777,321 |
|
5,479,223 |
|
230,039,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets |
|
8,341,580 |
|
- |
|
- |
|
- |
|
- |
|
189,297 |
|
8,530,877 |
Available-for-sale financial assets |
|
27,458,550 |
|
391,046 |
|
96,087 |
|
- |
|
110,167 |
|
367,834 |
|
28,423,684 |
Held-to-maturity financial assets |
|
14,188,930 |
|
10,544 |
|
- |
|
- |
|
- |
|
159,110 |
|
14,358,584 |
|
|
268,389,147 |
|
2,650,317 |
|
500,085 |
|
730,258 |
|
2,887,488 |
|
6,195,464 |
|
281,352,759 |
(*1) Geographical breakdown is the net book value, net of unrecognized balances and allowance for doubtful accounts.
51
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(j) Concentration by industry sector
An analysis of concentration by industry sector for financial instruments excluding equity securities, net of allowance, as of December 31, 2018 and 2017 was as follows:
|
|
December 31, 2018 |
||||||||||||
|
|
Finance and insurance |
|
Manu- facturing |
|
Retail and wholesale |
|
Real estate and service |
|
Others |
|
Retail customers |
|
Total |
Due from banks: (*1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
3,247,581 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3,247,581 |
Governments |
|
3,691,184 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3,691,184 |
|
|
6,938,765 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
6,938,765 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
8,372,012 |
|
- |
|
- |
|
300 |
|
279,268 |
|
- |
|
8,651,580 |
Retail |
|
- |
|
- |
|
- |
|
- |
|
- |
|
119,283,278 |
|
119,283,278 |
Governments |
|
690,658 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
690,658 |
Corporate |
|
3,643,353 |
|
39,668,341 |
|
14,949,785 |
|
21,294,789 |
|
25,064,492 |
|
- |
|
104,620,760 |
|
|
12,706,023 |
|
39,668,341 |
|
14,949,785 |
|
21,295,089 |
|
25,343,760 |
|
119,283,278 |
|
233,246,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans at FVTPL |
|
62,005 |
|
178,827 |
|
208,633 |
|
20,004 |
|
175,768 |
|
- |
|
645,237 |
Securities at FVTPL |
|
8,911,044 |
|
723,917 |
|
992,374 |
|
47,772 |
|
2,087,451 |
|
- |
|
12,762,558 |
Securities at FVOCI |
|
18,870,104 |
|
1,414,471 |
|
242,857 |
|
331,204 |
|
9,434,839 |
|
- |
|
30,293,475 |
Securities at amortized cost |
|
4,451,530 |
|
36,519 |
|
- |
|
61,275 |
|
11,681,640 |
|
- |
|
16,230,964 |
|
|
51,939,471 |
|
42,022,075 |
|
16,393,649 |
|
21,755,344 |
|
48,723,458 |
|
119,283,278 |
|
300,117,275 |
(*1) Industrial breakdown is the net book value, net of unrecognized balances and allowance for doubtful accounts.
|
|
December 31, 2017 |
||||||||||||
|
|
Finance and insurance |
|
Manu- facturing |
|
Retail and wholesale |
|
Real estate and service |
|
Others |
|
Retail customers |
|
Total |
Due from banks and loans: (*1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
7,424,094 |
|
- |
|
- |
|
56,744 |
|
616,657 |
|
- |
|
8,097,495 |
Retail |
|
- |
|
- |
|
- |
|
- |
|
- |
|
109,808,618 |
|
109,808,618 |
Governments |
|
12,620,413 |
|
1,314 |
|
- |
|
- |
|
54,979 |
|
- |
|
12,676,706 |
Corporate |
|
2,551,472 |
|
36,852,811 |
|
14,080,441 |
|
18,543,513 |
|
27,428,558 |
|
- |
|
99,456,795 |
|
|
22,595,979 |
|
36,854,125 |
|
14,080,441 |
|
18,600,257 |
|
28,100,194 |
|
109,808,618 |
|
230,039,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets |
|
6,090,029 |
|
512,950 |
|
1,018,560 |
|
4,989 |
|
904,349 |
|
- |
|
8,530,877 |
Available-for-sale financial assets |
|
19,570,667 |
|
873,498 |
|
125,235 |
|
441,137 |
|
7,413,147 |
|
- |
|
28,423,684 |
Held-to-maturity financial assets |
|
4,424,674 |
|
29,999 |
|
- |
|
62,129 |
|
9,841,782 |
|
- |
|
14,358,584 |
|
|
52,681,349 |
|
38,270,572 |
|
15,224,236 |
|
19,108,512 |
|
46,259,472 |
|
109,808,618 |
|
281,352,759 |
(*1) Industrial breakdown is the net book value, net of unrecognized balances and allowance for doubtful accounts.
52
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2.Market risk
Market risk is the risk that changes in market price such as interest rates, equity prices, and foreign exchange rates, etc. will affect the Bank’s income. Trading position is exposed to the risk such as interest rates, equity prices, foreign exchange rates, etc. and non-trading position is mainly exposed to interest rates. The Bank separates and manages its exposure to market risk between trading and non-trading position.
Overall authority for market risk is vested in the Risk Policy Committee. The Risk Management Department is responsible for the development of detailed risk management policies which are subject to review and approval by the Risk Policy Committee and for the day-to-day review of their implementation. The Risk Policy Committee also sets Value at Risk (VaR) limit, damage limit, sensitivity limit, investment limits, position limits, and stress damage limits of each department and desk. The Risk Management Department monitors operation departments and reports regularly to the Risk Policy Committee and the Risk Management Committee.
Before launching a new product from each business unit, the Bank is required to perform an objective analysis of the risk evaluation and examination of fair value measurement method from the Risk Management Department or Fair Value Evaluation Committee. The Derivative and Structured Product Risk Review Committee reviews the related risk exposure and investment limit.
(a) Market risk management of trading positions
Trading position includes securities, foreign exchange position, and derivatives which are traded for profits.
Trading data of foreign exchange, stocks, bonds and derivatives from trading positions are tracked and daily risk limits are systematically monitored based on the Bank’s risk management parameters. Statistical analysis that complements the above risk management process and stress testing is performed regularly in order to manage the impact and loss of rapid economic changes. These risk management processes enable the Bank to manage the scale of potential losses within a certain range when a crisis occurs.
i) Measurement method on market risk arising from trading positions
The principal tool used to measure and control market risk exposure within the Bank’s trading positions is VaR. The VaR of a trading position is the estimated loss that will arise on the portfolio over a specified period of time (ten days holding period) from an adverse market movement with a specified probability (confidence level). The Bank measures market risk based on 99.9% confidence level by using the VaR model based on historical simulation.
VaR is a commonly used market risk management technique. However, VaR estimates possible losses over a certain period at a particular confidence level using the historical market movement data. The use of historical market movement data as a basis for determining the possible range of future outcome may not always cover all possible scenarios, especially those of an exceptional nature. VaR models assume that a holding period of generally one to ten days is sufficient prior to liquidating the underlying positions, but this may not be the case for certain highly illiquid assets or in situations in which there is severe general market illiquidity.
53
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2.Market risk (continued)
(a) Market risk management of trading positions (continued)
The Bank directly applies the historical changes in interest rates, equity prices, and foreign exchange rates to current position. The actual outputs are regularly monitored by testing the effectiveness of assumptions, measurements and parameter. The application of this method does not prevent loss from larger market movement that exceeds the acceptable parameter.
VaR limit related to the operation of trading and non-trading portfolio is determined by management annually. VaR is measured at least daily. The quality of VaR model is monitored consistently by examining the VaR results related to trading book.
ii) VaR of trading positions
An analysis of trading position VaR for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||
|
|
Average |
|
Maximum |
|
Minimum |
|
Year-end |
Interest rate risk |
|
22,559 |
|
29,748 |
|
16,194 |
|
18,797 |
Equity risk |
|
12,118 |
|
25,701 |
|
1,976 |
|
22,212 |
Foreign currency risk (*1) |
|
39,282 |
|
45,738 |
|
34,162 |
|
34,294 |
Volatility risk |
|
131 |
|
511 |
|
30 |
|
261 |
Commodity risk |
|
17 |
|
61 |
|
- |
|
24 |
Covariance |
|
(30,150) |
|
(44,297) |
|
(14,337) |
|
(21,298) |
|
|
43,957 |
|
57,462 |
|
38,025 |
|
54,290 |
|
|
2017 |
||||||
|
|
Average |
|
Maximum |
|
Minimum |
|
Year-end |
Interest rate risk |
|
38,370 |
|
50,206 |
|
22,226 |
|
25,071 |
Equity risk |
|
4,051 |
|
5,622 |
|
3,040 |
|
4,675 |
Foreign currency risk (*1) |
|
43,827 |
|
46,108 |
|
41,562 |
|
41,947 |
Volatility risk |
|
70 |
|
124 |
|
43 |
|
66 |
Commodity risk |
|
22 |
|
46 |
|
- |
|
14 |
Covariance |
|
(36,397) |
|
(46,003) |
|
(24,840) |
|
(26,367) |
|
|
49,943 |
|
56,103 |
|
42,031 |
|
45,406 |
(*1) The Bank measured foreign currency risk arising from trading positions and non-trading positions.
54
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2.Market risk (continued)
(b) Market risk management of non-trading positions
The most critical market risk that arises from non-trading position is the interest rate risk. Accordingly, the Bank measures and manages market risk for non-trading position by taking into account effects of interest rate changes on both its net asset value and income. Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates.
Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. The Risk Policy Committee is the monitoring body for compliance with these limits including establishing policies and setting the limits and is assisted by the Risk Management Department in its day-to-day monitoring activities.
The Bank measures and manages interest rate risk by using various analyses such as interest rate gap, duration gap, and NII (Net Interest Income) simulation of each scenario through the ALM system (OFSA). The Bank also monitors interest rate VaR, earnings at risk (“EaR”), and gap rate of interest rate by setting the limits on a monthly basis.
i) Measurement method on market risk arising from non-trading positions
The Bank measures interest rate VaR by using standard modified duration and interest rate volatility, and interest rate EaR by using impact period by maturity period and interest rate volatility based on a standard methodology provided by the Bank for International Settlements (“BIS”).
ii) Interest rate VaR and EaR for non-trading positions
Interest rate VaR and EaR for non-trading positions which were measured by the standard methodology provided by BIS as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Interest rate VaR |
|
431,264 |
|
363,599 |
Interest rate EaR |
|
372,397 |
|
131,135 |
55
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2.Market risk (continued)
(c) Foreign exchange risk
The Bank manages foreign currency risk based on general positions which includes all spot and future foreign currency positions, etc. The Risk Policy Committee oversees the Bank’s foreign exchange exposure for both trading and non-trading activities by establishing limits for the net foreign currencies open position. The Bank’s foreign exchange position is centralized at the FX & Derivatives Department. Dealers in the FX & Derivatives Department manage the Bank’s overall position within the set limits through spot trading, forward contracts, currency options, futures and swaps and foreign exchange swaps. The Bank’s foreign exchange transactions are mainly conducted in the U.S. dollar (USD), Japanese yen (JPY), euro (EUR) and Chinese yuan (CNY). Other foreign currencies are limitedly traded.
Foreign currency denominated assets and liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
USD |
|
JPY |
|
EUR |
|
CNY |
|
Others |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
3,813,307 |
|
199,950 |
|
89,456 |
|
79,699 |
|
450,632 |
|
4,633,044 |
Securities at FVTPL |
|
410,497 |
|
- |
|
37,184 |
|
- |
|
169,810 |
|
617,491 |
Derivative assets |
|
111,036 |
|
4 |
|
2,299 |
|
- |
|
11,144 |
|
124,483 |
Loans at amortized cost |
|
14,929,193 |
|
516,165 |
|
926,207 |
|
35,795 |
|
2,417,269 |
|
18,824,629 |
Securities at FVOCI |
|
2,579,836 |
|
- |
|
- |
|
- |
|
223,255 |
|
2,803,091 |
Securities at amortized cost |
|
116,333 |
|
- |
|
- |
|
- |
|
186,515 |
|
302,848 |
Other financial assets |
|
2,899,688 |
|
64,003 |
|
69,637 |
|
339,312 |
|
221,079 |
|
3,593,719 |
|
|
24,859,890 |
|
780,122 |
|
1,124,783 |
|
454,806 |
|
3,679,704 |
|
30,899,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
11,615,783 |
|
605,718 |
|
483,610 |
|
196,598 |
|
1,334,209 |
|
14,235,918 |
Financial liabilities at FVTPL |
|
- |
|
- |
|
- |
|
- |
|
458,934 |
|
458,934 |
Derivative liabilities |
|
165,761 |
|
- |
|
1,914 |
|
- |
|
4,575 |
|
172,250 |
Borrowings |
|
6,618,578 |
|
85,470 |
|
112,683 |
|
6,798 |
|
106,321 |
|
6,929,850 |
Debt securities issued |
|
4,110,789 |
|
317,125 |
|
40,933 |
|
- |
|
1,103,732 |
|
5,572,579 |
Other financial liabilities |
|
2,620,311 |
|
99,791 |
|
123,927 |
|
332,121 |
|
380,061 |
|
3,556,211 |
|
|
25,131,222 |
|
1,108,104 |
|
763,067 |
|
535,517 |
|
3,387,832 |
|
30,925,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
|
(271,332) |
|
(327,982) |
|
361,716 |
|
(80,711) |
|
291,872 |
|
(26,437) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Off balance sheet items |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative exposures |
|
316,006 |
|
(58,495) |
|
(388,554) |
|
(32,425) |
|
(88,916) |
|
(252,384) |
Net position |
|
44,674 |
|
(386,477) |
|
(26,838) |
|
(113,136) |
|
202,956 |
|
(278,821) |
56
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2.Market risk (continued)
(c) Foreign exchange risk (continued)
|
|
December 31, 2017 |
||||||||||
|
|
USD |
|
JPY |
|
EUR |
|
CNY |
|
Others |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
2,274,988 |
|
299,583 |
|
126,202 |
|
47,628 |
|
309,374 |
|
3,057,775 |
Trading assets |
|
5,273 |
|
- |
|
- |
|
- |
|
189,297 |
|
194,570 |
Derivative assets |
|
59,391 |
|
4 |
|
766 |
|
- |
|
1,084 |
|
61,245 |
Loans |
|
13,748,731 |
|
621,085 |
|
869,759 |
|
10,593 |
|
2,374,413 |
|
17,624,581 |
Available-for-sale financial assets |
|
1,481,426 |
|
9,557 |
|
52,583 |
|
- |
|
163,365 |
|
1,706,931 |
Held-to-maturity financial assets |
|
78,972 |
|
- |
|
- |
|
- |
|
161,806 |
|
240,778 |
Other financial assets |
|
1,579,952 |
|
249,845 |
|
154,491 |
|
322,573 |
|
126,381 |
|
2,433,242 |
|
|
19,228,733 |
|
1,180,074 |
|
1,203,801 |
|
380,794 |
|
3,325,720 |
|
25,319,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
10,660,116 |
|
904,411 |
|
475,537 |
|
99,904 |
|
1,364,916 |
|
13,504,884 |
Trading liabilities |
|
- |
|
- |
|
- |
|
- |
|
434,586 |
|
434,586 |
Derivative liabilities |
|
101,520 |
|
- |
|
631 |
|
- |
|
713 |
|
102,864 |
Borrowings |
|
5,453,451 |
|
154,195 |
|
118,975 |
|
6,313 |
|
120,046 |
|
5,852,980 |
Debt securities issued |
|
3,027,696 |
|
249,616 |
|
31,981 |
|
196,380 |
|
419,781 |
|
3,925,454 |
Other financial liabilities |
|
2,542,251 |
|
134,056 |
|
208,206 |
|
280,558 |
|
121,373 |
|
3,286,444 |
|
|
21,785,034 |
|
1,442,278 |
|
835,330 |
|
583,155 |
|
2,461,415 |
|
27,107,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
|
(2,556,301) |
|
(262,204) |
|
368,471 |
|
(202,361) |
|
864,305 |
|
(1,788,090) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Off balance sheet items |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative exposures |
|
2,142,131 |
|
9,635 |
|
(433,642) |
|
86,857 |
|
(632,971) |
|
1,172,010 |
Net position |
|
(414,170) |
|
(252,569) |
|
(65,171) |
|
(115,504) |
|
231,334 |
|
(616,080) |
57
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
4.Financial risk management (continued)
4-3.Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Risk Policy Committee is responsible for establishing policies and setting the limits related to liquidity risk management. The Risk Management Department evaluates and manages the Bank’s overall liquidity risk and monitors compliance of all operating subsidiaries and foreign branches with limits on a daily basis.
The Bank applies the following basic principles for liquidity risk management:
|
|
raise funding in sufficient amounts at the optimal time and reasonable costs; |
|
|
maintain risk at appropriate levels and preemptively manage them through a prescribed risk limit system and an early warning signal detection system; |
|
|
secure stable sources of revenue and minimize actual losses by implementing an effective asset-liability management system based on diversified sources of funding with varying maturities; |
|
|
monitor and manage daily and intra-daily liquidity positions and risk exposures as to timely payment and settlement of financial obligations due under both normal and crisis situations; |
|
|
conduct periodic contingency analysis in anticipation of any potential liquidity crisis and establish and implement emergency plans in case of a crisis actually happening; and |
|
|
consider liquidity-related costs, benefits and risks in determining the price of products and services, employee performance evaluations and approval of launching new products and services. |
The Bank manages its liquidity risk within the limits set on won and foreign currency by using various analysis methods such as liquidity gap, real liquidity gap and loan-deposit ratio through the ALM system and various indices including risk limits, early warning index, and monitoring index.
The following table presents the Bank’s cash flows of financial assets and financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Since the effect of the discount is insignificant for the balance with the maturities of less than 12 months, the amount is the same as the book value.
58
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-3.Liquidity risk (continued)
(a) |
Contractual maturities for financial instruments |
|
Contractual maturities for financial assets and financial liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||||
|
|
1 month or less |
|
1 month ~ 3 months or less |
|
3 months ~ 6 months or less |
|
6 months ~ 1 year or less |
|
1 year ~ 5 years or less |
|
More than 5 years |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
8,785,105 |
|
317,148 |
|
314,468 |
|
5,829 |
|
58 |
|
- |
|
9,422,608 |
Securities at FVTPL |
|
12,811,266 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
12,811,266 |
Derivative assets |
|
1,482,088 |
|
50,498 |
|
66,815 |
|
106,966 |
|
495,274 |
|
262,007 |
|
2,463,648 |
Loans at amortized cost |
|
20,720,192 |
|
25,235,452 |
|
36,677,628 |
|
57,845,689 |
|
66,805,654 |
|
53,581,600 |
|
260,866,215 |
Loans at FVTPL |
|
28,221 |
|
386,353 |
|
39,154 |
|
102,394 |
|
101,725 |
|
- |
|
657,847 |
Securities at FVOCI |
|
30,317,505 |
|
- |
|
- |
|
- |
|
- |
|
409,913 |
|
30,731,281 |
Securities at amortized cost |
|
455,145 |
|
1,275,361 |
|
331,535 |
|
2,006,604 |
|
13,256,153 |
|
409,604 |
|
17,734,402 |
Other financial assets |
|
12,914,228 |
|
- |
|
- |
|
- |
|
- |
|
1,080,846 |
|
13,995,074 |
|
|
87,517,612 |
|
27,264,812 |
|
37,429,600 |
|
60,067,482 |
|
80,658,864 |
|
56,305,795 |
|
348,682,340 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
116,368,459 |
|
22,381,235 |
|
31,253,344 |
|
51,166,194 |
|
18,820,979 |
|
501,790 |
|
240,492,001 |
Financial liabilities at FVTPL |
|
459,336 |
|
193 |
|
53 |
|
10,403 |
|
10,124 |
|
- |
|
480,109 |
Derivative liabilities |
|
1,676,522 |
|
40,891 |
|
56,711 |
|
102,831 |
|
523,026 |
|
272,663 |
|
2,672,644 |
Borrowings |
|
3,553,602 |
|
2,794,953 |
|
1,999,265 |
|
2,747,962 |
|
3,993,928 |
|
1,103,572 |
|
16,193,282 |
Debt securities issued |
|
1,062,901 |
|
3,120,247 |
|
3,710,736 |
|
6,612,276 |
|
13,497,283 |
|
3,399,603 |
|
31,403,046 |
Other financial liabilities |
|
14,842,223 |
|
- |
|
- |
|
- |
|
130,122 |
|
- |
|
14,972,345 |
|
|
137,963,043 |
|
28,337,519 |
|
37,020,109 |
|
60,639,666 |
|
36,975,462 |
|
5,277,628 |
|
306,213,427 |
These amounts include cash flows of principal and interest on financial assets and financial liabilities. The undiscounted cash flows were classified based on the earliest dates for obligated repayment. Financial assets at FVTPL and financial assets at FVOCI except for assets restricted for sale for certain periods were included in 1 month or less.
59
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-3.Liquidity risk (continued)
(a) |
Contractual maturities for financial instruments (continued) |
|
|
|
December 31, 2017 |
||||||||||||
|
|
1 month or less |
|
1 month ~ 3 months or less |
|
3 months ~ 6 months or less |
|
6 months ~ 1 year or less |
|
1 year ~ 5 years or less |
|
More than 5 years |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
14,631,494 |
|
64,901 |
|
2,213 |
|
20,439 |
|
282 |
|
- |
|
14,719,329 |
Trading assets |
|
8,834,871 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
8,834,871 |
Derivative assets |
|
2,716,053 |
|
285,632 |
|
78,501 |
|
121,845 |
|
346,065 |
|
143,032 |
|
3,691,128 |
Loans |
|
18,930,546 |
|
25,949,870 |
|
34,101,846 |
|
54,276,387 |
|
58,603,682 |
|
49,578,608 |
|
241,440,939 |
Available-for-sale financial assets |
|
30,384,824 |
|
- |
|
- |
|
- |
|
- |
|
741,572 |
|
31,126,396 |
Held-to-maturity financial assets |
|
69,896 |
|
111,827 |
|
191,826 |
|
1,364,781 |
|
13,332,844 |
|
658,766 |
|
15,729,940 |
Other financial assets |
|
7,758,245 |
|
- |
|
- |
|
- |
|
1,074,378 |
|
- |
|
8,832,623 |
|
|
83,325,929 |
|
26,412,230 |
|
34,374,386 |
|
55,783,452 |
|
73,357,251 |
|
51,121,978 |
|
324,375,226 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
120,297,023 |
|
19,400,865 |
|
29,262,899 |
|
47,998,026 |
|
10,906,379 |
|
542,095 |
|
228,407,287 |
Trading liabilities |
|
434,586 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
434,586 |
Derivative liabilities |
|
2,490,191 |
|
38,289 |
|
30,028 |
|
46,915 |
|
164,442 |
|
60,717 |
|
2,830,582 |
Borrowings |
|
5,153,920 |
|
2,662,692 |
|
1,345,695 |
|
2,216,950 |
|
2,688,860 |
|
627,208 |
|
14,695,325 |
Debt securities issued |
|
610,653 |
|
1,944,975 |
|
2,016,407 |
|
6,307,767 |
|
12,213,940 |
|
2,940,935 |
|
26,034,677 |
Other financial liabilities |
|
14,344,285 |
|
- |
|
- |
|
1,367 |
|
129,329 |
|
- |
|
14,474,981 |
|
|
143,330,658 |
|
24,046,821 |
|
32,655,029 |
|
56,571,025 |
|
26,102,950 |
|
4,170,955 |
|
286,877,438 |
These amounts include cash flows of principal and interest on financial assets and financial liabilities. The undiscounted cash flows were classified based on the earliest dates for obligated repayment. Trading assets and available-for-sale financial assets except for assets restricted for sale for certain periods were included in the less than 1 month.
(b) |
Contractual maturities for off balance sheet items |
|
Financial guarantees such as financial guarantee contracts, loan commitments and others provided by the Bank are classified based on the earliest date at which the Bank should fulfill the obligation under the guarantee when the counterparty requests for the payment.
Off-balance sheet items as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Financial guarantee contracts |
|
8,334,092 |
|
6,452,931 |
Loan commitments and others |
|
87,175,322 |
|
70,271,358 |
|
|
95,509,414 |
|
76,724,289 |
60
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value
The fair value which the Bank primarily uses for measurement of financial instruments are the published price quotations in an active market which are based on the market prices or the dealer price quotations of financial instruments traded in an active market where available, which is the best evidence of fair value.
If the market for a financial instrument is not active, fair value is established either by using a valuation technique or independent third-party valuation service. The Bank uses diverse valuation techniques under reasonable assumptions which are based on the inputs observable in markets at the end of each reporting period.
Valuation techniques include using the 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. For example, the fair value for interest swaps is the present value of estimated future cash flows, and fair value for foreign exchange forwards contracts is measured by using the published forward exchange rate at the end of each reporting period.
The Bank classifies and discloses fair value of the financial instruments into the following three-level hierarchy:
(i) Level 1: Financial instruments measured at quoted prices from active markets are classified as level 1.
(ii) Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.
(iii) 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.
61
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(a) |
Financial instruments measured at fair value |
|
i) The table below analyzes financial instruments measured at the fair value as of December 31, 2018 and 2017 by the level in the fair value hierarchy into which the fair value measurement is categorized:
|
|
December 31, 2018 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Financial assets |
|
|
|
|
|
|
|
|
Loans at FVTPL: |
|
|
|
|
|
|
|
|
Loans |
|
- |
|
407,996 |
|
237,241 |
|
645,237 |
Securities at FVTPL: |
|
|
|
|
|
|
|
|
Debt securities |
|
520,089 |
|
11,007,914 |
|
1,079,674 |
|
12,607,677 |
Equity securities |
|
4,953 |
|
- |
|
43,755 |
|
48,708 |
Gold/silver deposits |
|
154,881 |
|
- |
|
- |
|
154,881 |
|
|
679,923 |
|
11,007,914 |
|
1,123,429 |
|
12,811,266 |
Derivative assets: |
|
|
|
|
|
|
|
|
Trading |
|
- |
|
1,450,779 |
|
2,675 |
|
1,453,454 |
Hedging |
|
- |
|
30,508 |
|
4,586 |
|
35,094 |
|
|
- |
|
1,481,287 |
|
7,261 |
|
1,488,548 |
Securities at FVOCI: |
|
|
|
|
|
|
|
|
Debt securities |
|
9,164,543 |
|
21,128,932 |
|
- |
|
30,293,475 |
Equity securities |
|
135,815 |
|
- |
|
301,991 |
|
437,806 |
|
|
9,300,358 |
|
21,128,932 |
|
301,991 |
|
30,731,281 |
|
|
9,980,281 |
|
34,026,129 |
|
1,669,922 |
|
45,676,332 |
Financial liabilities |
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL: |
|
|
|
|
|
|
|
|
Securities sold |
|
20,625 |
|
- |
|
- |
|
20,625 |
Gold/silver deposits |
|
458,934 |
|
- |
|
- |
|
458,934 |
|
|
479,559 |
|
- |
|
- |
|
479,559 |
Derivative liabilities: |
|
|
|
|
|
|
|
|
Trading |
|
954 |
|
1,300,320 |
|
2,658 |
|
1,303,932 |
Hedging |
|
- |
|
106,261 |
|
361,120 |
|
467,381 |
|
|
954 |
|
1,406,581 |
|
363,778 |
|
1,771,313 |
|
|
480,513 |
|
1,406,581 |
|
363,778 |
|
2,250, 872 |
62
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(a) |
Financial instruments measured at fair value (continued) |
|
|
|
December 31, 2017 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Financial assets |
|
|
|
|
|
|
|
|
Trading assets: |
|
|
|
|
|
|
|
|
Debt securities |
|
656,806 |
|
7,684,774 |
|
- |
|
8,341,580 |
Equity securities |
|
2,220 |
|
301,774 |
|
- |
|
303,994 |
Gold/silver deposits |
|
189,297 |
|
- |
|
- |
|
189,297 |
|
|
848,323 |
|
7,986,548 |
|
- |
|
8,834,871 |
Derivative assets: |
|
|
|
|
|
|
|
|
Trading |
|
33 |
|
2,585,881 |
|
8,343 |
|
2,594,257 |
Hedging |
|
- |
|
6,633 |
|
1,799 |
|
8,432 |
|
|
33 |
|
2,592,514 |
|
10,142 |
|
2,602,689 |
Available-for-sale financial assets: |
|
|
|
|
|
|
|
|
Debt securities |
|
8,777,666 |
|
19,646,018 |
|
- |
|
28,423,684 |
Equity securities |
|
348,685 |
|
1,253,593 |
|
1,100,435 |
|
2,702,713 |
|
|
9,126,351 |
|
20,899,611 |
|
1,100,435 |
|
31,126,397 |
|
|
9,974,707 |
|
31,478,673 |
|
1,110,577 |
|
42,563,957 |
Financial liabilities |
|
|
|
|
|
|
|
|
Trading liabilities: |
|
|
|
|
|
|
|
|
Gold/silver deposits |
|
434,586 |
|
- |
|
- |
|
434,586 |
Derivative liabilities: |
|
|
|
|
|
|
|
|
Trading |
|
55 |
|
2,474,381 |
|
3,574 |
|
2,478,010 |
Hedging |
|
- |
|
93,786 |
|
425,162 |
|
518,948 |
|
|
55 |
|
2,568,167 |
|
428,736 |
|
2,996,958 |
|
|
434,641 |
|
2,568,167 |
|
428,736 |
|
3,431,544 |
63
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(a) |
Financial instruments measured at fair value (continued) |
|
ii) There was no transfer between level 1 and level 2 for the years ended December 31, 2018 and 2017.
iii) Changes in level 3 of the fair value hierarchy
Changes in level 3 of the fair value hierarchy for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Loans at FVTPL |
|
Securities at FVTPL |
|
Securities at FVOCI |
|
Net derivative instruments |
|
Total |
Beginning balance (*1) |
|
113,168 |
|
826,251 |
|
277,464 |
|
(418,594) |
|
798,289 |
Total gain or loss: |
|
|
|
|
|
|
|
|
|
|
Recognized in profit or loss (*2) |
|
3,012 |
|
88,392 |
|
- |
|
56,362 |
|
147,766 |
Recognized in other comprehensive income |
|
- |
|
- |
|
24,583 |
|
- |
|
24,583 |
Purchases/issues |
|
187,474 |
|
291,769 |
|
- |
|
(779) |
|
478,464 |
Settlements |
|
(66,413) |
|
(82,983) |
|
(56) |
|
6,487 |
|
(142,965) |
Transfers into level 3 (*3) |
|
- |
|
- |
|
- |
|
6 |
|
6 |
Ending balance |
|
237,241 |
|
1,123,429 |
|
301,991 |
|
(356,518) |
|
1,306,143 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
|
|
December 31, 2017 |
||||||
|
|
Available-for-sale financial assets |
|
Net derivative instruments |
|
Financial liabilities designated at fair value through profit or loss |
|
Total |
Beginning balance |
|
1,104,428 |
|
(229,895) |
|
(2,005) |
|
872,528 |
Total gain or loss: |
|
|
|
|
|
|
|
|
Recognized in profit or loss (*2) |
|
(149,742) |
|
(191,909) |
|
4 |
|
(341,647) |
Recognized in other comprehensive income |
|
20,071 |
|
- |
|
- |
|
20,071 |
Purchases/issues |
|
215,344 |
|
2,441 |
|
- |
|
217,785 |
Settlements |
|
(93,096) |
|
741 |
|
2,001 |
|
(90,354) |
Transfers into level 3 (*3) |
|
3,430 |
|
28 |
|
- |
|
3,458 |
Ending balance |
|
1,100,435 |
|
(418,594) |
|
- |
|
681,841 |
64
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(a) |
Financial instruments measured at fair value (continued) |
|
(*2) Gains or losses among the changes in level 3 of the fair value hierarchy and gains or losses related to financial instruments that the Bank held as of December 31, 2018 and 2017 were presented in the statements of comprehensive income as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Gains or losses recognized in profit or loss |
|
Gains or losses recognized in profit or loss for financial instrument held at the end of the year |
|
Gains or losses recognized in profit or loss |
|
Gains or losses recognized in profit or loss for financial instrument held at the end of the year |
Net gain on financial assets at FVTPL |
|
92,194 |
|
87,501 |
|
- |
|
- |
Net trading loss |
|
- |
|
- |
|
(2,996) |
|
(2,996) |
Net gain on financial instruments designated at fair value through profit or loss |
|
- |
|
- |
|
4 |
|
- |
Net gain on sale of available-for-sale financial assets |
|
- |
|
- |
|
1,232 |
|
989 |
Impairment loss on financial assets |
|
- |
|
- |
|
(150,974) |
|
(150,974) |
Net other operating income (expenses) |
|
55,572 |
|
55,572 |
|
(188,913) |
|
(188,913) |
|
|
147,766 |
|
143,073 |
|
(341,647) |
|
(341,894) |
(*3) These financial instruments were transferred into or out of level 3 as the availability of observable market data has changed. The Bank recognized transfers between levels of the fair value hierarchy at the end of the reporting period during which the event or the change in circumstances that caused the transfer has occurred.
65
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(a) |
Financial instruments measured at fair value (continued) |
|
iv) Valuation techniques and inputs used in measuring fair value of financial instruments
ⓐ Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Type of financial instruments |
|
|
Book value |
|
Valuation techniques |
|
Inputs |
|
Financial assets |
||||||||||
Loans at FVTPL |
|
|
407,996 |
|
Discounted cash flow
|
|
Discount rate
|
|||
Securities at FVTPL |
|
Debt securities |
|
|
11,007,914 |
|
Discounted cash flow Net asset value
|
|
Discount rate
Price of underlying assets |
|
Derivative assets |
|
Trading |
|
|
1,450,779 |
|
Option model, Discounted cash flow |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
|
Hedging |
|
|
30,508 |
|
|
||||
|
|
|
|
1,481,287 |
|
|
|
|
||
Securities at FVOCI |
|
Debt securities |
|
|
21,128,932 |
|
Discounted cash flow |
|
Discount rate |
|
|
|
|
|
|
34,026,129 |
|
|
|
|
|
Financial liabilities |
||||||||||
Derivative liabilities |
|
Trading |
|
|
1,330,320 |
|
Option model, Discounted cash flow |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
|
Hedging |
|
|
106,261 |
|
|
||||
|
|
|
|
1,406,581 |
|
|
|
|
66
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
|
|
December 31, 2017 |
||||||||
|
|
Type of financial instruments |
|
|
Book value |
|
Valuation techniques |
|
Inputs |
|
Financial assets |
||||||||||
Trading assets |
|
Debt securities |
|
|
7,684,774 |
|
Discounted cash flow |
|
Discount rate |
|
|
Equity securities |
|
|
301,774 |
|
Net asset value |
|
Price of underlying assets |
||
|
|
|
|
7,986,548 |
|
|
|
|
||
Derivative assets |
|
Trading |
|
|
2,585,881 |
|
Option model, Discounted cash flow |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
|
Hedging |
|
|
6,633 |
|
|
||||
|
|
|
|
2,592,514 |
|
|
|
|
||
Available-for-sale financial assets |
|
Debt securities |
|
|
19,646,018 |
|
Discounted cash flow |
|
Discount rate |
|
|
Equity securities |
|
|
1,253,593 |
|
Net asset value |
|
Price of underlying assets |
||
|
|
|
|
20,899,611 |
|
|
|
|
||
|
|
|
|
|
31,478,673 |
|
|
|
|
|
Financial liabilities |
||||||||||
Derivative liabilities |
|
Trading |
|
|
2,474,381 |
|
Option model, Discounted cash flow |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
|
Hedging |
|
|
93,786 |
|
|
||||
|
|
|
|
2,568,167 |
|
|
|
|
67
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
ⓑ Information about valuation techniques and significant unobservable inputs in measuring financial instruments categorized as level 3 as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||||||
|
|
Valuation technique |
|
Type of financial instrument |
|
|
Book value |
|
Significant unobservable input |
|
Range of estimates for unobservable input |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Financial assets |
|
|
|
|
|
|
|
|
|
||
Loans at FVTPL |
|
Option model (*1) |
|
Loans |
|
|
237,241 |
|
Volatility of underlying assets |
|
16.39%~42.56% |
Securities at FVTPL |
|
Net asset value method |
|
Debt securities |
|
|
1,079,674 |
|
Price of underlying assets |
|
- |
|
Discounted cash flow |
|
Equity securities |
|
|
43,755 |
|
Discount rate Terminal growth rate |
|
5.80%~17.00% 0.00% |
|
|
|
|
|
|
|
|
1,123,429 |
|
|
|
|
Derivative assets |
|
Option model (*2) |
|
Equity and foreign exchange related |
|
|
145 |
|
Volatility of underlying assets |
|
2.20%~25.96% |
|
|
|
|
|
|
|
|
|
|
||
|
|
Option model (*2) |
|
Interest rates related |
|
|
7,116 |
|
Volatility of underlying assets |
|
0.42%~0.78% |
|
|
|
|
|
|
Regression coefficient |
|
0.42%~1.65% |
|||
|
|
|
|
|
|
Correlations |
|
44.93%~90.34% |
|||
|
7,261 |
|
|
||||||||
Securities at FVOCI |
|
Discounted cash flow
|
|
Equity securities |
|
|
301,991 |
|
Discount rate |
|
8.43%~17.40% |
|
|
|
|
|
Terminal growth rate |
|
0.00% |
||||
|
|
|
|
|
|
|
1,669,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|||||||||||
Derivative liabilities |
|
Option model (*2) |
|
Equity and foreign exchange related |
|
|
256 |
|
Volatility of underlying assets |
|
2.20%~25.96% |
|
|
|
|
|
|
|
|
|
|||
|
|
Option model (*2) |
|
Interest rates related |
|
|
363,522 |
|
Volatility of underlying assets |
|
0.47%~0.78% |
|
|
|
|
|
|
Regression coefficient |
|
0.42%~2.77% |
|||
|
|
|
|
|
|
Correlations |
|
28.15%~90.34% |
|||
|
|
|
|
|
|
|
363,778 |
|
|
|
|
(*1) The Bank uses binominal tree option model when measuring the fair value for loans at FVTPL.
(*2) Option models that the Bank uses in derivative valuation include Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
68
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
|
|
December 31, 2017 |
|||||||||
|
|
Valuation technique |
|
Type of financial instrument |
|
|
Book value |
|
Significant unobservable input |
|
Range of estimates for unobservable input |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Financial assets |
|
|
|
|
|
|
|
|
|
||
Derivative assets |
|
Option model (*1) |
|
Equity and foreign exchange related |
|
|
4,846 |
|
Volatility of underlying assets |
|
1.32%~29.53% |
|
|
|
|
|
|
|
Correlations |
|
0.14% |
||
|
|
Option model (*1) |
|
Interest rates related |
|
|
5,296 |
|
Volatility of underlying assets |
|
0.42%~0.70% |
|
|
|
|
|
|
Regression coefficient |
|
0.42%~1.65% |
|||
|
|
|
|
|
|
Correlations |
|
42.20%~90.33% |
|||
|
10,142 |
|
|
||||||||
Available-for-sale financial assets |
|
Discounted cash flow Comparable company analysis Net asset value |
|
Equity securities |
|
|
1,100,435 |
|
Discount rate |
|
1.98%~20.51% |
|
|
|
|
|
Terminal growth rate |
|
0.00% |
||||
|
|
|
|
|
|
|
1,110,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|||||||||||
Derivative liabilities |
|
Option model (*1) |
|
Equity and foreign exchange related |
|
|
80 |
|
Volatility of underlying assets |
|
1.32%~26.30% |
|
|
|
|
|
|
Correlations |
|
0.14% |
|||
|
|
Option model (*1) |
|
Interest rates related |
|
|
428,656 |
|
Volatility of underlying assets |
|
0.50%~0.70% |
|
|
|
|
|
|
Regression coefficient |
|
1.65%~2.77% |
|||
|
|
|
|
|
|
Correlations |
|
32.63%~90.33% |
|||
|
|
|
|
|
|
|
428,736 |
|
|
|
|
(*1) Option models that the Bank uses in derivative valuation include Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
69
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
v) Sensitivity to changes in unobservable inputs
For level 3 fair value measurement, changing one or more of the unobservable inputs used to reasonably possible alternative assumptions would have the following effect on profit (loss), and other comprehensive income (loss) as of December 31, 2018 and 2017 were as follows:
|
|
|
December 31, 2018 |
||||||||
Type of financial instrument |
|
Profit (loss) for the year |
|
Other comprehensive income (loss) for the year |
|||||||
|
Favorable change |
|
Unfavorable change |
|
Favorable change |
|
Unfavorable change |
||||
Loans at FVTPL (*1) |
|
8,858 |
|
(7,233) |
|
- |
|
- |
|
||
Derivative assets (*1) |
Equity and foreign exchange related |
|
57 |
|
(38) |
|
- |
|
- |
||
Interest rates related |
|
461 |
|
(701) |
|
- |
|
- |
|||
Securities at FVTPL (*2) |
Debt securities (*3) |
|
1,176 |
|
(807) |
|
- |
|
- |
||
Equity securities |
|
3,256 |
|
(1,754) |
|
- |
|
- |
|||
Securities at FVOCI (*2) |
Equity securities |
|
- |
|
- |
|
8,596 |
|
(4,843) |
||
|
|
|
13,808 |
|
(10,533) |
|
8,596 |
|
(4,843) |
||
Derivative liabilities (*1) |
Equity and foreign exchange related |
|
854 |
|
(912) |
|
- |
|
- |
||
|
Interest rates related |
|
10,186 |
|
(10,362) |
|
- |
|
- |
||
|
|
11,040 |
|
(11,274) |
|
- |
|
- |
(*1) Based on 10% of increase or decrease in volatility of underlying assets or correlations.
(*2) Based on changes in growth rate (0%~1%) and discount rate (-1%p~1%p).
(*3) W1,033,938 million of Securities at FVTPL classified as level 3 are excluded from sensitivity analysis since calculation of sensitivity according to the fluctuation of input variables is impracticable.
70
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
|
|
|
December 31, 2017 |
||||||||
Type of financial instrument |
|
Profit (loss) for the year |
|
Other comprehensive income (loss) for the year |
|||||||
|
Favorable change |
|
Unfavorable change |
|
Favorable change |
|
Unfavorable change |
||||
Derivative assets (*1) |
Equity and foreign exchange related |
|
1,238 |
|
(846) |
|
- |
|
- |
||
Interest rates related |
|
278 |
|
(326) |
|
- |
|
- |
|||
Available-for-sale financial assets (*2) |
Equity securities (*3) |
|
- |
|
- |
|
16,435 |
|
(8,229) |
||
|
|
|
1,516 |
|
(1,172) |
|
16,435 |
|
(8,229) |
||
Derivative liabilities (*1) |
Equity and foreign exchange related |
|
10 |
|
(13) |
|
- |
|
- |
||
|
Interest rates related |
|
13,820 |
|
(13,280) |
|
- |
|
- |
||
|
|
13,830 |
|
(13,293) |
|
- |
|
- |
(*1) Based on 10% of increase or decrease in volatility of underlying assets or correlations.
(*2) Based on changes in growth rate (0%~1%) and discount rate (-1%p~1%p).
(*3) W756,662 million of available-for-sale financial assets classified as level 3 are excluded from sensitivity analysis since calculation of sensitivity according to the fluctuation of input variables is impracticable.
71
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost
i) 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 book value 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. Therefore, the book value for deposits approximates fair value.
|
Loans at amortized cost |
|
The fair value of loans at amortized cost is measured by discounting the expected cash flows at the market interest rate, credit risk, etc.
|
Securities at amortized cost |
|
The fair value of securities at amortized cost is determined by applying the lesser of two quoted bond prices provided by two bond pricing agencies as of the latest trading date.
|
Deposits and borrowings
|
|
The book amount and the fair value for demand deposits, cash management account deposits, call money and bonds sold under repurchase agreements as short-term instruments are identical. The fair value of others is measured by discounting the contractual cash flows at the market interest rate that takes into account the residual risk.
|
Debt securities issued |
|
The fair value of deposits and borrowings 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 flow at the market interest rate that takes into account the residual risk.
|
72
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
ii) The book value and the fair value of financial instruments measured at amortized cost as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Book value |
|
|
||||||
|
|
Balance |
|
Unamortized balance |
|
Allowance |
|
Total |
|
Fair value |
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
|
|
Cash |
|
2,467,074 |
|
- |
|
- |
|
2,467,074 |
|
2,467,074 |
Due from banks |
|
6,946,113 |
|
- |
|
(7,348) |
|
6,938,765 |
|
6,938,765 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Household loans |
|
106,401,688 |
|
419,075 |
|
(280,464) |
|
106,540,299 |
|
106,965,158 |
Corporate loans |
|
121,277,311 |
|
76,877 |
|
(1,179,830) |
|
120,174,358 |
|
121,156,246 |
Public and other loans |
|
2,729,075 |
|
1,562 |
|
(20,055) |
|
2,710,582 |
|
2,733,532 |
Loans to bank |
|
3,831,159 |
|
- |
|
(10,122) |
|
3,821,037 |
|
3,828,572 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Government bonds |
|
11,426,126 |
|
- |
|
(652) |
|
11,425,474 |
|
11,524,046 |
Financial institutions bonds |
|
776,808 |
|
- |
|
(41) |
|
776,767 |
|
778,209 |
Corporate bonds and others |
|
4,031,630 |
|
- |
|
(2,907) |
|
4,028,723 |
|
4,068,341 |
Other financial assets |
|
13,995,074 |
|
(38,157) |
|
(25,020) |
|
13,931,897 |
|
13,951,377 |
|
|
273,882,058 |
|
459,357 |
|
(1,526,439) |
|
272,814,976 |
|
274,411,320 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
100,259,735 |
|
- |
|
- |
|
100,259,735 |
|
100,259,735 |
Time deposits |
|
120,395,290 |
|
- |
|
- |
|
120,395,290 |
|
120,287,631 |
Negotiable certificates of deposits |
|
8,602,552 |
|
- |
|
- |
|
8,602,552 |
|
8,654,003 |
Note discount deposits |
|
4,087,530 |
|
- |
|
- |
|
4,087,530 |
|
4,087,338 |
CMA (*1) |
|
4,084,709 |
|
- |
|
- |
|
4,084,709 |
|
4,084,709 |
Others |
|
21,963 |
|
- |
|
- |
|
21,963 |
|
21,962 |
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Call money |
|
831,593 |
|
- |
|
- |
|
831,593 |
|
831,593 |
Bill sold |
|
14,536 |
|
- |
|
- |
|
14,536 |
|
14,506 |
Bonds sold under repurchase agreements |
|
46,316 |
|
- |
|
- |
|
46,316 |
|
46,316 |
Borrowings |
|
14,985,702 |
|
(1,705) |
|
- |
|
14,983,997 |
|
15,023,941 |
Debt securities issued: |
|
|
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
23,814,050 |
|
(62,944) |
|
- |
|
23,751,106 |
|
24,020,973 |
Debt securities issued in foreign currencies |
|
5,572,580 |
|
(29,102) |
|
- |
|
5,543,478 |
|
5,345,938 |
Other financial liabilities |
|
14,928,888 |
|
(2,118) |
|
- |
|
14,926,770 |
|
14,904,658 |
|
|
297,645,444 |
|
(95,869) |
|
- |
|
297,549,575 |
|
297,583,303 |
(*1) CMA: Cash management account deposits
73
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
|
|
December 31, 2017 |
||||||||
|
|
Book value |
|
|
||||||
|
|
Balance |
|
Unamortized balance |
|
Allowance |
|
Total |
|
Fair value |
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
|
|
Cash |
|
1,658,239 |
|
- |
|
- |
|
1,658,239 |
|
1,658,239 |
Due from banks |
|
13,057,347 |
|
- |
|
(3,080) |
|
13,054,267 |
|
13,054,267 |
Loans: |
|
|
|
|
|
|
|
|
|
|
Household loans |
|
98,890,625 |
|
362,349 |
|
(297,121) |
|
98,955,853 |
|
98,630,107 |
Corporate loans |
|
112,981,422 |
|
63,989 |
|
(1,011,466) |
|
112,033,945 |
|
112,535,482 |
Public and other loans |
|
2,203,307 |
|
1,149 |
|
(10,135) |
|
2,194,321 |
|
2,202,338 |
Loans to bank |
|
3,805,922 |
|
- |
|
(4,694) |
|
3,801,228 |
|
3,794,103 |
Held-to-maturity financial assets: |
|
|
|
|
|
|
|
|
|
|
Government bonds |
|
9,595,227 |
|
- |
|
- |
|
9,595,227 |
|
9,599,761 |
Financial institutions bonds |
|
1,105,280 |
|
- |
|
- |
|
1,105,280 |
|
1,103,804 |
Corporate bonds and others |
|
3,658,077 |
|
- |
|
- |
|
3,658,077 |
|
3,654,443 |
Other financial assets |
|
8,832,623 |
|
(44,116) |
|
(24,193) |
|
8,764,314 |
|
8,787,940 |
|
|
255,788,069 |
|
383,371 |
|
(1,350,689) |
|
254,820,751 |
|
255,020,484 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
97,507,785 |
|
- |
|
- |
|
97,507,785 |
|
97,507,785 |
Time deposits |
|
111,849,093 |
|
- |
|
- |
|
111,849,093 |
|
111,691,554 |
Negotiable certificates of deposits |
|
6,973,204 |
|
- |
|
- |
|
6,973,204 |
|
7,013,548 |
Note discount deposits |
|
3,423,459 |
|
- |
|
- |
|
3,423,459 |
|
3,423,320 |
CMA |
|
4,197,146 |
|
- |
|
- |
|
4,197,146 |
|
4,197,146 |
Others |
|
24,350 |
|
- |
|
- |
|
24,350 |
|
24,349 |
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Call money |
|
433,281 |
|
- |
|
- |
|
433,281 |
|
433,281 |
Bill sold |
|
13,605 |
|
- |
|
- |
|
13,605 |
|
13,580 |
Bonds sold under repurchase agreements |
|
225,265 |
|
- |
|
- |
|
225,265 |
|
225,265 |
Borrowings |
|
13,799,569 |
|
- |
|
- |
|
13,799,569 |
|
13,779,335 |
Debt securities issued: |
|
|
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
20,057,244 |
|
(29,698) |
|
- |
|
20,027,546 |
|
19,886,840 |
Debt securities issued in foreign currencies |
|
3,925,454 |
|
(23,277) |
|
- |
|
3,902,177 |
|
3,918,403 |
Other financial liabilities |
|
14,557,598 |
|
(2,915) |
|
- |
|
14,554,683 |
|
14,528,020 |
|
|
276,987,053 |
|
(55,890) |
|
- |
|
276,931,163 |
|
276,642,426 |
74
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
iii) The fair value hierarchy of financial instruments which are not measured at fair value in the separate statements of financial position as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
Cash |
|
2,467,074 |
|
- |
|
- |
|
2,467,074 |
Due from banks |
|
- |
|
6,938,765 |
|
- |
|
6,938,765 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
Household loans |
|
- |
|
- |
|
106,965,158 |
|
106,965,158 |
Corporate loans |
|
- |
|
- |
|
121,156,246 |
|
121,156,246 |
Public and other loans |
|
- |
|
- |
|
2,733,532 |
|
2,733,532 |
Loans to bank |
|
- |
|
1,733,194 |
|
2,095,378 |
|
3,828,572 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
Government bonds |
|
768,812 |
|
10,755,234 |
|
- |
|
11,524,046 |
Financial institutions bonds |
|
719,925 |
|
58,284 |
|
- |
|
778,209 |
Corporate bonds and others |
|
- |
|
4,068,341 |
|
- |
|
4,068,341 |
Other financial assets |
|
- |
|
11,450,836 |
|
2,500,541 |
|
13,951,377 |
|
|
3,955,811 |
|
35,004,654 |
|
235,450,855 |
|
274,411,320 |
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand deposits |
|
- |
|
100,259,735 |
|
- |
|
100,259,735 |
Time deposits |
|
- |
|
- |
|
120,287,631 |
|
120,287,631 |
Negotiable certificates of deposits |
|
- |
|
- |
|
8,654,003 |
|
8,654,003 |
Note discount deposits |
|
- |
|
- |
|
4,087,338 |
|
4,087,338 |
CMA |
|
- |
|
4,084,709 |
|
- |
|
4,084,709 |
Others |
|
- |
|
- |
|
21,962 |
|
21,962 |
Borrowings: |
|
|
|
|
|
|
|
|
Call money |
|
- |
|
831,593 |
|
- |
|
831,593 |
Bill sold |
|
- |
|
- |
|
14,506 |
|
14,506 |
Bonds sold under repurchase agreements |
|
- |
|
- |
|
46,316 |
|
46,316 |
Borrowings |
|
- |
|
- |
|
15,023,941 |
|
15,023,941 |
Debt securities issued: |
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
- |
|
21,152,035 |
|
2,868,938 |
|
24,020,973 |
Debt securities issued in foreign currencies |
|
- |
|
5,345,938 |
|
- |
|
5,345,938 |
Other financial liabilities |
|
- |
|
6,478,858 |
|
8,425,800 |
|
14,904,658 |
|
|
- |
|
138,152,868 |
|
159,430,435 |
|
297,583,303 |
75
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
|
|
December 31, 2017 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
Cash |
|
1,658,239 |
|
- |
|
- |
|
1,658,239 |
Due from banks |
|
- |
|
13,054,267 |
|
- |
|
13,054,267 |
Loans: |
|
|
|
|
|
|
|
|
Household loans |
|
- |
|
- |
|
98,630,107 |
|
98,630,107 |
Corporate loans |
|
- |
|
- |
|
112,535,482 |
|
112,535,482 |
Public and other loans |
|
- |
|
- |
|
2,202,338 |
|
2,202,338 |
Loans to bank |
|
- |
|
748,348 |
|
3,045,755 |
|
3,794,103 |
Held-to-maturity financial assets: |
|
|
|
|
|
|
|
|
Government bonds |
|
1,411,506 |
|
8,188,255 |
|
- |
|
9,599,761 |
Financial institutions bonds |
|
936,067 |
|
167,737 |
|
- |
|
1,103,804 |
Corporate bonds and others |
|
- |
|
3,654,443 |
|
- |
|
3,654,443 |
Other financial assets |
|
- |
|
6,641,439 |
|
2,146,501 |
|
8,787,940 |
|
|
4,005,812 |
|
32,454,489 |
|
218,560,183 |
|
255,020,484 |
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand deposits |
|
- |
|
97,507,785 |
|
- |
|
97,507,785 |
Time deposits |
|
- |
|
- |
|
111,691,554 |
|
111,691,554 |
Negotiable certificates of deposits |
|
- |
|
- |
|
7,013,548 |
|
7,013,548 |
Note discount deposits |
|
- |
|
- |
|
3,423,320 |
|
3,423,320 |
CMA |
|
- |
|
4,197,146 |
|
- |
|
4,197,146 |
Others |
|
- |
|
- |
|
24,349 |
|
24,349 |
Borrowings: |
|
|
|
|
|
|
|
|
Call money |
|
- |
|
433,281 |
|
- |
|
433,281 |
Bill sold |
|
- |
|
- |
|
13,580 |
|
13,580 |
Bonds sold under repurchase agreements |
|
- |
|
- |
|
225,265 |
|
225,265 |
Borrowings |
|
- |
|
- |
|
13,779,335 |
|
13,779,335 |
Debt securities issued: |
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
- |
|
17,346,923 |
|
2,539,917 |
|
19,886,840 |
Debt securities issued in foreign currencies |
|
- |
|
3,918,403 |
|
- |
|
3,918,403 |
Other financial liabilities |
|
- |
|
5,454,293 |
|
9,073,727 |
|
14,528,020 |
|
|
- |
|
128,857,831 |
|
147,784,595 |
|
276,642,426 |
76
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
iv) For financial instruments not measured at fair value in the statement of financial position but for which the fair value is disclosed, valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 or level 3 as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
Level |
|
Type of financial instrument |
|
Fair value (*1) |
|
Valuation technique |
|
Inputs |
Level 2 |
|
Securities at amortized cost |
|
14,881,859 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Loans at amortized cost |
|
232,950,314 |
|
|
Discount rate, Credit spread, Prepayment rate |
|
|
Other financial assets |
|
2,500,541 |
|
|
Discount rate |
||
|
|
|
|
250,332,714 |
|
|
|
|
Level 2 |
|
Debt securities issued |
|
26,497,973 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Deposits |
|
132,989,491 |
|
|
Discount rate |
|
|
Borrowings |
|
10,259,243 |
|
|
Discount rate |
||
|
Debt securities issued |
|
2,868,938 |
|
|
Discount rate, Regression coefficient, Correlation coefficient |
||
|
Other financial liabilities |
|
8,425,800 |
|
|
Discount rate |
||
|
|
|
|
181,041,445 |
|
|
|
|
(*1) The amounts, which were not evaluated by the valuation technique, are not included and disclosed because the carrying amount is the reasonable approximation of fair value.
77
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
|
|
December 31, 2017 |
||||||
Level |
|
Type of financial instrument |
|
Fair value (*1) |
|
Valuation technique |
|
Inputs |
Level 2 |
|
Held-to-maturity financial assets |
|
12,010,435 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Loans |
|
216,413,682 |
|
|
Discount rate, Credit spread, Prepayment rate |
|
|
Other financial assets |
|
2,146,501 |
|
|
Discount rate |
||
|
|
|
|
230,570,618 |
|
|
|
|
Level 2 |
|
Debt securities issued |
|
21,265,326 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Deposits |
|
122,107,524 |
|
|
Discount rate |
|
|
Borrowings |
|
8,918,817 |
|
|
Discount rate |
||
|
Debt securities issued |
|
2,539,917 |
|
|
Discount rate, Regression coefficient, Correlation coefficient |
||
|
Other financial liabilities |
|
9,073,727 |
|
|
Discount rate |
||
|
|
|
|
163,905,311 |
|
|
|
|
(*1) The amounts, which were not evaluated by the valuation technique, are not included and disclosed because the carrying amount is the reasonable approximation of fair value.
(c) Deferred day one profit or loss for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Beginning balance |
|
Deferred |
|
Amortization |
|
Ending balance |
Loans at FVTPL |
|
(4,929) |
|
(2,506) |
|
2,925 |
|
(4,510) |
Securities at FVTPL |
|
- |
|
4 |
|
- |
|
4 |
|
|
December 31, 2017 |
||||||
|
|
Beginning balance |
|
Deferred |
|
Amortization |
|
Ending balance |
Financial liabilities designated at fair value through profit or loss |
|
(12) |
|
- |
|
12 |
|
- |
Equity swap liabilities |
|
12 |
|
- |
|
(12) |
|
- |
78
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(d) Classification by category of financial instruments
Financial assets and liabilities were measured at fair value or amortized cost. Financial instruments measured at fair value or amortized costs were measured in accordance with the Bank’s valuation methodologies, which were described in Note 3.
The carrying amounts of each category of financial instruments as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Financial assets at FVTPL |
|
Financial assets at FVOCI |
|
Financial assets at amortized cost |
|
Derivatives held for hedging |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
- |
|
- |
|
6,938,765 |
|
- |
|
6,938,765 |
Securities at FVTPL |
|
12,811,266 |
|
- |
|
- |
|
- |
|
12,811,266 |
Derivative assets |
|
1,453,455 |
|
- |
|
- |
|
35,093 |
|
1,488,548 |
Loans at FVTPL |
|
645,237 |
|
- |
|
- |
|
- |
|
645,237 |
Loans at amortized cost |
|
- |
|
- |
|
233,246,276 |
|
- |
|
233,246,276 |
Securities at FVOCI |
|
- |
|
30,731,281 |
|
- |
|
- |
|
30,731,281 |
Securities at amortized cost |
|
- |
|
- |
|
16,230,964 |
|
- |
|
16,230,964 |
Other financial assets |
|
- |
|
- |
|
13,931,897 |
|
- |
|
13,931,897 |
|
|
14,909,958 |
|
30,731,281 |
|
270,347,902 |
|
35,093 |
|
316,024,234 |
|
|
Financial liabilities at FVTPL |
|
Financial liabilities at amortized cost |
|
Derivatives held for hedging |
|
Total |
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
- |
|
237,451,779 |
|
- |
|
237,451,779 |
Financial liabilities at FVTPL |
|
479,559 |
|
- |
|
- |
|
479,559 |
Derivative liabilities |
|
1,303,932 |
|
- |
|
467,381 |
|
1,771,313 |
Borrowings |
|
- |
|
15,876,442 |
|
- |
|
15,876,442 |
Debt securities issued |
|
- |
|
29,294,584 |
|
- |
|
29,294,584 |
Other financial liabilities |
|
- |
|
14,926,770 |
|
- |
|
14,926,770 |
|
|
1,783,491 |
|
297,549,575 |
|
467,381 |
|
299,800,447 |
79
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(d) Classification by category of financial instruments (continued)
|
|
December 31, 2017 |
||||||||||
|
|
Financial assets at fair value through profit or loss |
|
Available-for-sale financial assets |
|
Held-to-maturity financial assets |
|
Loans and receivables |
|
Derivatives held for hedging |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
- |
|
- |
|
- |
|
13,054,267 |
|
- |
|
13,054,267 |
Trading assets |
|
8,834,871 |
|
- |
|
- |
|
- |
|
- |
|
8,834,871 |
Derivative assets |
|
2,594,256 |
|
- |
|
- |
|
- |
|
8,433 |
|
2,602,689 |
Loans |
|
- |
|
- |
|
- |
|
216,985,347 |
|
- |
|
216,985,347 |
Available-for-sale financial assets |
|
- |
|
31,126,397 |
|
- |
|
- |
|
- |
|
31,126,397 |
Held-to-maturity financial assets |
|
- |
|
- |
|
14,358,584 |
|
- |
|
- |
|
14,358,584 |
Other financial assets |
|
- |
|
- |
|
- |
|
8,764,314 |
|
- |
|
8,764,314 |
|
|
11,429,127 |
|
31,126,397 |
|
14,358,584 |
|
238,803,928 |
|
8,433 |
|
295,726,469 |
|
|
Trading liabilities |
|
Financial liabilities measured at amortized cost |
|
Derivatives held for hedging |
|
Total |
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
- |
|
223,975,037 |
|
- |
|
223,975,037 |
Trading liabilities |
|
434,586 |
|
- |
|
- |
|
434,586 |
Derivative liabilities |
|
2,478,010 |
|
- |
|
518,948 |
|
2,996,958 |
Borrowings |
|
- |
|
14,471,720 |
|
- |
|
14,471,720 |
Debt securities issued |
|
- |
|
23,929,723 |
|
- |
|
23,929,723 |
Other financial liabilities |
|
- |
|
14,554,683 |
|
- |
|
14,554,683 |
|
|
2,912,596 |
|
276,931,163 |
|
518,948 |
|
280,362,707 |
There are no financial assets and financial liabilities that are reclassified between financial instruments during the year.
80
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4.Measurement of fair value (continued)
(e) Financial instruments income and costs by category for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||||||
|
|
Interest income (expense) |
|
Fees and commission income (expense) |
|
Reversal of (provision for) credit loss allowance |
|
Others |
|
Total |
|
Other comprehensive income (loss) |
Securities at FVTPL |
|
172,718 |
|
10,403 |
|
- |
|
331,284 |
|
514,405 |
|
- |
Securities at FVOCI |
|
543,442 |
|
- |
|
(10,474) |
|
17,679 |
|
550,647 |
|
191,226 |
Securities at amortized cost |
|
376,934 |
|
- |
|
(1,988) |
|
- |
|
374,946 |
|
- |
Loans at FVTPL |
|
12,462 |
|
- |
|
- |
|
13,827 |
|
26,289 |
|
- |
Loans at amortized cost |
|
7,497,188 |
|
56,426 |
|
(234,420) |
|
25,260 |
|
7,344,454 |
|
- |
Other financial assets |
|
123,216 |
|
101,303 |
|
239 |
|
- |
|
224,759 |
|
- |
Financial liabilities at FVTPL |
|
- |
|
(18) |
|
- |
|
- |
|
(18) |
|
- |
Financial liabilities measured at amortized cost |
|
(3,695,812) |
|
(126) |
|
- |
|
(75,693) |
|
(3,771,631) |
|
(2,633) |
Net derivatives held for hedging |
|
- |
|
- |
|
- |
|
79,635 |
|
79,635 |
|
- |
Allowance for off balance sheet items |
|
- |
|
- |
|
20,749 |
|
- |
|
20,749 |
|
- |
|
|
5,030,148 |
|
167,988 |
|
(225,894) |
|
391,992 |
|
5,364,235 |
|
188,593 |
|
|
2017 |
||||||||||
|
|
Interest income (expense) |
|
Fees and commission income (expense) |
|
Impairment loss |
|
Others |
|
Total |
|
Other comprehensive income (loss) |
Trading assets |
|
140,217 |
|
8,794 |
|
- |
|
(99,505) |
|
49,506 |
|
- |
Available-for-sale financial assets |
|
428,647 |
|
- |
|
(178,228) |
|
273,049 |
|
523,468 |
|
(160,937) |
Held-to-maturity financial assets |
|
334,009 |
|
- |
|
- |
|
- |
|
334,009 |
|
- |
Loans and receivables |
|
6,546,404 |
|
132,501 |
3 |
(482,131) |
|
36,869 |
|
6,233,643 |
|
- |
Trading liabilities |
|
- |
|
(96) |
|
- |
|
- |
|
(96) |
|
- |
Financial liabilities designated at fair value through profit or loss |
|
- |
|
- |
|
- |
|
(43) |
|
(43) |
|
- |
Financial liabilities measured at amortized cost |
|
(2,928,039) |
|
(58) |
|
- |
|
194,559 |
|
(2,733,538) |
|
17,595 |
Net derivatives held for hedging |
|
- |
|
- |
|
- |
|
(194,559) |
|
(194,434) |
|
- |
|
|
4,521,238 |
|
141,141 |
|
(660,359) |
|
210,495 |
|
4,212,515 |
|
(143,342) |
81
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
4.Financial risk management (continued)
4-5.Capital risk management
Capital regulations applicable to banks were adopted in 1988, which focused primarily on capital adequacy and asset soundness as a measure of risk. Building upon the initial Basel Capital Accord of 1988, capital regulations were developed to reflect additional risks as well. For the purpose of improving risk management and increasing capital adequacy of banks, capital adequacy standards based on the new Basel Capital Accord (Basel III) was implemented by the Financial Services Commission regulations beginning on December 1, 2013. Under these regulations, all domestic banks including the Bank are required to maintain a capital adequacy ratio of 8% or above and report whether the Bank meet the capital adequacy ratio to the Financial Services Commission.
Under the Banking Act, the capital of a bank is divided into two categories.
(a) Tier 1 capital (Common equity Tier 1 capital + Additional Tier 1 capital)
i) Common equity Tier 1 capital: Common equity Tier 1 capital consists of capital stock, capital surplus, retained earnings (excluding regulatory reserve for loan loss), accumulated other comprehensive income, other disclosed reserves, and non-controlling interests that meet certain criteria.
ii) Additional Tier 1 capital: Additional Tier 1 capital consists of equity instrument that meet certain criteria for perpetual nature of the equity instrument, any related capital surplus, instruments issued by consolidated subsidiaries of the Bank and held by third parties that meet certain criteria.
(b) Tier 2 capital (Supplementary capital)
Tier 2 capital consists of instruments that meet certain criteria for loss absorption in case of liquidation, any related capital surplus, and instruments issued by consolidated subsidiaries of the Bank and held by third parties that meet certain criteria.
The capital adequacy ratio of the Bank is calculated by ratios of Tier 1 and Tier 2 capital (less any capital deductions) to risk-weighted assets. Pursuant to Basel III, operational risk, such as inadequate procedures, loss risk by employees, internal systems, occurrence of unexpected events, as well as credit risk, market risk and additional risk are taken into account in calculating the risk-weighted assets.
The Bank evaluates and manages the capital adequacy ratio pursuant to internally developed standards. It means that the Bank assesses whether the level on ratio of available capital to economic capital is sufficient, or not. The Bank manages the economic adequacy by the amount of each risk type including credit, market, operation, interest rate, liquidity, concentration, and foreign currency settlement risk, as well as the total amounts of all of those risk types.
82
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-5.Capital risk management (continued)
Details of capital categories and the capital adequacy ratio of the Bank as of December 31, 2018 and 2017 were as follows:
Category |
|
December 31, 2018 |
|
December 31, 2017 |
Capital: |
|
|
|
|
Common equity Tier 1 capital |
|
22,113,697 |
|
20,891,478 |
Additional Tier 1 capital |
|
698,660 |
|
669,927 |
Tier 1 capital |
|
22,812,357 |
|
21,561,405 |
Tier 2 capital |
|
4,687,083 |
|
3,829,348 |
|
|
27,499,440 |
|
25,390,753 |
|
|
|
|
|
Risk-weighted assets |
|
|
|
|
Credit risk-weighted assets (*1) |
|
154,994,030 |
|
146,784,021 |
Market risk-weighted assets |
|
7,227,874 |
|
6,802,866 |
Operating risk-weighted assets |
|
9,371,300 |
|
9,287,919 |
|
|
171,593,204 |
|
162,874,806 |
|
|
|
|
|
Capital adequacy ratio: |
|
|
|
|
Common equity Tier 1 capital ratio |
|
12.89% |
|
12.83% |
Tier 1 capital ratio |
|
13.29% |
|
13.24% |
Tier 2 capital ratio |
|
2.73% |
|
2.35% |
Total capital ratio |
|
16.03% |
|
15.59% |
(*1) Insufficient capital under capital floor is included in credit risk-weighted assets.
Pursuant to related regulations, the Bank shall maintain the total capital ratio at 8.0% or above, Tier 1 capital ratio at 6.0% or above and common equity capital ratio at 4.5% or above. In 2016, the minimum regulatory BIS capital requirement to be met by 2019 was raised to 14% due to the enforcement of Basel III capital regulations. This is due to the additions of capital conservation buffer (2.5%p), additional capital buffer for Domestic Systemically Important Bank (“D-SIB”) (1.0%p) and countercyclical capital buffer (2.5%p) to the existing minimum capital ratio. Capital conservation buffer and additional capital buffer for D-SIB will be adjusted upwards by 25% per year through 2019 based on transitional arrangements. The addition of countercyclical capital buffer can be used up to a maximum of the buffer rate of 2.5%p in a period of excess aggregate credit growth. The minimum regulatory BIS capital ratio to be complied with as of the end of 2018 is 10.625%, which is due to the increases of 1.875%p for capital conservation buffer, 0.75%p for additional capital buffer for D-SIB, and 0%p for countercyclical capital buffer, respectively.
83
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-6.Transaction as a transfer of financial instrument
(a) Transfers financial assets that were not derecognized
i) Bonds sold under repurchase agreements at a fixed price as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Transferred assets: |
|
|
|
|
Securities at FVOCI |
|
50,289 |
|
- |
Securities at amortized cost |
|
121,716 |
|
- |
Available-for-sale financial assets |
|
- |
|
70,920 |
Held-to-maturity financial assets |
|
- |
|
287,069 |
|
|
172,005 |
|
357,989 |
Associated liabilities: |
|
|
|
|
Bonds sold under repurchase agreements |
|
46,316 |
|
225,265 |
ii) When the Group's securities are transferred, the Group transfers the ownership of the securities, but upon the termination, the Group will have to return the securities. As a result, securities loaned as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
|
Lender |
Available-for-sale financial assets |
|
|
|
|
|
|
Government bonds |
|
- |
|
278,956 |
|
Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
|
- |
|
319,580 |
|
Korea Securities Finance Corp., Korea Securities Depository |
Securities at FVOCI: |
|
|
|
|
|
|
Government bonds |
|
595,149 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
|
319,770 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
Securities at amortized cost: |
|
|
|
|
|
|
Government bonds |
|
40,149 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
|
90,060 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
|
|
1,045,128 |
|
598,536 |
|
|
(b) Financial instruments that were qualified for derecognition but under continuing involvement.
There are no financial instruments that meets the conditions of derecognition and in which the Bank has continuing involvement as of December 31, 2018 and 2017.
84
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-7.Offsetting financial assets and financial liabilities
Details of financial assets and financial liabilities subject to offsetting, enforceable master netting agreements and similar agreements as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
Gross amounts of recognized financial assets and liabilities |
|
Gross amounts of recognized financial assets and liabilities set off in the statement of financial position |
|
Net amounts of financial assets and liabilities presented in the statement of financial position |
|
Related amounts not set off in the statement of financial position |
|
|
||
|
|
|
|
Financial instruments |
|
Cash collateral received |
|
Net amount |
||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (*1) |
|
1,487,280 |
|
- |
|
1,487,280 |
|
6,594,662 |
|
7,396 |
|
962,878 |
Other financial assets (*1) |
|
6,077,656 |
|
- |
|
6,077,656 |
|
|
|
|||
Bonds sold under repurchase agreements related collateral of securities (*2) |
|
172,006 |
|
- |
|
172,006 |
|
46,316 |
|
- |
|
125,690 |
Bonds purchased under resale agreement (Loans) (*2) |
|
4,720,281 |
|
- |
|
4,720,281 |
|
4,720,281 |
|
- |
|
- |
Securities lent (*2) |
|
1,045,128 |
|
- |
|
1,045,128 |
|
1,045,128 |
|
- |
|
- |
Domestic exchange settlements receivables (*3) |
|
32,337,320 |
|
26,344,937 |
|
5,992,383 |
|
- |
|
- |
|
5,992,383 |
Receivable from disposal of securities, etc. (*4) |
|
22,906 |
|
519 |
|
22,387 |
|
- |
|
- |
|
22,387 |
|
|
45,862,577 |
|
26,345,456 |
|
19,517,121 |
|
12,406,387 |
|
7,396 |
|
7,103,338 |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (*1) |
|
1,759,166 |
|
- |
|
1,759,166 |
|
6,795,260 |
|
- |
|
282,044 |
Other financial liabilities (*1) |
|
5,318,138 |
|
- |
|
5,318,138 |
|
|
|
|||
Bonds sold under repurchase agreements (Borrowings) (*2) |
|
46,316 |
|
- |
|
46,316 |
|
46,316 |
|
- |
|
- |
Securities sold |
|
20,625 |
|
- |
|
20,625 |
|
20,625 |
|
- |
|
- |
Domestic exchange settlement payables (*3) |
|
27,363,173 |
|
26,344,937 |
|
1,018,236 |
|
1,018,236 |
|
- |
|
- |
Payable from purchase of securities, etc. (*4) |
|
552 |
|
519 |
|
33 |
|
33 |
|
- |
|
- |
|
|
34,507,970 |
|
26,345,456 |
|
8,162,514 |
|
7,880,470 |
|
- |
|
282,044 |
(*1) The Bank has certain derivative transactions subject to the ISDA (International Swaps and Derivatives Association) agreement. According to the ISDA agreement, when credit events (e.g. default) of counterparties occur, the net amount after offsetting the amounts obligated by each party is settled.
(*2) Resale and repurchase agreement, securities borrowing and lending agreement are also similar to ISDA agreement with respect to enforceable netting agreements.
(*3) The Bank has legally enforceable right to set off and settles financial assets and liabilities on a net basis. Therefore, domestic exchanges settlement receivables (payables) are recorded on a net basis in the separate statements of financial position.
(*4) Receivables and payables related to settlement of purchase and disposition of enlisted securities are offset and the net amount is presented in the separate statement of financial position because the Bank currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis. The effect of offsetting due to the establishment of ‘Central Counter Party (“CCP”)’ system is included in the amount.
85
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-7.Offsetting financial assets and financial liabilities (continued)
|
|
December 31, 2017 |
||||||||||
|
|
Gross amounts of recognized financial assets and liabilities |
|
Gross amounts of recognized financial assets and liabilities set off in the statement of financial position |
|
Net amounts of financial assets and liabilities presented in the statement of financial position |
|
Related amounts not set off in the statement of financial position |
|
|
||
|
|
|
|
Financial instruments |
|
Cash collateral received |
|
Net amount |
||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (*1) |
|
2,598,278 |
|
- |
|
2,598,278 |
|
5,488,818 |
|
271,805 |
|
1,055,059 |
Other financial assets (*1) |
|
4,217,404 |
|
- |
|
4,217,404 |
|
|
|
|||
Bonds sold under repurchase agreements related collateral of securities (*2) |
|
357,989 |
|
- |
|
357,989 |
|
225,265 |
|
- |
|
132,724 |
Bonds purchased under resale agreement (Loans) (*2) |
|
3,351,784 |
|
- |
|
3,351,784 |
|
3,351,784 |
|
- |
|
- |
Securities lent (*2) |
|
598,536 |
|
- |
|
598,536 |
|
598,536 |
|
- |
|
- |
Domestic exchange settlements receivables (*3) |
|
33,071,878 |
|
30,199,944 |
|
2,871,934 |
|
- |
|
- |
|
2,871,934 |
Receivable from disposal of securities, etc. (*4) |
|
15,567 |
|
1,152 |
|
14,415 |
|
- |
|
- |
|
14,415 |
|
|
44,211,436 |
|
30,201,096 |
|
14,010,340 |
|
9,664,403 |
|
271,805 |
|
4,074,132 |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (*1) |
|
2,964,371 |
|
- |
|
2,964,371 |
|
5,553,780 |
|
- |
|
1,070,236 |
Other financial liabilities (*1) |
|
3,659,645 |
|
- |
|
3,659,645 |
|
|
|
|||
Bonds sold under repurchase agreements (Borrowings) (*2) |
|
225,265 |
|
- |
|
225,265 |
|
225,265 |
|
- |
|
- |
Domestic exchange settlement payables (*3) |
|
31,885,249 |
|
30,199,944 |
|
1,685,305 |
|
1,685,305 |
|
- |
|
- |
Payable from purchase of securities, etc. (*4) |
|
1,519 |
|
1,152 |
|
367 |
|
326 |
|
- |
|
41 |
|
|
38,736,049 |
|
30,201,096 |
|
8,534,953 |
|
7,464,676 |
|
- |
|
1,070,277 |
(*1) The Bank has certain derivative transactions subject to the ISDA (International Swaps and Derivatives Association) agreement. According to the ISDA agreement, when credit events (e.g. default) of counterparties occur, the net amount after offsetting the amounts obligated by each party is settled.
(*2) Resale and repurchase agreement, securities borrowing and lending agreement are also similar to ISDA agreement with respect to enforceable netting agreements.
(*3) The Bank has legally enforceable right to set off and settles financial assets and liabilities on a net basis. Therefore, domestic exchanges settlement receivables (payables) are recorded on a net basis in the separate statements of financial position.
(*4) Receivables and payables related to settlement of purchase and disposition of enlisted securities are offset and the net amount is presented in the separate statement of financial position because the Bank currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis. The effect of offsetting due to the establishment of ‘Central Counter Party (“CCP”)’ system is included in the amount.
86
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
5.Significant estimates and judgments
The preparation of separate financial statements requires the application of certain critical estimates and judgments relative to the future. Management’s estimated outcomes may differ from actual outcomes. The change in an accounting estimate is recognized prospectively in profit or loss in the period of the change, if the change affects that period only, or the period of the change and future periods, if the change affects both.
(a) Income taxes
The Bank is subject to tax laws from various countries. In the normal course of business, there are various types of transactions and different accounting methods that may add uncertainties to the decision of the final income taxes. The Bank has recognized current and deferred taxes that reflect tax consequences based on the best estimates in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, actual income taxes in the future may not be identical to the recognized deferred tax assets and liabilities, and this difference can affect current and deferred tax at the period when the final tax effect is determined.
(b) Fair value of financial instruments
The fair values of financial instruments which are not actively traded in the market are determined by using valuation techniques. The Bank determines valuation techniques and assumptions based on significant market conditions at the end of each reporting period. Diverse valuation techniques are used to determine the fair value of financial instruments, from generic valuation techniques to internally developed valuation models that incorporate various types of assumptions and variables.
(c) Allowances for loan losses, guarantees and unused loan commitments
The Bank determines and recognizes allowances for losses on debt securities, loans and other receivables measured at amortized cost or FVOCI, and recognizes provisions for guarantees and unused loan commitments through impairment testing. The accuracy of allowances for credit losses is determined by the methodology and assumptions used for expected cash flows for individually assessed allowances and collectively assessed allowances for groups of loans, guarantees and unused loan commitments.
(d) Defined benefit obligation
The present value of a defined benefit obligation that is measured by actuarial valuation methods uses various assumptions which can change according to various elements. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income. Other significant assumptions related to defined benefit obligations are based on current market situations.
87
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Cash and due from banks as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Cash |
|
2,467,074 |
|
1,658,239 |
Deposits in won: |
|
|
|
|
Reserve deposits |
|
2,094,612 |
|
8,503,968 |
Others |
|
620,663 |
|
1,841,884 |
|
|
2,715,275 |
|
10,345,852 |
Deposits in foreign currencies: |
|
|
|
|
Deposits |
|
2,884,812 |
|
2,232,467 |
Time deposits |
|
1,308,401 |
|
367,857 |
Others |
|
37,625 |
|
111,171 |
|
|
4,230,838 |
|
2,711,495 |
Allowance for impairment |
|
(7,348) |
|
(3,080) |
|
|
9,405,839 |
|
14,712,506 |
(b) Restricted due from banks as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Deposits in won: |
|
|
|
|
Reserve deposits |
|
2,094,612 |
|
8,503,968 |
Others |
|
620,308 |
|
1,841,602 |
|
|
2,714,920 |
|
10,345,570 |
Deposits in foreign currencies: |
|
|
|
|
Deposits |
|
921,268 |
|
665,589 |
Time deposits |
|
22,362 |
|
21,428 |
Others |
|
6,282 |
|
4,031 |
|
|
949,912 |
|
691,048 |
|
|
3,664,832 |
|
11,036,618 |
88
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Securities at FVTPL as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Debt securities: |
|
|
|
|
Government bonds |
|
292,556 |
|
227,885 |
Financial institution bonds |
|
920,163 |
|
741,484 |
Corporate bonds |
|
510,926 |
|
242,780 |
Bills bought |
|
4,788,877 |
|
3,164,088 |
CMA |
|
3,154,456 |
|
3,965,343 |
Beneficiary certificates |
|
2,436,152 |
|
- |
Others |
|
504,547 |
|
- |
|
|
12,607,677 |
|
8,341,580 |
Equity securities: |
|
|
|
|
Stocks |
|
48,708 |
|
192 |
Beneficiary certificates |
|
- |
|
303,802 |
|
|
48,708 |
|
303,994 |
Other: |
|
|
|
|
Gold/silver deposits |
|
154,881 |
|
189,297 |
|
|
12,811,266 |
|
8,834,871 |
89
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) The notional amounts of derivatives as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Foreign currency related |
|
|
|
|
Over the counter: |
|
|
|
|
Currency forwards |
|
125,826,485 |
|
86,704,681 |
Currency swaps |
|
31,103,735 |
|
29,689,979 |
Currency options |
|
1,942,878 |
|
1,156,619 |
|
|
158,873,098 |
|
117,551,279 |
Exchange traded: |
|
|
|
|
Currency futures |
|
33,543 |
|
48,213 |
|
|
158,906,641 |
|
117,599,492 |
Interest rates related |
|
|
|
|
Over the counter: |
|
|
|
|
Interest rate swaps |
|
30,793,177 |
|
28,205,968 |
|
|
30,793,177 |
|
28,205,968 |
Exchange traded: |
|
|
|
|
Interest rate futures |
|
294,777 |
|
400,159 |
Interest rate swaps (*1) |
|
35,183,073 |
|
30,158,662 |
|
|
35,477,850 |
|
30,558,821 |
|
|
66,271,027 |
|
58,764,789 |
Equity related |
|
|
|
|
Over the counter: |
|
|
|
|
Equity options |
|
344,550 |
|
426,915 |
|
|
344,550 |
|
426,915 |
Exchange traded: |
|
|
|
|
Equity futures |
|
29,514 |
|
5,871 |
Equity options |
|
52,063 |
|
27,815 |
|
|
81,577 |
|
33,686 |
|
|
426,127 |
|
460,601 |
Commodity related |
|
|
|
|
Over the counter: |
|
|
|
|
Commodity forwards |
|
157,416 |
|
128,955 |
|
|
157,416 |
|
128,955 |
Hedge |
|
|
|
|
Fair value hedge: |
|
|
|
|
Interest rate swaps |
|
9,377,731 |
|
7,948,422 |
|
|
235,138,942 |
|
184,902,259 |
(*1) The notional amount of derivatives which is settled in the ‘Central Counter Party (“CCP”)’ system.
90
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Fair values of derivative instruments as of December 31, 2018 and 2017 were as follows:
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
|||||
|
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
|
Foreign currency related |
|
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
|
Currency forwards |
|
852,352 |
|
781,096 |
|
1,599,006 |
|
1,429,251 |
|
Currency swaps |
|
394,428 |
|
373,512 |
|
830,658 |
|
864,623 |
|
Currency options |
|
7,651 |
|
12,273 |
|
11,601 |
|
12,070 |
|
|
|
1,254,431 |
|
1,166,881 |
|
2,441,265 |
|
2,305,944 |
|
Interest rates related |
|
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
196,853 |
|
135,589 |
|
147,857 |
|
170,466 |
|
|
|
196,853 |
|
135,589 |
|
147,857 |
|
170,466 |
|
Equity related |
|
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
|
Equity options |
|
145 |
|
509 |
|
4,444 |
|
1,545 |
|
|
|
145 |
|
509 |
|
4,444 |
|
1,545 |
|
Exchange traded: |
|
|
|
|
|
|
|
|
|
Equity options |
|
- |
|
953 |
|
33 |
|
55 |
|
|
|
145 |
|
1,462 |
|
4,477 |
|
1,600 |
|
Commodity related |
|
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
|
Commodity forwards |
|
2,026 |
|
- |
|
657 |
|
- |
|
Hedge |
|
|
|
|
|
|
|
|
|
Fair value hedge: |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
35,093 |
|
467,381 |
|
8,433 |
|
518,948 |
|
|
|
1,488,548 |
|
1,771,313 |
|
2,602,689 |
|
2,996,958 |
91
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Gain or loss on valuation of derivatives for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
||||
|
|
Gain |
|
Loss |
|
Gain |
|
Loss |
Foreign currency related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Currency forwards |
|
883,491 |
|
816,241 |
|
1,569,840 |
|
1,577,284 |
Currency swaps |
|
454,604 |
|
490,414 |
|
1,289,012 |
|
1,214,965 |
Currency options |
|
10,999 |
|
2,760 |
|
12,574 |
|
6,906 |
|
|
1,349,094 |
|
1,309,415 |
|
2,871,426 |
|
2,799,155 |
Interest rates related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
151,442 |
|
62,413 |
|
123,110 |
|
145,662 |
|
|
151,442 |
|
62,413 |
|
123,110 |
|
145,662 |
Equity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Equity options |
|
6,234 |
|
4,056 |
|
2,026 |
|
1,426 |
|
|
6,234 |
|
4,056 |
|
2,026 |
|
1,426 |
Exchange traded: |
|
|
|
|
|
|
|
|
Equity options |
|
24 |
|
152 |
|
65 |
|
5 |
|
|
6,258 |
|
4,208 |
|
2,091 |
|
1,431 |
Commodity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Commodity forwards |
|
2,026 |
|
- |
|
657 |
|
- |
|
|
2,026 |
|
- |
|
657 |
|
- |
Hedge |
|
|
|
|
|
|
|
|
Fair value hedge: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
142,154 |
|
86,909 |
|
38,958 |
|
246,661 |
|
|
1,650,974 |
|
1,462,945 |
|
3,036,242 |
|
3,192,909 |
92
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Hedge accounting
i) Purpose of risk hedge and strategy
The Bank transacts with derivative financial instruments to hedge its interest rate risk and currency risk arising from the assets and liabilities of the Bank. The Bank applies fair value hedge accounting that uses interest rate swaps to hedge fair value movements risk arising from changes in the market interest rates of the Korean won structured notes, foreign currency issued financial debentures, structured deposits in foreign currencies, foreign currency structured deposits and foreign currency investment receivables. In order to hedge the foreign exchange risk of the net investment from the overseas, the Bank applies the net investment hedge accounting for foreign operations using non-derivative financial instruments.
ii) Nominal amounts and average hedge ratios for hedging instruments as of December 31, 2018 were as follows:
|
|
1 year or less |
|
1 year ~ 2 years or less |
|
2 years ~ 3 years or less |
|
3 years ~ 4 years or less |
|
4 years ~ 5 years or less |
|
More than 5 years |
|
Total |
||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Interest rate swaps |
|
110,000 |
|
687,632 |
|
723,177 |
|
657,254 |
|
715,584 |
|
6,484,084 |
|
9,377,731 |
||
Average hedge ratio |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Debt securities issued in foreign currencies |
|
- |
|
- |
|
31,512 |
|
145,353 |
|
159,888 |
|
- |
|
336,753 |
||
Average hedge ratio |
|
- |
|
- |
|
100% |
|
100% |
|
100% |
|
- |
|
100% |
|
(e) Impact of hedge accounting on the separate financial statements
i) Impact on hedging instruments in the separate statement of financial position as of December 31, 2018 and separate statement of comprehensive income and changes in equity for the year then ended was as follows:
|
Notional amounts |
|
Separate statement of financial position |
|
|
Separate statement of comprehensive income |
||||||||||
|
Derivative assets |
|
Derivative liabilities |
|
Debt securities issued |
|
|
Net other operating expenses |
|
Other comprehensive income (loss) for the year |
|
Changes in fair value for the year |
||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk |
Interest rate swaps |
|
9,377,731 |
|
35,093 |
|
467,381 |
|
- |
|
|
79,635 |
|
- |
|
55,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange risk |
Borrowings in foreign currencies |
|
- |
|
- |
|
- |
|
- |
|
|
- |
|
260 |
|
260 |
Debt securities issued in foreign currencies |
|
336,754 |
|
- |
|
- |
|
334,301 |
|
|
- |
|
(2,893) |
|
(2,893) |
|
|
|
9,714,485 |
|
35,093 |
|
467,381 |
|
334,301 |
|
|
79,635 |
|
(2,633) |
|
52,612 |
93
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
8. |
Derivatives (continued) |
|
(e) Impact of hedge accounting on the separate financial statements (continued)
ii) Impact on hedged items in the separate statement of financial position as of December 31, 2018 and separate statement of comprehensive income and separate statement of changes in equity for the year then ended was as follows:
|
|
Hedging instruments |
|
Separate statement of financial position |
|
Separate statement of comprehensive income |
|
Changes in fair value for the year |
|
Reserve of exchange differences on translation |
||||||
Securities at FVOCI |
|
Deposits |
|
Debt securities issued |
Other comprehensive income for the year |
|
Net other operating expenses |
|||||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk |
|
Debt securities issued |
|
- |
|
- |
|
7,058,950 |
|
(357,232) |
|
- |
|
(47,772) |
|
- |
|
Investment bonds |
|
293,215 |
|
- |
|
- |
|
(2,832) |
|
- |
|
800 |
|
- |
|
|
Time deposits |
|
- |
|
1,814,109 |
|
- |
|
(167,226) |
|
- |
|
(9,490) |
|
- |
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange risk |
|
Net investments in foreign operations |
|
- |
|
- |
|
- |
|
- |
|
2,633 |
|
(2,633) |
|
1,117 |
|
|
|
|
293,215 |
|
1,814,109 |
|
7,058,950 |
|
(527,290) |
|
2,633 |
|
(59,095) |
|
1,117 |
iii) Gains (losses) on fair value hedged items and hedging instruments attributable to the hedged risk for the year ended December 31, 2018 were as follows:
|
|
Gains on fair value hedges (hedged items) |
|
Losses on fair value hedges (hedging instruments) |
|
Hedge ineffectiveness recognized in profit or loss (*1) |
Fair value hedges: |
|
|
|
|
|
|
Interest rate swaps |
|
(76,573) |
|
79,635 |
|
3,062 |
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
Foreign exchange risk |
|
2,633 |
|
(2,633) |
|
- |
|
|
(73,940) |
|
77,002 |
|
3,062 |
(*1) Recognized hedge ineffectiveness is included in other operating income and expenses in the separate statement of comprehensive income.
94
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Details of loans as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||
|
|
Loans at amortized cost |
|
Loans at FVOCI |
Household loans |
|
106,401,688 |
|
- |
Corporate loans |
|
121,277,311 |
|
645,237 |
Public and other loans |
|
2,729,075 |
|
- |
Loans to banks |
|
3,831,158 |
|
- |
|
|
234,239,232 |
|
645,237 |
Deferred loan origination costs and fees |
|
497,515 |
|
- |
|
|
234,736,747 |
|
645,237 |
Less: Allowance for impairment |
|
(1,490,471) |
|
- |
|
|
233,246,276 |
|
645,237 |
|
|
December 31, 2017 |
Household loans |
|
98,890,625 |
Corporate loans |
|
112,981,422 |
Public and other loans |
|
2,203,307 |
Loans to banks |
|
3,805,922 |
|
|
217,881,276 |
Deferred loan origination costs and fees |
|
427,487 |
|
|
218,308,763 |
Less: Allowance for impairment |
|
(1,323,416) |
|
|
216,985,347 |
95
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value
i) Changes in allowance for impairment for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||||||||||||||||||||||
|
|
Due from banks |
|
Loans |
|
Other assets |
|
Total |
||||||||||||||||||||||||
|
|
|
Household |
|
Corporate |
|
Others |
|
||||||||||||||||||||||||
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
|||
Beginning balance (*1) |
|
2,931 |
|
149 |
|
- |
|
52,295 |
|
117,521 |
|
133,341 |
|
354,661 |
|
498,650 |
|
512,364 |
|
10,097 |
|
2,709 |
|
3,893 |
|
21,997 |
|
2,157 |
|
1,020 |
|
1,713,785 |
Transfer to 12 month expected credit losses |
|
110 |
|
(110) |
|
- |
|
44,603 |
|
(44,247) |
|
(356) |
|
40,943 |
|
(40,793) |
|
(150) |
|
433 |
|
(433) |
|
- |
|
242 |
|
(242) |
|
- |
|
- |
Transfer to lifetime expected credit losses |
|
(5) |
|
5 |
|
- |
|
(5,289) |
|
10,822 |
|
(5,533) |
|
(33,368) |
|
67,178 |
|
(33,810) |
|
(221) |
|
221 |
|
- |
|
(106) |
|
116 |
|
(10) |
|
- |
Transfer to credit- impaired financial assets |
|
- |
|
- |
|
- |
|
(97) |
|
(2,110) |
|
2,207 |
|
(574) |
|
(9,440) |
|
10,014 |
|
(5) |
|
(140) |
|
145 |
|
(3) |
|
(69) |
|
72 |
|
- |
Provision for (reversal of) allowance |
|
3,934 |
|
197 |
|
- |
|
(12,831) |
|
(4,413) |
|
149,003 |
|
(67,597) |
|
(54,660) |
|
202,444 |
|
(511) |
|
8,058 |
|
10,798 |
|
(2,083) |
|
44 |
|
1,800 |
|
234,183 |
Write-offs |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(200,024) |
|
- |
|
- |
|
(264,334) |
|
- |
|
- |
|
(2,567) |
|
- |
|
- |
|
(65) |
|
(466,990) |
Effect of discounting |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(15,086) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(15,086) |
Allowance related to loans transferred |
|
- |
|
- |
|
- |
|
- |
|
(17) |
|
(2,216) |
|
- |
|
(357) |
|
(52,094) |
|
- |
|
- |
|
(2,454) |
|
- |
|
(7) |
|
(2,736) |
|
(59,881) |
Recoveries |
|
- |
|
- |
|
- |
|
- |
|
- |
|
47,813 |
|
- |
|
- |
|
61,832 |
|
- |
|
- |
|
91 |
|
- |
|
- |
|
547 |
|
110,283 |
Others (*2) |
|
134 |
|
3 |
|
- |
|
(9) |
|
- |
|
- |
|
1,174 |
|
5,007 |
|
(2,174) |
|
63 |
|
1 |
|
- |
|
2,346 |
|
- |
|
- |
|
6,545 |
Ending balance |
|
7,104 |
|
244 |
|
- |
|
78,672 |
|
77,556 |
|
124,235 |
|
295,239 |
|
465,585 |
|
419,006 |
|
9,856 |
|
10,416 |
|
9,906 |
|
22,393 |
|
1,999 |
|
628 |
|
1,522,839 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
(*2) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
96
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value (continued)
i) Changes in allowance for impairment for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
December 31, 2017 |
||||||||||
|
|
Due from banks |
|
Loans |
|
Other assets |
|
Total |
||||
Household |
|
Corporate |
|
Others |
||||||||
Beginning balance |
|
1,311 |
|
254,408 |
|
996,410 |
|
13,144 |
|
25,360 |
|
1,290,633 |
Provision for (reversal of) allowance |
|
1,769 |
|
131,810 |
|
346,885 |
|
2,617 |
|
(951) |
|
482,130 |
Write-offs |
|
- |
|
(126,679) |
|
(242,739) |
|
(565) |
|
(388) |
|
(370,371) |
Effect of discounting |
|
- |
|
- |
|
(17,483) |
|
- |
|
- |
|
(17,483) |
Allowance related to loans transferred |
|
- |
|
(2,042) |
|
(58,132) |
|
(402) |
|
- |
|
(60,576) |
Recoveries |
|
- |
|
39,624 |
|
67,953 |
|
35 |
|
493 |
|
108,105 |
Others (*1) |
|
- |
|
- |
|
(81,428) |
|
- |
|
(321) |
|
(81,749) |
Ending balance |
|
3,080 |
|
297,121 |
|
1,011,466 |
|
14,829 |
|
24,193 |
|
1,350,689 |
(*1) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
97
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value (continued)
ii) Changes in book value of due from banks, loans and other assets for the year ended December 31, 2018 were as follows:
|
|
December 31, 2018 |
||||||||||||||||||||||||||||||
|
|
Due from banks |
|
Loans |
|
Other assets |
|
Total |
||||||||||||||||||||||||
|
|
|
Household |
|
Corporate |
|
Others |
|
||||||||||||||||||||||||
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
|||
Beginning balance |
|
13,052,184 |
|
5,164 |
|
- |
|
91,474,258 |
|
7,162,513 |
|
253,854 |
|
96,203,951 |
|
15,292,928 |
|
878,750 |
|
5,550,172 |
|
445,996 |
|
13,061 |
|
8,738,983 |
|
47,929 |
|
1,595 |
|
239,121,338 |
Transfer to 12 month expected credit losses |
|
4,383 |
|
(4,383) |
|
- |
|
3,344,013 |
|
(3,340,423) |
|
(3,590) |
|
3,138,166 |
|
(3,137,672) |
|
(494) |
|
71,267 |
|
(71,267) |
|
- |
|
13,507 |
|
(13,506) |
|
(1) |
|
- |
Transfer to lifetime expected credit losses |
|
(1,842) |
|
1,842 |
|
- |
|
(4,816,122) |
|
4,831,162 |
|
(15,040) |
|
(13,171,352) |
|
13,207,301 |
|
(35,949) |
|
(364,544) |
|
364,544 |
|
- |
|
(45,197) |
|
45,208 |
|
(11) |
|
- |
Transfer to credit-impaired financial assets |
|
- |
|
- |
|
- |
|
(479,083) |
|
(26,689) |
|
505,772 |
|
(1,311,451) |
|
(34,445) |
|
1,345,896 |
|
(23,964) |
|
(8,557) |
|
32,521 |
|
(15,102) |
|
(239) |
|
15,341 |
|
- |
Origination |
|
2,621,692 |
|
- |
|
- |
|
33,386,195 |
|
- |
|
- |
|
61,924,062 |
|
- |
|
- |
|
4,101,145 |
|
- |
|
- |
|
10,754,991 |
|
- |
|
- |
|
112,788,085 |
Recoveries |
|
(8,818,037) |
|
(591) |
|
- |
|
(23,397,185) |
|
(2,007,789) |
|
(193,118) |
|
(45,106,896) |
|
(6,891,737) |
|
(638,247) |
|
(3,487,809) |
|
(129,933) |
|
(12,868) |
|
(5,540,854) |
|
(29,853) |
|
(889) |
|
(96,255,806) |
Write-offs |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(200,024) |
|
- |
|
- |
|
(264,334) |
|
- |
|
- |
|
(2,567) |
|
- |
|
- |
|
(65) |
|
(466,990) |
Allowance related to loans transferred |
|
- |
|
- |
|
- |
|
- |
|
(3,059) |
|
(72,721) |
|
- |
|
(15,997) |
|
(491,107) |
|
- |
|
- |
|
(14,554) |
|
- |
|
(498) |
|
(14,422) |
|
(612,358) |
Others (*1) |
|
85,673 |
|
28 |
|
- |
|
(1,238) |
|
- |
|
- |
|
347,604 |
|
62,597 |
|
(24,263) |
|
96,151 |
|
1,441 |
|
- |
|
- |
|
- |
|
- |
|
567,993 |
Ending balance |
|
6,944,053 |
|
2,060 |
|
- |
|
99,510,838 |
|
6,615,715 |
|
275,133 |
|
102,024,084 |
|
18,482,975 |
|
770,252 |
|
5,942,418 |
|
602,224 |
|
15,593 |
|
13,906,328 |
|
49,041 |
|
1,548 |
|
255,142,262 |
(*1) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
98
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value (continued)
iii) Changes in allowance for impairment for the year ended December 31, 2017 were as follows: (continued)
|
|
2017 |
||||||||||
|
|
Due from banks |
|
Loans |
|
|
|
|
||||
|
|
|
Household |
|
Corporate |
|
Others |
|
Other assets |
|
Total |
|
Beginning balance |
|
1,311 |
|
254,408 |
|
996,410 |
|
13,144 |
|
25,360 |
|
1,290,633 |
Provision for (reversal of) allowance |
|
1,769 |
|
131,810 |
|
346,885 |
|
2,617 |
|
(951) |
|
482,130 |
Write-offs |
|
- |
|
(126,679) |
|
(242,739) |
|
(565) |
|
(388) |
|
(370,371) |
Effect of discounting |
|
- |
|
- |
|
(17,483) |
|
- |
|
- |
|
(17,483) |
Allowance related to |
|
- |
|
(2,042) |
|
(58,132) |
|
(402) |
|
- |
|
(60,576) |
Recoveries |
|
- |
|
39,624 |
|
67,953 |
|
35 |
|
493 |
|
108,105 |
Others (*1) |
|
- |
|
- |
|
(81,428) |
|
- |
|
(379) |
|
(81,749) |
Ending balance |
|
3,080 |
|
297,121 |
|
1,011,466 |
|
14,829 |
|
24,193 |
|
1,350,689 |
(*1) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
(c) Changes in deferred loan origination costs for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Beginning balance (*1) |
|
427,915 |
|
377,974 |
Loan originations |
|
269,789 |
|
214,994 |
Amortization |
|
(200,189) |
|
(165,481) |
Ending balance |
|
497,515 |
|
427,487 |
(*1) The beginning balance for 2018 was restated in accordance with K-IFRS No.1109.
99
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
10.Securities at fair value through other comprehensive income and Securities at amortized cost
|
(a) |
Details of securities at FVOCI and securities at amortized cost as of December 31, 2018 and available-for-sale financial assets and held-to-maturity financial assets as of December 31, 2017 were as follows: |
|
|
December 31, 2018 |
Securities at FVOCI: |
|
|
Debt securities: |
|
|
Government bonds |
|
7,156,748 |
Financial institutions bonds |
|
14,920,775 |
Corporate bonds |
|
8,215,952 |
|
|
30,293,475 |
Equity securities: |
|
|
Stocks |
|
436,685 |
Equity investments |
|
1,121 |
|
|
437,806 |
|
|
30,731,281 |
Securities at amortized cost: |
|
|
Debt securities: |
|
|
Government bonds |
|
11,426,126 |
Financial institutions bonds |
|
776,808 |
Corporate bonds |
|
4,031,630 |
|
|
16,234,564 |
Allowance for impairment |
|
(3,600) |
|
|
16,230,964 |
100
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
10.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
(a) |
Details of securities at FVOCI and securities at amortized cost as of December 31, 2018 and available-for-sale financial assets and held-to-maturity financial assets as of December 31, 2017 were as follows: (continued) |
|
|
December 31, 2017 |
Available-for-sale financial assets: |
|
|
Debt securities: |
|
|
Government bonds |
|
5,505,989 |
Financial institutions bonds |
|
15,197,997 |
Corporate bonds |
|
7,719,698 |
|
|
28,423,684 |
Equity securities (*1): |
|
|
Stocks |
|
541,071 |
Equity investments |
|
261,531 |
Beneficiary certificates |
|
1,900,111 |
|
|
2,702,713 |
|
|
31,126,397 |
Held-to-maturity financial assets: |
|
|
Debt securities: |
|
|
Government bonds |
|
9,595,227 |
Financial institutions bonds |
|
1,105,280 |
Corporate bonds |
|
3,658,077 |
|
|
14,358,584 |
(*1) Equity securities with no quoted market prices in active markets and of which the fair value cannot be measured reliably was recorded at cost of W23,591 million as of December 31, 2017.
Details of equity instruments designated at FVOCI as of December 31, 2018 were as follows:
|
|
December 31, 2018 |
Marketable securities |
|
135,815 |
Non-marketable securities |
|
300,870 |
Others |
|
1,121 |
|
|
437,806 |
The Bank designated the above equity instruments at FVOCI, in accordance with the Bank’s policy.
Cumulative net losses reclassified in equity upon disposition of equity securities for the year ended December 31, 2018 were W4,399 million.
101
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
10.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
(b) |
Gains and losses on sale of securities at FVOCI for the years ended December 31, 2018 and 2017 were as follows: |
|
|
2018 |
|
2017 |
|
Gain on sale of securities at FVOCI |
|
10,124 |
|
- |
|
Loss on sale of securities at FVOCI |
|
(298) |
|
- |
|
Gain on sale of available-for-sale financial assets |
|
- |
|
199,490 |
|
Loss on sale of available-for-sale financial assets |
|
- |
|
(12,779) |
|
|
|
9,826 |
|
186,711 |
|
The Bank disposed equity instruments that are measured at FVOCI for debt-equity swap. At the time of disposal, fair value of equity instruments and cumulative net losses were W2,379 million and W4,399 million, respectively.
(c) |
There were no gains and losses on sale of securities at amortized cost for year ended December 31, 2018. |
(d) |
Changes in allowance for credit loss of securities at FVOCI and securities at amortized cost |
i) Changes in allowance for credit loss of securities at FVOCI and securities at amortized cost for the year ended December 31, 2018 were as follows:
|
|
Securities at FVOCI |
Securities at amortized cost |
|||||||||||||
|
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
Beginning balance (*1) |
|
7,972 |
|
- |
|
- |
|
7,972 |
|
1,367 |
|
- |
|
- |
|
1,367 |
Transfer to 12-month expected credit losses |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer to lifetime expected credit losses |
|
(161) |
|
161 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer to impaired financial assets |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Provision (reversal) |
|
10,386 |
|
89 |
|
- |
|
10,475 |
|
1,988 |
|
- |
|
- |
|
1,988 |
Disposals |
|
(1,280) |
|
(156) |
|
- |
|
(1,436) |
|
- |
|
- |
|
- |
|
- |
Others (*2) |
|
1,214 |
|
2 |
|
- |
|
1,216 |
|
245 |
|
- |
|
- |
|
245 |
Ending balance |
|
18,131 |
|
96 |
|
- |
|
18,227 |
|
3,600 |
|
- |
|
- |
|
3,600 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
(*2) Other changes were due to foreign exchange rate changes, etc.
The Bank recognized impairment loss on available-for-sale financial assets amounted to W178,228 million for the year ended December 31, 2017.
102
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
10.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
ii) Changes in book value of securities at FVOCI and securities at amortized cost for the year ended December 31, 2018 were as follows:
|
|
Securities at FVOCI |
|
Securities at amortized cost |
||||||||||||
|
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
Beginning balance |
|
28,423,684 |
|
- |
|
- |
|
28,423,684 |
|
14,358,584 |
|
- |
|
- |
|
14,358,584 |
Transfer to 12-month expected credit losses |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer to lifetime expected credit losses |
|
(15,506) |
|
15,506 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer to impaired financial asset |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Acquisitions |
|
23,600,909 |
|
98,778 |
|
- |
|
23,699,687 |
|
3,567,093 |
|
- |
|
- |
|
3,567,093 |
Disposals |
|
(4,575,625) |
|
(8,006) |
|
- |
|
(4,583,631) |
|
- |
|
- |
|
- |
|
- |
Redemption |
|
(18,199,108) |
|
- |
|
- |
|
(18,199,108) |
|
(1,792,087) |
|
- |
|
- |
|
(1,792,087) |
Others (*1) |
|
956,479 |
|
(3,636) |
|
- |
|
952,843 |
|
100,974 |
|
- |
|
- |
|
100,974 |
Ending balance |
|
30,190,833 |
|
102,642 |
|
- |
|
30,293,475 |
|
16,234,564 |
|
- |
|
- |
|
16,234,564 |
|
(*1) Other changes were due to foreign exchange rate changes, etc.
11.Property and equipment
(a) Details of property and equipment as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
1,229,200 |
|
- |
|
1,229,200 |
Buildings (*1) |
|
832,908 |
|
(275,690) |
|
557,218 |
Others |
|
1,235,144 |
|
(1,078,695) |
|
156,449 |
|
|
3,297,252 |
|
(1,354,385) |
|
1,942,867 |
(*1) W494 million of government subsidy was deducted from book value.
|
|
December 31, 2017 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
1,239,966 |
|
- |
|
1,239,966 |
Buildings (*1) |
|
829,035 |
|
(237,002) |
|
592,033 |
Others |
|
1,219,544 |
|
(1,063,106) |
|
156,438 |
|
|
3,288,545 |
|
(1,300,108) |
|
1,988,437 |
(*1) W666 million of government subsidy was deducted from book value.
103
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
11.Property and equipment (continued)
(b) Changes in property and equipment for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||||
|
|
Land |
|
Buildings |
|
Others |
|
Total |
|
Beginning balance |
|
1,239,966 |
|
592,033 |
|
156,438 |
|
1,988,437 |
|
Acquisitions (*1)(*2)(*3) |
|
- |
|
9,637 |
|
70,472 |
|
80,109 |
|
Disposals and write-offs (*4) |
|
(17,262) |
|
(1,744) |
|
(3,018) |
|
(22,024) |
|
Depreciation |
|
- |
|
(40,348) |
|
(67,227) |
|
(107,575) |
|
Amounts transferred from (to) investment property |
|
6,529 |
|
(2,314) |
|
- |
|
4,215 |
|
Amounts transferred to non-current assets held for sale |
|
(33) |
|
(46) |
|
- |
|
(79) |
|
Effects of foreign currency movements |
|
- |
|
- |
|
(217) |
|
(217) |
|
Ending balance |
|
1,229,200 |
|
557,218 |
|
156,449 |
|
1,942,867 |
(*1) W6,319 million transferred from construction-in progress was included.
(*2) W1,810 million of provision for the asset retirement related to newly acquired assets was included.
(*3) W897 million among acquisition cost of others was accounted for as accounts payable.
(*4) W932 million of loss on write-off was included.
|
|
December 31, 2017 |
|||||||
|
|
Land |
|
Buildings |
|
Others |
|
Total |
|
Beginning balance |
|
1,183,352 |
|
618,092 |
|
174,762 |
|
1,976,206 |
|
Acquisitions (*1)(*2) |
|
1,460 |
|
20,951 |
|
56,270 |
|
78,681 |
|
Disposals and write-offs (*3) |
|
(5,487) |
|
(356) |
|
(2,129) |
|
(7,972) |
|
Depreciation |
|
- |
|
(37,741) |
|
(72,552) |
|
(110,293) |
|
Amounts transferred from (to) investment property |
|
62,456 |
|
(5,392) |
|
- |
|
57,064 |
|
Amounts transferred to non-current assets held for sale |
|
(1,815) |
|
(3,521) |
|
- |
|
(5,336) |
|
Effects of foreign currency movements |
|
- |
|
- |
|
87 |
|
87 |
|
Ending balance |
|
1,239,966 |
|
592,033 |
|
156,438 |
|
1,988,437 |
(*1) W14,285 million transferred from construction-in progress was included.
(*2) W1,761 million of provision for the asset retirement related to newly acquired assets was included.
(*3) W831 million of loss on write-off was included.
104
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
11.Property and equipment (continued)
(c) Insured assets and liability insurances as of December 31, 2018 were as follows:
Type of insurance |
|
Insured assets |
|
Amount covered |
|
Insurance company |
Comprehensive insurance for financial institutions |
|
Cash & securities |
|
20,000 |
|
Samsung Fire & Marine Insurance Co., Ltd. |
Property insurance |
|
Real estate & movable properties for business purpose |
|
893.955 |
|
Samsung Fire & Marine Insurance Co., Ltd., etc. |
Burglary insurance |
|
Cash & securities |
|
60,000 |
|
Samsung Fire & Marine Insurance Co., Ltd., etc. |
Compensation liability insurance for officers |
|
- |
|
50,000 |
|
Meritz Fire & Marine Insurance Co., Ltd., etc. |
Compensation liability insurance for gas accident |
|
Real estate |
|
500 |
|
Meritz Fire & Marine Insurance Co., Ltd. |
Compensation liability insurance for personal information protection |
|
- |
|
10,000 |
|
Samsung Fire & Marine Insurance Co., Ltd. |
Compensation liability insurance for electronic financial transaction |
|
- |
|
2,000 |
|
DB Insurance Co., Ltd., etc. |
Compensation liability insurance for casualty |
|
Real estate |
|
1,000 |
|
Samsung Fire & Marine Insurance Co., Ltd. |
|
|
|
|
1,037,455 |
|
|
Besides the insurances listed above, the Bank also has automobile liability insurance, medical insurance for employees, and casualty insurance for protecting property and employees.
105
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Changes in intangible assets for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Software |
|
Development cost |
|
Memberships |
|
Others |
|
Total |
Beginning balance |
|
37,005 |
|
43,417 |
|
45,723 |
|
60,612 |
|
186,757 |
Acquisitions (*1) |
|
32,572 |
|
18,020 |
|
4,284 |
|
35,157 |
|
90,033 |
Disposals |
|
- |
|
- |
|
(2,619) |
|
- |
|
(2,619) |
Amortization (*2) |
|
(21,016) |
|
(14,937) |
|
- |
|
(33,996) |
|
(69,949) |
Effects of foreign currency movements |
|
2 |
|
- |
|
88 |
|
(4) |
|
86 |
Ending balance |
|
48,563 |
|
46,500 |
|
47,476 |
|
61,769 |
|
204,308 |
(*1) W1,047 million among acquisition cost of other intangible assets was accounted for as accounts payable.
(*2) W33,573 million among amortization cost of other intangible assets was included in other operating expenses.
|
|
December 31, 2017 |
||||||||
|
|
Software |
|
Development cost |
|
Memberships |
|
Others |
|
Total |
Beginning balance |
|
50,864 |
|
32,162 |
|
45,558 |
|
63,323 |
|
191,907 |
Acquisitions (*1) |
|
8,364 |
|
22,904 |
|
4,977 |
|
39,726 |
|
75,971 |
Disposals |
|
- |
|
- |
|
(4,788) |
|
(245) |
|
(5,033) |
Amortization (*2) |
|
(22,222) |
|
(11,649) |
|
- |
|
(42,119) |
|
(75,990) |
Effects of foreign currency movements |
|
(1) |
|
- |
|
(24) |
|
(73) |
|
(98) |
Ending balance |
|
37,005 |
|
43,417 |
|
45,723 |
|
60,612 |
|
186,757 |
(*1) W5,061 million among acquisition cost of other intangible assets was accounted for as accounts payable.
(*2) W41,570 million among amortization cost of other intangible assets was included in other operating expenses.
106
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
13.Investments in subsidiaries and associates
(a) Investments in subsidiaries and associates as of December 31, 2018 and 2017 were as follows:
Investees |
|
Location |
|
Industry sector |
Shinhan Asia Ltd. |
|
Hong Kong |
|
Merchant Banking |
Shinhan Bank America |
|
U.S.A |
|
Banking |
Shinhan Bank Europe GmbH |
|
Germany |
|
Banking |
Shinhan Bank Cambodia |
|
Cambodia |
|
Banking |
Shinhan Kazakhstan Bank Limited |
|
Kazakhstan |
|
Banking |
Shinhan Bank Canada |
|
Canada |
|
Banking |
Shinhan Bank China Limited |
|
China |
|
Banking |
Shinhan Bank Japan |
|
Japan |
|
Banking |
Shinhan Bank Vietnam Ltd. |
|
Vietnam |
|
Banking |
Shinhan Bank Mexico |
|
Mexico |
|
Banking |
PT Bank Shinhan Indonesia |
|
Indonesia |
|
Banking |
Shinhan-Daesung Contents Fund |
|
Korea |
|
Other |
BNP Paribas Cardif Life Insurance Co., Ltd. (*1) |
|
Korea |
|
Insurance |
Daewontos Co., Ltd. (*2) |
|
Korea |
|
Other |
Inhee Co., Ltd. |
|
Korea |
|
Wholesale |
Daegy Electrical Construction Co., Ltd. (*2) |
|
Korea |
|
Construction |
YEONWOONG SYSTEM (*2) |
|
Korea |
|
Other |
DOODOO LOGITECH (*2) |
|
Korea |
|
Other |
Neoplux Technology Valuation Investment Fund |
|
Korea |
|
Investment |
JAEYOUNG SOLUTEC CO., LTD. (*3) |
|
Korea |
|
Other |
Partners 4th Growth Investment Fund |
|
Korea |
|
Investment |
KTB Newlake Global Healthcare PEF |
|
Korea |
|
Investment |
Jaeyang Industry (*2) |
|
Korea |
|
Other |
Tigris-Aurum Fund 1 |
|
Korea |
|
Investment |
Chungyoung INC. |
|
Korea |
|
Other |
DAEKWANG SEMICONDUCTOR Co., Ltd. (*2) |
|
Korea |
|
Manufacturing |
Branbuil Co., Ltd. |
|
Korea |
|
Manufacturing |
Songrim Co., Ltd. (*2) |
|
Korea |
|
Wholesale |
Taihan Industrial System Co., Ltd. (*2) |
|
Korea |
|
Wholesale |
Hyungje Art Printing (*2) |
|
Korea |
|
Other |
ICSF (The Korea’s Information Center for Savings & Finance) |
|
Korea |
|
Service |
Shinhan-Albatross Technology Investment Fund |
|
Korea |
|
Investment |
Loggia |
|
Korea |
|
Manufacturing |
Quantum-Nvestor Fund No.1 (*3) |
|
Korea |
|
Finance |
Lodestone 1st Private Equity Fund |
|
Korea |
|
Finance |
Miraeequity-Incus Venture Business Fund No.4 |
|
Korea |
|
Finance |
LB Technology Fund 1 |
|
Korea |
|
Finance |
Shinhan-Neoplux Energy Newbiz Fund |
|
Korea |
|
Finance |
Stassets-DA Value Healthcare Fund I |
|
Korea |
|
Finance |
107
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Ownership percentage and book value of investments in subsidiaries and associates as of December 31, 2018 and 2017 were as follows:
|
|
Ownership (%) |
|
Book value |
||||
Investees |
|
December 31, 2018 |
|
December 31, 2017 |
|
December 31, 2018 |
|
December 31, 2017 |
Shinhan Asia Ltd. |
|
99.99 |
|
99.99 |
|
114,185 |
|
161,293 |
Shinhan Bank America |
|
100.00 |
|
100.00 |
|
193,049 |
|
136,419 |
Shinhan Bank Europe GmbH |
|
100.00 |
|
100.00 |
|
78,606 |
|
78,606 |
Shinhan Bank Cambodia |
|
97.50 |
|
97.50 |
|
84,351 |
|
55,705 |
Shinhan Kazakhstan Bank Limited |
|
100.00 |
|
100.00 |
|
77,913 |
|
77,913 |
Shinhan Bank Canada |
|
100.00 |
|
100.00 |
|
79,695 |
|
79,695 |
Shinhan Bank China Limited |
|
100.00 |
|
100.00 |
|
355,443 |
|
355,443 |
Shinhan Bank Japan |
|
100.00 |
|
100.00 |
|
410,485 |
|
359,745 |
Shinhan Bank Vietnam Ltd. |
|
100.00 |
|
100.00 |
|
330,654 |
|
330,654 |
Shinhan Bank Mexico |
|
99.99 |
|
99.99 |
|
97,467 |
|
97,467 |
PT Bank Shinhan Indonesia |
|
99.00 |
|
99.00 |
|
425,277 |
|
425,277 |
Shinhan-Daesung Contents Fund |
|
71.43 |
|
71.43 |
|
5,000 |
|
3,500 |
BNP Paribas Cardif Life Insurance Co., Ltd. (*1) |
|
14.99 |
|
14.99 |
|
42,204 |
|
42,203 |
Daewontos Co., Ltd. (*2) |
|
36.33 |
|
36.33 |
|
- |
|
- |
Inhee Co., Ltd. |
|
- |
|
15.36 |
|
- |
|
- |
Daegy Electrical Construction Co., Ltd. (*2) |
|
27.45 |
|
27.45 |
|
- |
|
- |
YEONWOONG SYSTEM (*2) |
|
21.77 |
|
21.77 |
|
- |
|
- |
DOODOO LOGITECH (*2) |
|
27.96 |
|
27.96 |
|
- |
|
- |
Neoplux Technology Valuation Investment Fund |
|
33.33 |
|
33.33 |
|
19,068 |
|
13,068 |
JAEYOUNG SOLUTEC CO., LTD. (*3) |
|
- |
|
9.61 |
|
- |
|
2,014 |
Partners 4th Growth Investment Fund |
|
25.00 |
|
25.00 |
|
16,697 |
|
14,100 |
KTB Newlake Global Healthcare PEF |
|
20.00 |
|
20.00 |
|
7,036 |
|
2,056 |
Jaeyang Industry (*2) |
|
25.90 |
|
25.90 |
|
- |
|
- |
Tigris-Aurum Fund 1 |
|
27.27 |
|
27.27 |
|
1,500 |
|
1,500 |
Chungyoung INC. |
|
- |
|
18.94 |
|
- |
|
- |
DAEKWANG SEMICONDUCTOR Co., Ltd. (*2) |
|
20.94 |
|
20.94 |
|
- |
|
- |
Branbuil Co., Ltd. |
|
- |
|
15.53 |
|
- |
|
- |
Songrim Co., Ltd. (*2) |
|
35.34 |
|
35.34 |
|
- |
|
- |
Taihan Industrial System Co., Ltd. (*2) |
|
28.29 |
|
28.29 |
|
- |
|
- |
Hyungje Art Printing (*2) |
|
31.54 |
|
- |
|
- |
|
- |
ICSF (The Korea’s Information Center for Savings & Finance) |
|
32.26 |
|
32.26 |
|
156 |
|
156 |
Shinhan-Albatross Technology Investment Fund |
|
33.33 |
|
33.33 |
|
6,000 |
|
2,000 |
Loggia |
|
- |
|
16.29 |
|
- |
|
- |
Quantum-Nvestor Fund No.1 (*3) |
|
- |
|
16.67 |
|
- |
|
1,000 |
Lodestone 1st Private Equity Fund |
|
- |
|
17.38 |
|
- |
|
2,000 |
Miraeequity-Incus Venture Business Fund No.4 |
|
23.53 |
|
23.53 |
|
2,000 |
|
2,000 |
LB Technology Fund 1 |
|
- |
|
18.52 |
|
- |
|
1,000 |
Shinhan-Neoplux Energy Newbiz Fund |
|
23.33 |
|
23.33 |
|
4,200 |
|
1,400 |
Stassets-DA Value Healthcare Fund I (*4) |
|
24.10 |
|
- |
|
1,000 |
|
- |
|
|
|
|
|
|
2,351,986 |
|
2,246,214 |
108
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Ownership percentage and book value of investments in subsidiaries and associates as of December 31, 2018 and 2017 were as follows: (continued)
(*1) Although the ownership interest in BNP Paribas Cardif Life Insurance Co., Ltd. was less than 15%, the Bank used the equity method accounting as the Bank has significant influence over the investee through significant operating transactions.
(*2) The shares of the investees were acquired by debt-equity swap. The Bank reclassified available-for-sale financial assets to investments in associates as the reorganization procedures were completed and now the Bank can normally exercise its voting rights to the investees.
(*3) |
These investees were sold and excluded from associates during the year ended December 31, 2018. |
(*4) The Bank newly acquired the associates during the year ended December 31, 2018.
14. |
Investment properties |
|
(a) |
Investment properties as of December 31, 2018 and 2017 were as follows: |
|
|
December 31, 2018 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
417,994 |
|
- |
|
417,994 |
Buildings |
|
222,549 |
|
(69,413) |
|
153,136 |
|
|
640,543 |
|
(69,413) |
|
571,130 |
|
|
|
|
|
|
|
|
|
December 31, 2017 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
435,722 |
|
- |
|
435,722 |
Buildings |
|
222,914 |
|
(60,511) |
|
162,403 |
|
|
658,636 |
|
(60,511) |
|
598,125 |
(b) Fair value of investment properties as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Investment properties (*1) |
|
605,107 |
|
686,811 |
(*1) Fair value of investment properties is estimated based on the recent market transactions and certain significant unobservable inputs. Accordingly fair value of investment properties is classified as level 3.
(c) Income and expenses on investment properties for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Rental income |
|
27,545 |
|
25,156 |
Direct operating expenses for investment properties that generate rental income |
|
5,736 |
|
5,600 |
109
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Other assets as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Unsettled trades and accounts receivable |
|
5,735,317 |
|
3,944,994 |
Domestic exchange settlement receivables |
|
5,992,383 |
|
2,871,934 |
Guarantee deposits |
|
1,008,256 |
|
1,010,267 |
Accrued income |
|
1,183,220 |
|
941,393 |
Prepaid expense |
|
82,904 |
|
74,048 |
Suspense payments |
|
53,604 |
|
43,975 |
Sundry assets |
|
74,028 |
|
72,246 |
Others |
|
2,771 |
|
2,019 |
Present value discount |
|
(38,157) |
|
(44,116) |
Allowance for impairment |
|
(25,020) |
|
(24,193) |
|
|
14,069,306 |
|
8,892,567 |
16. |
Non-current assets held for sale |
|
(a) Non-current assets held for sale as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Property and equipment |
|
79 |
|
4,498 |
The Bank classified property and equipment which are highly expected to be sold within one year from December 31, 2018, as non-current assets held for sale.
(b) The cumulative income or loss recognized in other comprehensive income
There were no cumulative income or loss recognized in other comprehensive income relating to non-current assets held for sale as of December 31, 2018 and 2017.
110
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Assets pledged as collateral as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Securities (*1): |
|
|
|
|
Securities at FVOCI |
|
409,913 |
|
- |
Securities at amortized cost |
|
10,680,863 |
|
- |
Available-for-sale financial assets |
|
- |
|
517,042 |
Held-to-maturity financial assets |
|
- |
|
10,496,418 |
|
|
11,090,776 |
|
11,013,460 |
Property and equipment (*2) |
|
5,784 |
|
5,592 |
|
|
11,096,560 |
|
11,019,052 |
(*1) The carrying amounts of assets pledged as collateral that the transferees had the right to sell or repledge regardless of the Bank’s default as of December 31, 2018 and 2017 were W649,663 million and W832,554 million, respectively.
(*2) The amounts were based on the notification amount of pledge
(b) The fair value of collateral held that the Bank has the right to sell or repledge regardless of pledger’s default as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Collateral held |
|
Collateral sold or repledged |
|
Collateral held |
|
Collateral sold or repledged |
Securities |
|
5,190,387 |
|
- |
|
3,749,516 |
|
- |
18. |
Financial liabilities designated at fair value through profit or loss |
|
(a) There were no financial liabilities designated at FVTPL as of December 31, 2018 and 2017.
(b) There was no net gain or loss on financial liabilities designated at FVTPL for the year ended December 31, 2018. Net losses on financial liabilities designated at FVTPL for the year ended December 31, 2017 were as follows:
|
|
|
|
|
2017 |
Deposits: |
|
|
Loss on transaction |
|
(43) |
111
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Deposits as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Demand deposits: |
|
|
|
|
Korean won |
|
92,950,163 |
|
89,461,654 |
Foreign currencies |
|
7,309,572 |
|
8,046,131 |
|
|
100,259,735 |
|
97,507,785 |
Time deposits: |
|
|
|
|
Korean won |
|
115,517,599 |
|
108,034,413 |
Foreign currencies |
|
5,044,918 |
|
3,993,733 |
Gain on fair value hedge |
|
(167,226) |
|
(179,053) |
|
|
120,395,291 |
|
111,849,093 |
Negotiable certificates of deposits |
|
8,602,552 |
|
6,973,204 |
Note discount deposits |
|
4,087,529 |
|
3,423,459 |
CMA |
|
4,084,709 |
|
4,197,146 |
Others |
|
21,963 |
|
24,350 |
|
|
237,451,779 |
|
223,975,037 |
21. |
Financial liabilities at fair value through profit or loss |
|
(a) Financial liabilities at FVTPL as of December 31, 2018 and trading liabilities as of December 31, 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Interest rate (%) |
|
Amount |
|
Interest rate (%) |
|
Amount |
Securities sold |
|
2.75 |
|
20,625 |
|
- |
|
- |
Gold/silver deposits |
|
- |
|
458,934 |
|
- |
|
434,586 |
|
|
|
|
479,559 |
|
|
|
434,586 |
(b) Net gain (loss) on financial liabilities at FVTPL for the year ended December 31, 2018 and net gain (loss) on trading liabilities for the year ended December 31, 2017 were as follows:
|
|
2018 |
|
2017 |
Securities sold: |
|
|
|
|
Gain on sale |
|
231 |
|
691 |
Loss on sale |
|
(384) |
|
(1,277) |
Gain on valuation |
|
27 |
|
- |
Loss on valuation |
|
(28) |
|
- |
|
|
(154) |
|
(586) |
Gold/silver deposits: |
|
|
|
|
Gain on sale |
|
1,611 |
|
2,834 |
Loss on sale |
|
(217) |
|
(395) |
Gain on valuation |
|
293 |
|
436 |
Loss on valuation |
|
(15,185) |
|
(176) |
|
|
(13,498) |
|
2,699 |
|
|
(13,652) |
|
2,113 |
112
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Borrowings as of December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
|
December 31, 2017 |
||||||
|
Interest rate (%) |
|
Amount |
|
Interest rate (%) |
|
Amount |
||
Call money: |
|
|
|
|
|
|
|
||
Korean won |
1.73 |
|
120,000 |
|
0.00 |
|
- |
||
Foreign currencies |
0.00~6.85 |
|
711,593 |
|
0.00~6.20 |
|
433,281 |
||
|
|
|
831,593 |
|
|
|
433,281 |
||
Bill sold |
0.75~1.70 |
|
14,536 |
|
0.65~1.63 |
|
13,605 |
||
Bonds sold under repurchase agreements: |
|
|
|
|
|
|
|
||
Korean won |
1.82 |
|
1,027 |
|
0.00 |
|
903 |
||
Foreign currencies |
2.63~6.50 |
|
45,289 |
|
1.69~6.00 |
|
224,362 |
||
|
|
|
46,316 |
|
|
|
225,265 |
||
Borrowings in Korean won: |
|
|
|
|
|
|
|
||
Borrowings from Bank of Korea |
0.50~0.75 |
|
2,288,991 |
|
0.50~0.75 |
|
2,873,706 |
||
Others |
0.00~4.25 |
|
6,523,743 |
|
0.00~4.25 |
|
5,730,527 |
||
|
|
|
8,812,734 |
|
|
|
8,604,233 |
||
Borrowings in foreign currencies: |
|
|
|
|
|
|
|
||
Overdraft due to banks |
0.00 |
|
77,543 |
|
0.00 |
|
128,809 |
||
Borrowings from banks |
0.00~9.20 |
|
4,318,752 |
|
0.24~9.25 |
|
3,650,498 |
||
Sub-lease |
0.00~3.34 |
|
84,017 |
|
0.00~2.15 |
|
240,380 |
||
Others |
2.60~3.18 |
|
1,692,656 |
|
1.45~1.70 |
|
1,175,649 |
||
|
|
|
6,172,968 |
|
|
|
5,195,336 |
||
Deferred origination fees |
|
|
(1,705) |
|
|
|
- |
||
|
|
|
15,876,442 |
|
|
|
14,471,720 |
113
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Debt securities issued as of December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
Interest |
|
Amount |
|
Interest |
|
Amount |
Debt securities issued in Korean won: |
|
|
|
|
|
|
|
Debt securities issued |
0.00~8.00 |
|
20,820,890 |
|
0.00~8.00 |
|
17,330,890 |
Subordinated debt securities issued |
2.20~4.60 |
|
3,200,145 |
|
2.20~4.60 |
|
3,000,400 |
Gain on fair value hedges |
|
|
(206,985) |
|
|
|
(274,046) |
Discount on debt securities issued |
|
|
(62,944) |
|
|
|
(29,698) |
|
|
|
23,751,106 |
|
|
|
20,027,546 |
Debt securities issued in foreign currencies: Currency: |
|
|
|
|
|
|
|
Debt securities issued |
0.02~4.01 |
|
3,356,032 |
|
0.00~4.20 |
|
2,504,859 |
Subordinated debt securities issued |
3.75~5.00 |
|
2,271,799 |
|
3.75~3.88 |
|
1,446,390 |
Gain on fair value hedges |
|
|
(55,251) |
|
|
|
(25,795) |
Discount on debt securities issued |
|
|
(29,102) |
|
|
|
(23,277) |
|
|
|
5,543,478 |
|
|
|
3,902,177 |
|
|
|
29,294,584 |
|
|
|
23,929,723 |
114
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
|
|
(a) Defined benefit plan assets and liabilities
The Bank provides a defined benefit plan for qualified employees. Plan assets are managed by trust companies, funds, and other similar companies that are subject to local regulations and each country’s business environment.
Defined benefit plan assets and liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Present value of defined benefit obligations |
|
1,364,974 |
|
1,259,893 |
Fair value of plan assets |
|
(1,299,502) |
|
(1,294,013) |
Defined benefit liabilities (assets) |
|
65,472 |
|
(34,120) |
(b) Changes in the present value of defined benefit obligations for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Beginning balance |
|
1,259,893 |
|
1,255,783 |
Current service cost |
|
103,098 |
|
126,388 |
Interest expense |
|
43,859 |
|
40,456 |
Remeasurements (*1)(*2) |
|
65,436 |
|
(106,119) |
Benefits paid by the plan |
|
(106,995) |
|
(64,787) |
Others |
|
(317) |
|
5,362 |
Past service cost |
|
- |
|
2,810 |
Ending balance |
|
1,364,974 |
|
1,259,893 |
(*1) Remeasurements for the years ended December 31, 2018 consist of W18,380 million of actuarial loss arising from changes in demographic assumptions, W54,875 million of actuarial loss arising from changes in financial assumptions and W7,819 million of actuarial gain arising from changes in experience adjustments, respectively.
(*2) Remeasurements for the years ended December 31, 2017 consist of W4,929 million of actuarial loss arising from changes in demographic assumptions, W77,881 million of actuarial gain arising from changes in financial assumptions and W33,167 million of actuarial gain arising from changes in experience adjustments, respectively.
(c) Changes in the fair value of plan assets for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Beginning balance |
|
1,294,013 |
|
1,208,370 |
Interest income |
|
50,725 |
|
41,085 |
Remeasurements |
|
(31,570) |
|
(21,188) |
Contributions paid into the plan |
|
92,000 |
|
120,000 |
Benefits paid by the plan |
|
(105,666) |
|
(54,254) |
Ending balance |
|
1,299,502 |
|
1,294,013 |
115
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) The amount of major categories of the fair value of plan assets as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Deposits |
|
1,281,069 |
|
1,275,313 |
Others |
|
18,433 |
|
18,700 |
|
|
1,299,502 |
|
1,294,013 |
(e) Actuarial assumptions as of December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
|
December 31, 2017 |
|
Descriptions |
Discount rate |
3.18% |
|
3.92% |
|
AA0 Corporate bond yields |
Future salary increasing rate |
2.33% + Upgrade rate |
|
2.63% + Upgrade rate |
|
Average for 5 years |
(f) Sensitivity analysis
Sensitivity analysis of the present value of defined benefit obligation as of December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
|||
|
|
Change in present value when the factor rises by 100 basis points |
|
Change in present value when the factor falls by 100 basis points |
Discount rate |
|
(121,458) |
|
140,202 |
Future salary increasing rate |
|
137,397 |
|
(120,101) |
|
December 31, 2017 |
|||
|
|
Change in present value when the factor rises by 100 basis points |
|
Change in present value when the factor falls by 100 basis points |
Discount rate |
|
(109,226) |
|
125,770 |
Future salary increasing rate |
|
126,331 |
|
(111,638) |
(g) The maturity analysis of undiscounted retirement benefit payments as of the end of the current term is as follows
|
|
1 year or less |
|
1 year~ 2 years or less |
|
2 years~ 5 years or less |
|
5 years~ 10 years or less |
|
More than 5 years |
|
Total |
Salary payment amount |
|
58,231 |
|
80,625 |
|
277,853 |
|
395,171 |
|
1,087,326 |
|
1,899,206 |
(h) The weighted-average duration of defined benefit obligations applied as of December 31, 2018 and 2017 were 9.90 years and 9.33 years, respectively.
116
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Changes in provisions for unused credit commitments and financial guarantee contracts issued for the year ended December 31, 2018 were as follows:
|
|
December 31, 2018 |
||||||||||||||
|
|
Loan commitments and other liabilities for credit |
|
Financial guarantee contracts |
|
Total |
||||||||||
|
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
|||||||
|
|
|
Credit-unimpaired financial asset |
|
Credit-impaired financial asset |
|
|
Credit-unimpaired financial asset |
|
Credit-impaired financial asset |
|
|||||
Beginning balance (*1) |
|
51,647 |
|
12,587 |
|
- |
|
63,031 |
|
9,876 |
|
8,658 |
|
145,799 |
||
Transfer to 12-month expected credit losses |
|
2,530 |
|
(2,530) |
|
- |
|
671 |
|
(671) |
|
- |
|
- |
||
Transfer to lifetime expected credit losses |
|
(2,004) |
|
2,004 |
|
- |
|
(989) |
|
989 |
|
- |
|
- |
||
Transfer to impaired financial asset |
|
- |
|
- |
|
- |
|
(13) |
|
- |
|
13 |
|
- |
||
Provision (reversal) |
|
(5,557) |
|
(528) |
|
- |
|
(1,128) |
|
(7,770) |
|
(5,764) |
|
(20,747) |
||
Foreign exchange movements |
|
555 |
|
(9) |
|
- |
|
607 |
|
403 |
|
448 |
|
2,004 |
||
Others (*2) |
|
- |
|
- |
|
- |
|
25,491 |
|
1,306 |
|
(479) |
|
26,318 |
||
Ending balance |
|
47,171 |
|
11,524 |
|
- |
|
87,670 |
|
4,133 |
|
2,876 |
|
153,374 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
(*2) Other changes were mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
(b) Changes in other provisions for the year ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||||||
|
|
Asset retirement |
|
Litigation |
|
Non-financial guarantee contracts |
|
Others |
|
Total |
|
Beginning balance |
|
30,874 |
|
11,850 |
|
45,070 |
|
42,539 |
|
130,333 |
|
Provision (reversal) |
|
6,474 |
|
(971) |
|
(3,698) |
|
1,353 |
|
3,158 |
|
Provision used |
|
(2,388) |
|
(5,492) |
|
- |
|
(5,049) |
|
(12,929) |
|
Foreign exchange movements |
|
- |
|
386 |
|
1,652 |
|
(570) |
|
1,468 |
|
Others (*1) |
|
1,810 |
|
- |
|
(1,728) |
|
13,825 |
|
13,907 |
|
Ending balance |
|
36,770 |
|
5,773 |
|
41,296 |
|
52,098 |
|
135,937 |
(*1) Other changes were mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
117
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in other provisions for year ended December 31, 2018 and 2017 were as follows: (continued)
|
|
December 31, 2017 |
||||||||||
|
|
Asset retirement |
|
Litigation |
|
Unused credit |
|
Guarantee |
|
Others |
|
Total |
Beginning balance |
|
36,098 |
|
12,044 |
|
75,036 |
|
113,059 |
|
84,405 |
|
320,642 |
Provision (reversal) |
|
(4,853) |
|
423 |
|
(7,331) |
|
(4,329) |
|
(20,559) |
|
(36,649) |
Provision used |
|
(2,132) |
|
- |
|
- |
|
- |
|
(21,220) |
|
(23,352) |
Foreign exchange movements |
|
- |
|
(617) |
|
(1,965) |
|
(4,533) |
|
(87) |
|
(7,202) |
Others (*1) |
|
1,761 |
|
- |
|
- |
|
19,562 |
|
- |
|
21,323 |
Ending balance |
|
30,874 |
|
11,850 |
|
65,740 |
|
123,759 |
|
42,539 |
|
274,762 |
(*1) Other changes were mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
(c) Asset retirement obligation liabilities represent the estimated cost to restore the existing leased properties which were discounted to the present value using the appropriate discount rate at the end of the reporting period. Disbursements of such costs were expected to incur at the end of the lease contract. Such costs were reasonably estimated using the average lease period and the average restoration expenses. The average lease period was calculated based on the past ten-year historical data of the expired leases. The average restoration expense was calculated based on the actual costs incurred for the past three years using the three-year average inflation rate.
25. |
Other liabilities |
|
Other liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Accounts payable |
|
5,670,859 |
|
3,974,906 |
Borrowing from trust account |
|
3,224,946 |
|
4,297,314 |
Accrued expenses |
|
2,124,902 |
|
1,974,718 |
Liability incurred by agency relationship |
|
1,306,075 |
|
935,016 |
Domestic exchange settlement payables |
|
1,018,237 |
|
1,685,305 |
Account for agency business of other institutions |
|
720,076 |
|
600,749 |
Guarantee deposits received |
|
241,207 |
|
554,433 |
Foreign exchange settlement payables |
|
225,720 |
|
222,195 |
Suspense payable |
|
48,406 |
|
42,570 |
Unearned income |
|
69,937 |
|
59,733 |
Withholding value-added tax and other taxes |
|
114,567 |
|
84,491 |
Dividend payable |
|
2,597 |
|
1,367 |
Sundry liabilities |
|
33,890 |
|
51,705 |
Present value discount |
|
(2,117) |
|
(2,913) |
|
|
14,799,302 |
|
14,481,589 |
118
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
26. |
Equity |
|
(a) Equity as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Capital stock: |
|
|
|
|
Common stock |
|
7,928,078 |
|
7,928,078 |
Other equity instruments: |
|
|
|
|
Hybrid bonds |
|
698,660 |
|
668,938 |
Capital surplus: |
|
|
|
|
Share premium |
|
398,080 |
|
398,080 |
Capital adjustments: |
|
|
|
|
Stock options |
|
4,850 |
|
782 |
Others |
|
(254) |
|
(139) |
|
|
4,596 |
|
643 |
Accumulated other comprehensive income (loss): |
|
|
|
|
Net change in fair value of financial assets at FVOCI |
|
6 |
|
- |
Net change in fair value of available-for-sale financial assets |
|
- |
|
37,034 |
Foreign currency translation differences for foreign operations |
|
(56,356) |
|
(55,344) |
Remeasurements of defined benefit plans |
|
(277,714) |
|
(207,385) |
|
|
(334,064) |
|
(225,695) |
Retained earnings: |
|
|
|
|
Legal reserve (*1) |
|
1,835,854 |
|
1,675,077 |
Voluntary reserve (*2) |
|
10,930,547 |
|
10,065,795 |
Other reserve (*3) |
|
112,058 |
|
99,681 |
Unappropriated retained earnings (*4) |
|
1,997,574 |
|
1,577,907 |
|
|
14,876,033 |
|
13,418,460 |
|
|
23,571,383 |
|
22,188,504 |
(*1) According to the Article 40 of the Banking Act, the Bank is required to appropriate an amount equal to a minimum of 10% of cash dividends paid for each accounting period as a legal reserve, until such reserve equals 100% of issued capital. The legal reserve is only available to reduce accumulated deficit or transfer to capital stock.
(*2) The amounts include a regulatory reserve for loan loss of W1,842,655 million and W1,754,773 million as of December 31, 2018 and 2017 respectively. The amounts also include asset revaluation surplus of W355,898 million as of December 31, 2018 and 2017.
(*3) Other reserve was established according to the laws applicable to some oversea branches and it may be used only to reduce their deficit.
(*4) The amounts include reversal of the regulatory reserve for loan loss of W118,844 million and provision for the regulatory reserve for loan loss of W87,882 million as of December 31, 2018 and 2017 respectively.
119
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for share data)
(b) Capital stock
Capital stock of the Bank as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Number of authorized shares |
|
2,000,000,000 shares |
|
2,000,000,000 shares |
Par value per share in won |
|
|
|
|
Number of issued shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
(c) Hybrid bonds
Hybrid bonds as of December 31, 2018 and 2017 were as follows:
|
|
|
|
Book value |
|
|
||
Date of issuance |
|
Date of maturity |
|
December 31 2018 |
|
December 31, 2017 |
|
Interest rate (%) |
Hybrid bonds issued in Korean won: |
|
|
|
|
|
|
||
March 21, 2008 |
|
March 21, 2038 |
|
- |
|
119,878 |
|
7.30 |
March 25, 2008 |
|
March 25, 2038 |
|
- |
|
49,947 |
|
7.30 |
June 7, 2013 |
|
June 7, 2043 |
|
299,568 |
|
299,568 |
|
4.63 |
June 29, 2017 |
|
Perpetual bond |
|
129,701 |
|
129,701 |
|
3.33 |
June 29, 2017 |
|
Perpetual bond |
|
69,844 |
|
69,844 |
|
3.81 |
October 15, 2018 |
|
Perpetual bond |
|
199,547 |
|
- |
|
3.70 |
|
|
|
|
698,660 |
|
668,938 |
|
|
Dividends on hybrid bond holders |
|
25,228 |
|
29,857 |
|
|
||
Weighted average interest rate (%) |
|
4.36 |
|
5.23 |
|
|
The above hybrid bonds are subject to early redemption option after five years or ten years from the date of issuance, and the maturity can be extended under the same condition at the maturity date. In addition, if no dividend is paid for common shares, the agreed interest is also not paid.
During the year ended December 31, 2018, W169,825 million of hybrid bonds issued in March 2008 were repaid early.
120
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||||
|
|
Items that are or may be reclassified to profit or loss |
|
Items that will not be reclassified to profit or loss |
|
|||||
|
|
Net change in fair value of financial assets at FVOCI |
|
Foreign currency translation differences for foreign operations |
|
Net change in fair value of financial assets at FVOCI |
|
Remeasur-ements of the defined benefit plans |
|
Total |
Beginning balance (*1) |
|
(97,666) |
|
(54,281) |
|
(40,967) |
|
(207,385) |
|
(400,299) |
Change due to fair value |
|
153,680 |
|
- |
|
21,721 |
|
- |
|
175,401 |
Change due to impairment |
|
10,257 |
|
- |
|
- |
|
- |
|
10,257 |
Change due to disposal |
|
11,910 |
|
- |
|
- |
|
- |
|
11,910 |
Effect of hedge accounting |
|
(2,365) |
|
(2,633) |
|
- |
|
- |
|
(4,998) |
Effect of foreign currency movements |
|
- |
|
(229) |
|
423 |
|
- |
|
194 |
Remeasurements of defined benefit plans |
|
- |
|
- |
|
- |
|
(97,006) |
|
(97,006) |
Amounts transferred to retained earnings |
|
- |
|
- |
|
(4,399) |
|
- |
|
(4,399) |
Effect of tax |
|
(47,708) |
|
787 |
|
(4,880) |
|
26,677 |
|
(25,124) |
Ending balance |
|
28,108 |
|
(56,356) |
|
(28,102) |
|
(277,714) |
|
(334,064) |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
|
|
2017 |
||||||
|
|
Net change in fair value of available-for-sale financial assets |
|
Foreign currency translation differences for foreign operations |
|
Remeasurements of defined benefit plans |
|
Total |
Beginning balance |
|
160,710 |
|
(34,299) |
|
(281,202) |
|
(154,791) |
Change due to fair value |
|
(74,100) |
|
- |
|
- |
|
(74,100) |
Change due to impairment |
|
38,383 |
|
- |
|
- |
|
38,383 |
Change due to disposal |
|
(119,348) |
|
- |
|
- |
|
(119,348) |
Effect of hedge accounting |
|
1,241 |
|
17,595 |
|
- |
|
18,836 |
Effect of foreign currency movements |
|
(7,113) |
|
(48,682) |
|
- |
|
(55,795) |
Remeasurements of defined benefit plans |
|
- |
|
- |
|
84,931 |
|
84,931 |
Effect of tax |
|
37,261 |
|
10,042 |
|
(11,114) |
|
36,189 |
Ending balance |
|
37,034 |
|
(55,344) |
|
(207,385) |
|
(225,695) |
121
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for par value per share and dividend per share)
(e) Separate statements of appropriation of retained earnings for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
|
|
Expected date of approval: March 21, 2018 |
|
Date of approval: March 22, 2018 |
Unappropriated retained earnings: |
|
|
|
|
Balance at beginning of year |
|
- |
|
- |
Net effect on change due to accounting policy |
|
(90,616) |
|
- |
Transfer from other comprehensive income through the sale of securities at FVOCI |
|
(3,189) |
|
- |
Interest on hybrid bond |
|
(25,228) |
|
(29,857) |
Profit for the year |
|
2,116,606 |
|
1,607,761 |
|
|
1,997,573 |
|
1,577,904 |
Transfer from reserves: |
|
|
|
|
Voluntary reserve |
|
8,453,145 |
|
7,676,276 |
|
|
10,450,718 |
|
9,254,180 |
Appropriation of retained earnings: |
|
|
|
|
Legal reserve |
|
211,661 |
|
160,776 |
Regulatory reserve for loan loss |
|
118,844 |
|
87,882 |
Other reserve |
|
11,139 |
|
12,377 |
Voluntary reserves |
|
9,218,899 |
|
8,453,145 |
Loss on redemption of hybrid bond |
|
175 |
|
- |
Dividends on common stock |
|
890,000 |
|
540,000 |
(Dividend per share in won: 2018: 2017: |
|
|
|
|
|
|
10,450,718 |
|
9,254,180 |
Unappropriated retained earnings to be carried over to subsequent year |
|
- |
|
- |
(f) Dividends
Dividends of common stock for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Number of issued shares outstanding |
|
1,585,615,506 |
|
1,585,615,506 |
Par value per share in won |
|
5,000 |
|
5,000 |
Dividend rate per share |
|
11.23% |
|
6.81% |
Dividend per share in won |
|
561.30 |
|
340.56 |
122
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(g) Dividends payout ratio
Dividends payout ratio for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Dividends |
|
890,000 |
|
540,000 |
Profit for the year |
|
2,116,606 |
|
1,607,761 |
Dividends payout ratio to profit for the year |
|
42.05% |
|
33.59% |
Profit for the year adjusted for regulatory reserve for loan loss |
|
1,785,305 |
|
1,519,879 |
Dividends payout ratio to profit for the year adjusted for regulatory reserve for loan loss |
|
49.85% |
|
35.53% |
27. |
Regulatory reserve for loan loss |
|
The Bank should calculate and disclose regulatory reserve for loan loss, in accordance with the Article 29-1 and 29-2 of Regulation on Supervision of Banking Business.
(a) |
The regulatory reserve for loan loss as of December 31, 2018 and 2017 were as follows: |
|
|
|
December 31, 2018 |
|
December 31, 2017 |
Regulatory reserve for loan loss |
|
1,842,655 |
|
1,754,773 |
Provision for regulatory reserve for loan loss |
|
118,844 |
|
87,882 |
|
|
1,961,499 |
|
1,842,655 |
(b) |
Profit for the year adjusted for regulatory reserve for loan loss and earnings per share adjusted for regulatory reserve for loan loss for the years ended December 31, 2018 and 2017 were as follows: |
|
|
|
2018 |
|
2017 |
Provision for regulatory reserve for loan loss (*1) |
|
331,301 |
|
87,882 |
Profit for the year adjusted for regulatory reserve for loan loss |
|
1,785,305 |
|
1,519,879 |
Earnings per share adjusted for regulatory reserve in won |
|
1,110 |
|
940 |
(*1) The amount calculated based on the reserve for loan losses that retroactively reflects the effect of adoption of K-IFRS No. 1109
123
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Net interest income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
Interest income: |
|
|
Cash and due from banks |
|
65,290 |
Loans (*1) |
|
7,509,650 |
Others |
|
57,926 |
Securities at FVTPL |
|
172,718 |
Securities at FVOCI |
|
543,442 |
Securities at amortized cost |
|
376,934 |
|
|
8,725,960 |
Interest expense: (*2) |
|
|
Deposits |
|
(2,761,558) |
Borrowings |
|
(278,283) |
Debt securities issued |
|
(601,560) |
Others |
|
(54,411) |
|
|
(3,695,812) |
Net interest income |
|
5,030,148 |
|
|
|
|
|
2017 |
Interest income: |
|
|
Cash and due from banks |
|
43,583 |
Trading assets |
|
140,216 |
Available-for-sale financial assets |
|
428,647 |
Held-to-maturity financial assets |
|
334,008 |
Loans |
|
6,443,680 |
Others |
|
59,143 |
|
|
7,449,277 |
Interest expense: (*2) |
|
|
Deposits |
|
(2,211,012) |
Borrowings |
|
(194,359) |
Debt securities issued |
|
(479,117) |
Others |
|
(43,551) |
|
|
(2,928,039) |
Net interest income |
|
4,521,238 |
(*1) The amounts include an interest income from loans at FVTPL of W12,462 million for the year ended December 31, 2018.
(*2) There were no interest expense from financial liabilities at FVTPL for the years ended December 31, 2018 and 2017.
(b) Interest income recognized on impaired financial assets year ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Interest income |
|
15,086 |
|
16,371 |
124
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Net fees and commission income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Fees and commission income: |
|
|
|
|
Credit placement fees |
|
54,672 |
|
55,124 |
Commission received as electronic charge receipt |
|
145,706 |
|
141,487 |
Brokerage fees |
|
97,928 |
|
107,773 |
Commission received as agency |
|
324,930 |
|
325,310 |
Investment banking fees |
|
84,758 |
|
65,769 |
Commission received in foreign exchange activities |
|
111,847 |
|
99,950 |
Asset management fees from trust accounts |
|
212,537 |
|
185,040 |
Guarantee fees |
|
65,246 |
|
58,220 |
Others |
|
100,314 |
|
87,752 |
|
|
1,197,938 |
|
1,126,425 |
Fees and commission expense: |
|
|
|
|
Credit-related fees |
|
(34,245) |
|
(33,520) |
Brand-related fees |
|
(34,769) |
|
(32,757) |
Service-related fees |
|
(25,586) |
|
(17,439) |
Trading and brokerage fees |
|
(9,360) |
|
(7,966) |
Commission paid in foreign exchange activities |
|
(23,686) |
|
(20,279) |
Others |
|
(64,362) |
|
(57,456) |
|
|
(192,008) |
|
(169,417) |
Net fees and commission income |
|
1,005,930 |
|
957,008 |
30. |
Dividend income |
|
Dividend income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Securities at FVTPL |
|
1,498 |
|
- |
Securities at FVOCI |
|
8,732 |
|
- |
Trading assets |
|
- |
|
26,293 |
Available-for-sale financial assets |
|
- |
|
87,807 |
|
|
10,230 |
|
114,100 |
125
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Gain and loss on financial instruments at FVTPL for the year ended December 31, 2018 and net trading loss for the year ended December 31, 2017 were as follows:
|
|
2018 |
Financial instruments at FVTPL |
|
|
Debt: |
|
|
Gain on valuation of debt securities |
|
62,850 |
Gain on sale of debt securities |
|
39,610 |
Loss on valuation of debt securities |
|
(26,170) |
Loss on sale of debt securities |
|
(34,922) |
Others |
|
76,451 |
|
|
117,819 |
Equity: |
|
|
Gain on valuation of equity securities |
|
23,616 |
Gain on sale of equity securities |
|
20,196 |
Loss on valuation of equity securities |
|
(375) |
Loss on sale of equity securities |
|
(10,083) |
|
|
33,354 |
Gold/silver: |
|
|
Gain on valuation of gold/silver deposits |
|
19,667 |
Gain on sale of gold/silver deposits |
|
1,611 |
Loss on valuation of gold/silver deposits |
|
(15,473) |
Loss on sale of gold/silver deposits |
|
(217) |
|
|
5,588 |
Loans at FVTPL |
|
|
Gain on valuation of loans |
|
5,292 |
Gain on sale of loans |
|
12,181 |
Loss on valuation of loans |
|
(1,225) |
Loss on sale of loans |
|
(2,420) |
|
|
13,828 |
|
|
170,589 |
|
|
|
Derivatives |
|
|
Foreign currency related: |
|
|
Gain on valuation and transaction |
|
5,839,322 |
Loss on valuation and transaction |
|
(5,677,617) |
|
|
161,705 |
Interest rates related: |
|
|
Gain on valuation and transaction |
|
468,823 |
Loss on valuation and transaction |
|
(452,234) |
|
|
16,589 |
Equity related: |
|
|
Gain on valuation and transaction |
|
20,203 |
Loss on valuation and transaction |
|
(10,863) |
|
|
9,340 |
Commodity related: |
|
|
Gain on valuation and transaction |
|
5,532 |
Loss on valuation and transaction |
|
(20,141) |
|
|
(14,609) |
|
|
173,025 |
Net gain on financial instruments at FVTPL |
|
343,614 |
126
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
31. Gain and loss on financial instruments at fair value through profit or loss (continued)
Gain and loss on financial instruments at FVTPL for the year ended December 31, 2018 and net trading loss for the year ended December 31, 2017 were as follows: (continued)
|
|
2017 |
Trading assets and trading liabilities |
|
|
Debt: |
|
|
Gain on valuation of debt securities |
|
474 |
Gain on sale of debt securities |
|
7,120 |
Loss on valuation of debt securities |
|
(3,910) |
Loss on sale of debt securities |
|
(15,124) |
|
|
(11,440) |
Equity: |
|
|
Gain on valuation of equity securities |
|
230 |
Gain on sale of equity securities |
|
17,327 |
Loss on valuation of equity securities |
|
(1,211) |
Loss on sale of equity securities |
|
(13,046) |
|
|
3,300 |
Gold/silver: |
|
|
Gain on valuation of gold/silver deposits |
|
6,735 |
Gain on sale of gold/silver deposits |
|
2,834 |
Loss on valuation of gold/silver deposits |
|
(693) |
Loss on sale of gold/silver deposits |
|
(395) |
|
|
8,481 |
|
|
341 |
Derivatives |
|
|
Foreign currency related: |
|
|
Gain on valuation and transaction |
|
7,436,112 |
Loss on valuation and transaction |
|
(7,604,693) |
|
|
(168,581) |
Interest rates related: |
|
|
Gain on valuation and transaction |
|
488,449 |
Loss on valuation and transaction |
|
(465,079) |
|
|
23,370 |
Equity related: |
|
|
Gain on valuation and transaction |
|
7,326 |
Loss on valuation and transaction |
|
(8,722) |
|
|
(1,396) |
Commodity related: |
|
|
Gain on valuation and transaction |
|
24,855 |
Loss on valuation and transaction |
|
(4,387) |
|
|
20,468 |
|
|
(126,139) |
Net trading loss |
|
(125,798) |
127
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
General and administrative expenses for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Employee benefits: |
|
|
|
|
Short and long term employee benefits |
|
1,634,292 |
|
1,618,366 |
Post-employee defined benefits |
|
96,232 |
|
128,569 |
Post-employee defined contributions |
|
53 |
|
46 |
Termination benefits |
|
90,484 |
|
224,033 |
|
|
1,821,061 |
|
1,971,014 |
Amortization: |
|
|
|
|
Depreciation |
|
107,575 |
|
110,293 |
Amortization of intangible assets |
|
36,376 |
|
34,420 |
|
|
143,951 |
|
144,713 |
Other general and administrative expenses: |
|
|
|
|
Rent |
|
243,398 |
|
221,478 |
Service contract expenses |
|
218,465 |
|
211,708 |
Taxes and dues |
|
74,624 |
|
69,538 |
Advertising |
|
70,336 |
|
56,408 |
Electronic data processing expenses |
|
49,093 |
|
51,575 |
Others |
|
137,663 |
|
141,045 |
|
|
793,579 |
|
751,752 |
|
|
2,758,591 |
|
2,867,479 |
128
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for exercise price and fair value)
(a) Stock options granted as of December 31, 2018 were as follows:
|
|
4th grant |
|
5th grant |
|
6th grant |
|
7th grant |
Grant date |
|
March 30, 2005 |
|
March 21, 2006 |
|
March 20, 2007 |
|
March 19, 2008 |
Exercise price in won (*1) |
|
|
|
|
|
|
|
|
Number of shares granted |
|
1,903,200 |
|
2,157,600 |
|
715,500 |
|
332,850 |
Contractual exercise period |
|
2017.05.18 ~ 2018.08.30 |
|
2017.05.18 ~ 2019.08.21 |
|
2017.05.18 ~ 2020.08.19 |
|
2017.5.18 ~ 2021.5.17 2017.9.18 ~ 2021.9.17 |
Changes in number of shares granted: |
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017 |
|
93,426 |
|
101,963 |
|
50,513 |
|
26,233 |
Exercised |
|
93,426 |
|
99,463 |
|
- |
|
- |
Outstanding at December 31, 2018 (*2) |
|
- |
|
2,500 |
|
50,513 |
|
26,233 |
|
|
|
|
|
|
|
|
|
Fair value in won (*3) |
|
- |
|
2,874 |
|
397 |
|
Expiration date 2021.5.17 : 1,441 Expiration date 2021.9.17 : 1,610 |
(*1) As of December 31, 2018, the granted shares are fully vested, and the weighted-average exercise price of 79,246 options outstanding was W52,241.
(*2) As of December 31, 2018, 4,759 rights of exercise for 7th grant are suspended.
(*3) As of December 31, 2018, suspended grants are evaluated based on the intrinsic value, which is the difference between the closing price of Shinhan Financial Group and the exercise price.
(b) Equity-settled share-based payments
i) Equity-settled share-based payments as of December 31, 2018 were as follows:
|
|
Contents |
||
Grant year |
|
2010 ~ 2013 |
|
2014~ |
Type (*1) |
|
Equity-settled share-based payment |
|
Equity-settled share-based payment |
Service period |
|
Upon appointment and promotion since April 1, 2010 (Within 3 years from grant date) |
|
Upon appointment and promotion since January 1, 2014 (Within 1 year from grant date) |
Performance conditions (*2) |
|
Increase rate of stock price and achievement of target ROE |
|
Increase rate of stock price and achievement of target ROE |
(*1) The Bank granted shares of Shinhan Financial Group. According to the commitment, the amount that the Bank must pay to the Shinhan Financial Group was recognized in liabilities, and the difference between the amount recognized in liabilities and the compensation cost based on equity-settled share-based payments was recognized in equity.
(*2) ROE: Return on Equity
129
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Equity-settled share-based payments (continued)
ii) Granted shares and the fair value of grant date as of December 31, 2018 were as follows:
Grant date |
|
Grant shares |
|
Fair value (*1) (in won) |
|
Estimated shares (*2) |
April 1, 2010 |
|
306,400 |
|
45,150 |
|
10,471 |
January 1, 2014 |
|
109,800 |
|
47,300 |
|
2,364 |
January 1, 2015 |
|
159,000 |
|
44,500 |
|
148,882 |
March 18, 2015 |
|
16,800 |
|
42,650 |
|
12,610 |
April 10, 2015 |
|
2,300 |
|
40,350 |
|
1,591 |
May 1, 2015 |
|
2,300 |
|
46,000 |
|
1,466 |
May 22, 2015 |
|
5,300 |
|
42,800 |
|
3,097 |
May 27, 2015 |
|
2,300 |
|
40,200 |
|
1,314 |
August 1, 2015 |
|
2,300 |
|
41,900 |
|
958 |
August 24, 2015 |
|
2,300 |
|
40,250 |
|
785 |
January 1, 2016 |
|
221,900 |
|
39,000 |
|
212,366 |
January 1, 2017 |
|
221,300 |
|
45,300 |
|
187,467 |
January 23, 2017 |
|
2,700 |
|
45,600 |
|
2,421 |
March 7, 2017 |
|
17,400 |
|
46,950 |
|
13,600 |
March 24, 2017 |
|
8,100 |
|
49,000 |
|
5,961 |
June 1, 2017 |
|
2,700 |
|
49,250 |
|
1,493 |
July 5, 2017 |
|
2,700 |
|
49,550 |
|
1,251 |
July 6, 2017 |
|
2,700 |
|
49,200 |
|
1,244 |
January 1, 2018 |
|
227,500 |
|
49,400 |
|
207,228 |
|
|
1,315,800 |
|
|
|
816,569 |
(*1) The fair value per share was evaluated based on the closing price of Shinhan Financial Group at each grant date. As of December 31, 2018, the fair value per share data evaluated by Shinhan Financial Group amounted to W39,600.
(*2) Grant shares at grant date were adjusted pursuant to increase rate of stock price (33.4% to 2013, 20.0% after 2014) and achievement of target ROE (66.6% to 2013, 80.0% after 2014) based on standard quantity applicable to the days of service among specified period of service, which allows for the determination of acquired quantity at the end of the operation period.
(c) Stock compensation costs calculated for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Compensation costs recorded for the year |
|
11,209 |
|
10,748 |
(d) Accrued expenses of the stock compensation costs and residual compensation costs as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Accrued expenses |
|
36,446 |
|
30,773 |
130
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Net other operating expenses for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Other operating income |
|
|
|
|
Gain on sale of assets: |
|
|
|
|
Loans at amortized cost |
|
26,133 |
|
45,117 |
Written-off loans |
|
13,119 |
|
116 |
|
|
39,252 |
|
45,233 |
Others: |
|
|
|
|
Gain on hedge activity from hedged items |
|
112,579 |
|
249,223 |
Gain on hedge activity from hedging instruments |
|
167,048 |
|
57,010 |
Reversal of allowance for acceptances and guarantee |
|
3,698 |
|
4,328 |
Reversal of other allowance |
|
- |
|
32,322 |
Others |
|
27,558 |
|
12,884 |
|
|
310,883 |
|
355,767 |
|
|
350,135 |
|
401,000 |
Other operating expense |
|
|
|
|
Loss on sale of assets: |
|
|
|
|
Loans at amortized cost |
|
(13,991) |
|
(8,365) |
Others: |
|
|
|
|
Loss on hedge activity from hedged items |
|
(189,152) |
|
(56,133) |
Loss on hedge activity from hedging instruments |
|
(87,413) |
|
(251,444) |
Provision for other allowance |
|
(6,856) |
|
- |
Contribution to fund |
|
(275,099) |
|
(244,189) |
Deposit insurance fee |
|
(293,910) |
|
(280,588) |
Others |
|
(151,181) |
|
(142,575) |
|
|
(1,003,611) |
|
(974,929) |
|
|
(1,017,602) |
|
(983,294) |
Net other operating expenses |
|
(667,467) |
|
(582,294) |
131
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Net non-operating income (expenses) for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Non-operating income |
|
|
|
|
Gain on sale of assets: |
|
|
|
|
Property and equipment |
|
11,109 |
|
4,293 |
Intangible assets |
|
50 |
|
514 |
Investment properties |
|
4,707 |
|
154 |
Non-current assets held for sale |
|
80 |
|
32,879 |
|
|
15,946 |
|
37,840 |
Investments in associates: |
|
|
|
|
Dividend income |
|
121,391 |
|
3,752 |
Gain from disposition |
|
7,361 |
|
1,586 |
|
|
128,752 |
|
5,338 |
Others: |
|
|
|
|
Rental income on investment property |
|
27,545 |
|
25,156 |
Others |
|
25,609 |
|
45,911 |
|
|
53,154 |
|
71,067 |
|
|
197,852 |
|
114,245 |
Non-operating expenses |
|
|
|
|
Loss on sale of assets: |
|
|
|
|
Property and equipment |
|
(976) |
|
(870) |
Intangible assets |
|
(20) |
|
(790) |
Investment properties |
|
(1,623) |
|
- |
Non-current assets held for sale |
|
(1,403) |
|
(1,674) |
|
|
(4,022) |
|
(3,334) |
Investments in associates: |
|
|
|
|
Impairment loss |
|
(47,108) |
|
(144) |
Others: |
|
|
|
|
Investment properties depreciation |
|
(10,370) |
|
(10,514) |
Donations |
|
(59,611) |
|
(121,352) |
Others |
|
(21,078) |
|
(20,608) |
|
|
(91,059) |
|
(152,474) |
|
|
(142,189) |
|
(155,952) |
Net non-operating income (expenses) |
|
55,663 |
|
(41,707) |
132
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Operating revenue for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Interest income |
|
8,725,960 |
|
7,449,277 |
Fees and commission income |
|
1,197,938 |
|
1,126,425 |
Dividend income |
|
10,230 |
|
114,100 |
Net gain on financial instruments at FVTPL |
|
6,595,352 |
|
- |
Trading income |
|
- |
|
7,991,461 |
Foreign currencies transaction gain |
|
1,700,742 |
|
3,099,210 |
Net gain on financial instruments at FVOCI |
|
10,124 |
|
- |
Gain on sale of available-for- sale financial assets |
|
- |
|
199,490 |
Reversal of provisions for acceptances and guarantees |
|
14,662 |
|
- |
Reversal of provisions for unused credit limit |
|
6,085 |
|
- |
Other operating income |
|
350,135 |
|
401,000 |
|
|
18,611,228 |
|
20,380,963 |
37. |
Income tax expense |
|
(a) The components of income tax expense for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Current income tax expense |
|
512,615 |
|
337,551 |
Deferred taxes arising from changes in temporary differences |
|
280,994 |
|
37,785 |
Deferred taxes arising from utilization of expired unused tax losses |
|
6,947 |
|
(15,818) |
Tax adjustment charged or credited directly to equity |
|
(26,666) |
|
35,609 |
Income tax expense |
|
773,890 |
|
395,127 |
133
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) The income tax expense calculated by applying statutory tax rates to the Bank’s taxable income differs from the actual tax expense in the separate statements of income for the years ended December 31, 2018 and 2017 for the following reasons:
|
|
2018 |
|
2017 |
Profit before income tax |
|
2,890,496 |
|
2,002,888 |
Statutory tax rate |
|
27.50% |
|
24.20% |
Income tax expense at statutory tax rates |
|
784,525 |
|
484,237 |
Adjustments: |
|
|
|
|
Non-taxable income |
|
(30,738) |
|
(8,143) |
Non-deductible expense |
|
9,620 |
|
10,425 |
Decrease resulting from consolidated corporate tax system |
|
(34,176) |
|
(25,756) |
Income tax paid |
|
39,986 |
|
(27,235) |
Impact of tax rate change |
|
- |
|
(43,430) |
Others |
|
4,673 |
|
5,029 |
Income tax expense |
|
773,890 |
|
395,127 |
Effective tax rate |
|
26.77% |
|
19.73% |
134
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Beginning balance |
|
Decreases |
|
Increases |
|
Ending balance |
|
Deferred tax assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
Accrued income |
|
(429,624) |
|
(436,855) |
|
(596,918) |
|
(589,687) |
|
(162,164) |
Accounts receivable |
|
(60,062) |
|
(60,062) |
|
(88,065) |
|
(88,065) |
|
(24,218) |
Securities at FVTPL |
|
(49,853) |
|
(106,774) |
|
41,374 |
|
98,295 |
|
27,031 |
Securities at FVOCI |
|
852,817 |
|
424,587 |
|
(165,569) |
|
262,661 |
|
72,232 |
Investments in subsidiaries and associates |
|
51,734 |
|
(5,755) |
|
47,108 |
|
104,597 |
|
28,764 |
Deferred loan origination costs and fees |
|
(427,937) |
|
(427,937) |
|
(497,515) |
|
(497,515) |
|
(136,817) |
Revaluation and depreciation on property and equipment |
|
(432,522) |
|
(4,043) |
|
5,691 |
|
(422,788) |
|
(116,267) |
Derivative liabilities |
|
(125,588) |
|
(142,108) |
|
(193,916) |
|
(177,396) |
|
(48,784) |
Deposits |
|
101,467 |
|
15,498 |
|
15,981 |
|
101,950 |
|
28,036 |
Accrued expenses |
|
379,320 |
|
379,320 |
|
226,076 |
|
226,076 |
|
62,171 |
Defined benefit obligations |
|
1,142,678 |
|
105,666 |
|
212,447 |
|
1,249,459 |
|
343,601 |
Plan assets |
|
(1,180,248) |
|
(88,189) |
|
(175,872) |
|
(1,267,931) |
|
(348,681) |
Other provisions |
|
149,497 |
|
147,991 |
|
151,829 |
|
153,335 |
|
42,167 |
Allowance for guarantees and acceptance |
|
126,634 |
|
129,510 |
|
138,852 |
|
135,976 |
|
37,394 |
Allowance for advanced depreciation |
|
(179,393) |
|
(2,256) |
|
- |
|
(177,137) |
|
(48,713) |
Allowance for expensing depreciation |
|
(1,923) |
|
(232) |
|
- |
|
(1,691) |
|
(465) |
Deemed dividends |
|
19,171 |
|
19,171 |
|
- |
|
- |
|
- |
Net change in fair value of securities at FVOCI |
|
15,982 |
|
15,982 |
|
16,297 |
|
16,297 |
|
4,482 |
Donation payables |
|
39,429 |
|
39,429 |
|
78,750 |
|
78,750 |
|
21,656 |
Allowance and bad debt |
|
377,060 |
|
695,946 |
|
363,097 |
|
44,211 |
|
12,158 |
Compensation expenses associated with stock option |
|
437 |
|
359 |
|
100 |
|
178 |
|
49 |
Fictitious dividends |
|
4,060 |
|
1 |
|
- |
|
4,059 |
|
1,116 |
Others |
|
70,349 |
|
440,768 |
|
473,660 |
|
103,241 |
|
28,377 |
|
|
443,485 |
|
1,140,017 |
|
53,407 |
|
(643,125) |
|
(176,875) |
Expired unused tax losses |
||||||||||
Appropriation by extinctive prescription of deposit |
|
1,281,039 |
|
25,262 |
|
- |
|
1,255,777 |
|
345,339 |
|
|
|
|
|
|
|
|
|
|
|
Temporary differences not qualified for deferred tax assets or liabilities |
||||||||||
Investments in subsidiaries and associates |
|
(22,219) |
|
- |
|
- |
|
(22,219) |
|
(6,110) |
|
|
1,746,743 |
|
1,165,279 |
|
53,407 |
|
634,871 |
|
174,574 |
135
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
December 31, 2017 |
||||||||
|
|
Beginning balance |
|
Decreases |
|
Increases |
|
Ending balance |
|
Deferred tax assets (liabilities) |
|
|
|
|
|
|
|
|
|
|
|
Accrued income |
|
(306,255) |
|
(308,304) |
|
(431,673) |
|
(429,624) |
|
(118,147) |
Accounts receivable |
|
(36,089) |
|
(36,089) |
|
(60,062) |
|
(60,062) |
|
(16,517) |
Trading assets |
|
(56,271) |
|
(59,469) |
|
(53,051) |
|
(49,853) |
|
(13,710) |
Available-for-sale financial assets |
|
780,467 |
|
454,602 |
|
526,952 |
|
852,817 |
|
234,525 |
Investments in subsidiaries and associates |
|
60,636 |
|
8,902 |
|
- |
|
51,734 |
|
14,227 |
Deferred loan origination costs and fees |
|
(378,933) |
|
(378,933) |
|
(427,937) |
|
(427,937) |
|
(117,683) |
Revaluation and depreciation on property and equipment |
|
(441,979) |
|
(5,718) |
|
3,739 |
|
(432,522) |
|
(118,944) |
Derivative liabilities |
|
(137,101) |
|
(148,094) |
|
(136,581) |
|
(125,588) |
|
(34,537) |
Deposits |
|
75,052 |
|
17,940 |
|
44,355 |
|
101,467 |
|
27,904 |
Accrued expenses |
|
262,174 |
|
263,525 |
|
380,671 |
|
379,320 |
|
104,313 |
Defined benefit obligations |
|
1,133,301 |
|
54,253 |
|
63,630 |
|
1,142,678 |
|
314,236 |
Plan assets |
|
(988,598) |
|
(54,254) |
|
(245,904) |
|
(1,180,248) |
|
(324,568) |
Other provisions |
|
207,583 |
|
207,583 |
|
151,002 |
|
151,002 |
|
41,526 |
Allowance for guarantees and acceptance |
|
113,059 |
|
113,059 |
|
123,759 |
|
123,759 |
|
34,034 |
Allowance for advanced depreciation |
|
(179,438) |
|
(45) |
|
- |
|
(179,393) |
|
(49,333) |
Allowance for expensing depreciation |
|
(2,154) |
|
(231) |
|
- |
|
(1,923) |
|
(529) |
Deemed dividends |
|
5,513 |
|
- |
|
13,658 |
|
19,171 |
|
5,272 |
Net change in fair value of available-for-sale financial assets |
|
(212,018) |
|
(212,018) |
|
(50,247) |
|
(50,247) |
|
(13,818) |
Donation payables |
|
35,717 |
|
35,717 |
|
39,429 |
|
39,429 |
|
10,843 |
Allowance and bad debt |
|
202,050 |
|
167,335 |
|
(20,751) |
|
13,964 |
|
3,840 |
Compensation expenses associated with stock option |
|
2,344 |
|
2,266 |
|
359 |
|
437 |
|
120 |
Fictitious dividends |
|
4,026 |
|
19 |
|
53 |
|
4,060 |
|
1,117 |
Others |
|
41,190 |
|
65,926 |
|
95,085 |
|
70,349 |
|
19,346 |
|
|
184,276 |
|
187,972 |
|
16,486 |
|
12,790 |
|
3,517 |
Expired unused tax losses |
||||||||||
Appropriation by extinctive prescription of deposit |
|
1,390,362 |
|
109,323 |
|
- |
|
1,281,039 |
|
352,286 |
|
|
|
|
|
|
|
|
|
|
|
Temporary differences not qualified for deferred tax assets or liabilities |
||||||||||
Investments in subsidiaries and associates |
|
(22,219) |
|
- |
|
- |
|
(22,219) |
|
(6,110) |
|
|
1,596,857 |
|
297,295 |
|
16,486 |
|
1,316,048 |
|
361,913 |
136
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) |
Changes in tax effects that were directly charged or credited to equity for the years ended December 31, 2018 and 2017 were as follows: |
|
|
December 31, 2018 |
|
December 31, 2017 (*1) |
|
Changes in tax effects |
||||
|
|
Amount before tax |
|
Tax effects |
|
Amount before tax |
|
Tax effects |
|
|
Net change in fair value of securities at FVOCI |
|
8 |
|
(2) |
|
(189,752) |
|
52,182 |
|
(52,184) |
Foreign currency translation differences for foreign operations |
|
(77,732) |
|
21,376 |
|
(76,335) |
|
20,992 |
|
384 |
Remeasurements of defined benefit plans |
|
(383,053) |
|
105,339 |
|
(286,046) |
|
78,661 |
|
26,678 |
Other (stock option) |
|
6,690 |
|
(1,840) |
|
1,078 |
|
(296) |
|
(1,544) |
|
|
(454,087) |
|
124,873 |
|
(551,055) |
|
151,539 |
|
(26,666) |
(*1) The balances ware restated in accordance with K-IFRS No.1109 and K-IFRS No.1115
|
|
December 31, 2017 |
|
December 31, 2016 |
|
Changes in tax effects |
||||
|
|
Amount before tax |
|
Tax effects |
|
Amount before tax |
|
Tax effects |
|
|
Net change in fair value of available-for-sale financial assets |
|
51,081 |
|
(14,047) |
|
212,018 |
|
(51,308) |
|
37,261 |
Foreign currency translation differences for foreign operations |
|
(76,335) |
|
20,992 |
|
(45,248) |
|
10,950 |
|
10,042 |
Remeasurements of defined benefit plans |
|
(286,046) |
|
78,661 |
|
(370,977) |
|
89,775 |
|
(11,114) |
Other (stock option) |
|
1,078 |
|
(296) |
|
(1,170) |
|
284 |
|
(580) |
|
|
(310,222) |
|
85,310 |
|
(205,377) |
|
49,701 |
|
35,609 |
137
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for earnings per share)
(e) |
The current tax assets and liabilities as of December 31, 2018 and 2017 were as follows: |
|
|
December 31, 2018 |
|
December 31, 2017 |
Current tax assets: |
|
|
|
|
Income taxes paid |
|
1,872 |
|
3,527 |
|
|
|
|
|
Current tax liabilities: |
|
|
|
|
Payable due to consolidated tax system |
|
265,789 |
|
179,364 |
Income taxes payables |
|
10,599 |
|
4,309 |
|
|
276,388 |
|
183,673 |
(f) The deferred tax assets / liabilities and current tax assets / liabilities presented on a gross basis prior to any offsetting as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Deferred tax assets |
|
1,665,075 |
|
2,092,570 |
Deferred tax liabilities |
|
1,490,501 |
|
1,730,657 |
Current tax assets |
|
194,862 |
|
219,671 |
Current tax liabilities |
|
469,378 |
|
399,817 |
38. |
Earnings per share |
|
(a) Earnings per share for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Profit for the year |
|
2,116,606 |
|
1,607,761 |
Less: dividends on hybrid bonds |
|
(25,228) |
|
(29,857) |
Profit available for common stock |
|
2,091,378 |
|
1,577,904 |
Weighted average number of common shares outstanding |
|
1,585,615,506 |
|
1,585,615,506 |
Basic and diluted earnings per share in won |
|
1,319 |
|
995 |
Considering that the Bank had no dilutive potential common shares and that stock options were not included in the calculation of diluted earnings per share because they were anti-dilutive for the reporting periods presented, diluted earnings per share equal to basic earnings per share for the years ended December 31, 2018 and 2017.
(b) Weighted average number of common shares outstanding as of December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Number of common shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
Weight |
|
365/365 |
|
365/365 |
Weighted average number of common shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
138
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
39.Commitments and contingencies
(a) Guarantees, acceptances and credit commitments as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Guarantees: |
|
|
|
|
Guarantee outstanding |
|
9,728,578 |
|
8,060,660 |
Contingent guarantees |
|
3,892,028 |
|
3,152,593 |
|
|
13,620,606 |
|
11,213,253 |
Commitments to extend credit: |
|
|
|
|
Loan commitments in Korean won |
|
68,946,886 |
|
53,160,964 |
Loan commitments in foreign currencies |
|
16,319,618 |
|
15,671,070 |
ABS and ABCP purchase commitments |
|
5,511,932 |
|
4,609,072 |
Others |
|
1,907,431 |
|
1,437,936 |
|
|
92,685,867 |
|
74,879,042 |
Endorsed bills: |
|
|
|
|
Secured endorsed bills |
|
37,667 |
|
85,456 |
Unsecured endorsed bills |
|
7,758,242 |
|
7,810,788 |
|
|
7,795,909 |
|
7,896,244 |
Loans sold with repurchase agreement |
|
1,387 |
|
1,387 |
(b) Provision for acceptances and guarantees
Allowance for acceptances and guarantees, as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Guarantees outstanding |
|
9,728,578 |
|
8,060,660 |
Contingent guarantees |
|
3,892,028 |
|
3,152,593 |
ABS and ABCP purchase commitments |
|
5,511,932 |
|
4,609,072 |
Secured endorsed bills |
|
37,667 |
|
85,456 |
|
|
19,170,205 |
|
15,907,781 |
Allowance for acceptances and guarantees |
|
135,975 |
|
123,759 |
Ratio (%) |
|
0.71 |
|
0.78 |
139
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
39.Commitments and contingencies (continued)
(c) Legal contingencies
Pending litigations in which the Bank was involved as a defendant as of December 31, 2018 were as follows:
Case |
|
Number of claim |
|
Claim amount |
|
Description |
|
Damage claim |
|
1 |
|
6,893 |
|
According to the asset custody contract, the plaintiff is liable for damages caused by a fire in the property of the real estate investment company in which the Bank is holding assets. |
In 2015 and 2017, the plaintiffs prevailed, but the first and second decisions were different and in progress of third order. |
Deposit return |
|
1 |
|
4,606 |
|
The plaintiff alleges that the plaintiff has canceled the money received in his account without his consent, and requested the plaintiff to pay the deposit equivalent to the amount. |
Since 2017, the Bank won the first and second trial and the third trial was ongoing as of December 31, 2018. |
Indemnification cost |
|
1 |
|
4,112 |
|
According to the asset custody contract, the plaintiffs filed a lawsuit against the Bank, claiming for a fire damage occurred on a property of the real estate investment company for which the Bank provides the custodian service. |
In 2017, the Bank has lost on the first order and in progress for second order. |
Others |
|
100 |
|
49,924 |
|
It includes various cases, such as compensation for loss claim.
|
|
|
|
103 |
|
65,535 |
|
|
As of December 31, 2018, the Bank recorded a provision of W5,773 million for litigation for certain of the above lawsuits. Additional losses may be incurred from these legal actions besides the current provision established by the Bank, but the amount of loss is not expected to have a material adverse effect on the Bank’s separate financial statements.
140
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
39. Commitments and contingencies (continued)
(d) Principal guaranteed trusts or principal and interest guaranteed trusts
Book value of trusts with guarantee commitments of payments of principal or principal and interest as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Principal guarantee commitments: |
|
|
|
|
Market evaluation form |
|
2,793,689 |
|
2,692,322 |
Book value evaluation form |
|
1,615,699 |
|
1,659,439 |
|
|
4,409,388 |
|
4,351,761 |
Principal and interest guarantee commitments: |
|
|
|
|
Book value evaluation form |
|
1,711 |
|
1,698 |
|
|
4,411,099 |
|
4,353,459 |
Principal in the money trusts |
|
4,019,806 |
|
3,979,776 |
Accrued trust income |
|
391,293 |
|
373,683 |
There may occur additional losses depending on the operating results of trust agreements. As of December 31, 2018 and 2017, no additional payments were required as per the operating results of trust agreements.
(e) Maturity structure of minimum lease payments
The future minimum lease payments under non-cancellable operating leases were payable as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Within 1 year |
|
1~5 years |
|
Over 5 years |
|
Total |
Minimum lease payments |
|
143,178 |
|
262,430 |
|
11,471 |
|
417,079 |
|
|
December 31, 2017 |
||||||
|
|
Within 1 year |
|
1~5 years |
|
Over 5 years |
|
Total |
Minimum lease payments |
|
210,972 |
|
278,689 |
|
29,087 |
|
518,748 |
141
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Cash and cash equivalents reported in the accompanying separate statements of cash flows as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Cash |
|
2,467,074 |
|
1,658,239 |
Reserve deposits |
|
2,094,612 |
|
8,503,968 |
Other deposits |
|
4,844,153 |
|
4,550,299 |
Cash and due from banks |
|
9,405,839 |
|
14,712,506 |
Less: Restricted due from banks |
|
(3,657,482) |
|
(11,033,538) |
Less: Due with original maturities of more than three months |
|
(1,286,040) |
|
(346,429) |
|
|
4,462,317 |
|
3,332,539 |
(b) Significant non-cash activities for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Dividend payable of hybrid bonds |
|
2,597 |
|
1,367 |
Debt-equity swap |
|
28,759 |
|
32,530 |
Accounts payable for purchase of property and equipment |
|
827 |
|
- |
Accounts payable for purchase of intangible assets |
|
1,047 |
|
5,061 |
Transfer from investment in subsidiaries and associates to non-current asset held for sale |
|
6,126 |
|
- |
(c) Changes in liabilities resulting from financing activities for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||
|
|
Borrowings |
|
|
Debt securities issued |
|
Total |
Beginning balance |
|
14,471,720 |
|
|
23,929,723 |
|
38,401,443 |
Changes in cash flows |
|
1,094,393 |
|
|
5,345,483 |
|
6,439,876 |
Amortization |
|
(1,705) |
|
|
(100,307) |
|
(102,012) |
Net foreign currencies transaction loss (gain) |
|
(374,911) |
|
|
82,081 |
|
(292,830) |
Changes in fair value of hedged items |
|
686,945 |
|
|
37,604 |
|
724,549 |
Ending balance |
|
15,876,442 |
|
|
29,294,584 |
|
45,171,026 |
|
|
December 31, 2017 |
|||||
|
|
Borrowings |
|
|
Debt securities issued |
|
Total |
Beginning balance |
|
13,944,878 |
|
|
20,923,326 |
|
34,868,204 |
Changes in cash flows |
|
999,425 |
|
|
3,592,690 |
|
4,592,115 |
Amortization |
|
802 |
|
|
3,196 |
|
3,998 |
Net foreign currencies transaction loss (gain) |
|
(473,385) |
|
|
(446,833) |
|
(920,218) |
Changes in fair value of hedged items |
|
- |
|
|
(142,656) |
|
(142,656) |
Ending balance |
|
14,471,720 |
|
|
23,929,723 |
|
38,401,443 |
142
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows:
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
Subsidiaries |
|
|
|
|
|
|
Shinhan Asia Ltd. |
|
Cash and due from banks |
|
- |
|
324 |
|
|
Loans |
|
- |
|
326,749 |
|
|
Allowance for loan loss |
|
- |
|
(61) |
|
|
Other assets |
|
- |
|
614 |
|
|
Deposits |
|
115,409 |
|
512 |
Shinhan Bank Europe GmbH |
|
Cash and due from banks |
|
1,615 |
|
3,012 |
|
|
Loans |
|
310,947 |
|
240,155 |
|
|
Allowance for loan loss |
|
(899) |
|
(708) |
|
|
Other assets |
|
703 |
|
352 |
|
|
Deposits |
|
19 |
|
18 |
|
|
Borrowings |
|
129,914 |
|
56,210 |
Shinhan Bank Cambodia |
|
Cash and due from banks |
|
61 |
|
185 |
|
|
Loans |
|
71,558 |
|
57,856 |
|
|
Allowance for loan loss |
|
(145) |
|
(79) |
|
|
Other assets |
|
423 |
|
309 |
|
|
Provisions |
|
1 |
|
1 |
Shinhan Kazakhstan Bank |
|
Cash and due from banks |
|
990 |
|
588 |
Limited |
|
Loans |
|
3,354 |
|
- |
|
|
Allowance for loan loss |
|
(9) |
|
(1) |
|
|
Other assets |
|
1 |
|
- |
|
|
Deposits |
|
- |
|
6 |
|
|
Provisions |
|
300 |
|
368 |
Shinhan Bank Canada |
|
Cash and due from banks |
|
- |
|
542 |
|
|
Loans |
|
117,827 |
|
117,300 |
|
|
Allowance for loan loss |
|
(337) |
|
(344) |
|
|
Other assets |
|
970 |
|
394 |
|
|
Deposits |
|
389 |
|
287 |
|
|
Borrowings |
|
10,866 |
|
11,191 |
Shinhan Bank China Limited |
|
Cash and due from banks |
|
26,220 |
|
6,081 |
|
|
Loans |
|
226,943 |
|
185,369 |
|
|
Allowance for loan loss |
|
(513) |
|
(262) |
|
|
Other assets |
|
1,630 |
|
804 |
|
|
Deposits |
|
1,449 |
|
2,065 |
|
|
Borrowings |
|
7,441 |
|
4,493 |
|
|
Provisions |
|
131 |
|
89 |
143
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
Subsidiaries (continued)
Shinhan Bank Japan |
|
Cash and due from banks |
|
18,602 |
|
25,620 |
|
|
Loans |
|
167,715 |
|
214,280 |
|
|
Allowance for loan loss |
|
(268) |
|
(179) |
|
|
Other assets |
|
1,492 |
|
1,244 |
|
|
Deposits |
|
13,255 |
|
156 |
|
|
Borrowings |
|
52,954 |
|
124,212 |
|
|
Provisions |
|
29 |
|
14 |
|
|
Other liabilities |
|
500 |
|
702 |
Shinhan Bank Vietnam Ltd. |
|
Cash and due from banks |
|
201 |
|
5,036 |
|
|
Loans |
|
66,474 |
|
32,784 |
|
|
Allowance for loan loss |
|
(16) |
|
(9) |
|
|
Deposits |
|
56,040 |
|
7,450 |
|
|
Borrowings |
|
72,677 |
|
- |
|
|
Provisions |
|
445 |
|
324 |
PT Bank Shinhan Indonesia |
|
Cash and due from banks |
|
343 |
|
187 |
|
|
Loans |
|
272,816 |
|
110,890 |
|
|
Allowance for loan loss |
|
(781) |
|
(324) |
|
|
Other assets |
|
2,101 |
|
254 |
Shinhan Bank America |
|
Cash and due from banks |
|
11,257 |
|
17,908 |
|
|
Allowance for loan loss |
|
(32) |
|
(52) |
Shinhan Bank Mexico |
|
Loans |
|
25,157 |
|
- |
|
|
Allowance for loan loss |
|
(4,544) |
|
- |
|
|
Other assets |
|
124 |
|
- |
Trust accounts |
|
Other assets |
|
306 |
|
584 |
|
|
Other liabilities |
|
230,148 |
|
244,706 |
Structured entities |
|
Securities at fair value through profit or loss |
|
715,762 |
|
1,294,317 |
|
|
Derivative assets |
|
5,602 |
|
121 |
|
|
Loans |
|
13,692 |
|
15,878 |
|
|
Allowance for loan loss |
|
(50) |
|
(44) |
|
|
Other assets |
|
30,192 |
|
27,698 |
|
|
Deposits |
|
7,251 |
|
9,529 |
|
|
Derivative liabilities |
|
1,988 |
|
9,722 |
|
|
Provisions |
|
31,300 |
|
29,213 |
|
|
Other liabilities |
|
- |
|
1 |
144
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
||||||
The parent company |
|
|
|
|
|
|
||||||
Shinhan Financial Group |
|
Other assets |
|
- |
|
934 |
||||||
|
|
Deposits |
|
24 |
|
3 |
||||||
|
|
Other liabilities |
|
309,355 |
|
222,867 |
||||||
Entities under common control |
|
|
|
|
|
|
||||||
Shinhan Card Co., Ltd. |
|
Derivative assets |
|
5,100 |
|
785 |
||||||
|
|
Other assets |
|
1,338 |
|
2,248 |
||||||
|
|
Deposits |
|
23,522 |
|
7,263 |
||||||
|
|
Derivative liabilities |
|
269 |
|
2,539 |
||||||
|
|
Provisions |
|
180 |
|
47 |
||||||
|
|
Other liabilities |
|
22,702 |
|
23,106 |
||||||
Shinhan Investment Corp. |
|
Cash and due from banks |
|
6,281 |
|
3,461 |
||||||
|
|
Derivative assets |
|
13,095 |
|
3,954 |
||||||
|
|
Loans |
|
22,914 |
|
14,984 |
||||||
|
|
Allowance for loan loss |
|
(19) |
|
(4) |
||||||
|
|
Other assets |
|
19,972 |
|
18,240 |
||||||
|
|
Deposits |
|
202,561 |
|
272,064 |
||||||
|
|
Derivative liabilities |
|
1,981 |
|
39,302 |
||||||
|
|
Provisions |
|
67 |
|
34 |
||||||
|
|
Other liabilities |
|
40,338 |
|
39,010 |
||||||
Shinhan Life Insurance |
|
Derivative assets |
|
17,302 |
|
1,558 |
||||||
|
|
Other assets |
|
3 |
|
11 |
||||||
|
|
Deposits |
|
14,335 |
|
6,379 |
||||||
|
|
Derivative liabilities |
|
7,771 |
|
44,928 |
||||||
|
|
Provisions |
|
16 |
|
4 |
||||||
|
|
Other liabilities |
|
14,674 |
|
15,184 |
||||||
Shinhan Capital Co., Ltd. |
|
Deposits |
|
1,504 |
|
754 |
||||||
|
|
Provisions |
|
14 |
|
14 |
||||||
|
|
Other liabilities |
|
13,611 |
|
12,799 |
||||||
Jeju Bank |
|
Loans |
|
1,621 |
|
2,658 |
||||||
|
|
Allowance for loan loss |
|
(2) |
|
(1) |
||||||
|
|
Other assets |
|
1 |
|
1 |
||||||
|
|
Deposits |
|
11,045 |
|
22,376 |
||||||
|
|
Other liabilities |
|
2,446 |
|
2,475 |
||||||
Shinhan Credit Information |
|
Deposits |
|
3,793 |
|
6,059 |
||||||
Co., Ltd. |
|
Other liabilities |
|
1,599 |
|
1,719 |
||||||
Shinhan Alternative Investment |
|
Deposits |
|
5,405 |
|
168 |
||||||
Management Inc. |
|
Other liabilities |
|
23 |
|
- |
145
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows:
(continued)
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
Entities under common control (continued) |
|
|
||||
Shinhan BNP Paribas AMC |
|
Deposits |
|
121,976 |
|
117,149 |
|
|
Other liabilities |
|
1,673 |
|
1,512 |
Shinhan DS |
|
Deposits |
|
815 |
|
11,135 |
|
|
Other liabilities |
|
6,567 |
|
6,544 |
Shinhan Savings Bank |
|
Other liabilities |
|
8,987 |
|
8,987 |
Shinhan Aitas |
|
Deposits |
|
14,604 |
|
9,381 |
|
|
Other liabilities |
|
60 |
|
41 |
Shinhan REITs Management |
|
Deposits |
|
79 |
|
71 |
Investments in associates and associates of entities under common control |
||||||
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
Other assets |
|
- |
|
9,760 |
|
Deposits |
|
444 |
|
446 |
|
|
|
Provisions |
|
- |
|
2 |
BNP Paribas Cardif General Insurance |
|
Deposits |
|
157 |
|
221 |
Dream High Fund III |
|
Deposits |
|
4 |
|
3 |
Midas Dong-A Snowball Venture Fund |
|
Deposits |
|
159 |
|
220 |
IBKS-Shinhan Creative Economy New Technology Fund |
|
Deposits |
|
- |
|
78 |
JAEYOUNG SOLUTEC Co., Ltd. (*1) |
|
Loans |
|
- |
|
14,847 |
|
Allowance for loan loss |
|
- |
|
(123) |
|
|
|
Deposits |
|
- |
|
2,659 |
|
|
Provisions |
|
- |
|
4 |
Partners 4th Growth Investment Fund |
|
Deposits |
|
1,855 |
|
2,076 |
Credian Health Care Private Equity Fund II |
|
Deposits |
|
45 |
|
26 |
Snowball Venture Fund II |
|
Deposits |
|
354 |
|
239 |
IBKS-Shinhan Creative Economy New Technology Fund II |
|
Deposits |
|
672 |
|
76 |
YIUM The 3rd Private Investment Joint Stock Company |
|
Deposits |
|
49 |
|
65 |
Branbuil Co., Ltd |
|
Deposits |
|
- |
|
55 |
KTB Newlake Global Healthcare PEF |
|
Loans |
|
151 |
|
- |
|
Allowance for loan loss |
|
(1) |
|
- |
|
|
Deposits |
|
- |
|
465 |
|
|
Provisions |
|
- |
|
13 |
146
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows:
(continued)
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
Investments in associates and associates of entities under common control (continued) |
||||||
Taihan Industrial System Co., Ltd |
|
Deposits |
|
85 |
|
100 |
ICSF (The Korea’s Information Center for Savings & Finance) |
|
Deposits |
|
4 |
|
4 |
Key management personnel |
|
|
|
|
|
|
|
|
Loans |
|
2,783 |
|
2,828 |
|
|
Allowance for loan loss |
|
(1) |
|
(3) |
|
|
Provisions |
|
1 |
|
1 |
(*1) This investee was sold and excluded from associates during the year ended December 31, 2018.
147
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows:
Related party |
|
Account |
|
2018 |
|
2017 |
Subsidiaries |
|
|
|
|
|
|
Shinhan Asia Ltd. |
|
Interest income |
|
8,873 |
|
3,108 |
|
|
Dividend income |
|
118,619 |
|
- |
|
|
Reversal of (provision for) allowance |
|
61 |
|
(17) |
Shinhan Bank |
|
Interest income |
|
3,930 |
|
2,424 |
Europe GmbH |
|
Fees and commission income |
|
81 |
|
58 |
|
|
Provision for allowance |
|
(182) |
|
(189) |
|
|
Interest expense |
|
(1,744) |
|
- |
Shinhan Bank Cambodia |
|
Interest income |
|
1,549 |
|
725 |
|
|
Fees and commission income |
|
47 |
|
49 |
|
|
Provision for allowance |
|
(66) |
|
(20) |
|
|
Other operating expense |
|
(1) |
|
(1) |
Shinhan Kazakhstan |
|
Interest income |
|
1 |
|
- |
Bank Limited |
|
Fees and commission income |
|
76 |
|
87 |
|
|
Other operating income |
|
68 |
|
- |
|
|
Reversal of (provision for) allowance |
|
(8) |
|
9 |
|
|
Interest expense |
|
- |
|
(13) |
|
|
Other operating expense |
|
- |
|
(368) |
Shinhan Bank Canada |
|
Interest income |
|
2,592 |
|
2,006 |
|
|
Fees and commission income |
|
89 |
|
101 |
|
|
Provision for allowance |
|
5 |
|
(68) |
Shinhan Bank China Limited |
|
Interest income |
|
6,351 |
|
4,174 |
|
|
Fees and commission income |
|
339 |
|
252 |
|
|
Other operating income |
|
- |
|
5 |
|
|
Reversal of (provision for) allowance |
|
(252) |
|
143 |
|
|
Other operating expense |
|
(42) |
|
- |
Shinhan Bank Japan |
|
Interest income |
|
4,680 |
|
4,585 |
|
|
Fees and commission income |
|
533 |
|
618 |
|
|
Other operating income |
|
- |
|
84 |
|
|
Reversal of (provision for) allowance |
|
(90) |
|
45 |
|
|
Interest expense |
|
(885) |
|
- |
|
|
Other operating expense |
|
(15) |
|
- |
Shinhan Bank Vietnam Ltd. |
|
Interest income |
|
- |
|
380 |
|
|
Fees and commission income |
|
879 |
|
1,503 |
|
|
Other operating income |
|
- |
|
194 |
|
|
Reversal of allowance |
|
(7) |
|
8 |
|
|
Interest expense |
|
(842) |
|
- |
|
|
Other operating expense |
|
(121) |
|
- |
148
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
2018 |
|
2017 |
Subsidiaries (continued) |
|
|
|
|
|
|
PT Bank Shinhan Indonesia |
|
Interest income |
|
4,729 |
|
786 |
|
|
Fees and commission income |
|
385 |
|
1 |
|
|
Provision for allowance |
|
(458) |
|
(322) |
|
|
Other operating expense |
|
- |
|
(3) |
Shinhan Bank America |
|
Fees and commission income |
|
127 |
|
136 |
|
|
Reversal of (provision for) allowance |
|
20 |
|
(52) |
Shinhan Bank Mexico |
|
Interest income |
|
130 |
|
- |
|
|
Provision for allowance |
|
(4,544) |
|
- |
Trust Accounts |
|
Fees and commission income |
|
20,115 |
|
18,851 |
|
|
Interest expense |
|
(4,786) |
|
(2,849) |
Structured entities |
|
Interest income |
|
18,295 |
|
26,950 |
|
|
Fees and commission income |
|
15,466 |
|
13,181 |
|
|
Gain related to derivatives |
|
14,319 |
|
3,546 |
|
|
Other operating income |
|
55 |
|
368 |
|
|
Interest expense |
|
(54) |
|
(50) |
|
|
Loss related to derivatives |
|
(1,289) |
|
(10,499) |
|
|
Reversal of (provision for) allowance |
|
(5) |
|
28 |
|
|
Other operating expense |
|
(2,087) |
|
- |
The parent company |
|
|
|
|
|
|
Shinhan Financial Group |
|
Other operating income |
|
1,392 |
|
2,228 |
|
|
Interest expense |
|
(268) |
|
(228) |
|
|
Fees and commission expense |
|
(31,608) |
|
(29,779) |
|
|
|
|
|
|
|
Entities under common control |
|
|
|
|
||
Shinhan Card Co., Ltd. |
|
Interest income |
|
3,302 |
|
1,868 |
|
|
Fees and commission income |
|
198,589 |
|
187,385 |
|
|
Gain related to derivatives |
|
8,975 |
|
2,694 |
|
|
Other operating income |
|
1,815 |
|
2,092 |
|
|
Interest expense |
|
(256) |
|
(528) |
|
|
Fees and commission expense |
|
(180) |
|
(177) |
|
|
Loss related to derivatives |
|
(371) |
|
(5,111) |
|
|
Other operating expense |
|
(3,561) |
|
(3,064) |
149
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
2018 |
|
2017 |
Entities under common control (continued) |
|
|
|
|
||
Shinhan Investment |
|
Interest income |
|
950 |
|
466 |
Corp. |
|
Fees and commission income |
|
7,362 |
|
5,167 |
|
|
Gain related to derivatives |
|
45,592 |
|
10,037 |
|
|
Other operating income |
|
4,484 |
|
4,637 |
|
|
Interest expense |
|
(2,247) |
|
(1,499) |
|
|
Loss related to derivatives |
|
(14,150) |
|
(98,769) |
|
|
Reversal of (provision for) allowance |
|
(15) |
|
(3) |
|
|
Other operating expense |
|
(286) |
|
(785) |
Shinhan Life Insurance |
|
Interest income |
|
49 |
|
47 |
|
|
Fees and commission income |
|
11,286 |
|
7,513 |
|
|
Gain related to derivatives |
|
51,311 |
|
7,117 |
|
|
Other operating income |
|
695 |
|
1,470 |
|
|
Interest expense |
|
(278) |
|
(264) |
|
|
Loss related to derivatives |
|
(8,272) |
|
(109,882) |
|
|
Other operating expense |
|
(641) |
|
(843) |
Shinhan Capital |
|
Other operating income |
|
972 |
|
314 |
Co., Ltd. |
|
Interest expense |
|
(229) |
|
(241) |
|
|
Fees and commission expense |
|
- |
|
(10) |
|
|
Other operating expense |
|
- |
|
(4) |
Jeju Bank |
|
Interest income |
|
25 |
|
3 |
|
|
Other operating income |
|
52 |
|
44 |
|
|
Interest expense |
|
(79) |
|
(45) |
|
|
Provision for allowance |
|
(1) |
|
- |
Shinhan Credit |
|
Fees and commission income |
|
3 |
|
3 |
Information Co., Ltd. |
|
Other operating income |
|
83 |
|
76 |
|
|
Interest expense |
|
(84) |
|
(94) |
|
|
Fees and commission expense |
|
(5,095) |
|
(4,645) |
Shinhan Alternative Investment Management Inc. |
|
Interest expense |
|
(37) |
|
- |
Shinhan BNP Paribas |
|
Fees and commission income |
|
44 |
|
- |
AMC |
|
Other operating income |
|
9 |
|
52 |
|
|
Interest expense |
|
(2,157) |
|
(1,187) |
|
|
Reversal of allowance |
|
- |
|
16 |
|
|
Fees and commission expense |
|
(2,158) |
|
(2,250) |
150
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
2018 |
|
2017 |
|
Entities under common control (continued) |
|
|
|
|
|||
Shinhan DS |
|
Other operating income |
|
175 |
|
134 |
|
|
|
Interest expense |
|
(146) |
|
(168) |
|
|
|
Other operating expense |
|
(41,096) |
|
(34,629) |
|
Shinhan Savings Bank |
|
Fees and commission income |
|
869 |
|
796 |
|
|
|
Other operating income |
|
205 |
|
175 |
|
|
|
Interest expense |
|
(152) |
|
(120) |
|
Shinhan Aitas |
|
Fees and commission income |
|
31 |
|
31 |
|
|
|
Other operating income |
|
6 |
|
5 |
|
|
|
Interest expense |
|
(70) |
|
(71) |
|
Shinhan BNPP Global Multi Asset Security Trust |
|
Fees and commission income |
|
- |
|
5 |
|
Shinhan REITs Management |
|
Interest expense |
|
(132) |
|
- |
|
Investments in associates and entities under common control |
|
|
|||||
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
Fees and commission income |
|
2,418 |
|
3,246 |
|
|
|
Other operating income |
|
- |
|
(1) |
|
BNP Paribas Cardif General Insurance |
|
Fees and commission income |
|
5 |
|
2 |
|
IBKS-Shinhan Creative Economy New Technology Fund |
|
Interest expense |
|
- |
|
(2) |
|
Midas Dong-A Snowball |
|
|
|
|
|
|
|
Venture Fund |
|
Interest expense |
|
(2) |
|
(3) |
|
JAEYOUNG SOLUTEC |
|
Interest income |
|
347 |
|
654 |
|
CO., LTD. (*1) |
|
Fees and commission income |
|
1 |
|
1 |
|
|
|
Other operating income |
|
3 |
|
3 |
|
|
|
Reversal of (provision for) allowance |
|
(2) |
|
(55) |
|
|
|
Interest expense |
|
(1) |
|
(4) |
151
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
2018 |
|
2017 |
Investments in associates and entities under common control (continued) |
|
|
||||
Partners 4th Growth Investment Fund |
|
Interest expense |
|
(19) |
|
(16) |
Shinhan-Albatross Technology Investment Fund |
|
Interest expense |
|
- |
|
(21) |
KTB Newlake Global Healthcare PEF |
|
Interest income |
|
2 |
|
10 |
Snowball Venture Fund II |
|
Interest expense |
|
(2) |
|
- |
Branbuil Co., Ltd. |
|
Fees and commission income |
|
- |
|
2 |
Taihan Industrial System Co., Ltd. |
|
Fees and commission income |
|
1 |
|
2 |
Hyungje Art Printing |
|
Interest income |
|
13 |
|
- |
|
|
Fees and commission income |
|
1 |
|
- |
|
|
|
|
|
|
|
Key management personnel |
|
|
||||
|
|
Interest income |
|
94 |
|
51 |
(*1) These investee was sold and excluded from associates during the year ended December 31, 2018.
.
152
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(c) Details of transactions with key management for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Short and long term employee benefits |
|
14,175 |
|
8,916 |
Post-employment benefits |
|
305 |
|
298 |
Share-based payment transactions |
|
2,393 |
|
4,655 |
|
|
16,873 |
|
13,869 |
(d) The guarantees provided between the related parties as of December 31, 2018 and 2017 were as follows:
|
|
|
Amount of guarantees |
|
|
||
|
Guaranteed party |
|
December 31, 2018 |
|
December 31, 2017 |
|
Account |
|
Shinhan Bank China Limited |
|
65,056 |
|
65,599 |
|
Financial guarantee |
|
Shinhan Bank Cambodia |
|
559 |
|
536 |
|
Financial guarantee |
|
Shinhan Kazakhstan Bank Limited |
|
22,362 |
|
21,428 |
|
Financial guarantee |
|
Shinhan Bank Vietnam Ltd. |
|
255,528 |
|
205,822 |
|
Financial guarantee |
|
|
|
3,765 |
|
32 |
|
Performance guarantees |
|
Shinhan Bank Japan |
|
20,264 |
|
18,982 |
|
Financial guarantee |
|
Structured entities (*1) |
|
2,601,495 |
|
1,840,403 |
|
ABCP purchase commitments |
|
|
|
679,345 |
|
278,266 |
|
Unused credit limit |
|
Shinhan Investment Corp. |
|
214,955 |
|
218,166 |
|
Unused credit limit |
|
Shinhan Card Co., Ltd. |
|
500,000 |
|
500,000 |
|
Unused credit limit |
|
Shinhan Life Insurance |
|
50,000 |
|
50,000 |
|
Unused credit limit |
|
Shinhan Capital Co., Ltd. |
|
70,000 |
|
70,000 |
|
Unused credit limit |
|
Shinhan BNP Paribas AMC |
|
228,216 |
|
53,484 |
|
Security underwriting commitment |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
10,000 |
|
10,000 |
|
Unused credit limit |
|
Shinhan Alternative Investment Management Inc. |
|
3,600 |
|
- |
|
Security underwriting commitment |
|
Neoplux Technology Valuation Investment Fund |
|
- |
|
6,000 |
|
Security underwriting commitment |
|
JAEYOUNG SOLUTEC |
|
- |
|
109 |
|
Unused credit limit |
|
CO., LTD. (*2) |
|
- |
|
429 |
|
Import letter of credit |
|
KTB Newlake Global Healthcare PEF |
|
849 |
|
700 |
|
Unused credit limit |
|
Shinhan Private Equity Inc. |
|
3,600 |
|
- |
|
Security underwriting commitment |
|
|
|
4,725,994 |
|
3,339,956 |
|
|
(*1) The amount was recognized after deducting the balance of current ABCP.
(*2) This investee was sold and excluded from associates during the year ended December 31, 2018.
153
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(e) Details of collaterals provided to the related parties as of December 31, 2018 and 2017 were as follows:
|
|
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Related party |
|
Pledged assets |
|
Book value |
|
Collateral value |
|
Book value |
|
Collateral value |
Subsidiary |
|
Shinhan Bank Japan |
|
Securities |
|
149,934 |
|
149,934 |
|
149,811 |
|
149,811 |
Entity under common control |
|
Shinhan Life Insurance |
|
Securities |
|
10,230 |
|
10,230 |
|
10,271 |
|
10,271 |
|
|
|
|
|
|
160,164 |
|
160,164 |
|
160,082 |
|
160,082 |
(f) Details of collaterals provided by the related parties as of December 31, 2018 and 2017 were as follows:
|
|
Related party |
|
Pledged assets |
|
December 31, 2018 |
|
December 31, 2017 |
Subsidiaries |
|
S-redefine 4th Co., Ltd. |
|
Trust |
|
318,000 |
|
- |
|
|
Tiger Eyes 1st Co., Ltd |
|
Real estate |
|
60,000 |
|
60,000 |
|
|
Sunny Financial 9th Co., Ltd. |
|
Trust |
|
36,000 |
|
36,000 |
|
|
Sunny Smart 8th Co., Ltd. |
|
Trust |
|
24,000 |
|
24,000 |
|
|
Sunny more 1st Co., Ltd. |
|
Other movables |
|
24,000 |
|
24,000 |
|
|
S-solution 9th Co., Ltd. |
|
Real estate |
|
18,000 |
|
18,000 |
|
|
S-smart 3rd Co., Ltd. |
|
Trust |
|
16,680 |
|
16,680 |
|
|
Sunny Russell 4th L.L.C |
|
Other movables |
|
12,000 |
|
12,000 |
|
|
Redefine Unjung Co., Ltd. |
|
Real estate |
|
66,000 |
|
- |
|
|
GIB dochuk Co., Ltd. |
|
Trust |
|
39,000 |
|
- |
Entities under |
|
Shinhan Investment Corp. |
|
Deposits |
|
135,700 |
|
135,700 |
common control |
|
|
|
Real estate |
|
91,974 |
|
91,974 |
|
|
Jeju Bank |
|
Government bonds |
|
20,000 |
|
20,000 |
|
|
Shinhan Life Insurance |
|
Government bonds |
|
6,000 |
|
7,170 |
|
|
Shinhan Credit Information Co., Ltd. |
|
Deposits |
|
180 |
|
180 |
Investments in associates |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
Government bonds |
|
12,000 |
|
11,666 |
|
|
JAEYOUNG SOLUTEC |
|
Real estate |
|
- |
|
20,814 |
|
|
CO., LTD. (*1) |
|
Korea Trade Insurance Corporation guarantee |
|
- |
|
7,037 |
|
|
|
|
|
|
879,534 |
|
485,221 |
(*1) This investee was sold and excluded from associates during the year ended December 31, 2018.
154
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41. Related party transactions (continued)
(g) Details of significant lease and collection of related parties as of December 31, 2018 are as follows:
|
|
Related party |
|
|
Beginning balance (*1) |
|
Rental |
|
Recovery (*2) |
|
Ending balance (*1) |
Subsidiaries |
|
Structured entities |
|
|
15,878 |
|
32,787 |
|
(34,973) |
|
13,692 |
|
|
Shinhan Asia Ltd. |
|
|
326,749 |
|
1,116,665 |
|
(1,443,414) |
|
- |
|
|
Shinhan Bank Vietnam Ltd. |
|
|
32,784 |
|
122,169 |
|
(88,479) |
|
66,474 |
|
|
Shinhan Bank Canada |
|
|
117,300 |
|
132,477 |
|
(131,950) |
|
117,827 |
|
|
Shinhan Bank Cambodia |
|
|
57,856 |
|
133,428 |
|
(119,726) |
|
71,558 |
|
|
Shinhan Bank China Limited |
|
|
185,369 |
|
241,672 |
|
(200,098) |
|
226,943 |
|
|
Shinhan Bank Japan |
|
|
214,280 |
|
384,753 |
|
(431,318) |
|
167,715 |
|
|
PT Bank Shinhan Indonesia |
|
|
110,890 |
|
538,766 |
|
(376,840) |
|
272,816 |
|
|
Shinhan Bank Europe GmbH |
|
|
240,155 |
|
512,696 |
|
(441,904) |
|
310,947 |
|
|
Shinhan Bank Mexico |
|
|
- |
|
26,048 |
|
(891) |
|
25,157 |
|
|
Shinhan Kazakhstan Bank Limited |
|
|
- |
|
3,354 |
|
- |
|
3,354 |
Entities under common control |
|
Jeju Bank |
|
|
2,658 |
|
3,223 |
|
(4,260) |
|
1,621 |
|
Shinhan Investment Corp. |
|
|
14,984 |
|
39,307 |
|
(31,377) |
|
22,914 |
|
Investment in associates |
|
KTB Newlake Global Healthcare PEF |
|
|
- |
|
151 |
|
- |
|
151 |
(*1) The amount is before deducting allowance for bad debts.
(*2) It includes gains and losses of foreign exchange regarding overseas subsidiaries.
(h) Details of significant redemption of borrowings of related parties as of December 31, 2018 are as follows:
|
|
Related party |
|
|
Beginning |
|
Rental |
|
Recovery (*1) |
|
Ending |
Subsidiaries |
|
Shinhan Bank Europe GmbH |
|
|
56,210 |
|
227,067 |
|
(153,363) |
|
129,914 |
|
|
Shinhan Bank Japan |
|
|
124,212 |
|
171,539 |
|
(242,797) |
|
52,954 |
|
|
Shinhan Bank Canada |
|
|
11,191 |
|
23,012 |
|
(23,337) |
|
10,866 |
|
|
Shinhan Bank China Limited |
|
|
4,493 |
|
16,963 |
|
(14,015) |
|
7,441 |
|
|
Shinhan Asia Ltd. |
|
|
- |
|
38,123 |
|
(38,123) |
|
- |
|
|
Shinhan Bank Cambodia |
|
|
- |
|
23,106 |
|
(23,106) |
|
- |
|
|
Shinhan Bank Vietnam Ltd. |
|
|
- |
|
72,677 |
|
- |
|
72,677 |
(*1) It includes gains and losses of foreign exchange regarding overseas subsidiaries.
155
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
42. Information of trust business
(a) Total assets with trust business as of December 31, 2018 and 2017 and operating revenue for the years ended December 31, 2018 and 2017 were as follows:
|
|
Total assets |
|
Operating revenue |
||||
|
|
December 31, 2018 |
|
December 31, 2017 |
|
2018 |
|
2017 |
Consolidated |
|
4,521,280 |
|
4,471,457 |
|
128,577 |
|
112,528 |
Unconsolidated |
|
71,639,988 |
|
46,014,514 |
|
996,465 |
|
929,899 |
|
|
76,161,268 |
|
50,485,971 |
|
1,125,042 |
|
1,042,427 |
(b) Significant balances with trust business as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Borrowings from trust accounts |
|
3,224,946 |
|
4,297,314 |
Accrued revenues from asset management fee from trust accounts |
|
34,286 |
|
29,379 |
Accrued interest expenses |
|
1,325 |
|
824 |
(c) Significant transactions with trust business for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Asset management fee from trust accounts |
|
212,537 |
|
185,040 |
Termination fee |
|
6,840 |
|
3,415 |
Interest on borrowings from trust accounts |
|
49,940 |
|
40,717 |
156
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies
As described in Note 2, the Bank has changed its accounting policies upon adoption of K-IFRS No.1109, Financial Instruments, and K-IFRS No.1115, Revenue from Contracts with Customers. With respect to classification, measurement and impairment of financial instruments, the separate financial statements as of and for the year ended December 31, 2017 have not been restated in accordance with the exemption not to restate comparative financial statements.
K-IFRS No.1109 replaced K-IFRS No.1039, Financial Instruments: Recognition and Measurement, relating to recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. Additionally, K-IFRS No.1109 made amendments to other standards relating to financial instruments such as K-IFRS No.1107, Financial Instruments: Disclosures.
K-IFRS No.1115 replaced existing revenue recognition guidance, including K-IFRS No.1018, ‘Revenue’, K-IFRS No.1011, ‘Construction Contracts’, K-IFRS No.2031, ‘Revenue-Barter Transactions Involving Advertising Services’, K-IFRS No.2113, ‘Customer Loyalty Programmes’, K-IFRS No.2115, ‘Agreement for the Construction of Real Estate’, and K-IFRS No.2118, ‘Transfers of Assets from Customers.’
157
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(i) Changes in equity due to application of K-IFRS No.1109 and No.1115
Changes in equity as of January 1, 2018 due to the initial application date of K-IFRS No.1109 and No.1115 were as follows:
|
|
Amounts |
Retained earnings at January 1, 2018 before changes |
|
13,418,460 |
Adjustments of retained earnings due to the application of K-IFRS No.1109: |
|
|
Reclassification from financial assets at amortized cost to financial assets at FVTPL |
|
2,456 |
Reclassification from available-for-sale financial assets to financial assets at FVTPL |
|
49,931 |
Reclassification from available-for-sale financial assets to financial assets at FVOCI |
|
200,339 |
Increase in loss allowance for financial assets at amortized cost |
|
(364,464) |
Increase in loss allowance for loan commitments and financial guarantee contracts |
|
528 |
Increase in loss allowance for debt instruments at FVOCI |
|
(7,972) |
Others (*1) |
|
(3,253) |
|
|
(122,435) |
Adjustments of retained earnings due to the application of K-IFRS No.1115 (*2) |
|
(2,554) |
Tax effects (*3) |
|
34,373 |
Retained earnings at January 1, 2018 after changes |
|
13,327,844 |
|
|
Amounts |
Accumulated other comprehensive loss at January 1, 2018 before changes |
|
(225,695) |
Adjustments of accumulated other comprehensive income due to the application of K-IFRS No.1109: |
|
|
Reclassification from available-for-sale financial assets to financial assets at FVTPL |
|
(49,931) |
Reclassification from available-for-sale financial assets to financial assets at FVOCI |
|
(200,339) |
Increase in loss allowance for debt instruments at FVOCI |
|
7,972 |
Others (*1) |
|
1,465 |
|
|
(240,833) |
Tax effects (*3) |
|
66,229 |
Accumulated other comprehensive loss at January 1, 2018 after changes |
|
(400,299) |
(*1) |
Others represent translation difference of foreign currencies, etc. |
(*2) |
Adjustments were resulting from deferred fee income on management of trust accounts under K-IFRS No.1115, which was previously recognized as profit or loss at a point in time. |
(*3) |
Tax effects due to the application of K-IFRS No.1109 were separately shown. |
158
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(ii) Reclassification of financial instruments upon adoption of K-IFRS No.1109
Details of reclassification of financial instruments as of January 1, 2018, the initial application date of K-IFRS No.1109, were as follows:
|
Classification under K-IFRS No.1039 |
|
Classification under K-IFRS No.1109 |
|
Amounts under |
|
Amounts under |
|
Difference |
||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
||||||||||
Due from banks |
Loans and receivables |
|
Amortized cost |
|
13,057,347 |
|
13,057,347 |
|
- |
||||||||||
Loans |
Loans and receivables |
|
Financial assets at FVTPL |
|
605,367 |
|
606,439 |
|
1,072 |
||||||||||
Loans and receivables |
|
Amortized cost |
|
217,703,397 |
|
217,703,397 |
|
- |
|||||||||||
Other financial assets |
Loans and receivables |
|
Amortized cost |
|
8,788,507 |
|
8,788,507 |
|
- |
||||||||||
Trading assets |
Trading assets |
|
Financial assets at FVTPL |
|
8,341,580 |
|
8,341,580 |
|
- |
||||||||||
Trading assets |
Trading assets |
|
Financial assets at FVTPL |
|
303,993 |
|
303,993 |
|
- |
||||||||||
Trading assets (gold/silver deposits) |
Trading assets |
|
Financial assets at FVTPL |
|
189,297 |
|
189,297 |
|
- |
||||||||||
Derivatives |
Trading assets |
|
Financial assets at FVTPL |
|
2,602,690 |
|
2,598,327 |
|
(4,363) |
||||||||||
Available-for-sale financial assets (debt securities) |
Available-for-sale financial assets |
|
Financial assets at FVTPL |
|
28,423,684 |
|
28,423,684 |
|
- |
||||||||||
Available-for-sale financial assets (equity securities) |
Available-for-sale financial assets |
|
Financial assets at FVTPL |
|
2,298,554 |
|
2,301,835 |
|
3,281 |
||||||||||
|
Available-for-sale financial assets |
|
Financial assets at FVOCI |
|
404,159 |
|
404,159 |
|
- |
||||||||||
Held-to-maturity financial assets (debt securities) |
Held-to-maturity financial assets |
|
Amortized cost |
|
14,358,584 |
|
14,358,584 |
|
- |
||||||||||
|
|
|
|
|
297,077,158 |
|
297,077,149 |
|
(9) |
||||||||||
Financial Liabilities: |
|
|
|
|
|
||||||||||||||
Deposits |
Financial liability at amortized cost |
|
Financial liabilities at amortized cost |
|
223,975,037 |
|
223,975,037 |
|
- |
||||||||||
Trading liabilities |
Trading liabilities
|
|
Financial liabilities |
|
434,586 |
|
434,586 |
|
- |
||||||||||
Derivatives |
Trading liabilities
|
|
Financial liabilities at FVTPL |
|
2,996,958 |
|
2,996,958 |
|
- |
||||||||||
Borrowings |
Financial liabilities at amortized cost |
|
Financial liabilities at amortized cost |
|
14,471,720 |
|
14,471,720 |
|
- |
||||||||||
Debt securities issued |
Financial liabilities at amortized cost |
|
Financial liabilities at amortized cost |
|
23,929,723 |
|
23,929,723 |
|
- |
||||||||||
Others |
Financial liabilities at amortized cost |
|
Financial liabilities at amortized cost |
|
14,474,096 |
|
14,474,096 |
|
- |
||||||||||
|
|
|
|
|
280,282,120 |
|
280,282,120 |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
159
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(iii) Impairment of financial assets upon adoption of K-IFRS No.1109
Changes of credit loss allowance as of January 1, 2018, the initial application date of K-IFRS No.1109, were as follows:
Classification K-IFRS No.1039 |
|
Classification K-IFRS No.1109 |
|
Loss allowance under |
|
Loss allowance under |
|
Difference |
Loans and receivables |
|
|
|
|
|
|
|
|
Due from banks |
|
Financial assets at amortized cost |
|
3,080 |
|
3,081 |
|
1 |
Loans and receivables |
|
Financial assets at amortized cost |
|
1,320,101 |
|
1,685,531 |
|
365,430 |
|
|
Financial assets at FVTPL |
|
3,315 |
|
- |
|
(3,315) |
Other financial assets |
|
Financial assets at amortized cost |
|
24,193 |
|
25,174 |
|
981 |
Available-for-sale financial assets |
|
|
|
|
|
|
|
|
Debt securities |
|
Financial assets at FVOCI |
|
- |
|
7,972 |
|
7,972 |
Held-to-maturity financial assets |
|
|
|
|
|
|
|
|
Debt securities |
|
Financial assets at amortized cost |
|
- |
|
1,367 |
|
1,367 |
|
|
|
|
1,350,689 |
|
1,723,125 |
|
372,436 |
Financial guarantee |
|
Financial guarantee |
|
80,587 |
|
81,565 |
|
978 |
Unused credit line and other credit commitment |
|
Unused credit line and other credit commitment |
|
65,740 |
|
64,234 |
|
(1,506) |
|
|
|
|
146,327 |
|
145,799 |
|
(528) |
160
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(iv) Details in reclassification of financial instruments from application of K-IFRS No.1109
For the financial assets and liabilities as of January 1, 2018, the date of the initial application of K-IFRS No.1109, details of reclassifications and remeasurements in the Bank’s financial assets and liabilities from application of K-IFRS No.1109 were as follows:
1) Effects on gross carrying amounts
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
13,057,347 |
|
- |
|
- |
|
13,057,347 |
|
- |
|
- |
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
218,308,764 |
|
- |
|
- |
|
218,308,764 |
|
- |
|
- |
Reclassification to financial assets at FVTPL (*2) |
|
- |
|
(605,367) |
|
- |
|
(605,367) |
|
- |
|
- |
|
|
218,308,764 |
|
(605,367) |
|
- |
|
217,703,397 |
|
- |
|
- |
Other financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
8,788,507 |
|
- |
|
- |
|
8,788,507 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets (debt securities) (*4) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
8,341,580 |
|
- |
|
- |
|
8,341,580 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(8,341,580) |
|
- |
|
(8,341,580) |
|
- |
|
- |
|
|
8,341,580 |
|
(8,341,580) |
|
- |
- |
- |
|
- |
|
- |
Trading assets (equity securities) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
303,993 |
|
- |
|
- |
|
303,993 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(303,993) |
|
- |
|
(303,993) |
|
- |
|
- |
|
|
303,993 |
|
(303,993) |
|
- |
|
- |
|
- |
|
- |
Trading assets (gold deposits) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
189,297 |
|
- |
|
- |
|
189,297 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(189,297) |
|
- |
|
(189,297) |
|
- |
|
- |
|
|
189,297 |
|
(189,297) |
|
- |
|
- |
|
- |
|
- |
Derivative assets (*1) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
2,602,690 |
|
- |
|
- |
|
2,602,690 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(4,363) |
|
- |
|
(4,363) |
|
- |
|
- |
|
|
2,602,690 |
|
(4,363) |
|
- |
|
2,598,327 |
|
- |
|
- |
Available-for-sale financial assets (debt securities) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
28,423,684 |
|
- |
|
- |
|
28,423,684 |
|
- |
|
- |
Reclassification to financial assets at FVOCI |
|
- |
|
(28,423,684) |
|
- |
|
(28,423,684) |
|
- |
|
- |
|
|
28,423,684 |
|
(28,423,684) |
|
- |
|
- |
|
- |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
161
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(iv) Details in reclassification of financial instruments from application of K-IFRS No.1109 (continued)
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Available-for-sale financial assets (equity securities) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
2,702,713 |
|
- |
|
- |
|
2,702,713 |
|
- |
|
- |
Reclassification to financial assets at FVTPL (*3) |
|
- |
|
(2,298,554) |
|
- |
|
(2,298,554) |
|
- |
|
- |
Reclassification to financial assets at FVOCI |
|
- |
|
(404,159) |
|
- |
|
(404,159) |
|
- |
|
- |
|
|
2,702,713 |
|
(2,702,713) |
|
- |
|
- |
|
- |
|
- |
Held-to-maturity financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
14,358,584 |
|
- |
|
- |
|
14,358,584 |
|
- |
|
- |
Reclassification to financial assets at amortized cost |
|
- |
|
(14,358,584) |
|
- |
|
(14,358,584) |
|
- |
|
- |
|
|
14,358,584 |
|
(14,358,584) |
|
- |
|
- |
|
- |
|
- |
Financial assets at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from loans and receivables |
|
- |
|
605,367 |
|
2,456 |
|
607,823 |
|
2,456 |
|
- |
Transfer from trading assets |
|
- |
|
8,834,870 |
|
- |
|
8,834,870 |
|
- |
|
- |
Transfer from available-for-sale financial assets |
|
- |
|
2,298,554 |
|
- |
|
2,298,554 |
|
49,931 |
|
(49,931) |
Transfer from derivative assets |
|
- |
|
4,363 |
|
109 |
|
4,472 |
|
109 |
|
- |
Others |
|
- |
|
(2,575) |
|
- |
|
(2,575) |
|
- |
|
- |
|
|
- |
|
11,740,579 |
|
2,565 |
|
11,743,144 |
|
52,496 |
|
(49,931) |
Financial assets at FVOCI (*5) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from available-for-sale financial assets |
|
- |
|
28,827,843 |
|
- |
|
28,827,843 |
|
200,339 |
|
(200,339) |
|
|
- |
|
28,827,843 |
|
- |
|
28,827,843 |
|
200,339 |
|
(200,339) |
Financial assets at amortized cost (*5) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from held-to-maturity financial assets |
|
- |
|
14,358,584 |
|
- |
|
14,358,584 |
|
- |
|
- |
|
|
- |
|
14,358,584 |
|
- |
|
14,358,584 |
|
- |
|
- |
|
|
297,077,159 |
|
(2,575) |
|
2,565 |
|
297,077,149 |
|
252,835 |
|
(250,270) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
223,975,037 |
|
- |
|
- |
|
223,975,037 |
|
- |
|
- |
Trading liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
434,586 |
|
- |
|
- |
|
434,586 |
|
- |
|
- |
Reclassification to financial liabilities at FVTPL |
|
- |
|
(434,586) |
|
- |
|
(434,586) |
|
- |
|
- |
|
|
434,586 |
|
(434,586) |
|
- |
|
- |
|
- |
|
- |
Financial liabilities at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from trading liabilities |
|
- |
|
434,586 |
|
- |
|
434,586 |
|
- |
|
- |
|
|
- |
|
434,586 |
|
- |
|
434,586 |
|
- |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
162
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(iv) Details in reclassification of financial instruments from application of K-IFRS No.1109 (continued)
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
2,996,958 |
|
- |
|
- |
|
2,996,958 |
|
- |
|
- |
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
14,471,720 |
|
- |
|
- |
|
14,471,720 |
|
- |
|
- |
Debt securities issued |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
23,929,723 |
|
- |
|
- |
|
23,929,723 |
|
- |
|
- |
Other financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
14,474,096 |
|
- |
|
- |
|
14,474,096 |
|
- |
|
- |
|
|
280,282,120 |
|
- |
|
- |
|
280,282,120 |
|
- |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
(*2) Loans and receivables amounted to W605,367 million under K-IFRS No.1039 have been reclassified to financial assets at FVTPL from application of K-IFRS No.1109. The reasons for reclassification were as follows:
Classification |
|
Amounts |
|
|
|
Reclassification by business model for financial asset management |
|
495,700 |
Financial assets not qualifying characteristics of contractual cash flows that are solely payments of principal and interest |
|
109,667 |
|
|
605,367 |
(*3) Equity securities amounted to W2,298,554 million under K-IFRS No.1039, which were classified as available- for-sale financial assets, have been reclassified to financial assets at FVTPL from application of K-IFRS No.1109. The reasons for reclassification were as follows:
Classification |
|
Amounts |
|
|
|
Financial asset not qualifying characteristics of contractual cash flows that are solely payments of principal and interest of puttable financial instruments |
|
2,204,045 |
No designation of financial assets at FVOCI |
|
94,509 |
|
|
2,298,554 |
(*4) With respect to financial assets and financial liabilities reclassified from financial assets at FVTPL, effective interest rates calculated on the initial application date of K-IFRS No.1109 and interest income or expense recognized shall be disclosed. Such reclassification has not occurred from the application of K-IFRS No.1109.
(*5) With respect to financial assets and financial liabilities reclassified to financial instruments at amortized cost, and financial assets at FVTPL reclassified to financial assets at FVOCI, the gain or loss on fair value measurement that would otherwise have been recognized in profit or loss or other comprehensive income in the reporting period, and the fair value of the financial assets or financial liabilities, shall be disclosed. Such reclassification has not occurred from application of K-IFRS No.1109.
163
SHINHAN BANK
Notes to the Separate Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43. Transition effects arising from changes in accounting policies (continued)
(iv) Details in reclassification of financial instruments from application of K-IFRS No.1109 (continued)
2) Credit loss allowance
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Credit loss allowance for |
|
|
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
3,080 |
|
- |
|
1 |
|
3,081 |
|
(1) |
|
- |
Loans and receivables |
|
1,323,416 |
|
(3,315) |
|
365,430 |
|
1,685,531 |
|
(362,115) |
|
- |
Financial guarantee |
|
80,587 |
|
- |
|
978 |
|
81,565 |
|
(978) |
|
- |
Unused credit line and other credit commitment |
|
65,740 |
|
- |
|
(1,506) |
|
64,234 |
|
1,506 |
|
- |
Debt securities at FVOCI |
|
- |
|
- |
|
7,972 |
|
7,972 |
|
(7,972) |
|
7,972 |
Debt securities at amortized cost |
|
- |
|
- |
|
1,367 |
|
1,367 |
|
(1,367) |
|
- |
Other financial assets |
|
24,193 |
|
- |
|
981 |
|
25,174 |
|
(981) |
|
- |
|
|
1,497,016 |
|
(3,315) |
|
375,223 |
|
1,868,924 |
|
(371,908) |
|
7,972 |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
(v) Hedge accounting
K-IFRS No.1109 maintains the mechanics of hedge accounting (i.e. fair value hedge, cash flow hedge, hedge of a net investment in a foreign operation) as defined in K-IFRS No.1039, whereas a principle-based hedge accounting requirements that focuses on an entity’s risk replaced complex and rule-based hedge accounting requirements in K-IFRS No.1039. Additionally, qualifying hedged items and qualifying hedging instruments have been expanded and hedge accounting requirements have been eased by eliminating a subsequent hedge effectiveness assessment and a quantitative test (80~125%).
Hedge accounting can be applied to certain transactions that fail to qualify for hedge accounting requirements under K-IFRS No.1039 when applying K-IFRS No.1109, and thus alleviates profit or loss volatility.
The Bank applied the requirements for hedge accounting under K-IFRS No.1109 as much as possible to the risk management activities that meet the requirements for hedge accounting. As of December 31, 2018, there were no transactions that failed to qualify for hedge accounting requirements under K-IFRS No.1039 but for which hedge accounting was applied under K-IFRS No.1109.
164
Independent Auditors’ Review Report on Internal Accounting Control System
English translation of a Report Originally Issued in Korean
To the President of
Shinhan Bank:
We have reviewed the accompanying Report on the Operational Status of Internal Accounting Control System (“IACS”) of Shinhan Bank (the “Bank”) as of December 31, 2018. The Bank's management is responsible for designing and maintaining effective IACS and for its assessment of the effectiveness of IACS. Our responsibility is to review management's assessment and issue a report based on our review. In the accompanying report of management’s assessment of IACS, the Bank’s management stated: “Based on the assessment of the operational status of the IACS, no material weaknesses are identified as of December 31, 2018, in all material respects, in accordance with the IACS Framework issued by the Internal Accounting Control System Operation Committee.”
We conducted our review in accordance with IACS Review Standards, issued by the Korean Institute of Certified Public Accountants. Those Standards require that we plan and perform the review to obtain assurance of a level less than that of an audit as to whether the Report on the Operational Status of Internal Accounting Control System is free of material misstatement. Our review consists principally of obtaining an understanding of the Bank’s IACS, inquiries of company personnel about the details of the report, and tracing to related documents we considered necessary in the circumstances. We have not performed an audit and, accordingly, we do not express an audit opinion.
A company's IACS is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Korean International Financial Reporting Standards. Because of its inherent limitations, however, IACS may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our review, nothing has come to our attention that the Report on the Operational Status of Internal Accounting Control System as of December 31, 2018 is not prepared, in all material respects, in accordance with the IACS Framework issued by the Internal Accounting Control System Operation Committee.
This report applies to the Bank’s IACS in existence as of December 31, 2018. We did not review the Bank’s IACS subsequent to December 31, 2018. This report has been prepared for Korean regulatory purposes, pursuant to the Act on External Audit of Stock Companies, Etc. and may not be appropriate for other purposes or for other users.
KPMG Samjong Accounting Corp.
Seoul, Korea
March 11, 2019
Notice to Readers This report is annexed in relation to the audit of the separate financial statements as of December 31, 2018. |
165
166
167
Exhibit 99.2
SHINHAN BANK AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2018 and 2017
(With Independent Auditors’ Report Thereon)
Contents
|
|
Page |
|
|
|
Independent Auditors’ Report |
|
1 |
|
|
|
Consolidated Statements of Financial Position |
|
3 |
|
|
|
Consolidated Statements of Comprehensive Income |
|
4 |
|
|
|
Consolidated Statements of Changes in Equity |
|
6 |
|
|
|
Consolidated Statements of Cash Flows |
|
8 |
|
|
|
Notes to the Consolidated Financial Statements |
|
10 |
|
|
|
Independent Auditors’ Report
(Based on a report originally issued in Korean)
To the Board of Directors and Stockholder of
Shinhan Bank:
Opinion
We have audited the consolidated financial statements of Shinhan Bank and its subsidiaries (“the Group”), which comprise the consolidated statements of financial position as of December 31, 2018 and 2017, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing (KSAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Matter
The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1
• |
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
|
• |
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. |
|
• |
Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management. |
|
• |
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
|
• |
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
|
• |
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
|
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
KPMG Samjong Accounting Corp.
Seoul, Korea
March 11, 2019
This report is effective as of March 11, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
2
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Financial Position
As of December 31, 2018 and 2017
(In millions of won) |
|
Notes |
|
December 31, 2018 (*1) |
|
December 31, 2017 (*1) |
Assets |
|
|
|
|
|
|
Cash and due from banks |
|
4,7,10,40,41 |
|
13,150,277 |
|
18,662,322 |
Securities at fair value through profit or loss |
|
|
|
15,612,433 |
|
- |
Trading assets |
|
4,8,41,43 |
|
- |
|
11,216,398 |
Derivative assets |
|
4,9,41,43 |
|
1,484,458 |
|
2,604,090 |
Loans at amortized cost |
|
4,10,18,41,43 |
|
251,233,806 |
|
- |
Loans at fair value through profit or loss |
|
4,10 |
|
645,237 |
|
- |
Loans |
|
4,10,18,41,43 |
|
- |
|
231,732,156 |
Securities at fair value through other comprehensive income |
|
|
|
31,878,348 |
|
- |
Available-for-sale financial assets |
|
4,11,18,43 |
|
- |
|
32,495,541 |
Securities at amortized cost |
|
4,11,18,43 |
|
16,824,400 |
|
- |
Held-to-maturity financial assets |
|
4,11,18,43 |
|
- |
|
14,822,898 |
Property and equipment |
|
6,12,17,18 |
|
2,014,412 |
|
2,055,875 |
Intangible assets |
|
6,13 |
|
316,229 |
|
299,579 |
Investments in associates |
|
14 |
|
109,742 |
|
100,336 |
Investment properties |
|
6,15 |
|
571,293 |
|
598,296 |
Defined benefit assets |
|
24 |
|
- |
|
34,120 |
Current tax assets |
|
37 |
|
43,026 |
|
24,674 |
Deferred tax assets |
|
37 |
|
222,766 |
|
407,344 |
Other assets |
|
4,10,16,41,43 |
|
14,409,627 |
|
9,253,079 |
Non-current assets held for sale |
|
17 |
|
7,561 |
|
7,534 |
Total assets |
|
|
|
348,523,615 |
|
324,314,242 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits |
|
4,20,41 |
|
257,892,724 |
|
242,653,744 |
Financial liabilities at fair value through profit or loss |
|
4,21 |
|
479,559 |
|
- |
Trading liabilities |
|
4,21 |
|
- |
|
434,586 |
Derivative liabilities |
|
4,9,41,43 |
|
1,771,585 |
|
2,992,936 |
Borrowings |
|
4,22,40,41 |
|
16,154,821 |
|
14,617,562 |
Debt securities issued |
|
4,23,40 |
|
31,899,266 |
|
25,460,427 |
Defined benefit liabilities |
|
24 |
|
70,649 |
|
3,805 |
Provisions |
|
25,39,41 |
|
284,716 |
|
259,323 |
Current tax liabilities |
|
37 |
|
319,428 |
|
210,944 |
Deferred tax liabilities |
|
37 |
|
23,480 |
|
11,994 |
Other liabilities |
|
4,26,41,44 |
|
15,434,848 |
|
15,014,977 |
Total liabilities |
|
|
|
324,331,076 |
|
301,660,298 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Capital stock |
|
27 |
|
7,928,078 |
|
7,928,078 |
Hybrid bonds |
|
27 |
|
698,660 |
|
668,938 |
Capital surplus |
|
27 |
|
403,164 |
|
403,164 |
Capital adjustments |
|
27,37 |
|
646 |
|
(3,307) |
Accumulated other comprehensive loss |
|
27,37 |
|
(606,697) |
|
(490,772) |
Retained earnings |
|
27,28 |
|
15,762,751 |
|
14,142,545 |
Total equity attributable to equity holder of Shinhan Bank |
|
|
|
24,186,602 |
|
22,648,646 |
Non-controlling interests |
|
27 |
|
5,937 |
|
5,298 |
Total equity |
|
|
|
24,192,539 |
|
22,653,944 |
Total liabilities and equity |
|
|
|
348,523,615 |
|
324,314,242 |
3
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Financial Position
As of December 31, 2018 and 2017
(*1) The consolidated statement of financial position as of December 31, 2018 was prepared in accordance with K-IFRS No.1109 and K-IFRS No.1115. However, the comparative consolidated statement of financial position as of December 31, 2017 was not retrospectively restated.
See accompanying notes to the consolidated financial statements.
4
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2018 and 2017
|
Notes |
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
|
|
|
Interest income |
|
|
|
9,596,725 |
|
8,123,401 |
Financial assets at fair value through profit or loss |
|
|
|
234,031 |
|
- |
Trading assets |
|
|
|
- |
|
181,654 |
Financial assets at fair value through other comprehensive income and amortized cost |
|
|
|
9,362,694 |
|
- |
Loans and receivables and investment securities |
|
|
|
- |
|
7,941,747 |
Interest expense |
|
|
|
(4,010,731) |
|
(3,131,350) |
Net interest income |
|
4,6,29,41,43 |
|
5,585,994 |
|
4,992,051 |
|
|
|
|
|
|
|
Fees and commission income |
|
|
|
1,257,752 |
|
1,183,874 |
Fees and commission expense |
|
|
|
(221,219) |
|
(192,799) |
Net fees and commission income |
|
4,6,30,41,43 |
|
1,036,533 |
|
991,075 |
|
|
|
|
|
|
|
Dividend income |
|
31,43 |
|
15,662 |
|
100,516 |
Net gain on financial assets at fair value through profit or loss |
|
|
|
358,511 |
|
- |
Net trading loss |
|
32 |
|
- |
|
(164,898) |
Net foreign currencies transaction gain |
|
32 |
|
141,745 |
|
472,576 |
Net loss on financial instruments designated at fair value through profit or loss |
|
19 |
|
- |
|
(43) |
Net gain on disposal of financial asset at fair value through other comprehensive income |
|
11 |
|
16,387 |
|
- |
Net gain on sale of available-for-sale financial assets |
|
11 |
|
- |
|
195,845 |
Provision for credit loss allowance |
|
|
|
(243,139) |
|
- |
Impairment loss on financial assets |
|
4,10,41 |
|
- |
|
(660,561) |
General and administrative expenses |
|
33,41 |
|
(3,061,786) |
|
(3,118,058) |
Net other operating expenses |
|
6,35,41 |
|
(685,221) |
|
(602,789) |
Operating income |
|
|
|
3,164,686 |
|
2,205,714 |
|
|
|
|
|
|
|
Net non-operating expenses |
|
6,36 |
|
(17,305) |
|
(47,922) |
|
|
|
|
|
|
|
Share of profit (loss) of associates |
|
6,14 |
|
(977) |
|
1,306 |
Profit before income tax |
|
6 |
|
3,146,404 |
|
2,159,098 |
|
|
|
|
|
|
|
Income tax expense |
|
6,37 |
|
(867,042) |
|
(446,784) |
Profit for the year |
|
6,27 |
|
2,279,362 |
|
1,712,314 |
|
|
|
|
|
|
|
5
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Continued)
For the years ended December 31, 2018 and 2017
|
Notes |
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
|
|
|
Other comprehensive income (loss) for the year: Items that are or may be reclassified subsequently to profit or loss |
|
4,27,37
|
|
|
|
|
Foreign currency translation differences for foreign operations |
|
|
|
21,299 |
|
(186,232) |
Unrealized net change in fair value of financial assets at fair value through other comprehensive income |
|
|
|
87,074 |
|
- |
Unrealized net change in fair value of available-for-sale financial assets |
|
|
|
- |
|
(92,969) |
Share of other comprehensive loss of associates |
|
|
|
(1,754) |
|
(10,563) |
|
|
|
|
106,619 |
|
(289,764) |
Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
|
Remeasurements of defined benefit plans |
|
|
|
(70,399) |
|
73,879 |
Unrealized net change in fair value of financial assets at fair value through other comprehensive income |
|
|
|
17,670 |
|
- |
Share of other comprehensive income of associates |
|
|
|
14 |
|
152 |
|
|
|
|
(52,715) |
|
74,031 |
Other comprehensive income (loss) for the year, net of income tax |
|
|
|
53,904 |
|
(215,733) |
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
2,333,266 |
|
1,496,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to: |
|
6 |
|
|
|
|
Equity holder of Shinhan Bank |
|
|
|
2,279,049 |
|
1,712,073 |
Non-controlling interests |
|
|
|
313 |
|
241 |
Profit for the year |
|
|
|
2,279,362 |
|
1,712,314 |
Total comprehensive income (loss) attributable to: |
|
|
|
|
|
|
Equity holder of Shinhan Bank |
|
|
|
2,332,943 |
|
1,497,332 |
Non-controlling interests |
|
|
|
323 |
|
(751) |
Total comprehensive income for the year |
|
|
|
2,333,266 |
|
1,496,581 |
|
|
|
|
|
|
|
Earnings per share: |
|
38 |
|
|
|
|
Basic and diluted earnings per share in won |
|
|
|
1,421 |
|
1,061 |
|
|
|
|
|
|
|
(*1) The consolidated statement of comprehensive income for the year ended December 31, 2018 was prepared in accordance with K-IFRS No.1109 and K-IFRS No.1115. However, the comparative consolidated statement of comprehensive income for the year ended December 31, 2017 was not retrospectively restated.
See accompanying notes to the consolidated financial statements.
6
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the year ended December 31, 2017
|
|
|
Attributable to equity holder of Shinhan Bank |
|
|
|
|
|||||||||||||
(In millions of won) |
|
|
Capital stock |
|
Hybrid bonds |
|
Capital surplus |
|
Capital adjustments |
|
Accumulated other comprehensive income (loss) |
|
Retained earnings |
|
Sub-total |
|
Non-controlling interests |
|
Total (*1) |
|
Balance at January 1, 2017 |
|
|
7,928,078 |
|
469,393 |
|
403,164 |
|
(64,615) |
|
(276,445) |
|
13,000,837 |
|
21,460,412 |
|
6,561 |
|
21,466,973 |
|
Total comprehensive income (loss), net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,712,073 |
|
1,712,073 |
|
241 |
|
1,712,314 |
|
Foreign currency translation differences for foreign operations |
|
|
- |
|
- |
|
- |
|
- |
|
(185,227) |
|
- |
|
(185,227) |
|
(1,005) |
|
(186,232) |
|
Unrealized net changes in fair values of |
|
|
- |
|
- |
|
- |
|
- |
|
(92,983) |
|
- |
|
(92,983) |
|
14 |
|
(92,969) |
|
Share of other comprehensive loss of associates |
|
|
- |
|
- |
|
- |
|
- |
|
(9,997) |
|
(414) |
|
(10,411) |
|
- |
|
(10,411) |
|
Remeasurements of defined benefit plans |
|
|
- |
|
- |
|
- |
|
- |
|
73,880 |
|
- |
|
73,880 |
|
(1) |
|
73,879 |
|
Total comprehensive income (loss) for the year |
|
|
- |
|
- |
|
- |
|
- |
|
(214,327) |
|
1,711,659 |
|
1,497,332 |
|
(751) |
|
1,496,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners, recognized directly |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends to equity holder |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
(480,000) |
|
(480,000) |
|
- |
|
(480,000) |
|
Dividends to hybrid bond holders |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
(29,857) |
|
(29,857) |
|
- |
|
(29,857) |
|
Redemption of hybrid bonds |
|
|
- |
|
199,545 |
|
- |
|
- |
|
- |
|
- |
|
199,545 |
|
- |
|
199,545 |
|
Share-based payment transactions |
|
|
- |
|
- |
|
- |
|
1,213 |
|
- |
|
- |
|
1,213 |
|
- |
|
1,213 |
|
Capital investment in subsidiaries |
|
|
- |
|
- |
|
- |
|
1 |
|
- |
|
- |
|
- |
|
(512) |
|
(511) |
|
Disposal of other capital adjustments |
|
|
- |
|
- |
|
- |
|
60,094 |
|
- |
|
(60,094) |
|
- |
|
- |
|
- |
|
Total transactions with owners |
|
|
- |
|
199,545 |
|
- |
|
61,308 |
|
- |
|
(569,951) |
|
(309,099) |
|
(512) |
|
(309,610) |
|
Balance at December 31, 2017 |
|
|
7,928,078 |
|
668,938 |
|
403,164 |
|
(3,307) |
|
(490,772) |
|
14,142,545 |
|
22,648,646 |
|
5,298 |
|
22,653,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
7
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Changes in Equity (Continued)
For the year ended December 31, 2018
|
|
|
Attributable to equity holder of Shinhan Bank |
|
|
|
|
|||||||||||||
(In millions of won) |
|
|
Capital stock |
|
Hybrid bonds |
|
Capital surplus |
|
Capital adjustments |
|
Accumulated other comprehensive income (loss) (*1) |
|
Retained earnings (*1) |
|
Sub-total (*1) |
|
Non-controlling interests (*1) |
|
Total (*1) |
|
Balance at January 1, 2018 |
|
|
7,928,078 |
|
668,938 |
|
403,164 |
|
(3,307) |
|
(490,772) |
|
14,142,545 |
|
22,648,646 |
|
5,298 |
|
22,653,944 |
|
Adjustments on initial application of K-IFRS No.1109 and K-IFRS No.1115, net of income tax (Note 46) |
|
|
- |
|
- |
|
- |
|
- |
|
(173,021) |
|
(90,413) |
|
(263,434) |
|
(418) |
|
(263,852) |
|
Balance at January 1, 2018 (adjusted) |
|
|
7,928,078 |
|
668,938 |
|
403,164 |
|
(3,307) |
|
(663,793) |
|
14,052,132 |
|
22,385,212 |
|
4,880 |
|
22,390,092 |
|
Total comprehensive income (loss), net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
2,279,049 |
|
2,279,049 |
|
313 |
|
2,279,362 |
|
Foreign currency translation differences for foreign operations |
|
|
- |
|
- |
|
- |
|
- |
|
21,277 |
|
- |
|
21,277 |
|
22 |
|
21,299 |
|
Unrealized net changes in fair values of financial assets at fair value through other comprehensive income |
|
|
- |
|
- |
|
- |
|
- |
|
107,944 |
|
(3,189) |
|
104,755 |
|
(11) |
|
104,744 |
|
Share of other comprehensive loss of associates |
|
|
- |
|
- |
|
- |
|
- |
|
(1,727) |
|
(13) |
|
(1,740) |
|
- |
|
(1,740) |
|
Remeasurements of defined benefit plans |
|
|
- |
|
- |
|
- |
|
- |
|
(70,398) |
|
- |
|
(70,398) |
|
(1) |
|
(70,399) |
|
Total comprehensive income for the year |
|
|
- |
|
- |
|
- |
|
- |
|
57,096 |
|
2,275,847 |
|
2,332,943 |
|
323 |
|
2,333,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners, recognized directly in equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual dividends to equity holder |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
(540,000) |
|
(540,000) |
|
- |
|
(540,000) |
|
Dividends to hybrid bond holders |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
(25,228) |
|
(25,228) |
|
- |
|
(25,228) |
|
Issuance of hybrid bonds |
|
|
- |
|
199,547 |
|
- |
|
- |
|
- |
|
- |
|
199,547 |
|
- |
|
199,547 |
|
Redemption of hybrid bonds |
|
|
- |
|
(169,825) |
|
- |
|
(175) |
|
- |
|
- |
|
(170,000) |
|
- |
|
(170,000) |
|
Share-based payment transactions |
|
|
- |
|
- |
|
- |
|
4,128 |
|
- |
|
- |
|
4,128 |
|
- |
|
4,128 |
|
Capital investment in subsidiaries |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
734 |
|
734 |
|
Total transactions with owners |
|
|
- |
|
29,722 |
|
- |
|
3,953 |
|
- |
|
(565,228) |
|
(531,553) |
|
734 |
|
(530,819) |
|
Balance at December 31, 2018 |
|
|
7,928,078 |
|
698,660 |
|
403,164 |
|
646 |
|
(606,697) |
|
15,762,751 |
|
24,186,602 |
|
5,937 |
|
24,192,539 |
8
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the year ended December 31, 2018
(*1) The consolidated statement of changes in equity for the year ended December 31, 2018 was prepared in accordance with K-IFRS No.1109 and K-IFRS No.1115. However, the comparative consolidated statement of changes in equity for the year ended December 31, 2017 was not retrospectively restated.
See accompanying notes to the consolidated financial statements.
9
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 2018 and 2017
(In millions of won) |
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Profit before income tax |
|
3,146,404 |
|
2,159,098 |
Adjustments for: |
|
|
|
|
Net interest income |
|
(5,585,994) |
|
(4,992,051) |
Dividend income |
|
(15,662) |
|
(100,516) |
Net gain on financial assets at fair value through profit or loss |
|
(253,832) |
|
- |
Net non-cash trading loss |
|
- |
|
(24,019) |
Net non-cash foreign currencies transaction loss (gain) |
|
129,495 |
|
(207,133) |
Net gain on sale of financial assets at fair value through other comprehensive income |
|
(15,288) |
|
- |
Net gain on sale of available-for-sale financial assets |
|
- |
|
(195,845) |
Provision for credit loss allowance |
|
245,218 |
|
- |
Net impairment loss on financial assets at fair value through other comprehensive income |
|
- |
|
482,333 |
Net impairment loss on available-for-sale financial assets |
|
- |
|
178,228 |
Non-cash employee benefits |
|
109,500 |
|
141,360 |
Depreciation and amortization |
|
196,027 |
|
158,954 |
Net non-cash other operating expenses |
|
(40,419) |
|
(13,786) |
Share of loss (gain) of associates |
|
977 |
|
(1,306) |
Net non-cash non-operating expenses |
|
(5,828) |
|
(15,870) |
|
|
(5,235,806) |
|
(4,589,651) |
Changes in assets and liabilities: |
|
|
|
|
Due from banks |
|
6,571,282 |
|
(3,878,473) |
Securities at fair value through profit or loss |
|
(2,192,359) |
|
- |
Trading assets |
|
- |
|
23,330 |
Derivative assets |
|
2,748,118 |
|
3,010,188 |
Loans at amortized cost |
|
(22,536,002) |
|
- |
Loans at fair value through profit or loss |
|
(34,732) |
|
- |
Loans |
|
- |
|
(14,611,563) |
Other assets |
|
(4,910,938) |
|
3,109,802 |
Financial liabilities designated at fair value through profit or loss |
|
- |
|
(6,282) |
Deposits |
|
16,408,681 |
|
15,072,282 |
Financial liabilities at fair value through profit or loss |
|
27,561 |
|
- |
Trading liabilities |
|
- |
|
(52,591) |
Derivative liabilities |
|
(2,679,631) |
|
(2,981,452) |
Defined benefit liabilities |
|
(94,396) |
|
(125,561) |
Provisions |
|
19,817 |
|
(16,032) |
Other liabilities |
|
734,212 |
|
1,984,768 |
|
|
(5,938,387) |
|
1,528,416 |
|
|
|
|
|
Income tax paid |
|
(509,165) |
|
(331,970) |
Interest received |
|
9,527,836 |
|
7,989,875 |
Interest paid |
|
(4,143,026) |
|
(2,886,843) |
Dividends received |
|
18,435 |
|
104,268 |
Net cash provided by (used in) operating activities |
|
(3,133,709) |
|
3,973,193 |
|
|
|
|
|
10
SHINHAN BANK AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 2018 and 2017
|
2018 (*1) |
|
2017 (*1) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Proceeds from sale of securities at fair value through profit or loss |
|
925,774 |
|
- |
Acquisition of securities at fair value through profit or loss |
|
(925,116) |
|
- |
Proceeds from sale of securities at fair value through other comprehensive income |
|
23,102,529 |
|
- |
Acquisition of securities at fair value through other comprehensive income |
|
(23,603,810) |
|
- |
Proceeds from sale of available-for-sale financial assets |
|
- |
|
23,462,272 |
Acquisition of available-for-sale financial assets |
|
- |
|
(28,581,468) |
Proceeds from sale of securities at amortized cost |
|
1,846,933 |
|
- |
Acquisition of securities at amortized cost |
|
(3,751,191) |
|
- |
Proceeds from redemption of held-to-maturity financial assets |
|
- |
|
1,559,419 |
Acquisition of held-to-maturity financial assets |
|
- |
|
(4,820,662) |
Proceeds from sale of property and equipment |
|
35,907 |
|
10,543 |
Acquisition of property and equipment |
|
(90,625) |
|
(84,470) |
Proceeds from sale of intangible assets |
|
2,648 |
|
4,757 |
Acquisition of intangible assets |
|
(93,282) |
|
(75,717) |
Proceeds from sale of investments in associates |
|
10,944 |
|
69,257 |
Acquisition of investments in associates |
|
(21,377) |
|
(25,298) |
Proceeds from sale of investment properties |
|
15,274 |
|
3,507 |
Acquisition of investment properties |
|
(1,132) |
|
(2,120) |
Proceeds from sale of non-current assets held for sale |
|
3,175 |
|
10,466 |
Proceeds from sale of other assets |
|
945,794 |
|
930,097 |
Acquisition of other assets |
|
(944,869) |
|
(914,571) |
Acquisition of subsidiaries, net of cash acquired |
|
- |
|
83,631 |
Net cash used in investing activities |
|
(2,542,424) |
|
(8,370,357) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from borrowings, net |
|
1,134,388 |
|
958,927 |
Proceeds from issuance of debt securities |
|
14,749,462 |
|
10,772,423 |
Repayment of debt securities |
|
(8,271,552) |
|
(6,302,222) |
Dividends paid |
|
(563,999) |
|
(511,165) |
Issuance of hybrid bonds |
|
199,547 |
|
199,545 |
Redemption of hybrid bonds |
|
(170,000) |
|
- |
Increase of other liabilities |
|
95,415 |
|
140,454 |
Decrease of other liabilities |
|
(94,621) |
|
(132,265) |
Contribution from (payment to) non-controlling interests |
|
734 |
|
(3,149) |
Net cash provided by financing activities |
|
7,079,374 |
|
5,122,548 |
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents held |
|
(29,174) |
|
(22,065) |
Net increase in cash and cash equivalents |
|
1,374,067 |
|
703,319 |
|
|
|
|
|
Cash and cash equivalents at beginning of the year (Note 40) |
|
5,330,886 |
|
4,627,784 |
|
|
|
|
|
Cash and cash equivalents at end of the year (Note 40) |
|
6,704,953 |
|
5,331,103 |
|
|
|
|
|
(*1) The consolidated statement of cash flows for the year ended December 31, 2018 was prepared in accordance with K-IFRS No.1109 and K-IFRS No.1115. However, the comparative consolidated statement of cash flows for the year ended December 31, 2017 was not retrospectively restated.
See accompanying notes to the consolidated financial statements.
11
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
Shinhan Bank (the “Bank”), the controlling company, is headquartered at 20, Sejong-daero 9-gil, Jung-gu, Seoul, Republic of Korea. Consolidated financial statements for the year presented herein consist of the Bank and subsidiaries (collectively referred to as "the Group"), and equity interests in associates and joint ventures of the Group.
(a) Controlling company
The Bank was established on October 1, 1943 under the name of Chohung Bank, through the merger of Hanseung Bank and Dongil Bank, which were established on February 19, 1897 and August 8, 1906, respectively, to engage in commercial banking and trust operations.
The Bank acquired Chungbuk Bank and Kangwon Bank in 1999, and the former Shinhan Bank on April 1, 2006, and subsequently changed its name to Shinhan Bank. As of December 31, 2018, the Bank has 1,585,615,506 outstanding common shares with par value of W7,928,078 million which Shinhan Financial Group Co., Ltd. (“Shinhan Financial Group”) owns 100% of those. As of December 31, 2018, the Bank operates through 741 domestic branches, 135 depositary offices, 30 premises and 14 overseas branches.
(b) Subsidiaries included in consolidation
Details of ownerships in subsidiaries as of December 31, 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
Ownership (%) |
||
Subsidiaries |
|
Location |
|
Fiscal year-end |
|
Sector |
|
December 31, 2018 |
|
December 31, 2017 |
Shinhan Asia |
|
Hong Kong |
|
December |
|
Wholesale finance |
|
99.99 |
|
99.99 |
Shinhan America |
|
U.S.A |
|
December |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan Europe |
|
Germany |
|
December |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan Cambodia |
|
Cambodia |
|
December |
|
Banking |
|
97.50 |
|
97.50 |
Shinhan Kazakhstan |
|
Kazakhstan |
|
December |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan Canada |
|
Canada |
|
December |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan China |
|
China |
|
December |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan Japan |
|
Japan |
|
March |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan Vietnam |
|
Vietnam |
|
December |
|
Banking |
|
100.00 |
|
100.00 |
Shinhan Mexico |
|
Mexico |
|
December |
|
Banking |
|
99.99 |
|
99.99 |
Shinhan Indonesia |
|
Indonesia |
|
December |
|
Banking |
|
99.00 |
|
99.00 |
i) Shinhan Asia Ltd.
Shinhan Asia Ltd. (“Shinhan Asia”) engages in merchant banking activities in Hong Kong. As of December 31, 2018, Shinhan Asia’s capital stock amounted to USD 100 million.
ii) Shinhan Bank America
Shinhan Bank America (“Shinhan America”) was established on March 24, 2003 through the merger of Chohung Bank of New York and California Chohung Bank. As a result of rights offering during the year ended December 31, 2018, Shinhan America’s capital stock amounted to USD 173 million as of December 31, 2018.
iii) Shinhan Bank Europe GmbH
Shinhan Bank Europe GmbH (“Shinhan Europe”) was established in 1994. As of December 31, 2018, Shinhan Europe’s capital stock amounted to EUR 23 million.
12
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(b) Subsidiaries included in consolidation (continued) |
|
iv) Shinhan Bank Cambodia
Shinhan Khmer Bank PLC (“Shinhan Khmer”) was established on October 15, 2007. Shinhan Bank Cambodia was renamed from Shinhan Khmer Bank PLC in the year ended December 31, 2018. As a result of rights offering during the year ended December 31, 2018, Shinhan Bank Cambodia’s capital stock amounted to USD 75 million as of December 31, 2018.
v) Shinhan Bank Kazakhstan Limited
Shinhan Bank Kazakhstan Limited (“Shinhan Kazakhstan”) was established on December 16, 2008. As of December 31, 2018, Shinhan Kazakhstan’s capital stock amounted to KZT 10,029 million.
vi) Shinhan Bank Canada
Shinhan Bank Canada (“Shinhan Canada”) was established on March 9, 2009. As of December 31, 2018, Shinhan Canada’s capital stock amounted to CAD 80 million.
vii) Shinhan Bank China Limited
Shinhan Bank China Limited (“Shinhan China”) was established on May 12, 2008. As of December 31, 2018, Shinhan China’s capital stock amounted to CNY 2,000 million.
viii) Shinhan Bank Japan
Shinhan Bank Japan (“Shinhan Japan”) was established on September 14, 2009. As a result of rights offering during the year ended December, 2018, Shinhan Japan’s capital stock amounted to JPY 17,500 million as of December 31, 2018.
ix) Shinhan Bank Vietnam Ltd.
Shinhan Bank Vietnam Ltd. (“Shinhan Vietnam”) was established on November 16, 2009 and merged with Shinhan Vina Bank on November 28, 2011. On December 17, 2017, Shinhan Vietnam acquired the retail business of ANZ Vietnam. As of December 31, 2018, Shinhan Vietnam’s capital stock amounted to VND 4,547,100 million.
x) Banco Shinhan de Mexico
Banco Shinhan de Mexico (“Shinhan Mexico”) was established on October 12, 2015 for obtaining the authorization of banking business. As a result of the rights offering during the year ended December 31, 2017, Shinhan Mexico’s issued capital stock amounted to MXN 1,583 million as of December 31, 2018.
xi) PT Bank Shinhan Indonesia
On November 30, 2015, the Bank acquired 97.76% of voting share and obtained the control of PT Bank Metro Express, which was established on September 8, 1967 and is engaged in the banking business. PT Bank Metro Express was renamed as PT Bank Shinhan Indonesia (“Shinhan Indonesia”) in 2016 and merged PT Centratama Nasional Bank, a former subsidiary of the Bank, on December 6, 2016. As a result of the rights offering during the year ended December 31, 2017, the issued capital of Shinhan Indonesia amounted to IDR 944,278 million as of December 31, 2018.
13
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(c) Subsidiaries included in consolidation (continued)
In addition, structured entities included in consolidation as of December 31, 2018 and 2017 were as follows:
Structured entities |
|
Location |
|
Fiscal period-end (month) |
MPC Yulchon Green 1st |
|
Korea |
|
3 / 6 / 9 / 12 |
MPC Yulchon 2nd |
|
Korea |
|
3 / 6 / 9 / 12 |
MPC Yulchon 1st |
|
Korea |
|
3 / 6 / 9 / 12 |
S-Nuri 1st Co., Ltd. |
|
Korea |
|
2 / 4 / 6 / 8 / 10 / 12 |
Shinhan-S-Russell Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
GPS 11th Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny Financial 1st Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
S-way 5th Co., Ltd. |
|
Korea |
|
10 |
Sunny Financial 2nd Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny Financial 9th Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny More 3rd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny More 1st Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny More 2nd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny More 5th Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny More 10th Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
CGN YULCHON 2nd Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
Sunny Dream 4th L.L.C |
|
Korea |
|
3 / 6 / 9 / 12 |
Sunny Dream 7th Co., Ltd. |
|
Korea |
|
10 |
Sunny Dream 9th L.L.C |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny Dream 5th Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny Russell 3rd L.L.C |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny Russell 8th Co., Ltd. |
|
Korea |
|
12 |
|
|
|
|
|
14
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(c) Subsidiaries included in consolidation (continued)
Structured entities |
|
Location |
|
Fiscal period-end (month) |
Sunny Russell 6th Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
Shinhan-Daesung Contents Fund |
|
Korea |
|
12 |
S-smart 1st Co., Ltd. |
|
Korea |
|
11 |
Sunny Russell 1st Co., Ltd. |
|
Korea |
|
2 |
Sunny Russell 4th L.L.C |
|
Korea |
|
12 |
S-smart 5th Co., Ltd. |
|
Korea |
|
12 |
S-smart 6th Co., Ltd. |
|
Korea |
|
3 |
Sunny Russell 5th Co., Ltd. |
|
Korea |
|
12 |
S-smart 9th Co., Ltd. |
|
Korea |
|
12 |
Sunny Smart 2nd Co., Ltd. |
|
Korea |
|
12 |
Sunny Smart 8th Co., Ltd. |
|
Korea |
|
12 |
Tiger Eyes 3rd Co., Ltd. |
|
Korea |
|
12 |
Sunny Smart 5th Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Tiger Eyes 1st Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
S-solution 2nd Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny Smart 10th Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
S-solution 3rd Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
S-solution 4th Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
S-solution 5th Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
S-solution 7th Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
Shinhan display 1st Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
S-solution 9th Co., Ltd. |
|
Korea |
|
10 |
SH inno 1st Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
Sunny solution 2nd Co., Ltd. |
|
Korea |
|
11 |
Sunny smart 3rd Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Shinhan serveone 1st Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny Dream 1st Co., Ltd. |
|
Korea |
|
7 |
Sunny solution 1st Co., Ltd. |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny solution 3rd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Shinhan Display 2nd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny solution 6th Co., Ltd |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny solution 4th Co., Ltd |
|
Korea |
|
3 / 6 / 9 / 12 |
Redefine Unjung Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
Sunny solution 9th Co., Ltd |
|
Korea |
|
2 / 5 / 8 / 11 |
Sunny solution 10th Co., Ltd |
|
Korea |
|
3 / 6 / 9 / 12 |
GIB portfolio a 1st Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
GIB portfolio a 3rd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
GIB portfolio a 4th Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
GIB portfolio a 2nd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
S-redefine 3rd Co., Ltd. |
|
Korea |
|
7 |
GIB portfolio a 5th Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
S-Tiger 2nd Co., Ltd. |
|
Korea |
|
1 / 4 / 7 / 10 |
GIB harim Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
Maestro werye Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
S-redefine 4th Co., Ltd. |
|
Korea |
|
9 |
Rich gate 1st Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
GIB dochuck Co., Ltd. |
|
Korea |
|
10 |
Grand bene Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
S redefine 7th Co., Ltd. |
|
Korea |
|
3 / 6 / 9 / 12 |
15
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(c) Subsidiaries included in consolidation (continued)
Structured entities |
|
Location |
|
Fiscal period-end (month) |
Development Trust |
|
Korea |
|
12 |
Non-specified Money Trust |
|
Korea |
|
12 |
Old-age Living Pension Trust |
|
Korea |
|
12 |
New-Personal Pension Trust |
|
Korea |
|
12 |
Personal Pension Trust |
|
Korea |
|
12 |
Retirement Trust |
|
Korea |
|
12 |
New Old-age Living Pension Trust |
|
Korea |
|
12 |
Pension Trust |
|
Korea |
|
12 |
Household Money Trust (Shinhan) |
|
Korea |
|
12 |
Corporation Money Trust (Shinhan) |
|
Korea |
|
12 |
Shinhan BNPP Private Corporate 25th |
|
Korea |
|
1 |
The Group consolidates a structured entity when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to most significantly affect those returns through its power over the structured entity based on the terms in the agreement relating to the establishment of the structured entity. For consolidated structured entities, the Group recognizes non-controlling interests related to the structured entity as liabilities in the consolidated statement of financial position.
As of December 31, 2018, the Group provides Asset Backed Commercial Paper (ABCP) purchase agreement amounting to W3,294,375 million to the structured entities described above.
16
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(d) Subsidiaries included in consolidation (continued)
|
Subsidiaries |
Newly included subsidiaries |
|
during the year ended December 31, 2018 |
Sunny solution 3rd Co., Ltd. |
|
Shinhan Display 2nd Co., Ltd. |
|
Sunny solution 6th Co., Ltd. |
|
Sunny solution 4th Co., Ltd. |
|
Redefine Unjung Co., Ltd. |
|
Sunny solution 9th Co., Ltd. |
|
Sunny solution 10th Co., Ltd. |
|
S-Tiger 3rd Co., Ltd. |
|
GIB portfolio a 1st Co., Ltd. |
|
GIB portfolio a 3rd Co., Ltd. |
|
GIB portfolio a 4th Co., Ltd. |
|
GIB portfolio a 2nd Co., Ltd. |
|
S-redefine 3rd Co., Ltd. |
|
GIB portfolio a 5th Co., Ltd. |
|
S-Tiger 2nd Co., Ltd. |
|
GIB harim Co., Ltd. |
|
Maestro werye Co., Ltd. |
|
S-redefine 4th Co., Ltd |
|
Rich gate 1st Co., Ltd. |
|
GIB dochuck Co., Ltd. |
|
Grand bene Co., Ltd. |
|
S redefine 7th Co., Ltd. |
Excluded subsidiaries |
|
during the year ended December 31, 2018 |
GPS 4th Ltd. |
|
S-solution 8th Co., Ltd. |
|
S-dream 10th Co., Ltd. |
|
S-Narae 1st L.L.C. |
|
GPS 7th L.L.C |
|
Sunny More 6th Co., Ltd. |
|
GPS 10th Ltd. |
|
GPS 8th Ltd. |
|
Sunny Russell 2nd Co., Ltd. |
|
S-way 5th Co., Ltd. |
|
Sunny More 7th Co., Ltd. |
|
Shinhan BNPP Private Corporate 18th |
|
Sunny Russell 7th L.L.C |
|
S-smart 3rd Co., Ltd. |
|
Sunny Smart 1st Co., Ltd. |
|
S-Tiger 3rd Co., Ltd. |
|
|
|
|
|
|
17
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies.
This is the first set of the Group’s annual consolidated financial statements where K-IFRS No.1109 and K-IFRS No.1115 have been applied.
The Group’s consolidated financial statements have been prepared in accordance with the accounting policies stated below.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statements of financial position:
|
|
derivative financial instruments are measured at fair value |
|
|
|
financial instruments at fair value through profit or loss (“FVTPL”) are measured at fair value |
|
|
|
financial instruments at fair value through other comprehensive income (“FVOCI”) are measured at fair value |
|
|
|
share-based payment arrangements are initially measured at fair value on grant date |
|
|
|
recognized financial instruments designated as hedged items in qualifying fair value hedge relationships and adjusted for changes in fair value attributable to the risk being hedged |
|
|
|
liabilities for defined benefit plans are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets |
|
(c) Functional and presentation currency
The respective financial statements of the Group entities are prepared in the functional currency of the respective operation. These consolidated financial statements are presented in Korean won, which is the Bank’s functional currency and the currency of the primary economic environment in which the Group operates. Subsidiaries whose functional currency is not Korean won were as follows:
Functional currency |
|
Subsidiaries |
USD |
|
Shinhan Asia, Shinhan America, Shinhan Cambodia |
EUR |
|
Shinhan Europe |
KZT |
|
Shinhan Kazakhstan |
CAD |
|
Shinhan Canada |
CNY |
|
Shinhan China |
JPY |
|
Shinhan Japan |
VND |
|
Shinhan Vietnam |
MXN |
|
Shinhan Mexico |
IDR |
|
Shinhan Indonesia |
18
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
2.Basis of preparation (continued)
(d) Use of estimates and judgements
The preparation of the consolidated 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.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the significant effect on the amount recognized in the consolidated financial statements is described in Note 5.
The Group recognizes credit loss allowance for expected credit losses on debt instruments, loans and receivables that are measured at amortized cost or at FVOCI, loan commitments and financial guarantee contracts upon adoption of K-IFRS No.1109, ‘Financial Instruments’. The measurement of such allowance is determined by techniques, assumptions and input variables used by the Group to measure expected future cash flows of individual financial instruments and to measure expected credit losses in a collective manner. The details of techniques, assumptions and input variables used to measure the credit loss allowance for expected credit losses as of December 31, 2018 are described in Note 4.
3. Significant accounting policies
In preparing these consolidated financial statements, the Group has consistently applied the accounting policies as listed below with those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2017, except for the changes in accounting policies as explained in (a), which are effective for annual periods beginning on January 1, 2018.
(a) Changes in accounting policies
i) K-IFRS No.1109, ‘Financial Instruments’
The Group has applied K-IFRS No.1109, ‘Financial Instruments’, which was published on September 25, 2015, from the year beginning on January 1, 2018. K-IFRS No.1109 replaced K-IFRS No.1039, ‘Financial Instruments: Recognition and Measurement’. The accounting policies related to K-IFRS No.1039 are presented in Note 3 (ab).
The main characteristics of K-IFRS No.1109 are: classification and measurement of financial instruments based on characteristics of contractual cash flows and business model, impairment model based on expected credit losses, the expansion of the types of qualifying hedging instruments and hedged items, and changes in hedge effectiveness tests, etc.
In principle, K-IFRS No.1109 should be applied retrospectively. However, there are clauses exempting the Group from restating the comparative information with respect to classification, measurement of financial instruments, and impairment. In addition, for hedge accounting, the new standard will be applied prospectively except for certain cases such as accounting for the time value of options.
19
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(a) Changes in accounting policies (continued)
The Group’s consolidated financial statements as of and for the year ended December 31, 2018 have been prepared in accordance with K-IFRS No.1109, and the accompanying comparative consolidated financial statements as of and for the year ended December 31, 2017 have not been retrospectively adjusted.
Details on the adjustments to the carrying amounts of financial assets and financial liabilities, the adjustments to credit loss allowance, and the effects on equity as a result of initial application of K-IFRS No.1109 are presented in Note 46.
ii) K-IFRS No.1115, ‘Revenue from Contracts with Customers’
The Group has applied K-IFRS No.1115, ‘Revenue from Contracts with Customers’, which was published on November 6, 2015, from the year starting on January 1, 2018. K-IFRS No.1115 replaces existing revenue recognition guidance, including K-IFRS No.1018, ‘Revenue’, K-IFRS No.1011, ‘Construction Contracts’, K-IFRS No.2031, ‘Revenue-Barter Transactions Involving Advertising Services’, K-IFRS No.2113, ‘Customer Loyalty Programmes’, K-IFRS No.2115, ‘Agreement for the Construction of Real Estate’, and K-IFRS No.2118, ‘Transfers of Assets from Customers.’
According to K-IFRS No.1115, all types of contracts recognize revenue through five-step revenue recognition model (① ‘Identifying the contract’ → ② ‘Identifying performance obligations’ → ③ ‘Determining the transaction price’ → ④ ‘Allocating the transaction price to performance obligations’ → ⑤ ‘Recognizing the revenue by satisfying performance obligations’).
The Group elected to retrospectively apply K-IFRS No.1115 and reflected the cumulative financial effect of the initial application of K-IFRS No.1115 at the date of initial recognition, in accordance with the transitional provision of K-IFRS No.1115. The accompanying comparative consolidated financial statements as of and for the year ended December 31, 2017 have not been retrospectively adjusted. Effects on equity as a result of initial application of K-IFRS No.1115 are presented in Note 46.
iii) Amendments to K-IFRS No.1040, ‘Investment Property’
The Group has applied the amendments on K-IFRS No.1040, ‘Investment Property’ from the year beginning on January 1, 2018. The amendments clarify that an entity shall transfer a property to, or from, investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. And it is clarified that the provisions on the transfers of investment property is applied to the properties that are being constructed or developed. The amendments did not have a significant impact on the Group’s consolidated financial statements.
iv) Amendments to K-IFRS No.1102, ‘Share-based Payment’
The Group has applied the amendments on K-IFRS No.1102, ‘Share-based Payment’ from the year beginning on January 1, 2018.
Amendments to K-IFRS No.1102 clarify accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. The amendments also clarify that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The amendments did not have a significant impact on the Group’s consolidated financial statements.
20
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(b) Basis of consolidation
i) Subsidiaries
Subsidiaries are investees controlled by the Group. The Group controls an investee when it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
If a member of the Group uses accounting policies other than those adopted in the consolidated financial statements for the same transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements.
There is no non-controlling interest in structured entities because the ownership interests in structured entities are shown as liabilities of the Group.
ii) Intra-group transactions eliminated on consolidation
Intra-group balances, transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if intra-group losses indicate an impairment that requires recognition in the consolidated financial statements.
iii) Non-controlling interests
Non-controlling interests in a subsidiary are accounted for separately from the parent’s ownership interests in a subsidiary. Each component of net profit or loss and other comprehensive income is attributed to the owners of the parent and non-controlling interest holders, even when the allocation reduces the non-controlling interests balance below zero.
21
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(c) Business combinations
i) Business combinations
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
Each identifiable asset and liability is measured at its acquisition-date fair value except for below:
|
- |
Leases and insurance contracts are required to be classified on the basis of the contractual terms and other factors |
|
- |
Only those contingent liabilities assumed in a business combination that are a present obligation and can be measured reliably are recognized |
|
- |
Deferred tax assets or liabilities are recognized and measured in accordance with K-IFRS No.1012, ‘Income Taxes’ |
|
- |
Employee benefit arrangements are recognized and measured in accordance with K-IFRS No.1019, ‘Employee Benefits’ |
|
- |
Indemnification assets are recognized and measured on the same basis as the indemnified liability or asset |
|
- |
Reacquired rights are measured in accordance with special provisions |
|
- |
Liabilities or equity instruments related to share-based payment transactions are measured in accordance with the method in K-IFRS No.1102, ‘Share-based Payment’ |
|
- |
Non-current assets held for sale are measured at fair value less costs to sell in accordance with K-IFRS No.1105, ‘Non-current Assets Held for Sale and Discontinued Operations’ |
As of the acquisition date, non-controlling interests in the acquiree are measured as the non-controlling interests' proportionate share of the acquiree's identifiable net assets.
The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer. However, any portion of the acquirer's share-based payment awards exchanged for awards held by the acquiree's employee that is included in consideration transferred in the business combination shall be measured in accordance with the method described above rather than at fair value.
Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include finder's fees; advisory, legal, accounting, valuation and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity securities. Acquisition-related costs, other than those associated with the issue of debt or equity securities, which are recognized in accordance with K-IFRS No.1032, ‘Financial Instruments: Presentation’ and K-IFRS No.1109, ‘Financial Instruments’, are expensed in the periods in which the costs are incurred and the services are received.
22
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(c) Business combinations (continued)
ii) Goodwill
The Group measures goodwill at the acquisition date as:
|
- |
the fair value of the consideration transferred; plus |
|
- |
the recognized amount of any non-controlling interests in the acquiree; plus |
|
- |
if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less |
|
- |
the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed. |
When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
When the Group additionally acquires non-controlling interest, the Group does not recognize goodwill since the transaction is regarded as equity transaction.
As part of its transition to K-IFRS, the Group elected to restate only those business combinations which occurred on or after January 1, 2010 in accordance with K-IFRS. In respect of acquisitions prior to January 1, 2010, goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous Generally Accepted Accounting Principles (“GAAP”).
(d) Investments in associates
An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
The investment in an associate and a joint venture is initially recognized at cost, and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate and the joint venture after the date of acquisition. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Intra-group losses are recognized as expense if intra-group losses indicate an impairment that requires recognition in the consolidated financial statements.
If an associate or a joint venture uses accounting policies different from those of the Group for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in applying the equity method.
When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has to make payments on behalf of the investee for further losses.
23
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(e) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the chief operating decision maker to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available.
The segment reporting to a chief executive officer includes items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly general expenses and income tax assets and liabilities. The Group considers the Chief Executive Officer (“CEO”) of the Bank as the chief operating decision maker.
(f) Foreign currencies
i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency using the reporting date’s exchange rate. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedging instrument of the net investment in a foreign operation or a qualifying cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
ii) Foreign operations
If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation and are translated using the exchange rate at the reporting date.
24
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(f) Foreign currencies (continued)
When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
iii) Net investment in a foreign operation
If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, then foreign currency differences arising on the item form part of the net investment in the foreign operation and are recognized in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. Equity instruments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date. However, the Group’s account overdraft is included in borrowings.
(h) Non-derivative financial assets
Financial assets are recognized when the Group becomes a party to the contractual provisions of the instrument. In addition, a regular way purchase or sale (a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market concerned) is recognized on the trade date.
A financial asset is measured initially at its fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition of the financial asset. Transaction costs on the financial assets at FVTPL that are directly attributable to the acquisition are recognized in profit or loss as incurred.
i) Financial assets designated at FVTPL
Financial assets can be irrevocably designated as measured at FVTPL despite of classification standards stated below, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases.
25
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(h) Non-derivative financial assets (continued)
ii) Equity instruments
For the equity instruments that are not held for trading, at initial recognition, the Group may make an irrevocable election to present subsequent changes in fair value in other comprehensive income. Equity instruments that are not classified as financial assets at FVOCI are classified as financial assets at FVTPL.
The Group subsequently measures all equity investments at fair value. Valuation gains or losses of the equity instruments that are classified as financial assets at FVOCI previously recognized as other comprehensive income is not reclassified as profit or loss on derecognition. The Group recognizes dividends in profit or loss when the Group’s right to receive payments of the dividend is established.
Valuation gains or losses due to changes in fair value of the financial assets at FVTPL are recognized as gains or losses on financial assets at FVTPL. Impairment loss (reversal) on equity instruments at FVOCI is not recognized separately.
iii) Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model in which the asset is managed and the contractual cash flow characteristics of the asset. Debt instruments are classified as financial assets at amortized cost, at FVOCI, or at FVTPL. Debt instruments are reclassified only when the Group’s business model changes.
ⓐ Financial assets at amortized cost
Assets that are held within a business model whose objective is to hold assets to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Impairment losses, and gains or losses on derecognition of the financial assets at amortized cost are recognized in profit or loss. Interest income on the effective interest method is included in the ‘Interest income’ in the consolidated statement of comprehensive income.
ⓑ Financial assets at FVOCI
Assets that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Other than impairment losses, interest income amortized using effective interest method and foreign exchange differences, gains or losses of the financial assets at FVOCI are recognized as other comprehensive income in equity. On derecognition, gains or losses accumulated in other comprehensive income are reclassified to profit or loss. The interest income on the effective interest method is included in the ‘Interest income’ in the consolidated statement of comprehensive income. Foreign exchange differences and impairment losses are included in the ‘Net foreign currency transaction gain’ and ‘Impairment loss on financial assets’ in the consolidated statement of comprehensive income, respectively.
ⓒ Financial assets at FVTPL
Debt securities other than financial assets at amortized costs or FVOCI are classified at FVTPL. Unless hedge accounting is applied, gains or losses from financial assets at FVTPL are recognized as profit or loss and are included in ‘Net gain on financial assets at fair value through profit or loss’ in the consolidated statement of comprehensive income.
26
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(h) Non-derivative financial assets (continued)
iv) Embedded derivatives
Financial assets with embedded derivatives are classified regarding the entire hybrid contract, and the embedded derivatives are not separately recognized. The entire hybrid contract is considered when it is determined whether the contractual cash flows represent solely payments of principal and interest.
v) Derecognition of financial assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability.
If the Group retains substantially all the risks and rewards of ownership of the transferred financial assets, the Group continues to recognize the transferred financial assets and recognizes financial liabilities for the consideration received.
vi) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Group currently has a legally enforceable right to set off the recognized amounts, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
27
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(i) Expected credit loss on financial assets
As for financial assets at amortized cost and financial assets at FVOCI, the expected credit loss is evaluated at the end of each period and recognized as loss allowances.
Since initial recognition, a loss allowance shall be measured by the three stages in the table below depending on the extent of significant increase in credit risk.
Stage |
|
Category |
|
Description |
Stage 1 |
|
Credit risk has not increased significantly since initial recognition |
|
12 month expected credit losses: Expected credit loss resulting from potential default of financial instruments occurring over 12 months from the end of reporting period
|
Stage 2 |
|
Credit risk has increased significantly since initial recognition
|
|
Lifetime expected credit losses: Expected credit loss resulting from all potential default of financial instruments occurring over the expected life
|
Stage 3 |
|
Credit-impaired financial assets |
|
However, as for the financial assets whose credit is impaired at the initial recognition, only the cumulative change in the lifetime expected credit loss is recognized as the loss allowance.
The ‘lifetime’ refers to the expected life to the contractual maturity of the financial asset.
i) Forward looking information
The Group determines a material increase on credit risk and estimates the expected credit loss on a forward looking basis.
The measuring factors of the expected credit loss are assumed to have certain relationship with the economic cycle. Through relationship analysis between the macroeconomic variables and the credit risk measuring factors, the forward looking information is reflected in the expected credit loss estimation.
ii) Financial assets at amortized cost
The expected credit loss on the financial assets at amortized cost is recognized as the difference between the present value of the contractual cash flow and the present value of the expected cash flow. The expected cash flow is estimated separately for the individually material financial assets.
For the financial assets which are not individually material, they are included in a group of assets with a similar credit risk and expected credit loss is estimated collectively.
The expected credit losses of financial assets measured as amortized cost are presented net of loss allowance, and the allowance is derecognized together with the asset when it is determined to be unrecoverable. When the loan previously written-off is subsequently collected, it is recognized as an increase in loss allowance. At each reporting date, the Group recognizes in profit or loss the amount of the change in lifetime expected credit losses.
iii) Financial assets at FVOCI
The expected credit loss on the financial assets at FVOCI is calculated using the same method as that on the financial assets at amortized cost, however the changes in loss allowance are recognized as other comprehensive income. As for disposal and repayment, the loss allowance is reclassified from other comprehensive income to profit or loss.
28
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(j) Derivative financial instruments
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
i) Hedge accounting
The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge), and foreign currency risk of net investment in foreign operation (net investment hedges).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
ii) Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the consolidated statement of comprehensive income.
The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.
29
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(j) Derivative financial instruments (continued)
iii) Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the consolidated statements of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
Once hedge accounting is discontinued, any cumulative gain or loss existing in equity at that time and is recognized over the period the forecast transaction occurs as profit or loss. However, when a forecast transaction is no longer expected to occur, the cumulative gain or loss recognized in equity is immediately recognized in the profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
iv) Hedge of net investment
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the accumulated other comprehensive income is transferred to profit or loss as part of the profit or loss on disposal in accordance with K-IFRS No.1021, ‘The Effects of Changes in Foreign Exchange Rates’.
v) Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately only if the economic characteristics and risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the combined instrument is not designated at FVTPL. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
vi) Derivative financial instruments held for trading
Changes in the fair value of derivative financial instruments not designated as a hedging instrument are recognized immediately in profit or loss.
30
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(j) Derivative financial instruments (continued)
vii) Day one profit or loss
If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there may be a difference between the transaction price and the amount determined using that valuation technique. As for these circumstances, the difference between the fair value at the initial recognition and the transaction price is not recognized as profit or loss but deferred. The deferred difference is amortized by using straight line method over the life of the financial instruments.
(k) Property and equipment
Property and equipment are initially measured at cost and after initial recognition. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Certain land and buildings are measured at fair value at the date of transition to K-IFRS, which is deemed cost, in accordance with K-IFRS No.1101, ‘First-time Adoption of K-IFRS’. Dividend from relevant revaluation surplus is prohibited in accordance with the resolution of the board of directors.
The Group recognizes in the carrying amount of an item of property and equipment the cost of replacing part of property and equipment when that cost is incurred if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.
Land is not depreciated. Other property and equipment are depreciated on a straight-line basis over the estimated useful lives, which most closely reflect the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives. The estimated useful lives for the current and comparative periods are as follows:
Descriptions |
|
Useful lives |
Buildings |
|
40 years |
Other properties |
|
4~5 years |
The gain or loss arising from the derecognition of an item of property and equipment, which is included in profit or loss, is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
Depreciation methods, useful lives and residual values are reassessed at each fiscal year-end and any adjustment is accounted for as a change in accounting estimate.
(l) Intangible assets
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
31
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(l) Intangible assets (continued)
Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets as below from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which club memberships are expected to be available for use, this intangible asset is determined as having indefinite useful lives and not amortized.
Descriptions |
|
Useful lives |
Software and capitalized development cost |
|
5 years |
Other intangible assets |
|
5 years or contract periods, whichever the shorter |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.
Expenditures on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
(m) Investment properties
Investment property is property held either to earn rental income or for capital appreciation or both. An investment property is initially recognized at cost including any directly attributable expenditure. Subsequent to initial recognition, the asset is measured at cost less accumulated depreciation and accumulated impairment losses, if any.
The depreciation method and the estimated useful lives for the current and comparative periods were as follows:
Descriptions |
|
Depreciation method |
|
Useful lives |
Buildings |
|
Straight-line |
|
40 years |
Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as changes in accounting estimates.
32
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(n) Leases
The Group classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases where the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
i) Finance leases
At the commencement of the lease term, the Group recognizes as finance assets and finance liabilities in its consolidated statements of financial position, the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. The Group reviews to determine whether the leased asset may be impaired.
ii) Operating leases
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the period of the lease.
(o) Non-current assets held for sale
Assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. The assets or disposal group that are classified as assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.
The Group recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.
An asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
33
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(p) Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets, other than assets arising from employee benefits, deferred tax assets and non-current assets held for sale, are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.
The Group estimates the recoverable amount of an individual asset, if it is impossible to measure the individual recoverable amount of an asset, then the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or the CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or the CGU.
An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergies arising from the goodwill acquired. Any impairment identified at the CGU level will first reduce the carrying value of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(q) Non-derivative financial liabilities
The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.
Transaction costs on the financial liabilities at FVTPL are recognized in profit or loss as incurred.
i) Financial liabilities designated at FVTPL
Financial liabilities can be irrevocably designated as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases, or a group of financial instruments is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. The amount of change in the fair value of the financial liabilities designated at FVTPL that is attributable to changes in the credit risk of that liabilities shall be presented in other comprehensive income.
ii) Financial liabilities at FVTPL
Since initial recognition, financial liabilities at FVTPL is measured at fair value, and changes in the fair value are recognized as profit or loss.
34
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(q) Non-derivative financial liabilities (continued)
iii) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
The Group derecognizes a financial liability from the consolidated statement of financial position when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
(r) Equity capital
i) Capital stock
Capital stock is classified as equity. Incremental costs directly attributable to the transaction of stock are deducted from equity, net of any tax effects.
ii) Hybrid bonds
The Group classifies an issued financial instrument, or its component parts, as a financial liability or an equity instrument depending on the substance of the contractual arrangement of such financial instrument. Hybrid bonds where the Group has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation are classified as an equity instrument and presented in equity.
iii) Non-controlling interests
Non-controlling interests, which represent the equity in a subsidiary not attributable, directly or indirectly, to a parent’s ownership interests, consist of the amount of those non-controlling interests at the date of the original combination calculated in accordance with K-IFRS No.1103, ‘Business Combinations’ and the non-controlling interests share of changes in equity since the date of the combination.
35
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(s) Employee benefits
i) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
ii) Other long-term employee benefits
The Group’s net obligation in respect of other long-term employee benefits that are not expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
iii) Retirement benefits: defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method.
The discount rate is the yield at the reporting date on high-quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Group recognizes service cost and net interest on the net defined benefit liability (asset) in profit or loss and remeasurements of the net defined benefit liability (asset) in other comprehensive income.
iv) Retirement benefits: defined contribution plans
The Group recognizes the contribution expense as an account of severance payments in profit or loss in the period according to the defined contribution plans.
v) Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring. If benefits are not expected to be wholly settled within 12 months of the reporting date, then they are discounted.
36
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(t) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized as personnel expense in profit or loss.
The Group has granted share-based payment based on Shinhan Financial Group’s share to the employees. In accordance with a repayment arrangement with Shinhan Financial Group, the Group is required to pay Shinhan Financial Group for the provision of the share-based payments. The Group recognizes the costs as expenses and accrued expenses in liabilities for the service period. When vesting conditions are not satisfied because of death, retirement or dismissal of employees during the specified service period, no amount is recognized for goods or services received on a cumulative basis. Share-based payment arrangements in which the Group has no obligation to settle the share-based payment transaction are accounted for as equity-settled share-based payment transactions, regardless of the repayment arrangement with Shinhan Financial Group.
(u) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
Provisions shall be used only for expenditures for which the provisions are originally recognized.
37
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(v) Financial guarantee contract
A financial guarantee contract is a contract that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contracts are recognized initially at their fair value, and the initial fair value is amortized over the life of the financial guarantee contract. The financial guarantee liability is subsequently measured at the higher of the amount of the best estimate of the expenditure required to settle the present obligation at the end of reporting period; and the amount initially recognized less, cumulative amortization recognized on a straight-line basis over the guarantee period. Financial guarantee liabilities are included within other liabilities.
From January 1, 2018, after initial recognition, financial guarantee contracts are measured at the higher of:
- Loss allowance in accordance with K-IFRS No.1109, ‘Financial Instruments’
- The amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of K-IFRS No.1115, ‘Revenue from Contracts with Customers’
(w) Recognition of revenues and expenses
Other than those under the scope of K-IFRS No.1017, ‘Leases’, K-IFRS No.1028, ‘Investments in Associates and Joint Ventures’, K-IFRS No.1109, ‘Financial Instruments’, K-IFRS No.1110, ‘Consolidated Financial Statements’, and K-IFRS No.1111, ‘Joint Arrangements’, the Group’s revenues are recognized using five-step revenue recognition model as follows: ① ‘Identifying the contract’ → ② ‘Identifying performance obligations’ → ③ ‘Determining the transaction price’ → ④ ‘Allocating the transaction price to performance obligations’ → ⑤ ‘Recognizing the revenue by satisfying performance obligations’.
i) Interest income and expense
Interest income and expense are in the scope of K-IFRS No.1109 and recognized in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument, but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, and all other premiums or discounts. When it is not possible to estimate reliably the cash flows or the expected life of a financial instrument, the Group uses the contractual cash flows over the full contractual term of the financial instrument.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
ii) Fees and commission
The recognition of revenue for financial service fees depends on the purposes for which the fees are assessed and the basis of accounting for any associated financial instrument.
38
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(w) Recognition of revenues and expenses (continued)
ⓐ Fees that are an integral part of the effective interest rate of a financial instrument
Such fees are generally treated as an adjustment to the effective interest rate. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, preparing and processing documents, closing the transaction and the origination fees received on issuing financial liabilities. However, when the financial instrument is measured at fair value with the change in fair value recognized in profit or loss, the fees are recognized as revenue when the instrument is initially recognized.
ⓑ Fees earned as services are provided
Fees and commission income, including investment management fees, sales commission, and account servicing fees, are recognized as revenue when the related service as a performance obligation is provided.
ⓒ Fees that are earned on the execution of a significant act
The fees that are earned on the execution of a significant act including commission on the allotment of shares or other securities to a client, placement fee for arranging a loan between a borrower and an investor and sales commission, are recognized as revenue when the significant act as a performance obligation has been completed.
iii) Dividends
Dividends income is recognized when the shareholder’s right to receive payment is established. Usually this is the ex-dividend date for equity securities.
(x) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.
Shinhan Financial Group, the parent company, files its national income tax return with the Korean tax authorities under the consolidated corporate tax system, which allows it to make national income tax payments based on the consolidated profits or losses of the Shinhan Financial Group and its wholly owned domestic subsidiaries including the Group. Deferred taxes are measured based on the future tax benefits expected to be realized in consideration of the expected profits or losses of eligible companies in accordance with the consolidated corporate tax system. Consolidated corporate tax amounts, once determined, are allocated to each of the subsidiaries and are used as a basis for the income taxes to be recorded in their stand-alone financial statements.
The Group recognizes deferred tax liabilities for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes deferred tax assets for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
39
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(x) Income tax (continued)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduced the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.
If any additional income tax expense exists by payment of dividends, the Group recognizes it when the liability relating to the payment is recognized.
(y) Accounting for trust accounts
The Group accounts for trust accounts separately from its bank accounts under the Financial Investment Services and Capital Markets Act and thus the trust accounts are not included in the accompanying consolidated financial statements. Borrowings from trust accounts are included in other liabilities. Trust fees and commissions in relation to the service provided to trust accounts by the Group are recognized as fees and commission income.
(z) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholder of the Bank by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.
(aa) New standards and interpretations not yet adopted
The following new standards, interpretations and amendments to existing standards have been published and are mandatory for the Group for annual period beginning after January 1, 2018, and the Group has not early adopted them.
The Group is currently evaluating the effects from the application of these new standards on the consolidated financial statements.
i) K-IFRS No.1116, ‘Leases’
K-IFRS No.1116, published on May 22, 2017, replaces existing standards including K-IFRS No.1017, ‘Leases’, K-IFRS No.2104, ‘Determining whether an Arrangement contains a Lease’, K-IFRS No.2015, ‘Operating Leases - Incentives’ and K-IFRS No.2027, ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’.
40
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(aa) New standards and interpretations not yet adopted (continued)
At inception of a contract, an entity shall assess whether the contract is, or contains, a lease. However, as a practical expedient, for the contracts previously identified as leases or not, an entity is not required to reassess whether the contract is, or contains, a lease at the date of initial application.
For a contract that is, or contains, a lease, a lessee or a lessor shall account for each lease component within the contract as a lease separately from non-lease components of the contract.
A lessee shall recognize a right-of-use asset, which indicates an asset that represents a lessee’s right to use an underlying asset for the lease term, and a lease liability, which indicates obligation to make lease payments. However, a lessee may elect not to apply the requirements to short-term leases and leases for which the underlying asset is of low value. Also, as a practical expedient, a lessee may elect, by class of underlying asset, not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component.
There has not been a material change in the accounting treatments for a lessor from the existing standard K-IFRS No.1017. K-IFRS No.1116 is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted.
ⓐ Transition method of K-IFRS No.1116, ‘Lease’
The lessee is required to apply either retrospective application (full retrospective approach) to each past reporting period presented in accordance with K-IFRS No.1008, ‘Accounting Policies, Changes in Accounting Estimates and Errors’ or recognize the cumulative effect of the initial application at the date of initial application (cumulative effect of batch reconciliation action).
The Group plans to apply K-IFRS No.1116 for the first time by applying cumulative effect of the initial application as of January 1, 2019. Accordingly, the cumulative effect of applying K-IFRS No.1116 is adjusted in the retained earnings (or, where appropriate, other components of equity) at the date of initial application and the comparative financial statements are not going to be restated.
ⓑ Financial effect of K-IFRS No.1116, ‘Lease’
The Group assessed the impact on the consolidated financial statements based on the situation and available information as of December 31, 2018, in order to assess the financial impact of the initial adoption of K-IFRS No.1116.
As of December 31, 2018, the aggregate amount of the minimum lease payments prior to the present value discount for the assets currently used as operating leases is approximately W519 billion and the discounted amount is approximately W505 billion if discounted by the incremental borrowing rate of the lessee. However, the Group will account for each lease element and associated non-lease element as a single lease element, using the simplified method of accounting for contracts that include all or part of the lease.
As a result of a detailed analysis of the effect on the financial statements, the Group expects the right-to-use assets and lease liabilities as of December 31, 2018 to increase by approximately W502 billion and approximately W461 billion, respectively.
ii) Amendment of K-IFRS No.1109, ‘Financial instruments’
Financial assets that are redeemable with reimbursable financial assets are remeasured to be measured at amortized cost. When the financial liabilities measured at amortized cost are changed but not eliminated, the effect of the change should be recognized in profit or loss. These amendments will be effective from the fiscal year beginning on or after January 1, 2019 and are subject to early adoption.
41
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(aa) New standards and interpretations not yet adopted (continued)
iii) Amendment of K-IFRS No.1019, ‘Employee benefits’
If the change in the defined benefit plan results in the revision, reduction or settlement of the plan, the assumptions used in remeasurement of the net defined benefit obligation (asset) to estimate the current service cost and net interest for the remaining period of the period after the adjustments in the plan. In addition, the decrease in excess of the amount of unrecognized actuarial gain or loss is reflected in profit or loss as a part of past service cost or settlement profit or loss. The amendments are applied prospectively to the amendment, reduction, and settlement of systems that have occurred since the fiscal year beginning on or after January 1, 2019.
iv) Amendment of K-IFRS No.1028, ‘Investment in associates and joint ventures’
The clarification has been conducted that other financial instruments (financial instruments that do not apply the equity method) to the related companies or joint ventures are subject to K-IFRS No.1109, and that the long-term investment interests that form part of the net investment in the related companies or joint ventures was revised accordingly with the K-IFRS No.1109. These amendments will be effective from the fiscal year beginning on or after January 1, 2019 and are subject to early adoption. In addition, the first-time adoption of this standard does not require reclassification of comparative information by applying the transitional provisions of K-IFRS No.1109, and the effect of retroactive application is reflected in the beginning retained earnings (or other appropriate capital elements) at the date of initial application.
v) Establishment of K-IFRS No.2123, ‘Uncertainty over income tax treatments’
The interpretation is applied to the recognition and measurement of deferred tax and deferred income tax if there is uncertainty about whether or not the tax treatment applied by the entity will be recognized by the taxing authority. Guidance on accounting units of uncertainty in taxation and circumstances requiring reevaluation Includes. The interpretation is effective from January 1, 2019, and it can choose between retroactively reclassifying comparative financial statements or reflect the effect of the change on the basis of the first year of adoption.
vi) Annual amendments through year 2015 – 2017
vi-i) K-IFRS No.1103, ‘Business combination’
The business combination that is held in stages to acquire control over the joint business (meeting the definition of the business) while retaining the rights and liabilities for the assets related to the joint business. Therefore, Remeasurement should be conducted for all underlying assets and liabilities. The amendments are effective for annual periods beginning on or after January 1, 2019, or reflect the effect of the change on the basis of the first year of adoption.
vi-ii) K-IFRS No.1012, ‘Income taxes’
The provisions of paragraph 57A of K-IFRS No.1012 (defining the timing and recognition of dividend tax effects) apply to all income tax effects of dividends and are recognized in profit or loss, other comprehensive income or capital. This amendment is effective for fiscal years beginning on or after January 1, 2019, but may be applied early.
42
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(ab) Accounting policies in accordance with K-IFRS No.1039
The following accounting policies are applied to the comparative separate statements of financial position as of December 31, 2017, and the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes.
i) Non-derivative financial assets
Financial assets are classified into financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets and held-to-maturity financial assets. Financial assets are recognized when the Group becomes a party to the contractual provisions of the instrument. In addition, a regular way purchase or sale (a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the market concerned) is recognized on the trade date.
A financial asset is measured initially at its fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition of the financial asset.
ⓐ Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit or loss if it is held for trading or is designated at fair value through profit or loss. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.
ⓑ Held-to-maturity financial assets
A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Group has the positive intention and ability to hold to maturity, is classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method.
ⓒ Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method.
ⓓ Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity investments or loans and receivables. Subsequent to initial recognition, they are measured at fair value, which changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives those are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.
43
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3. Significant accounting policies (continued)
(ab) Accounting policies in accordance with K-IFRS No.1039 (continued)
ii) Impairment of financial assets
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. However, losses expected as a result of future events, regardless of likelihood, are not recognized.
If any objective evidence of impairment exists, impairment losses should be measured by the following categories of financial assets and recognized in profit or loss.
ⓐ Loans
The Group first assesses whether objective evidence of impairment exists individually for loans that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on loans and receivables has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e., the effective interest rate computed at initial recognition).
If the interest rate of loans is a floating rate, the discount rate used to evaluate impairment is the current effective interest rate defined in the agreement. The present value of estimated future cash flows of secured financial assets is calculated by including cash flows from collateral after deducting costs to acquire and sell the collateral, regardless of probability of realization of such collateral.
In assessing collective impairment, the Group classifies loans, based on credit risk assessment or a credit rating assessment process that takes into account asset type, industry, regional location, collateral type, delinquency and other relative factors.
Future cash flows of loans subject to collective impairment assessment are estimated by using statistical modelling of historical trends of the probability of default, timing of recoveries and the amount of losses incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the impairment losses are likely to be greater or less than suggested by historical modelling. In adjusting the future cash flows by historical modelling, the result has to be in line with changes and trends of observable data (e.g., impairment losses of collective assets and unemployment rates, asset prices, commodity prices, payment status and other variables representing the size of impairment losses). Methodologies and assumptions used to estimate future cash flow are reviewed on a regular basis in order to reduce discrepancy between estimated impairment losses and actual loss.
Impairment losses are recognized in profit or loss and reflected in an allowance account against loans. When a subsequent event causes the amount of impairment losses to decrease, and the decrease can be related objectively to an event occurring after the impairment is recognized, the decrease in impairment losses is reversed through profit or loss of the period.
44
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(ab) Accounting policies in accordance with K-IFRS No.1039 (continued)
ⓑ Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognized. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss is recognized in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.
ⓒ Held-to-maturity financial assets
An impairment loss in respect of held-to-maturity financial assets measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate and is recognized in profit or loss. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
iii) Derivative financial instruments
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
ⓐ Hedge Accounting
The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designated derivatives as hedging instruments to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge), and foreign currency risk of net investment in foreign operation (net investment hedges).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
ⓑ Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the separate statement of comprehensive income.
The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.
45
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
3.Significant accounting policies (continued)
(y) Accounting policies in accordance with K-IFRS No.1039 (continued)
iii) Derivative financial instruments (continued)
ⓒ Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the hedging reserve in equity. The amount recognized in other comprehensive income is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same line item in the separate statements of comprehensive income as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in the hedging reserve in equity remains there until the forecasted transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognized. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss. In other cases the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
ⓓ Hedge of net investment
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in profit or loss. When the hedged part of a net investment is disposed of, the relevant amount in the accumulated other comprehensive income is transferred to profit or loss as part of the profit or loss on disposal in accordance with K-IFRS No.1021, ‘The Effects of Changes in Foreign Exchange Rates’.
ⓔ Embedded derivatives
Embedded derivatives are separated from the host contract and accounted for separately only if the economic characteristics and risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the combined instrument is not measured at fair value through profit or loss. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.
ⓕ Other derivative financial instruments
Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.
46
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4-1. Credit risk
Credit risk is the risk of financial loss of the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arises principally from due from banks, the lending process related to loans, investment activities in debt securities and off balance sheet items including loan commitments, etc. Credit risk management is critical to the Group’s business activities; thus, the Group carefully manages the credit risk exposure.
(a) Credit risk management |
|
Major policies of the credit risk management are determined by the Risk Policy Committee, which is the Group’s executive decision-making body for credit risk management. The Risk Policy Committee is led by the Group’s Deputy President and Head of Risk Management Group. The Risk Policy Committee also consists of chief officers from eight different business units. The Credit Review Committee performs credit review evaluations and operates separately from the Risk Policy Committee.
Each business unit is required to implement the Group’s risk management policies and procedures. Risk Management Department reviews compliance of business units with agreed exposure limits established by the Risk Policy Committee, including those for selected industries, country risk and product types.
The Group established the authorization structure for the approval and renewal of credit facilities. Authorization limits are allocated to the business unit credit officer. Larger facilities require approval by the Credit Committee. The Group assesses all credit exposures in excess of designated limits, prior to facilities being committed to customers by the business unit concerned. Renewals and review of facilities are subject to the same review process.
The Group is responsible for limiting concentrations of exposures to counterparties, geographies and industries, and by issuers, credit rating band, market liquidity and country.
The Group develops and maintains the risk grading system in order to categorize exposures according to the degree of risk of financial loss faced and to focus management on the attendant risks. The risk grading system is used in determining credit approvals, credit renewals, credit pricing, credit limits, or where impairment provisions may be required against specific credit exposures for existing loans.
Each business unit is responsible for the quality and performance of its credit portfolio and for monitoring and controlling all credit risks in its portfolio, including those subject to central approval. In addition to periodic loan reviews by credit officers, the Group also utilizes an automated monitoring tool which conducts searches for companies with high probability of default. Regular reports on the credit quality of local portfolios are provided to the Credit Administration Department who may require appropriate corrective action to be taken.
47
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4. Financial risk management (continued)
4-1. Credit risk (continued)
(b) Risk management and risk mitigation policy
In order to control the credit risk of the Group at an appropriate level, the following risk management system is established and operated.
- Credit risk limits are set and managed by business sector, customer, product, industry, etc. based on credit VaR (Value at Risk) and maximum exposure amount.
- The risk department establishes and manages limits for credit VaR, and maximum exposure limits. The credit planning department and the credit assessment department conduct maximum exposure limits.
- The risk engineering department and risk engineering department establishes a credit risk limit operation plan for the entire bank at least once a year, and commits it to the risk policy committee.
- Each business unit monitors and adheres to credit risk limits assigned to each business unit.
- Identify and manage by individual and corporate customers, industry and nationality for identified credit risk.
- Set limits on acceptable risks for individual borrowers or borrowers, and by geographical sectors.
- The risk is reviewed on an annual basis or within a period when it is deemed necessary, and the limits of risks by product, industry and country are approved by the Board on a quarterly basis.
- The maximum amount of exposure by the borrower, including the institution, is managed separately by the lower level limit for the accounts in the consolidated financial statements and the other accounts, and the limit of the risk is also determined for daily transactions related to commodity transactions such as foreign currency forward transactions.
- Actual maximum exposure limits is managed on a daily basis.
- Maximum credit risk exposure is managed in the process of analyzing the interest and principal repayment ability of the borrower, and if necessary, changes the loan limit in the process.
Other risk management measures are as follows.
i) Collateral
The Group has adopted policies and procedures to mitigate credit risk. In connection with credit risk, collateral is generally used, and the Group has adopted a policy for pledging certain types of assets. The main types of collateral are as follows:
- Mortgage
- Real estate, inventories, accounts receivable, etc.
- Financial instruments such as debt securities and equity securities
Long-term loans are generally collateralized. On the other hand, revolving personal loans are generally unsecured. In addition, in order to minimize losses due to credit risk, the Group establishes additional collateral for the counterparty in the event of an indication of impairment of the asset.
Collateral for financial assets other than loans is subject to the nature of the products. Except for special cases such as Asset Backed Securities (ABS), unsecured securities are common in the case of debt securities.
ii) Derivative financial instruments
The Group maintains a credit limit on the amount and duration of derivative financial instruments that are in between the disposal agreements after purchase.
48
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4. Financial risk management (continued)
4-1. Credit risk (continued)
iii) Collective offsetting contracts
The Group limits its maximum exposure to credit losses by engaging in collective offsetting contracts with counterparties in performing significant number of transactions.
Collective offsetting contracts generally do not result from offsetting assets and liabilities in the consolidated financial statements, as transactions are usually set at a gross amount basis. However, when all amounts to the counterparty are set on a net basis, the credit risk associated with a favorable contract is reduced by collective offsetting contracts if losses are incurred.
The Group's overall maximum exposure to credit risk that is part of a collective offsetting contract can vary substantially within a short period of time because it is affected by each transaction.
iv) Credit related contracts
Warranties and credit guarantees have credit risks similar to credit. Credit (which guarantees credit on behalf of the customer by issuing a note to a third party for the amount requested under specific terms and conditions) is secured by the underlying commodities associated with them, it involves less risk. The credit enhancement arrangements represent the unused portion of the credit limit in the form of a credit, guarantee or letter of credit. In relation to the credit risk of a credit enhancement arrangement, the Group is potentially exposed to the same amount as the total unused arrangements. Long-term contracts generally have a greater degree of credit risk than short-term, and the Group monitors the maturity of credit arrangements.
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model)
i) Determining significant increases in credit risk since initial recognition
At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. The supportable information also includes historical default data held by the Group and the analysis by internal credit risk rating specialists.
ⓐ Measuring the risk of default
The Group assigns an internal credit risk rating to each individual exposure based on observable data and historical experiences that have been found to have a reasonable correlation with the risk of default. The internal credit risk rating is determined by considering both qualitative and quantitative factors that indicate the risk of default, which may vary depending on the nature of the exposure and the type of borrower.
The internal credit risk rating based on the borrower’s information related to each individual exposures on initial recognition, may change depending on the results of continuing monitoring and reviews.
49
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4. Financial risk management (continued)
4-1. Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
ⓑ Measuring term structure of probability of default
The Group accumulates information after analyzing the information regarding exposure to credit risk and default information by the type of product and borrower and results of internal credit risk assessment. For some portfolios, the Group uses information obtained from external credit rating agencies when performing these analyses.
The Group applies statistical techniques to estimate the probability of default for the remaining life of the exposure from the accumulated data and to estimate changes in the estimated probability of default over time.
ⓒ Significant increases in credit risk
The Group uses the indicators defined as per portfolio to determine the significant increase in credit risk and such indicators generally consist of changes in the risk of default estimated from changes in the internal credit risk rating, qualitative factors, days of delinquency, and others. The method used to determine whether credit risk of financial instruments has significantly increased after the initial recognitions is summarized as follows:
Corporate exposures |
|
Retail exposures |
|
|
|
Significant change in credit ratings |
|
Significant change in credit ratings |
Continued past due more than 30 days |
|
Continued past due more than 30 days |
Loan classification of precautionary and below |
|
Loan classification of precautionary and below |
Borrower with early warning signals |
|
Borrower with early warning signals |
Negative net assets |
|
Specific pool segment |
Adverse audit opinion or disclaimer of opinion |
|
Collective loans for housing for which the constructors are insolvent |
Interest coverage ratios of below 1 for consecutive three years |
|
|
Negative cash flows from operating activities for consecutive two years |
|
|
The Group considers the credit risk of financial instrument has been significantly increased since initial recognition if a specific exposure is past due more than 30 days (however, for a specific portfolio if it is past due more than 7 days). The Group counts the number of days past due from the earliest date on which the Group has not received the contractual payments in full from the borrower and does not consider the grace period granted to the borrower.
The Group regularly reviews the criteria for determining if there have been significant increases in credit risk from the following perspective.
- A significant increase in credit risk shall be identified prior to the occurrence of default.
- The criteria established to judge the significant increase in credit risk shall have a more predictive power than the criteria for days of delinquency.
- As a result of applying the judgment criteria, financial instruments shall not be to move too frequently between the 12-months expected credit losses measurement and the lifetime expected credit losses measurement.
50
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4. Financial risk management (continued)
4-1. Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
ii) Modified financial assets
If the contractual cash flows on a financial asset have been renegotiated or modified and the financial asset was not derecognized, the Group assesses whether there has been a significant increase in the credit risk of the financial instrument by comparing the risk of a default occurring at initial recognition based on the original, unmodified contractual terms and the risk of a default occurring at the reporting date based on the modified contractual terms.
The Group may adjust the contractual cash flows of loans to customers who are in financial difficulties in order to manage the risk of default and enhance the collectability (hereinafter referred to as ‘debt restructuring’). These adjustments generally involve extension of maturity, changes in interest payment schedule, and changes in other contractual terms.
Debt restructuring is a qualitative indicator of a significant increase in credit risk and the Group recognizes lifetime expected credit losses for the exposure expected to be the subject of such adjustments. If a borrower faithfully makes payments of contractual cash flows that were modified in accordance with the debt restructuring or if the borrower's internal credit rating has recovered to the level prior to the recognition of the lifetime expected credit losses, the Group recognizes the 12-months expected credit losses for that exposure again.
iii) Risk of default
The Group considers a financial asset to be in default if it meets one or more of the following conditions:
- if a borrower is overdue 90 days or more from the contractual payment date,
- if the Group judges that it is not possible to recover principal and interest without enforcing the collateral on a financial asset
The Group uses the following indicators when determining whether a borrower is in default:
- qualitative factors (e.g. breach of contract terms),
- quantitative factors (e.g. if the same borrower does not perform more than one payment obligations to the Group, the number of days past due per payment obligation. However, in the case of a specific portfolio, the Group uses the number of days past due for each financial instrument)
- internal data and external data
The definition of default applied by the Group generally conforms to the definition of default defined for regulatory capital management purposes; however, depending on the situations, the information used to determine whether a default has incurred and the extent thereof may vary.
iv) Reflection of forward-looking information
The Group reflects forward-looking information presented by internal experts based on a variety of sources when measuring expected credit losses. For the purpose of estimating these forward-looking information, the Group utilizes the economic outlook published by domestic and overseas research institutes or government and public agencies.
51
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4. Financial risk management (continued)
4-1. Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
The Group reflects future macroeconomic conditions anticipated from a neutral standpoint that is free from bias in measuring expected credit losses. Expected credit losses in this respect reflect conditions that are most likely to occur and are based on the same assumptions that the Group used in its business plan and management strategy.
The Group identified the key macroeconomic variables relevant to forecast credit risk and credit losses for each portfolio as follows by analyzing past experience data and drew correlations across credit risk for each variable.
Key macroeconomic variables |
|
Correlation with credit risk |
|
|
|
Economic growth |
|
Negative |
Consumer price change rates |
|
Positive |
Benchmark rate |
|
Positive |
3-year Korea Treasury Bond |
|
Positive |
3-year Corporate Bond |
|
Positive |
KOSPI |
|
Negative |
The predicted correlations between the macroeconomic variables and the risk of default, used by the Group, were derived based on data from the past nine years.
v) Measurement of expected credit losses
Key variables used in measuring expected credit losses are as follows:
- Probability of default (PD)
- Loss given default (LGD)
- Exposure at default (EAD)
These variables have been estimated from historical experience data by using the statistical techniques developed internally by the Group and have been adjusted to reflect forward-looking information.
Estimates of PD over a specified period are estimated by reflecting characteristics of counterparties and their exposure, based on a statistical model at a specific point of time. The Group uses its own information to develop a statistical credit assessment model used for the estimation, and additional information observed in the market is considered for some portfolios such as a group of large corporates. When a counterparty or exposure is concentrated in specific grades, the method of measuring PD for that grades would be adjusted, and the PD by grade is estimated by considering contract expiration of the exposure.
LGD refers to the expected loss if a borrower defaults. The Group calculates LGD based on the experience recovery rate measured from past default exposures. The model for measuring LGD is developed to reflect type of collateral, seniority of collateral, type of borrower, and cost of recovery. In particular, LGD for retail loan products uses loan to value (LTV) as a key variable. The recovery rate reflected in the LGD calculation is based on the present value of recovery amount, discounted at the effective interest rate.
EAD refers to the expected exposure at the time of default. The Group derives EAD reflecting a rate at which the current exposure is expected to be used additionally up to the point of default within the contractual limit. EAD of financial assets
52
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
is equal to the total carrying amount of the asset, and EAD of loan commitments or financial guarantee contracts is calculated as the sum of the amount expected to be used in the future.
4.Financial risk management (continued)
4-1.Credit risk (continued)
(c) Techniques, assumptions and input variables used to measure impairment (Expected credit loss model) (continued)
When measuring expected credit losses on financial assets, the Group reflects a period of expected credit loss measurement based on a contractual maturity. The Group takes into consideration of the extension rights held by a borrower when deciding the contractual maturity.
Risk factors such as PD, LGD and EAD are collectively estimated according to the following criteria:
- Type of products
- Internal credit risk rating
- Type of collateral
- Loan to value (LTV)
- Industry that the borrower belongs to
- Location of the borrower or collateral
- Days of delinquency
The criteria for classification of groups are periodically reviewed to maintain homogeneity of the group and adjusted if necessary. The Group uses external benchmark information to supplement internal information for a particular portfolio that did not have sufficient internal data accumulated from the past experience.
vi) Write-off of financial assets
The Group writes off a portion of or entire loan or debt security that is not expected to receive its principal and interest. In general, the Group conducts write-off when it is deemed that the borrower has no sufficient resources or income to repay the principal and interest. Such determination on write-off is carried out in accordance with the internal rules of the Group and is carried out with the approval of an external institution, if necessary. Apart from write-off, the Group may continue to exercise its right of collection under its own recovery policy even after the write-off of financial assets.
53
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(d) 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 December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
Due from banks (*1)(*2): |
|
|
Banks |
|
5,155,564 |
Governments |
|
5,425,800 |
|
|
10,581,364 |
Loans at amortized cost (*1)(*2): |
|
|
Banks |
|
8,725,756 |
Retail: |
|
|
Mortgage lending |
|
49,114,592 |
Others |
|
76,271,127 |
|
|
125,385,719 |
Governments |
|
690,658 |
Corporate |
|
|
Large enterprises |
|
32,548,577 |
Small and medium-sized enterprises |
|
78,817,756 |
Special finance |
|
4,965,619 |
Others |
|
941 |
|
|
116,332,893 |
Credit cards |
|
98,780 |
|
|
251,233,806 |
Loans at FVTPL: |
|
|
Banks |
|
20,004 |
Corporate |
|
|
Large enterprises |
|
319,918 |
Small and medium-sized enterprises |
|
305,315 |
|
|
625,233 |
|
|
645,237 |
Securities at FVTPL: |
|
|
Debt securities |
|
15,334,231 |
Gold/silver deposits |
|
154,881 |
|
|
15,489,112 |
Securities at FVOCI (*1) |
|
31,435,546 |
Securities at amortized cost (*1) |
|
16,824,400 |
Derivative assets |
|
1,484,458 |
Other financial assets (*1)(*3) |
|
14,200,801 |
Off balance sheet items: |
|
|
Financial guarantee contracts |
|
4,391,207 |
Loan commitments and other liabilities for credit |
|
91,002,891 |
|
|
95,394,098 |
|
|
437,288,822 |
|
(*1) |
The maximum exposure amounts for due from banks and loans and other financial assets are measured as the amount net of allowances. |
54
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(*2) Due from banks and loans were classified as similar credit risk group to be with consistent calculating capital adequacy ratio under New Basel Capital Accord (Basel III).
(*3) Other financial assets comprise accounts receivable, accrued income, guarantee deposits, domestic exchange settlements receivables, suspense receivables, etc.
55
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(d) Maximum exposure to credit risk (continued)
|
|
December 31, 2017 |
|
|
|
|
|
Due from banks and loans (*1)(*2): |
|
|
|
Banks |
|
9,826,462 |
|
Retail: |
|
|
|
Mortgage lending |
|
48,690,383 |
|
Others |
|
65,913,610 |
|
|
|
114,603,993 |
|
Governments |
|
14,125,100 |
|
Corporate: |
|
|
|
Large enterprises |
|
32,746,281 |
|
Small and medium-sized enterprises |
|
73,184,008 |
|
Special finance |
|
4,076,599 |
|
Others |
|
465 |
|
|
|
110,007,353 |
|
Credit cards |
|
81,673 |
|
|
|
248,644,581 |
|
Trading assets: |
|
|
|
Debt securities |
|
10,506,358 |
|
Gold/silver deposits |
|
189,297 |
|
|
|
10,695,655 |
|
Derivative assets |
|
2,604,090 |
|
Available-for-sale financial assets: |
|
|
|
Debt securities |
|
29,959,169 |
|
Held-to-maturity financial assets: |
|
|
|
Debt securities |
|
14,822,898 |
|
Other financial assets (*1)(*3) |
|
9,080,904 |
|
Off balance sheet items: |
|
|
|
Financial guarantee contracts |
|
3,242,514 |
|
Loan commitments and other liabilities for credit |
|
73,790,861 |
|
|
|
77,033,375 |
|
|
|
392,840,672 |
|
(*1) The maximum exposure amounts for due from banks and loans and other financial assets are measured as the amount net of allowances.
(*2) Due from banks and loans were classified as similar credit risk group to be with consistent calculating capital adequacy ratio under New Basel Capital Accord (Basel III).
(*3) Other financial assets comprise accounts receivable, accrued income, guarantee deposits, domestic exchange settlements receivables, suspense receivables, etc.
56
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(e) Credit risk exposure by credit risk grade
i) The maximum exposure of financial instruments to credit risk by credit risk grade as of December 31, 2018 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
12-month expected loss |
|
Life time expected loss |
|
Total |
|
Allowances |
|
Net |
|
Mitigation of credit risk due to collateral |
||||||
Grade 1 (*2) |
|
Grade 2 (*2) |
|
Grade 1 (*2) |
|
Grade 2 (*2) |
|
Impaired |
||||||||||
Due from banks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
5,162,123 |
|
- |
|
3,816 |
|
- |
|
- |
|
5,165,939 |
|
(10,375) |
|
5,155,564 |
|
- |
Governments |
|
5,430,210 |
|
- |
|
- |
|
- |
|
- |
|
5,430,210 |
|
(4,410) |
|
5,425,800 |
|
- |
|
|
10,592,333 |
|
- |
|
3,816 |
|
- |
|
- |
|
10,596,149 |
|
(14,785) |
|
10,581,364 |
|
- |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
7,715,882 |
|
921,256 |
|
91,050 |
|
11,494 |
|
- |
|
8,739,682 |
|
(13,926) |
|
8,725,756 |
|
54,903 |
Retail |
|
113,520,487 |
|
4,138,405 |
|
4,853,910 |
|
2,897,946 |
|
340,159 |
|
125,750,907 |
|
(365,188) |
|
125,385,719 |
|
75,022,341 |
Governments |
|
688,758 |
|
2,399 |
|
- |
|
- |
|
- |
|
691,157 |
|
(499) |
|
690,658 |
|
- |
Corporate |
|
73,508,663 |
|
22,812,566 |
|
9,529,058 |
|
11,000,465 |
|
773,440 |
|
117,624,192 |
|
(1,291,299) |
|
116,332,893 |
|
66,769,705 |
Credit cards |
|
19 |
|
100,172 |
|
2 |
|
2,318 |
|
1,069 |
|
103,580 |
|
(4,800) |
|
98,780 |
|
548 |
|
|
195,433,809 |
|
27,974,798 |
|
14,474,020 |
|
13,912,223 |
|
1,114,668 |
|
252,909,518 |
|
(1,675,712) |
|
251,233,806 |
|
141,847,497 |
Securities at FVOCI (*1) |
|
24,490,856 |
|
6,838,860 |
|
- |
|
105,830 |
|
- |
|
31,435,546 |
|
- |
|
31,435,546 |
|
- |
Securities at amortized cost |
|
16,006,518 |
|
800,172 |
|
22,474 |
|
- |
|
- |
|
16,829,164 |
|
(4,764) |
|
16,824,400 |
|
- |
|
|
246,523,516 |
|
35,613,830 |
|
14,500,310 |
|
14,018,053 |
|
1,114,668 |
|
311,770,377 |
|
(1,695,261) |
|
310,075,116 |
|
141,847,497 |
(*1) Provision for credit loss allowance recognized in other comprehensive income on securities at FVOCI is W20,564 million.
(*2) Credit quality of due from banks and loans was classified based on the internal credit rating as follows:
Type of borrowers |
|
Grade 1 |
|
Grade 2 |
Banks and Governments |
|
OECD sovereign credit rating of 6 or above (as applied to the nationalities of the banks and governments) |
|
OECD sovereign credit rating of below 6 (as applied to the nationalities 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 |
Corporate (loans and credit cards) |
|
Internal credit rating of BBB+ or above |
|
Internal credit rating of below BBB+ |
Credit cards (individuals) |
|
For individual credit card holders, score of 7 or higher in Shinhan Card’s internal behavior scoring system |
|
For individual credit card holders, score of below 7 in Shinhan Card’s internal behavior scoring system |
57
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
ii) Credit risk exposure per credit grade of off-balance sheet items as of December 31, 2018 was as follows:
|
|
December 31, 2018 |
||||||
|
|
12-month expected credit loss |
|
Life time expected credit loss |
|
Impaired |
|
Total |
Financial guarantee: |
|
|
|
|
|
|
|
|
Grade 1 |
|
2,117,330 |
|
144,396 |
|
- |
|
2,261,726 |
Grade 2 |
|
1,975,530 |
|
152,162 |
|
- |
|
2,127,692 |
Impaired |
|
- |
|
- |
|
1,789 |
|
1,789 |
|
|
4,092,860 |
|
296,558 |
|
1,789 |
|
4,391,207 |
Loan commitment and |
|
|
|
|
|
|
|
|
Grade 1 |
|
69,820,060 |
|
2,995,450 |
|
- |
|
72,815,510 |
Grade 2 |
|
16,931,240 |
|
1,256,141 |
|
- |
|
18,187,381 |
|
|
86,751,300 |
|
4,251,591 |
|
- |
|
91,002,891 |
|
|
90,844,160 |
|
4,548,149 |
|
1,789 |
|
95,394,098 |
58
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-1.Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
iii) Credit risk exposure per collateral of financial instruments as of December 31, 2018 was as follows:
|
|
December 31, 2018 |
||||||
|
|
12-month expected credit loss |
|
Life time expected credit loss |
|
Impaired |
|
Total |
Guarantees |
|
12,805,907 |
|
3,827,687 |
|
50,198 |
|
16,683,792 |
Deposits and savings |
|
761,631 |
|
222,692 |
|
677 |
|
985,000 |
Property and equipment |
|
1,051,573 |
|
244,571 |
|
18,766 |
|
1,314,910 |
Real estate |
|
113,055,399 |
|
13,530,936 |
|
256,917 |
|
126,843,252 |
|
|
127,674,510 |
|
17,825,886 |
|
326,558 |
|
145,826,954 |
iv) Credit risk exposure per LTV of mortgage loans as of December 31, 2018 was as follows:
|
|
December 31, 2018 |
||||||||||
|
|
40% or less |
|
Above 40% ~ 60% |
|
Above 60% ~ 80% |
|
Above 80% ~ 100% |
|
Other |
|
Total |
Loans at amortized cost |
|
16,867,813 |
|
15,050,255 |
|
13,489,872 |
|
3,126,966 |
|
601,275 |
|
49,136,181 |
Less: allowance |
|
(1,321) |
|
(2,208) |
|
(6,340) |
|
(5,715) |
|
(6,005) |
|
(21,589) |
|
|
16,866,492 |
|
15,048,047 |
|
13,483,532 |
|
3,121,251 |
|
595,270 |
|
49,114,592 |
v) Due from banks and loans as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||||||||
|
|
Banks |
|
Retail |
|
Governments |
|
Corporate |
|
Credit cards |
|
Total |
Neither past due nor impaired |
|
9,843,616 |
|
114,227,036 |
|
14,129,002 |
|
110,033,944 |
|
80,660 |
|
248,314,258 |
Past due but not impaired |
|
- |
|
451,639 |
|
- |
|
176,579 |
|
6,925 |
|
635,143 |
Impaired |
|
- |
|
318,741 |
|
- |
|
897,009 |
|
33 |
|
1,215,783 |
|
|
9,843,616 |
|
114,997,416 |
|
14,129,002 |
|
111,107,532 |
|
87,618 |
|
250,165,184 |
Less: allowance |
|
(17,154) |
|
(393,423) |
|
(3,902) |
|
(1,100,179) |
|
(5,945) |
|
(1,520,603) |
|
|
9,826,462 |
|
114,603,993 |
|
14,125,100 |
|
110,007,353 |
|
81,673 |
|
248,644,581 |
59
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
vi) Credit quality of due from banks and loans that were neither past due nor impaired as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||||||||
|
|
Banks |
|
Retail |
|
Governments |
|
Corporate |
|
Credit cards |
|
Total |
Grade 1 |
|
9,838,259 |
|
108,181,667 |
|
14,129,002 |
|
78,894,110 |
|
71,233 |
|
211,114,271 |
Grade 2 |
|
5,357 |
|
6,045,369 |
|
- |
|
31,139,834 |
|
9,427 |
|
37,199,987 |
|
|
9,843,616 |
|
114,227,036 |
|
14,129,002 |
|
110,033,944 |
|
80,660 |
|
248,314,258 |
Less: allowance |
|
(17,154) |
|
(196,716) |
|
(3,902) |
|
(566,569) |
|
(5,945) |
|
(790,286) |
|
|
9,826,462 |
|
114,030,320 |
|
14,125,100 |
|
109,467,375 |
|
74,715 |
|
247,523,972 |
Mitigation of credit risk due to collateral |
|
96,660 |
|
74,797,088 |
|
- |
|
57,116,428 |
|
258 |
|
132,010,434 |
vii) Aging analysis of due from banks and loans, that were past due but not impaired as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||||
|
|
Retail |
|
Corporate |
|
Credit cards |
|
Total |
Less than 30 days |
|
344,006 |
|
118,520 |
|
6,431 |
|
468,957 |
30 days ~ less than 60 days |
|
54,305 |
|
30,418 |
|
66 |
|
84,789 |
60 days ~ less than 90 days |
|
37,898 |
|
15,854 |
|
38 |
|
53,790 |
90 days or more |
|
15,430 |
|
11,787 |
|
390 |
|
27,607 |
|
|
451,639 |
|
176,579 |
|
6,925 |
|
635,143 |
Less: allowance |
|
(50,863) |
|
(8,219) |
|
- |
|
(59,082) |
|
|
400,776 |
|
168,360 |
|
6,925 |
|
576,061 |
Mitigation of credit risk due to collateral |
|
318,660 |
|
89,618 |
|
2 |
|
408,280 |
60
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(e) Credit risk exposure by credit risk grade (continued)
viii) Mitigation of credit risk due to the collateral of impaired due from banks and loans, net of allowance, as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
|||||||
|
|
Retail |
|
Corporate |
|
Credit cards |
|
Total |
|
Impaired |
|
318,741 |
|
897,009 |
|
33 |
|
1,215,783 |
|
Less: allowance |
|
(145,844) |
|
(525,391) |
|
- |
|
(671,235) |
|
|
|
172,897 |
|
371,618 |
|
33 |
|
544,548 |
|
Mitigation of credit risk due to collateral |
|
122,150 |
|
327,418 |
|
- |
|
449,568 |
ix) Credit ratings of debt securities as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
||||||
|
|
Trading assets |
|
Available-for-sale financial assets |
|
Held-to-maturity financial assets |
|
Total |
AAA |
|
3,065,304 |
|
21,826,000 |
|
13,813,452 |
|
38,704,756 |
AA- to AA+ |
|
1,187,091 |
|
3,113,596 |
|
346,953 |
|
4,647,640 |
A- to A+ |
|
3,348,546 |
|
2,037,692 |
|
130,293 |
|
5,516,531 |
BBB- to BBB+ |
|
839,249 |
|
1,171,960 |
|
166,906 |
|
2,178,115 |
Lower than BBB- |
|
47,981 |
|
421,016 |
|
177,840 |
|
646,837 |
Unrated |
|
2,018,187 |
|
1,388,905 |
|
187,454 |
|
3,594,546 |
|
|
10,506,358 |
|
29,959,169 |
|
14,822,898 |
|
55,288,425 |
x) The credit quality of debt securities according to the credit ratings by external rating agencies as of December 31, 2017 was as follows:
|
|
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
xi) Information related to impairment for debt securities as of December 31, 2017 was as follows:
|
|
December 31, 2017 |
|
Neither past due nor impaired |
|
55,288,425 |
|
61
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(f) Nature and effect of modification in contractual cash flows
i) For the financial assets for which the loss allowances have been measured at amounts equal to the lifetime credit losses, and the contractual cash flows were modified during year ended December 31, 2018, the amortized costs before modification amounted to W45,178 million and the net losses resulting from the modification amounted to W14,953 million.
ii) As of December 31, 2018, the book value of financial asset, for which contractual cash flows have been modified while the loss allowance was measured at an amount equal to lifetime expected credit losses at initial recognition, and the loss allowance reverted to being measured at an amount equal to 12-month expected credit losses during the year ended December 31, 2018, is W1,159 million.
(g) The contractual amounts outstanding on financial assets that were written-off but were still subject to enforcement activity as of December 31, 2018, were W6,043,744 million.
(h) As of December 31, 2018 and 2017, there were no assets acquired by the execution of collateral.
(i) Concentration by geographic location
An analysis of concentration by geographic location for financial assets excluding equity securities, net of allowance, as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||||
|
|
Korea |
|
U.S.A |
|
Japan |
|
Vietnam |
|
China |
|
Other |
|
Total |
Due from banks: (*) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
222,634 |
|
1,478,810 |
|
454,277 |
|
294,466 |
|
2,006,399 |
|
698,978 |
|
5,155,564 |
Governments |
|
3,168,858 |
|
499,742 |
|
750,676 |
|
182,822 |
|
546,597 |
|
277,105 |
|
5,425,800 |
|
|
3,391,492 |
|
1,978,553 |
|
1,204,953 |
|
477,288 |
|
2,552,996 |
|
976,082 |
|
10,581,364 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
5,180,244 |
|
15,360 |
|
186,618 |
|
627,411 |
|
1,215,043 |
|
1,501,080 |
|
8,725,756 |
Retail |
|
118,927,400 |
|
358,470 |
|
3,440,600 |
|
1,031,270 |
|
971,159 |
|
656,820 |
|
125,385,719 |
Governments |
|
688,261 |
|
- |
|
- |
|
- |
|
- |
|
2,397 |
|
690,658 |
Corporate |
|
101,731,466 |
|
2,473,910 |
|
2,526,494 |
|
1,846,468 |
|
2,621,580 |
|
5,132,975 |
|
116,332,893 |
Credit cards |
|
4,450 |
|
1,247 |
|
23 |
|
92,287 |
|
16 |
|
757 |
|
98,780 |
|
|
226,531,821 |
|
2,848,987 |
|
6,153,735 |
|
3,597,436 |
|
4,807,798 |
|
7,294,029 |
|
251,233,806 |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Loans at FVTPL |
|
645,237 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
645,237 |
Securities at FVTPL |
|
15,063,058 |
|
53,863 |
|
27,064 |
|
- |
|
88,297 |
|
256,830 |
|
15,489,112 |
Securities at FVOCI |
|
29,020,711 |
|
646,873 |
|
197,234 |
|
392,668 |
|
616,143 |
|
561,917 |
|
31,435,546 |
Securities at amortized cost |
|
16,081,956 |
|
24,689 |
|
68,594 |
|
360,953 |
|
34,923 |
|
253,285 |
|
16,824,400 |
|
|
290,734,275 |
|
5,552,964 |
|
7,651,580 |
|
4,828,345 |
|
8,100,157 |
|
9,342,144 |
|
326,209,465 |
|
|
December 31, 2017 |
||||||||||||
|
|
Korea |
|
U.S.A |
|
Japan |
|
Vietnam |
|
China |
|
Other |
|
Total |
Due from banks and loans: (*) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
2,890,736 |
|
1,152,093 |
|
268,533 |
|
547,462 |
|
3,420,224 |
|
1,547,414 |
|
9,826,462 |
Retail |
|
109,733,109 |
|
345,530 |
|
2,695,853 |
|
745,705 |
|
613,134 |
|
470,662 |
|
114,603,993 |
Governments |
|
12,569,884 |
|
130,553 |
|
388,142 |
|
35,786 |
|
664,030 |
|
336,705 |
|
14,125,100 |
Corporate |
|
97,068,853 |
|
2,140,109 |
|
2,130,721 |
|
1,596,579 |
|
2,530,295 |
|
4,540,796 |
|
110,007,353 |
Credit cards |
|
3,751 |
|
859 |
|
60 |
|
76,194 |
|
18 |
|
791 |
|
81,673 |
|
|
222,266,333 |
|
3,769,144 |
|
5,483,309 |
|
3,001,726 |
|
7,227,701 |
|
6,896,368 |
|
248,644,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets |
|
10,476,869 |
|
- |
|
- |
|
- |
|
29,489 |
|
189,297 |
|
10,695,655 |
Available-for-sale financial assets |
|
27,916,554 |
|
447,804 |
|
163,652 |
|
474,134 |
|
510,678 |
|
446,347 |
|
29,959,169 |
Held-to-maturity financial assets |
|
14,273,306 |
|
31,988 |
|
34,487 |
|
237,641 |
|
37,096 |
|
208,380 |
|
14,822,898 |
|
|
274,933,062 |
|
4,248,936 |
|
5,681,448 |
|
3,713,501 |
|
7,804,964 |
|
7,740,392 |
|
304,122,303 |
(*) Geographical breakdown is the net book value, net of unrecognized balances and allowance for doubtful accounts.
62
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-1. Credit risk (continued)
(j) Concentration by industry sector
An analysis of concentration by industry sector for financial assets excluding equity securities, net of allowance, as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||||
|
|
Finance and insurance |
|
Manu- facturing |
|
Retail and wholesale |
|
Real estate and service |
|
Others |
|
Retail customers |
|
Total |
Due from banks:(*1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
5,155,564 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
5,155,564 |
Governments |
|
5,425,800 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
5,425,800 |
|
|
10,581,364 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
10,581,364 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
8,369,039 |
|
2,219 |
|
- |
|
300 |
|
354,198 |
|
- |
|
8,725,756 |
Retail |
|
- |
|
- |
|
- |
|
- |
|
- |
|
125,385,719 |
|
125,385,719 |
Governments |
|
690,658 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
690,658 |
Corporate |
|
4,618,663 |
|
42,921,485 |
|
16,119,877 |
|
22,832,074 |
|
29,840,794 |
|
- |
|
116,332,893 |
Credit cards |
|
- |
|
- |
|
- |
|
- |
|
- |
|
98,780 |
|
98,780 |
|
|
13,678,360 |
|
42,923,704 |
|
16,119,877 |
|
22,832,374 |
|
30,194,992 |
|
125,484,499 |
|
251,233,806 |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
Loans at FVTPL |
|
62,005 |
|
178,827 |
|
208,633 |
|
20,004 |
|
175,768 |
|
- |
|
645,237 |
Securities at FVTPL |
|
10,749,389 |
|
824,042 |
|
1,032,448 |
|
124,471 |
|
2,758,762 |
|
- |
|
15,489,112 |
Securities at FVOCI |
|
19,383,586 |
|
1,468,235 |
|
242,857 |
|
332,101 |
|
10,008,767 |
|
- |
|
31,435,546 |
Securities at amortized cost |
|
4,630,825 |
|
99,437 |
|
- |
|
61,275 |
|
12,032,863 |
|
- |
|
16,824,400 |
|
|
59,085,529 |
|
45,494,245 |
|
17,603,815 |
|
23,370,225 |
|
55,171,152 |
|
125,484,499 |
|
326,209,465 |
|
|
December 31, 2017 |
||||||||||||
|
|
Finance and insurance |
|
Manu- facturing |
|
Retail and wholesale |
|
Real estate and service |
|
Others |
|
Retail customers |
|
Total |
Due from banks and loans: (*1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
7,610,214 |
|
1,592 |
|
- |
|
56,744 |
|
2,157,912 |
|
- |
|
9,826,462 |
Retail |
|
- |
|
- |
|
- |
|
- |
|
- |
|
114,603,993 |
|
114,603,993 |
Governments |
|
13,192,733 |
|
1,314 |
|
- |
|
- |
|
931,053 |
|
- |
|
14,125,100 |
Corporate |
|
3,160,611 |
|
39,462,251 |
|
15,384,000 |
|
18,943,931 |
|
33,056,560 |
|
- |
|
110,007,353 |
Credit cards |
|
- |
|
- |
|
- |
|
- |
|
- |
|
81,673 |
|
81,673 |
|
|
23,963,558 |
|
39,465,157 |
|
15,384,000 |
|
19,000,675 |
|
36,145,525 |
|
114,685,666 |
|
248,644,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets |
|
7,148,494 |
|
603,241 |
|
1,078,705 |
|
93,040 |
|
1,772,175 |
|
- |
|
10,695,655 |
Available-for-sale financial assets |
|
20,024,919 |
|
1,057,244 |
|
164,779 |
|
455,014 |
|
8,257,213 |
|
- |
|
29,959,169 |
Held-to-maturity financial assets |
|
4,491,644 |
|
48,981 |
|
- |
|
62,129 |
|
10,220,144 |
|
- |
|
14,822,898 |
|
|
55,628,615 |
|
41,174,623 |
|
16,627,484 |
|
19,610,858 |
|
56,395,057 |
|
114,685,666 |
|
304,122,303 |
(*) Industrial breakdown is the net book value, net of unrecognized balances and allowance for doubtful accounts.
63
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4. Financial risk management (continued)
4-2. Market risk
Market risk is the risk that changes in market price such as interest rates, equity prices, and foreign exchange rates, etc. will affect the Group’s income. Trading position is exposed to the risk such as interest rates, equity prices, foreign exchange rates, etc., and non-trading position is mainly exposed to interest rates. The Group separates and manages its exposure to market risk between trading and non-trading position.
Overall authority for market risk is vested in the Risk Policy Committee. The Risk Management Department is responsible for the development of detailed risk management policies which are subject to review and approval by the Risk Policy Committee and for the day-to-day review of their implementation. The Risk Policy Committee also sets Value at Risk (VaR) limit, damage limit, sensitivity limit, investment limits, position limits, and stress damage limits of each department and desk. The Risk Management Department monitors operation departments and reports regularly to the Risk Policy Committee and the Risk Management Committee.
Before launching a new product from each business unit, the Group is required to perform an objective analysis of the risk evaluation and examination of fair value measurement method from the Risk Management Department or Fair Value Evaluation Committee. The Derivative and Structured Product Risk Review Committee reviews the related risk exposure and investment limit.
(a) Market risk management of trading positions
Trading position includes securities, foreign exchange position, and derivatives which are traded for profits.
Trading data of foreign exchange, stocks, bonds and derivatives from trading positions are tracked and daily risk limits are systematically monitored based on the Group’s risk management parameters. Statistical analysis that complements the above risk management process and stress testing is performed regularly in order to manage the impact and loss of rapid economic changes. These risk management processes enable the Group to manage the scale of potential losses within a certain range when a crisis occurs.
i) Measurement method on market risk arising from trading positions
The principal tool used to measure and control market risk exposure within the Group’s trading position is VaR. The VaR of a trading position is the estimated loss that will arise on the portfolio over a specified period of time (ten days holding period) from an adverse market movement with a specified probability (confidence level). The Group measures market risk based on 99.9% confidence level by using the VaR model based on historical simulation.
VaR is a commonly used market risk management technique. However, VaR estimates possible losses over a certain period at a particular confidence level using the historical market movement data. The use of historical market movement data as a basis for determining the possible range of future outcome may not always cover all possible scenarios, especially those of an exceptional nature. VaR models assume that a holding period of generally one to ten days is sufficient prior to liquidating the underlying positions, but this may not be the case for certain highly illiquid assets or in situations in which there is severe general market illiquidity.
64
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-2. Market risk (continued)
(a) Market risk management of trading positions (continued)
The Group directly applies the historical changes in interest rates, equity prices, and foreign exchange rates to current position. The actual outputs are regularly monitored by testing the effectiveness of assumptions, measurements and parameter. The application of this method does not prevent loss from larger market movement that exceeds the acceptable parameter.
VaR limit related to the operation of trading and non-trading portfolio is determined by management annually. VaR is measured at least daily. The quality of VaR model is monitored consistently by examining the VaR results related to trading book.
ii) VaR of trading positions
An analysis of trading position VaR for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||
|
|
Average |
|
Maximum |
|
Minimum |
|
Year-end |
Interest rate risk |
|
22,559 |
|
29,748 |
|
16,194 |
|
18,797 |
Equity risk |
|
12,118 |
|
25,701 |
|
1,976 |
|
22,212 |
Foreign currency risk (*1) |
|
39,282 |
|
45,738 |
|
34,162 |
|
34,294 |
Volatility risk |
|
131 |
|
511 |
|
30 |
|
261 |
Commodity risk |
|
17 |
|
61 |
|
- |
|
24 |
Covariance |
|
(30,150) |
|
(44,297) |
|
(14,337) |
|
(21,298) |
|
|
43,957 |
|
57,462 |
|
38,025 |
|
54,290 |
|
|
2017 |
||||||
|
|
Average |
|
Maximum |
|
Minimum |
|
Year-end |
Interest rate risk |
|
38,370 |
|
50,206 |
|
22,226 |
|
25,071 |
Equity risk |
|
4,051 |
|
5,622 |
|
3,040 |
|
4,675 |
Foreign currency risk (*1) |
|
43,827 |
|
46,108 |
|
41,562 |
|
41,947 |
Volatility risk |
|
70 |
|
124 |
|
43 |
|
66 |
Commodity risk |
|
22 |
|
46 |
|
- |
|
14 |
Covariance |
|
(36,397) |
|
(46,003) |
|
(24,840) |
|
(26,367) |
|
|
49,943 |
|
56,103 |
|
42,031 |
|
45,406 |
(*1) The Group measured foreign currency risk arising from trading positions and non-trading positions.
65
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-2. Market risk (continued)
(b) Market risk management of non-trading positions
The most critical market risk that arises from non-trading position is the interest rate risk. Accordingly, the Group measures and manages market risk for non-trading position by taking into account effects of interest rate changes on both its net asset value and income. Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates.
Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. The Risk Policy Committee is the monitoring body for compliance with these limits including establishing policies and setting the limits and is assisted by the Risk Management Department in its day-to-day monitoring activities.
The Group measures and manages interest rate risk by using various analyses such as interest rate gap, duration gap, and NII (Net Interest Income) simulation of each scenario through the ALM system (OFSA). The Group also monitors interest rate VaR, earnings at risk (“EaR”), and gap rate of interest rate by setting the limits on a monthly basis.
i) Measurement method on market risk arising from non-trading positions
The Group measures interest rate VaR by using standard modified duration and interest rate volatility, and interest rate EaR by using impact period by maturity period and interest rate volatility based on a standard methodology provided by the Bank for International Settlements (“BIS”).
ii) Interest rate VaR and EaR for non-trading positions
Interest rate VaR and EaR for non-trading positions which were measured by the standard methodology provided by BIS as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Interest rate VaR |
|
301,152 |
|
429,241 |
Interest rate EaR |
|
371,682 |
|
174,262 |
66
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2. Market risk (continued)
(c) Foreign exchange risk
The Group manages foreign currency risk based on general positions which includes all spot and future foreign currency positions, etc. The Risk Policy Committee oversees the Group’s foreign exchange exposure for both trading and non-trading activities by establishing limits for the net foreign currencies open position. The Group’s foreign exchange position is centralized at the FX & Derivatives Department. Dealers in the FX & Derivatives Department manage the Group’s overall position within the set limits through spot trading, forward contracts, currency options, futures and swaps and foreign exchange swaps. The Group’s foreign exchange transactions are mainly conducted in the U.S. dollar (USD), Japanese yen (JPY), euro (EUR) and Chinese yuan (CNY). Other foreign currencies are limitedly traded.
Foreign currency denominated assets and liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
USD |
|
JPY |
|
EUR |
|
CNY |
|
Others |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
3,982,259 |
|
1,189,532 |
|
198,332 |
|
1,582,092 |
|
1,472,817 |
|
8,425,032 |
Securities at FVTPL |
|
410,497 |
|
- |
|
37,184 |
|
- |
|
169,810 |
|
617,491 |
Derivative assets |
|
111,036 |
|
285 |
|
2,299 |
|
406 |
|
11,875 |
|
125,901 |
Loans at amortized cost |
|
15,522,744 |
|
6,859,420 |
|
1,275,174 |
|
3,496,937 |
|
5,934,618 |
|
33,088,893 |
Securities at FVOCI |
|
2,628,613 |
|
125,512 |
|
- |
|
357,682 |
|
696,230 |
|
3,808,037 |
Securities at amortized cost |
|
116,333 |
|
128,512 |
|
- |
|
34,955 |
|
617,648 |
|
897,448 |
Other financial assets |
|
2,926,663 |
|
135,984 |
|
70,321 |
|
456,405 |
|
349,571 |
|
3,938,944 |
|
|
25,698,145 |
|
8,439,245 |
|
1,583,310 |
|
5,928,477 |
|
9,252,569 |
|
50,901,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
13,016,480 |
|
7,207,653 |
|
693,052 |
|
4,553,334 |
|
5,216,302 |
|
30,686,821 |
Financial liabilities at FVTPL |
|
- |
|
- |
|
- |
|
- |
|
458,934 |
|
458,934 |
Derivative liabilities |
|
165,761 |
|
- |
|
1,914 |
|
2,089 |
|
4,892 |
|
174,656 |
Borrowings |
|
5,881,097 |
|
444,481 |
|
280,949 |
|
395,719 |
|
167,995 |
|
7,170,241 |
Debt securities issued |
|
4,110,789 |
|
317,125 |
|
40,933 |
|
- |
|
1,103,732 |
|
5,572,579 |
Other financial liabilities |
|
2,621,974 |
|
192,161 |
|
125,434 |
|
573,544 |
|
540,510 |
|
4,053,623 |
|
|
25,796,101 |
|
8,161,420 |
|
1,142,282 |
|
5,524,686 |
|
7,492,365 |
|
48,116,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
|
(97,956) |
|
277,825 |
|
441,028 |
|
403,791 |
|
1,760,204 |
|
2,784,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Off balance sheet items |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative exposures |
|
316,006 |
|
(58,204) |
|
(388,554) |
|
(34,075) |
|
(88,718) |
|
(253,545) |
Net position |
|
218,050 |
|
219,621 |
|
52,474 |
|
369,716 |
|
1,671,486 |
|
2,531,347 |
67
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-2. Market risk (continued)
(c) Foreign exchange risk (continued)
|
|
December 31, 2017 |
||||||||||
|
|
USD |
|
JPY |
|
EUR |
|
CNY |
|
Others |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
2,343,055 |
|
955,205 |
|
267,008 |
|
1,932,502 |
|
1,482,475 |
|
6,980,245 |
Trading assets |
|
5,273 |
|
- |
|
- |
|
- |
|
189,297 |
|
194,570 |
Derivative assets |
|
59,391 |
|
4 |
|
766 |
|
203 |
|
1,455 |
|
61,819 |
Loans |
|
14,461,961 |
|
5,739,301 |
|
1,196,346 |
|
2,774,264 |
|
5,059,607 |
|
29,231,479 |
Available-for-sale financial assets |
|
1,855,032 |
|
113,239 |
|
52,583 |
|
395,150 |
|
666,486 |
|
3,082,490 |
Held-to-maturity financial assets |
|
78,975 |
|
137,100 |
|
- |
|
37,096 |
|
451,922 |
|
705,093 |
Other financial assets |
|
1,586,395 |
|
288,243 |
|
154,853 |
|
458,166 |
|
286,725 |
|
2,774,382 |
|
|
20,390,082 |
|
7,233,092 |
|
1,671,556 |
|
5,597,381 |
|
8,137,967 |
|
43,030,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
11,998,969 |
|
6,286,743 |
|
757,326 |
|
4,283,274 |
|
4,878,846 |
|
28,205,158 |
Trading liabilities |
|
- |
|
- |
|
- |
|
- |
|
434,586 |
|
434,586 |
Derivative liabilities |
|
101,520 |
|
195 |
|
631 |
|
4,734 |
|
713 |
|
107,793 |
Borrowings |
|
4,960,709 |
|
291,342 |
|
231,539 |
|
407,678 |
|
68,988 |
|
5,960,256 |
Debt securities issued |
|
3,027,696 |
|
249,616 |
|
31,981 |
|
196,380 |
|
419,781 |
|
3,925,454 |
Other financial liabilities |
|
2,531,630 |
|
208,516 |
|
208,527 |
|
472,207 |
|
276,083 |
|
3,696,963 |
|
|
22,620,524 |
|
7,036,412 |
|
1,230,004 |
|
5,364,273 |
|
6,078,997 |
|
42,330,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets (liabilities) |
|
(2,230,442) |
|
196,680 |
|
441,552 |
|
233,108 |
|
2,058,970 |
|
699,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Off balance sheet items |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative exposures |
|
2,142,130 |
|
9,462 |
|
(433,642) |
|
81,099 |
|
(633,174) |
|
1,165,875 |
Net position |
|
(88,312) |
|
206,142 |
|
7,910 |
|
314,207 |
|
1,425,796 |
|
1,865,743 |
68
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4.Financial risk management (continued)
4-3. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Risk Policy Committee is responsible for establishing policies and setting the limits related to liquidity risk management. The Risk Management Department evaluates and manages the Group’s overall liquidity risk and monitors compliance of all operating subsidiaries and foreign branches with limits on a daily basis.
The Group applies the following basic principles for liquidity risk management:
|
raise funding in sufficient amounts at the optimal time and reasonable costs; |
|
maintain risk at appropriate levels and preemptively manage them through a prescribed risk limit system and an early warning signal detection system; |
|
secure stable sources of revenue and minimize actual losses by implementing an effective asset-liability management system based on diversified sources of funding with varying maturities; |
|
monitor and manage daily and intra-daily liquidity positions and risk exposures as to timely payment and settlement of financial obligations due under both normal and crisis situations; |
|
conduct periodic contingency analysis in anticipation of any potential liquidity crisis and establish and implement emergency plans in case of a crisis actually happening; and |
|
consider liquidity-related costs, benefits and risks in determining the price of products and services, employee performance evaluations and approval of launching new products and services. |
The Group manages its liquidity risk within the limits set on won and foreign currency by using various analysis methods such as liquidity gap, real liquidity gap and loan-deposit ratio through the ALM system and various indices including risk limits, early warning index, and monitoring index.
The following table presents the Group’s cash flows of financial assets and financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Since the effect of the discount is insignificant for the balance with the maturities of less than 12 months, the amount is the same as the book value.
69
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-3. Liquidity risk (continued)
(a) Contractual maturities for financial instruments
Contractual maturities for financial assets and financial liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||||
|
|
1 month or less |
|
1 month~ 3 months or less |
|
3 months~ 6 months or less |
|
6 months~ 1 year or less |
|
1 year~ 5 years or less |
|
More than 5 years |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
11,756,787 |
|
675,537 |
|
673,225 |
|
82,202 |
|
58 |
|
- |
|
13,187,809 |
Securities at FVTPL |
|
15,612,433 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
15,612,433 |
Derivative assets |
|
1,472,004 |
|
50,498 |
|
66,815 |
|
106,966 |
|
495,274 |
|
262,007 |
|
2,453,564 |
Loans at amortized cost |
|
22,225,699 |
|
26,584,311 |
|
38,564,391 |
|
60,699,972 |
|
74,171,256 |
|
60,271,062 |
|
282,516,691 |
Loans at FVTPL |
|
28,221 |
|
386,353 |
|
39,154 |
|
102,394 |
|
101,725 |
|
- |
|
657,847 |
Securities at FVOCI |
|
31,466,977 |
|
- |
|
- |
|
- |
|
- |
|
411,371 |
|
31,878,348 |
Securities at amortized cost |
|
482,234 |
|
1,298,891 |
|
396,923 |
|
2,061,008 |
|
13,527,891 |
|
801,152 |
|
18,568,099 |
Other financial assets |
|
13,152,211 |
|
- |
|
- |
|
- |
|
- |
|
1,110,556 |
|
14,262,767 |
|
|
96,196,566 |
|
28,995,590 |
|
39,740,508 |
|
63,052,542 |
|
88,296,204 |
|
62,856,148 |
|
379,137,558 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
119,899,315 |
|
23,977,712 |
|
33,362,815 |
|
54,459,955 |
|
27,536,213 |
|
2,835,925 |
|
262,071,935 |
Financial liabilities at FVTPL |
|
459,336 |
|
193 |
|
53 |
|
10,403 |
|
10,124 |
|
- |
|
480,109 |
Derivative liabilities |
|
1,671,223 |
|
40,891 |
|
56,711 |
|
102,831 |
|
523,026 |
|
272,663 |
|
2,667,345 |
Borrowings |
|
3,739,100 |
|
2,675,305 |
|
2,022,551 |
|
2,777,822 |
|
4,164,139 |
|
1,103,572 |
|
16,482,489 |
Debt securities issued |
|
2,402,156 |
|
4,023,015 |
|
3,917,384 |
|
6,779,292 |
|
13,497,283 |
|
3,399,603 |
|
34,018,733 |
Other financial liabilities |
|
15,377,699 |
|
- |
|
- |
|
- |
|
130,122 |
|
- |
|
15,507,821 |
|
|
143,548,829 |
|
30,717,116 |
|
39,359,514 |
|
64,130,303 |
|
45,860,907 |
|
7,611,763 |
|
331,228,432 |
These amounts include cash flows of principal and interest on financial assets and financial liabilities. The undiscounted cash flows were classified based on the earliest dates for obligated repayment. Financial assets at FVTPL and financial assets at FVOCI except for assets restricted for sale for certain periods were included in 1 month or less.
70
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-3. Liquidity risk (continued)
(a) Contractual maturities for financial instruments (continued)
|
|
December 31, 2017 |
||||||||||||
|
|
1 month or less |
|
1 month~ 3 months or less |
|
3 months~ 6 months or less |
|
6 months~ 1 year or less |
|
1 year~ 5 years or less |
|
More than 5 years |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
17,692,577 |
|
640,029 |
|
231,699 |
|
131,391 |
|
5,008 |
|
- |
|
18,700,704 |
Trading assets |
|
11,216,398 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
11,216,398 |
Derivative assets |
|
2,715,665 |
|
285,632 |
|
78,501 |
|
121,845 |
|
346,065 |
|
143,032 |
|
3,690,740 |
Loans |
|
19,613,910 |
|
27,102,835 |
|
36,486,097 |
|
56,796,297 |
|
64,140,522 |
|
54,087,978 |
|
258,227,639 |
Available-for-sale financial assets |
|
31,672,125 |
|
- |
|
- |
|
- |
|
- |
|
823,416 |
|
32,495,541 |
Held-to-maturity financial assets |
|
121,160 |
|
143,405 |
|
202,680 |
|
1,372,783 |
|
13,567,630 |
|
1,050,348 |
|
16,458,006 |
Other financial assets |
|
8,043,587 |
|
- |
|
- |
|
1,364 |
|
1,104,932 |
|
- |
|
9,149,883 |
|
|
91,075,422 |
|
28,171,901 |
|
36,998,977 |
|
58,423,680 |
|
79,164,157 |
|
56,104,774 |
|
349,938,911 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
127,474,369 |
|
20,940,723 |
|
30,674,220 |
|
51,094,384 |
|
15,745,090 |
|
1,895,195 |
|
247,823,981 |
Trading liabilities |
|
434,586 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
434,586 |
Derivative liabilities |
|
2,484,338 |
|
38,289 |
|
30,028 |
|
46,915 |
|
164,442 |
|
60,717 |
|
2,824,729 |
Borrowings |
|
5,469,114 |
|
2,354,580 |
|
1,296,828 |
|
2,338,371 |
|
2,763,308 |
|
632,682 |
|
14,854,883 |
Debt securities issued |
|
612,200 |
|
2,812,829 |
|
2,155,415 |
|
6,868,469 |
|
12,190,221 |
|
2,940,935 |
|
27,580,069 |
Other financial liabilities |
|
14,805,782 |
|
- |
|
- |
|
- |
|
129,329 |
|
- |
|
14,935,111 |
|
|
151,280,389 |
|
26,146,421 |
|
34,156,491 |
|
60,348,139 |
|
30,992,390 |
|
5,529,529 |
|
308,453,359 |
These amounts include cash flows of principal and interest on financial assets and financial liabilities. The undiscounted cash flows were classified based on the earliest dates for obligated repayment. Trading assets and available-for-sale financial assets except for assets restricted for sale for certain periods were included in the less than 1 month.
(b) Contractual maturities for off balance sheet items
Financial guarantees such as financial guarantee contracts, 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 for the payment.
Off-balance sheet items as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Financial guarantee contracts |
|
4,391,207 |
|
3,242,514 |
Loan commitments and others |
|
91,002,891 |
|
73,790,861 |
|
|
95,394,098 |
|
77,033,375 |
71
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4.Financial risk management (continued)
4-4. Measurement of fair value
The fair value which the Group primarily uses for measurement of financial instruments are the published price quotations in an active market which are based on the market prices or the dealer price quotations of financial instruments traded in an active market where available, which is the best evidence of fair value.
If the market for a financial instrument is not active, fair value is established either by using a valuation technique or independent third-party valuation service. The Group uses diverse valuation techniques under reasonable assumptions which are based on the inputs observable in markets at the end of each reporting period.
Valuation techniques include using the 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. For example, the fair value for interest swaps is the present value of estimated future cash flows, and fair value for foreign exchange forwards contracts is measured by using the published forward exchange rate at the end of each reporting period.
The Group classifies and discloses fair value of the financial instruments into the following three-level hierarchy:
(i) Level 1: Financial instruments measured at quoted prices from active markets are classified as level 1.
(ii) Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.
(iii) 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.
72
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value
i) The table below analyzes financial instruments measured at the fair value as of December 31, 2018 and 2017 by the level in the fair value hierarchy into which the fair value measurement is categorized:
|
|
December 31, 2018 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Financial assets |
|
|
|
|
|
|
|
|
Loans at FVTPL: |
|
|
|
|
|
|
|
|
Loans |
|
- |
|
407,996 |
|
237,241 |
|
645,237 |
Securities at FVTPL: |
|
|
|
|
|
|
|
|
Debt securities |
|
1,039,563 |
|
13,020,589 |
|
1,274,079 |
|
15,334,231 |
Equity securities |
|
79,567 |
|
- |
|
43,754 |
|
123,321 |
Gold/silver deposits |
|
154,881 |
|
- |
|
- |
|
154,881 |
Derivative assets: |
|
|
|
|
|
|
|
|
Trading |
|
- |
|
1,440,695 |
|
2,675 |
|
1,443,370 |
Hedging |
|
- |
|
36,502 |
|
4,586 |
|
41,088 |
Securities at FVOCI: |
|
|
|
|
|
|
|
|
Debt securities |
|
9,223,783 |
|
22,211,763 |
|
- |
|
31,435,546 |
Equity securities |
|
135,815 |
|
- |
|
306,987 |
|
442,802 |
|
|
10,633,609 |
|
37,117,545 |
|
1,869,322 |
|
49,620,476 |
Financial liabilities |
|
|
|
|
|
|
|
|
Financial liabilities at FVTPL: |
|
|
|
|
|
|
|
|
Securities sold |
|
20,625 |
|
- |
|
- |
|
20,625 |
Gold/silver deposits |
|
458,934 |
|
- |
|
- |
|
458,934 |
Derivative liabilities: |
|
|
|
|
|
|
|
|
Trading |
|
953 |
|
1,295,021 |
|
2,658 |
|
1,298,632 |
Hedging |
|
- |
|
111,833 |
|
361,120 |
|
472,953 |
|
|
480,512 |
|
1,406,854 |
|
363,778 |
|
2,251,144 |
73
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
|
|
December 31, 2017 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Financial assets |
|
|
|
|
|
|
|
|
Trading assets: |
|
|
|
|
|
|
|
|
Debt securities |
|
1,328,512 |
|
9,177,846 |
|
- |
|
10,506,358 |
Equity securities |
|
218,969 |
|
301,774 |
|
- |
|
520,743 |
Gold/silver deposits |
|
189,297 |
|
- |
|
- |
|
189,297 |
Derivative assets: |
|
|
|
|
|
|
|
|
Trading |
|
33 |
|
2,585,491 |
|
8,343 |
|
2,593,867 |
Hedging |
|
- |
|
8,424 |
|
1,799 |
|
10,223 |
Available-for-sale financial assets: |
|
|
|
|
|
|
|
|
Debt securities |
|
8,897,634 |
|
21,061,535 |
|
- |
|
29,959,169 |
Equity securities |
|
404,623 |
|
1,013,679 |
|
1,118,070 |
|
2,536,372 |
|
|
11,039,068 |
|
34,148,749 |
|
1,128,212 |
|
46,316,029 |
Financial liabilities |
|
|
|
|
|
|
|
|
Trading liabilities: |
|
|
|
|
|
|
|
|
Gold/silver deposits |
|
434,586 |
|
- |
|
- |
|
434,586 |
Derivative liabilities: |
|
|
|
|
|
|
|
|
Trading |
|
55 |
|
2,468,792 |
|
3,574 |
|
2,472,421 |
Hedging |
|
- |
|
95,353 |
|
425,162 |
|
520,515 |
|
|
434,641 |
|
2,564,145 |
|
428,736 |
|
3,427,522 |
74
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
ii) There was no transfer between level 1 and level 2 for the years ended December 31, 2018 and 2017.
iii) Changes in level 3 of the fair value hierarchy
Changes in level 3 of the fair value hierarchy for the years ended December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
||||||||||
|
|
Loans at FVTPL |
|
Securities at FVTPL |
|
Securities at FVOCI |
|
Net derivative instruments |
|
Total |
|
Beginning balance(*1) |
|
113,168 |
|
841,791 |
|
279,560 |
|
(418,594) |
|
815,925 |
|
Total gain or loss: |
|
|
|
|
|
|
|
|
|
|
|
Recognized in profit or loss (*2) |
|
3,012 |
|
278,898 |
|
- |
|
56,362 |
|
338,272 |
|
Recognized in other comprehensive loss |
|
- |
|
- |
|
27,484 |
|
- |
|
27,484 |
|
Purchases/issues |
|
187,474 |
|
292,109 |
|
- |
|
(779) |
|
478,804 |
|
Settlements |
|
(66,413) |
|
(94,965) |
|
(57) |
|
6,487 |
|
(154,948) |
|
Transfers into level 3 (*3) |
|
- |
|
- |
|
- |
|
7 |
|
7 |
|
Ending balance |
|
237,241 |
|
1,317,833 |
|
306,987 |
|
(356,517) |
|
1,505,544 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
|
December 31, 2017 |
||||||||||
|
|
Trading assets |
|
Available-for-sale financial |
|
Net derivative instruments |
|
Financial liabilities designated at fair value through profit or loss |
|
Total |
|
Beginning balance |
|
14,936 |
|
1,131,599 |
|
(229,895) |
|
(2,005) |
|
914,635 |
|
Total gain or loss: |
|
|
|
|
|
|
|
|
|
|
|
Recognized in profit or loss (*2) |
|
- |
|
(149,742) |
|
(191,909) |
|
4 |
|
(341,647) |
|
Recognized in other comprehensive loss |
|
- |
|
(10,515) |
|
- |
|
- |
|
(10,515) |
|
Purchases/issues |
|
- |
|
238,333 |
|
2,441 |
|
- |
|
240,774 |
|
Settlements |
|
(14,936) |
|
(95,035) |
|
741 |
|
2,001 |
|
(107,229) |
|
Transfers into level 3 (*3) |
|
- |
|
3,430 |
|
28 |
|
- |
|
3,458 |
|
Ending balance |
|
- |
|
1,118,070 |
|
(418,594) |
|
- |
|
699,476 |
75
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
(*2) Gains or losses among the changes in level 3 of the fair value hierarchy and gains or losses related to financial instruments that the Group held as of December 31, 2018 and 2017 are presented in the statement of comprehensive income as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Gains or losses recognized in profit or loss |
|
Gains or losses recognized in profit or loss for financial instrument held at the end of the year |
|
Gains or losses recognized in profit or loss |
|
Gains or losses recognized in profit or loss for financial instrument held at the end of the year |
Net gain on financial assets at FVTPL |
|
282,700 |
|
278,007 |
|
- |
|
- |
Net trading loss |
|
- |
|
- |
|
(2,996) |
|
(2,996) |
Net gain on financial instruments designated at fair value through profit or loss |
|
- |
|
- |
|
4 |
|
- |
Net gain on sale of available- |
|
- |
|
- |
|
1,232 |
|
989 |
Impairment loss on financial assets |
|
- |
|
- |
|
(150,974) |
|
(150,974) |
Net other operating income (expenses) |
|
55,572 |
|
55,572 |
|
(188,913) |
|
(188,913) |
|
|
338,272 |
|
333,579 |
|
(341,647) |
|
(341,894) |
(*3) These financial instruments were transferred into or out of level 3 as the availability of observable market data has changed. The Group recognized transfers between levels of the fair value hierarchy at the end of the reporting period during which the event or the change in circumstances that caused the transfer has occurred.
76
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
iv) Valuation techniques and inputs used in measuring fair value of financial instruments
ⓐ Valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Type of financial instruments |
|
|
Book value |
|
Valuation techniques |
|
Inputs |
|
Financial assets |
||||||||||
Loans at FVTPL |
|
|
407,996 |
|
Discounted cash flow |
|
Discount rate
|
|||
Securities at FVTPL |
|
Debt securities |
|
|
13,020,589 |
|
Discounted cash flow Net asset value
|
|
Discount rate
Price of underlying assets |
|
Derivative assets |
|
Trading |
|
|
1,440,695 |
|
Option model, Discounted cash flow |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
|
Hedging |
|
|
36,502 |
|
|
||||
|
|
|
|
1,477,197 |
|
|
|
|
||
Securities at FVOCI |
|
Debt securities |
|
|
22,211,763 |
|
Discounted cash flow |
|
Discount rate |
|
|
|
|
|
|
37,117,545 |
|
|
|
|
|
Financial liabilities |
||||||||||
Derivative liabilities |
|
Trading |
|
|
1,295,021 |
|
Option model, Discounted cash flow |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
|
Hedging |
|
|
111,833 |
|
|
||||
|
|
|
|
1,406,854 |
|
|
|
|
77
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
|
|
December 31, 2017 |
|||||||
|
|
Type of financial instruments |
|
|
Book value |
|
Valuation techniques |
|
Inputs |
Financial assets |
|||||||||
Trading assets |
|
Debt securities |
|
|
9,177,846 |
|
Discounted cash flow |
|
Discount rate |
|
Equity securities |
|
|
301,774 |
|
Net asset value |
|
Price of underlying assets |
|
|
|
|
|
9,479,620 |
|
|
|
|
|
Derivative assets |
|
Trading |
|
|
2,585,491 |
|
Option model |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
Hedging |
|
|
8,424 |
|
Discounted cash flow |
|
||
|
|
|
|
2,593,915 |
|
|
|
|
|
Available-for-sale financial assets |
|
Debt securities |
|
|
21,061,535 |
|
Discounted cash flow |
|
Discount rate |
|
Equity securities |
|
|
1,013,679 |
|
Net asset value |
|
Price of underlying assets |
|
|
|
|
|
22,075,214 |
|
|
|
|
|
|
|
|
|
|
34,148,749 |
|
|
|
|
Financial liabilities |
|||||||||
Derivative liabilities |
|
Trading |
|
|
2,468,792 |
|
Option model |
|
Discount rate, foreign exchange rate, volatility, stock price, commodity index, etc. |
|
Hedging |
|
|
95,353 |
|
Discounted cash flow |
|
||
|
|
|
|
|
2,564,145 |
|
|
|
|
78
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
ⓑ Information about valuation techniques and significant unobservable inputs in measuring financial instruments categorized as level 3 as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
Valuation technique |
|
Type of financial instrument |
|
|
Book value |
|
Significant unobservable input |
|
Range of estimates for unobservable input |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|||||||
Financial assets |
|
|
|
|
|
|
|
|
|
|||
Loans at FVTPL |
|
Option model (*1) |
|
Loans |
|
|
237,241 |
|
Volatility of underlying assets |
|
16.39%~42.56% |
|
Securities at FVTPL |
|
Net asset value method |
|
Debt securities |
|
|
1,274,079 |
|
Price of underlying assets |
|
- |
|
|
Discounted cash flow |
|
Equity securities |
|
|
43,754 |
|
Discount rate Terminal growth rate |
|
5.80%~17.00% 0.00% |
||
|
|
|
|
|
|
|
1,317,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
Option model (*2) |
|
Equity and foreign exchange related |
|
|
145 |
|
Volatility of underlying assets |
|
2.20%~25.96% |
|
|
|
Option model (*2) |
|
Interest rates related |
|
|
7,116 |
|
Volatility of underlying assets |
|
0.42%~0.78% |
|
|
|
|
|
|
|
Regression coefficient |
|
0.42%~1.65% |
||||
|
|
|
|
|
|
Correlations |
|
44.93%~90.34% |
||||
|
7,261 |
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities at FVOCI |
|
Discounted cash flow
|
|
Equity securities |
|
|
306,987 |
|
Discount rate |
|
8.43%~17.40% |
|
|
|
|
|
|
Terminal growth rate |
|
0.00% |
|||||
|
|
|
|
|
|
|
1,869,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
||||||||||||
Derivative Liabilities |
|
Option model (*2) |
|
Equity and foreign exchange related |
|
|
257 |
|
Volatility of underlying assets |
|
2.20%~25.96% |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Option model (*2) |
|
Interest rates related |
|
|
363,521 |
|
Volatility of underlying assets |
|
0.47%~0.78% |
|
|
|
|
|
|
|
Regression coefficient |
|
0.42%~2.77% |
||||
|
|
|
|
|
|
Correlations |
|
28.15%~90.34% |
||||
|
|
|
|
|
|
|
363,778 |
|
|
|
|
(*1) The Group uses binominal tree option model when measuring the fair value for loans at FVTPL.
(*2) Option models that the Group uses in derivative valuation include Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
79
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
|
(a) |
Financial instruments measured at fair value (continued) |
|
|
December 31, 2017 |
|||||||||
|
|
Valuation technique |
|
Type of financial instrument |
|
|
Book value |
|
Significant unobservable input |
|
Range of estimates for unobservable input |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Financial assets |
|
|
|
|
|
|
|
|
|
||
Derivative assets |
|
Option model (*1) |
|
Equity and foreign exchange related |
|
|
4,846 |
|
Volatility of underlying assets |
|
1.32%~29.53% |
|
|
|
|
|
Correlations |
|
0.14% |
||||
|
|
Option model (*1) |
|
Interest rates related |
|
|
5,296 |
|
Volatility of underlying assets |
|
0.42%~0.70% |
|
|
|
|
|
Regression coefficient |
|
0.42%~1.65% |
||||
|
|
|
|
|
Correlations |
|
42.20%~90.33% |
||||
|
|
|
|
|
|
|
10,142 |
|
|
|
|
Available-for-sale financial assets |
|
Discounted cash flow |
|
Equity securities |
|
|
1,118,070 |
|
Discount rate |
|
1.98%~20.51% |
|
|
|
|
|
|
|
|
||||
|
|
Comparable company analysis |
|
|
|
|
|
|
Terminal growth rate |
|
0.00% |
|
|
Net asset value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,128,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|||||||||||
Derivative liabilities |
|
Option model (*1) |
|
Equity and foreign exchange related |
|
|
80 |
|
Volatility of underlying asset |
|
1.32%~26.30% |
|
|
|
|
|
Correlations |
|
0.14% |
||||
|
|
Option model (*1) |
|
Interest rates related |
|
|
428,656 |
|
Volatility of underlying asset |
|
0.50%~0.70% |
|
|
|
|
|
Regression coefficient |
|
1.65%~2.77% |
||||
|
|
|
|
|
Correlations |
|
32.63%~90.33% |
||||
|
|
|
|
|
|
|
428,736 |
|
|
|
|
(*1) Option models that the Group uses in derivative valuation include Black-Scholes model, Hull-White model, Monte Carlo simulation, etc.
80
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(a) Financial instruments measured at fair value (continued)
v) Sensitivity to changes in unobservable inputs.
For level 3 fair value measurement, changing one or more of the unobservable inputs used to reasonably possible alternative assumptions would have the following effect on profit (loss), and other comprehensive income (loss) as of December 31, 2018 and 2017 were as follows:
|
|
|
December 31, 2018 |
|||||||||
Type of financial instrument |
|
Profit (loss) for the year |
|
Other comprehensive income (loss) for the year |
||||||||
|
Favorable change |
|
Unfavorable change |
|
Favorable change |
|
Unfavorable change |
|||||
Loans at FVTPL |
|
8,858 |
|
(7,233) |
|
- |
|
- |
||||
Derivative assets (*1) |
Equity and foreign exchange related |
|
57 |
|
(38) |
|
- |
|
- |
|||
Interest rates related |
|
461 |
|
(701) |
|
- |
|
- |
||||
Securities at FVTPL (*2) |
|
|
|
|
|
|
|
|
|
|||
Debt securities (*3) |
|
1,176 |
|
(807) |
|
- |
|
- |
||||
|
Equity securities
|
|
3,256 |
|
(1,754) |
|
- |
|
- |
|||
Securities at FVOCI (*2) |
Equity securities |
|
- |
|
- |
|
8,596 |
|
(4,843) |
|||
|
|
|
13,808 |
|
(10,533) |
|
8,596 |
|
(4,843) |
|||
Derivative liabilities (*1) |
Equity and foreign exchange related |
|
854 |
|
(912) |
|
- |
|
- |
|||
|
Interest rates related |
|
10,186 |
|
(10,362) |
|
- |
|
- |
|||
|
|
11,040 |
|
(11,274) |
|
- |
|
- |
(*1) Based on 10% of increase or decrease in volatility of underlying assets or correlations.
(*2) Based on changes in growth rate (0%~1%) and discount rate (-1%p~1%p).
(*3) W1,033,938 million of Securities at FVTPL classified as level 3 are excluded from sensitivity analysis since calculation of sensitivity according to the fluctuation of input variables is impracticable.
|
|
December 31, 2017 |
|||||||
Type of financial instrument |
|
Profit (loss) for the year |
|
Other comprehensive income (loss) for the year |
|||||
|
Favorable change |
|
Unfavorable change |
|
Favorable change |
|
Unfavorable change |
||
Derivative assets (*1) |
Equity and foreign exchange related |
|
1,238 |
|
(846) |
|
- |
|
- |
Interest rates related |
|
278 |
|
(326) |
|
- |
|
- |
|
Available-for-sale financial assets (*2) |
Equity securities (*3) |
|
- |
|
- |
|
16,435 |
|
(8,229) |
|
|
|
1,516 |
|
(1,172) |
|
16,435 |
|
(8,229) |
Derivative liabilities (*1) |
Equity and foreign exchange related |
|
10 |
|
(13) |
|
- |
|
- |
Interest rates related |
|
13,820 |
|
(13,280) |
|
- |
|
- |
|
|
|
|
13,830 |
|
(13,293) |
|
- |
|
- |
(*1) Based on 10% of increase or decrease in volatility of underlying assets or correlations.
(*2) Based on changes in growth rate (0%~1%) and discount rate (-1%p~1%p).
(*3) W770,784 million of available-for-sale financial assets classified as level 3 are excluded from sensitivity analysis since calculation of sensitivity according to the fluctuation of input variables is impracticable.
81
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost
i) 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 book value 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. Therefore, the book value for deposits approximates fair value.
|
Loans at amortized cost |
|
The fair value of loans at amortized cost is measured by discounting the expected cash flows at the market interest rate, credit risk, etc. |
Securities at amortized cost |
|
The fair value of securities at amortized cost is determined by applying the lesser of two quoted bond prices provided by two bond pricing agencies as of the latest trading date. |
Deposits and borrowings
|
|
The book amount and the fair value for demand deposits, cash management account deposits, call money and bonds sold under repurchase agreements as short-term instruments are identical. The fair value of others is measured by discounting the contractual cash flows at the market interest rate that takes into account the residual risk.
|
Debt securities issued |
|
The fair value of deposits and borrowings 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 flow at the market interest rate that takes into account the residual risk.
|
82
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
ii) The book value and the fair value of financial instruments measured at amortized cost as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Book value |
|
|
||||||
|
|
Balance |
|
Unamortized balance |
|
Allowance |
|
Total |
|
Fair value |
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
|
|
Cash |
|
2,568,913 |
|
- |
|
- |
|
2,568,913 |
|
2,568,913 |
Due from banks |
|
10,596,149 |
|
- |
|
(14,785) |
|
10,581,364 |
|
10,581,364 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Household loans |
|
112,594,439 |
|
418,020 |
|
(305,288) |
|
112,707,171 |
|
113,677,417 |
Corporate loans |
|
133,399,567 |
|
76,685 |
|
(1,339,174) |
|
132,137,078 |
|
133,163,232 |
Public and other loans |
|
2,729,075 |
|
1,558 |
|
(20,053) |
|
2,710,580 |
|
2,733,532 |
Loans to bank |
|
3,586,594 |
|
- |
|
(6,395) |
|
3,580,199 |
|
3,581,605 |
Credit card receivables |
|
103,580 |
|
- |
|
(4,802) |
|
98,778 |
|
103,175 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
|
|
Government bonds |
|
11,695,562 |
|
- |
|
(1,454) |
|
11,694,108 |
|
11,793,483 |
Financial institutions bonds |
|
929,757 |
|
- |
|
(357) |
|
929,400 |
|
931,157 |
Corporate bonds and others |
|
4,129,043 |
|
- |
|
(2,953) |
|
4,126,090 |
|
4,165,754 |
Others |
|
74,802 |
|
- |
|
- |
|
74,802 |
|
74,802 |
Other financial assets |
|
14,262,768 |
|
(36,355) |
|
(25,612) |
|
14,200,801 |
|
14,218,601 |
|
|
296,670,249 |
|
459,908 |
|
(1,720,873) |
|
295,409,284 |
|
297,593,035 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
104,998,305 |
|
- |
|
- |
|
104,998,305 |
|
104,998,305 |
Time deposits |
|
135,486,566 |
|
- |
|
- |
|
135,486,566 |
|
135,414,254 |
Negotiable certificates of deposits |
|
9,213,652 |
|
- |
|
- |
|
9,213,652 |
|
9,265,012 |
Note discount deposits |
|
4,087,529 |
|
- |
|
- |
|
4,087,529 |
|
4,087,338 |
CMA (*1) |
|
4,084,709 |
|
- |
|
- |
|
4,084,709 |
|
4,084,709 |
Others |
|
21,963 |
|
- |
|
- |
|
21,963 |
|
21,963 |
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Call money |
|
960,162 |
|
- |
|
- |
|
960,162 |
|
960,162 |
Bill sold |
|
14,536 |
|
- |
|
- |
|
14,536 |
|
14,506 |
Bonds sold under repurchase agreements |
|
83,028 |
|
- |
|
- |
|
83,028 |
|
83,028 |
Borrowings |
|
15,098,953 |
|
(1,858) |
|
- |
|
15,097,095 |
|
15,163,551 |
Debt securities issued: |
|
|
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
26,418,732 |
|
(62,944) |
|
- |
|
26,355,788 |
|
26,625,655 |
Debt securities issued in foreign currencies |
|
5,572,580 |
|
(29,102) |
|
- |
|
5,543,478 |
|
5,345,938 |
Other financial liabilities |
|
15,462,193 |
|
(2,118) |
|
- |
|
15,460,075 |
|
15,443,585 |
|
|
321,502,908 |
|
(96,022) |
|
- |
|
321,406,886 |
|
321,508,006 |
(*1) CMA: Cash management account deposits
83
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
|
|
December 31, 2017 |
||||||||
|
|
Book value |
|
|
||||||
|
|
Balance |
|
Unamortized balance |
|
Allowance |
|
Total |
|
Fair value |
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
|
|
Cash |
|
1,749,897 |
|
- |
|
- |
|
1,749,897 |
|
1,749,897 |
Due from banks |
|
16,926,471 |
|
- |
|
(14,046) |
|
16,912,425 |
|
16,912,425 |
Loans: |
|
|
|
|
|
|
|
|
|
|
Household loans |
|
103,724,329 |
|
361,170 |
|
(336,134) |
|
103,749,365 |
|
103,425,377 |
Corporate loans |
|
123,835,486 |
|
63,780 |
|
(1,150,289) |
|
122,748,977 |
|
123,254,416 |
Public and other loans |
|
2,203,307 |
|
1,146 |
|
(10,135) |
|
2,194,318 |
|
2,202,338 |
Loans to bank |
|
2,961,877 |
|
- |
|
(4,054) |
|
2,957,823 |
|
2,948,387 |
Credit card receivables |
|
87,618 |
|
- |
|
(5,945) |
|
81,673 |
|
87,355 |
Held-to-maturity financial assets: |
|
|
|
|
|
|
|
|
|
|
Government bonds |
|
9,808,234 |
|
- |
|
- |
|
9,808,234 |
|
9,812,768 |
Financial institutions bonds |
|
1,224,816 |
|
- |
|
- |
|
1,224,816 |
|
1,223,340 |
Corporate bonds and others |
|
3,789,848 |
|
- |
|
- |
|
3,789,848 |
|
3,786,215 |
Other financial assets |
|
9,149,590 |
|
(42,434) |
|
(26,252) |
|
9,080,904 |
|
9,102,615 |
|
|
275,461,473 |
|
383,662 |
|
(1,546,855) |
|
274,298,280 |
|
274,505,133 |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
101,742,731 |
|
- |
|
- |
|
101,742,731 |
|
101,742,731 |
Time deposits |
|
125,787,781 |
|
- |
|
- |
|
125,787,781 |
|
125,659,179 |
Negotiable certificates of deposits |
|
7,478,278 |
|
- |
|
- |
|
7,478,278 |
|
7,517,777 |
Note discount deposits |
|
3,423,459 |
|
- |
|
- |
|
3,423,459 |
|
3,423,320 |
CMA |
|
4,197,146 |
|
- |
|
- |
|
4,197,146 |
|
4,197,146 |
Others |
|
24,349 |
|
- |
|
- |
|
24,349 |
|
24,349 |
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Call money |
|
561,813 |
|
- |
|
- |
|
561,813 |
|
561,813 |
Bill sold |
|
13,605 |
|
- |
|
- |
|
13,605 |
|
13,580 |
Bonds sold under repurchase agreements |
|
297,599 |
|
- |
|
- |
|
297,599 |
|
297,599 |
Borrowings |
|
13,744,713 |
|
(168) |
|
- |
|
13,744,545 |
|
13,725,468 |
Debt securities issued: |
|
|
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
21,587,948 |
|
(29,698) |
|
- |
|
21,558,250 |
|
21,417,544 |
Debt securities issued in foreign currencies |
|
3,925,454 |
|
(23,277) |
|
- |
|
3,902,177 |
|
3,918,403 |
Other financial liabilities |
|
14,972,891 |
|
(2,915) |
|
- |
|
14,969,976 |
|
14,942,184 |
|
|
297,757,767 |
|
(56,058) |
|
- |
|
297,701,709 |
|
297,441,093 |
84
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
iii) Fair value hierarchy of financial instruments which are not measured at fair value in the consolidated statements of financial position as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
Cash |
|
2,568,913 |
|
- |
|
- |
|
2,568,913 |
Due from banks |
|
- |
|
10,581,364 |
|
- |
|
10,581,364 |
Loans at amortized cost: |
|
|
|
|
|
|
|
|
Household loans |
|
- |
|
- |
|
113,677,417 |
|
113,677,417 |
Corporate loans |
|
- |
|
- |
|
133,163,232 |
|
133,163,232 |
Public and other loans |
|
- |
|
- |
|
2,733,532 |
|
2,733,532 |
Loans to bank |
|
- |
|
2,499,812 |
|
1,081,793 |
|
3,581,605 |
Credit card receivables |
|
- |
|
- |
|
103,175 |
|
103,175 |
Securities at amortized cost: |
|
|
|
|
|
|
|
|
Government bonds |
|
768,812 |
|
11,024,671 |
|
- |
|
11,793,483 |
Financial institutions bonds |
|
719,925 |
|
211,232 |
|
- |
|
931,157 |
Corporate bonds and others |
|
- |
|
4,165,754 |
|
- |
|
4,165,754 |
Others |
|
- |
|
74,802 |
|
- |
|
74,802 |
Other financial assets |
|
- |
|
11,606,370 |
|
2,612,231 |
|
14,218,601 |
|
|
4,057,650 |
|
40,164,005 |
|
253,371,380 |
|
297,593,035 |
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand deposits |
|
- |
|
104,998,305 |
|
- |
|
104,998,305 |
Time deposits |
|
- |
|
- |
|
135,414,254 |
|
135,414,254 |
Negotiable certificates of deposits |
|
- |
|
- |
|
9,265,012 |
|
9,265,012 |
Note discount deposits |
|
- |
|
- |
|
4,087,338 |
|
4,087,338 |
CMA |
|
- |
|
4,084,709 |
|
- |
|
4,084,709 |
Others |
|
- |
|
- |
|
21,963 |
|
21,963 |
Borrowings: |
|
|
|
|
|
|
|
|
Call money |
|
- |
|
960,162 |
|
- |
|
960,162 |
Bill sold |
|
- |
|
- |
|
14,506 |
|
14,506 |
Bonds sold under repurchase agreements |
|
- |
|
- |
|
83,028 |
|
83,028 |
Borrowings |
|
- |
|
- |
|
15,163,551 |
|
15,163,551 |
Debt securities issued: |
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
- |
|
23,756,717 |
|
2,868,938 |
|
26,625,655 |
Debt securities issued in foreign currencies |
|
- |
|
5,345,938 |
|
- |
|
5,345,938 |
Other financial liabilities |
|
- |
|
6,630,726 |
|
8,812,859 |
|
15,443,585 |
|
|
- |
|
145,776,557 |
|
175,731,449 |
|
321,508,006 |
85
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
|
|
December 31, 2017 |
||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
Assets |
|
|
|
|
|
|
|
|
Cash and due from banks: |
|
|
|
|
|
|
|
|
Cash |
|
1,749,897 |
|
- |
|
- |
|
1,749,897 |
Due from banks |
|
- |
|
16,912,425 |
|
- |
|
16,912,425 |
Loans: |
|
|
|
|
|
|
|
|
Household loans |
|
- |
|
- |
|
103,425,377 |
|
103,425,377 |
Corporate loans |
|
- |
|
- |
|
123,254,416 |
|
123,254,416 |
Public and other loans |
|
- |
|
- |
|
2,202,338 |
|
2,202,338 |
Loans to bank |
|
- |
|
848,225 |
|
2,100,162 |
|
2,948,387 |
Credit card receivables |
|
- |
|
- |
|
87,355 |
|
87,355 |
Held-to-maturity financial assets: |
|
|
|
|
|
|
|
|
Government bonds |
|
1,411,506 |
|
8,401,262 |
|
- |
|
9,812,768 |
Financial institutions bonds |
|
936,067 |
|
287,273 |
|
- |
|
1,223,340 |
Corporate bonds and others |
|
- |
|
3,786,215 |
|
- |
|
3,786,215 |
Other financial assets |
|
- |
|
6,832,567 |
|
2,270,048 |
|
9,102,615 |
|
|
4,097,470 |
|
37,067,967 |
|
233,339,696 |
|
274,505,133 |
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand deposits |
|
- |
|
101,742,731 |
|
- |
|
101,742,731 |
Time deposits |
|
- |
|
- |
|
125,659,179 |
|
125,659,179 |
Negotiable certificates of deposits |
|
- |
|
- |
|
7,517,777 |
|
7,517,777 |
Note discount deposits |
|
- |
|
- |
|
3,423,320 |
|
3,423,320 |
CMA |
|
- |
|
4,197,146 |
|
- |
|
4,197,146 |
Others |
|
- |
|
- |
|
24,349 |
|
24,349 |
Borrowings: |
|
|
|
|
|
|
|
|
Call money |
|
- |
|
561,813 |
|
- |
|
561,813 |
Bill sold |
|
- |
|
- |
|
13,580 |
|
13,580 |
Bonds sold under repurchase agreements |
|
- |
|
- |
|
297,599 |
|
297,599 |
Borrowings |
|
- |
|
- |
|
13,725,468 |
|
13,725,468 |
Debt securities issued: |
|
|
|
|
|
|
|
|
Debt securities issued in Korean won |
|
- |
|
18,877,627 |
|
2,539,917 |
|
21,417,544 |
Debt securities issued in foreign currencies |
|
- |
|
3,918,403 |
|
- |
|
3,918,403 |
Other financial liabilities |
|
- |
|
5,642,142 |
|
9,300,042 |
|
14,942,184 |
|
|
- |
|
134,939,862 |
|
162,501,231 |
|
297,441,093 |
86
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(b) Financial instruments measured at amortized cost (continued)
iv) For financial instruments not measured at fair value in the statement of financial position but for which the fair value is disclosed, valuation techniques and inputs used in measuring fair value of financial instruments classified as level 2 or level 3 as of December 31, 2018 and 2017 were as follows :
|
|
December 31, 2018 |
||||||
Level |
|
Type of financial instrument |
|
Fair value |
|
Valuation technique |
|
Inputs |
|
|
|
|
|||||
Level 2 |
|
Securities at amortized cost |
|
15,476,459 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Loans at amortized cost |
|
250,759,149 |
|
|
Discount rate, Credit spread, Prepayment rate |
|
|
Other financial assets |
|
2,612,231 |
|
|
Discount rate |
||
|
|
|
|
268,847,839 |
|
|
|
|
Level 2 |
|
Debt securities issued |
|
29,102,655 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Deposits |
|
147,759,425 |
|
|
Discount rate |
|
|
Borrowings |
|
10,380,014 |
|
|
Discount rate |
||
|
Debt securities issued |
|
2,868,938 |
|
|
Discount rate, Regression coefficient, Correlation coefficient |
||
|
Other financial liabilities |
|
8,812,859 |
|
|
Discount rate |
||
|
|
|
|
198,923,891 |
|
|
|
|
|
|
December 31, 2017 |
||||||
Level |
|
Type of financial instrument |
|
Fair value (*1) |
|
Valuation technique |
|
Inputs |
|
|
|
|
|||||
Level 2 |
|
Held-to-maturity financial assets |
|
12,474,750 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Loans |
|
231,069,648 |
|
|
Discount rate, Credit spread, Prepayment rate |
|
|
Other financial assets |
|
2,270,048 |
|
|
Discount rate |
||
|
|
|
|
245,814,446 |
|
|
|
|
Level 2 |
|
Debt securities issued |
|
22,796,030 |
|
Discounted cash flow |
|
Discount rate |
Level 3 |
|
Deposits |
|
135,627,081 |
|
|
Discount rate |
|
|
Borrowings |
|
8,849,302 |
|
|
Discount rate |
||
|
Debt securities issued |
|
2,539,917 |
|
|
Discount rate, Regression coefficient, Correlation coefficient |
||
|
Other financial liabilities |
|
9,300,042 |
|
|
Discount rate |
||
|
|
|
|
179,112,372 |
|
|
|
|
(*1) The amounts, which were not evaluated by the valuation technique, are not included and disclosed because the carrying amount is the reasonable approximation of fair value.
87
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(c) Deferred day one profit or loss for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Beginning balance |
|
Deferred |
|
Amortization |
|
Ending balance |
Loans at FVTPL |
|
(4,929) |
|
(2,506) |
|
2,925 |
|
(4,510) |
Securities at FVTPL |
|
- |
|
4 |
|
- |
|
4 |
|
|
December 31, 2017 |
||||||
|
|
Beginning balance |
|
Deferred |
|
Amortization |
|
Ending balance |
Financial liabilities designated at fair value through profit or loss |
|
(12) |
|
- |
|
12 |
|
- |
Equity swap liabilities |
|
12 |
|
- |
|
(12) |
|
- |
88
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4. Financial risk management (continued)
4-4. Measurement of fair value (continued)
(d) Classification by category of financial instruments
Financial assets and liabilities were measured at fair value or amortized cost. Financial instruments measured at fair value or amortized costs were measured in accordance with the Group’s valuation methodologies, which were described in Note 3.
The carrying amounts of each category of financial instruments as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||
|
|
Financial assets at FVTPL |
|
Financial assets at FVOCI |
|
Financial assets at amortized cost |
|
Derivatives held for hedging |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
- |
|
- |
|
10,581,364 |
|
- |
|
10,581,364 |
Securities at FVTPL |
|
15,612,433 |
|
- |
|
- |
|
- |
|
15,612,433 |
Derivative assets |
|
1,443,371 |
|
- |
|
- |
|
41,087 |
|
1,484,458 |
Loans at FVTPL |
|
645,237 |
|
- |
|
- |
|
- |
|
645,237 |
Loans at amortized cost |
|
- |
|
- |
|
251,233,806 |
|
- |
|
251,233,806 |
Securities at FVOCI |
|
- |
|
31,878,348 |
|
- |
|
- |
|
31,878,348 |
Securities at amortized cost |
|
- |
|
- |
|
16,824,400 |
|
- |
|
16,824,400 |
Other financial assets |
|
- |
|
- |
|
14,200,801 |
|
- |
|
14,200,801 |
|
|
17,701,041 |
|
31,878,348 |
|
292,840,371 |
|
41,087 |
|
342,460,847 |
|
|
Financial liabilities at FVTPL |
|
Financial liabilities at amortized cost |
|
Derivatives held for hedging |
|
Total |
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
- |
|
257,892,724 |
|
- |
|
257,892,724 |
Financial liabilities at FVTPL |
|
479,559 |
|
- |
|
- |
|
479,559 |
Derivative liabilities |
|
1,298,632 |
|
- |
|
472,953 |
|
1,771,585 |
Borrowings |
|
- |
|
16,154,821 |
|
- |
|
16,154,821 |
Debt securities issued |
|
- |
|
31,899,266 |
|
- |
|
31,899,266 |
Other financial liabilities |
|
- |
|
15,460,075 |
|
- |
|
15,460,075 |
|
|
1,778,191 |
|
321,406,886 |
|
472,953 |
|
323,658,030 |
89
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(d) Classification by category of financial instruments (continued)
|
|
December 31, 2017 |
||||||||||
|
|
Financial assets at fair value through profit or loss |
|
Available-for-sale financial assets |
|
Held-to-maturity financial assets |
|
Loans and receivables |
|
Derivatives held for hedging |
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
- |
|
- |
|
- |
|
16,912,425 |
|
- |
|
16,912,425 |
Trading assets |
|
11,216,398 |
|
- |
|
- |
|
- |
|
- |
|
11,216,398 |
Derivative assets |
|
2,593,867 |
|
- |
|
- |
|
- |
|
10,223 |
|
2,604,090 |
Loans |
|
- |
|
- |
|
- |
|
231,732,156 |
|
- |
|
231,732,156 |
Available-for-sale financial assets |
|
- |
|
32,495,541 |
|
- |
|
- |
|
- |
|
32,495,541 |
Held-to-maturity financial assets |
|
- |
|
- |
|
14,822,898 |
|
- |
|
- |
|
14,822,898 |
Other financial assets |
|
- |
|
- |
|
- |
|
9,080,904 |
|
- |
|
9,080,904 |
|
|
13,810,265 |
|
32,495,541 |
|
14,822,898 |
|
257,725,485 |
|
10,223 |
|
318,864,412 |
|
|
Trading |
|
Financial liabilities measured at amortized cost |
|
Derivatives held for hedging |
|
Total |
Liabilities |
|
|
|
|
|
|
|
|
Deposits |
|
- |
|
242,653,744 |
|
- |
|
242,653,744 |
Trading liabilities |
|
434,586 |
|
- |
|
- |
|
434,586 |
Derivative liabilities |
|
2,472,421 |
|
- |
|
520,515 |
|
2,992,936 |
Borrowings |
|
- |
|
14,617,562 |
|
- |
|
14,617,562 |
Debt securities issued |
|
- |
|
25,460,427 |
|
- |
|
25,460,427 |
Other financial liabilities |
|
- |
|
14,969,976 |
|
- |
|
14,969,976 |
|
|
2,907,007 |
|
297,701,709 |
|
520,515 |
|
301,129,231 |
There are no financial assets and financial liabilities that are reclassified between financial instruments during the year.
90
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-4. Measurement of fair value (continued)
(e) Financial instruments income and costs by category for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
Interest income (expense) |
|
Fees and commission income (expense) |
|
Reversal of (provision for) credit loss allowance |
|
Others |
|
Total |
|
Other comprehensive income (loss) |
Securities at FVTPL |
|
221,569 |
|
10,403 |
|
- |
|
348,809 |
|
580,781 |
|
- |
Securities at FVOCI |
|
607,771 |
|
- |
|
(8,395) |
|
27,264 |
|
626,640 |
|
165,538 |
Securities at amortized cost |
|
403,707 |
|
- |
|
1,122 |
|
- |
|
404,829 |
|
- |
Loans at FVTPL |
|
12,462 |
|
- |
|
- |
|
13,827 |
|
26,289 |
|
- |
Loans at amortized cost |
|
8,184,956 |
|
73,870 |
|
(245,113) |
|
25,999 |
|
8,039,712 |
|
- |
Other financial assets |
|
166,260 |
|
113,305 |
|
1,400 |
|
- |
|
280,965 |
|
- |
Financial liabilities at FVTPL |
|
- |
|
(18) |
|
- |
|
- |
|
(18) |
|
- |
Financial liabilities at amortized cost |
|
(4,010,730) |
|
(126) |
|
- |
|
(75,693) |
|
(4,086,549) |
|
(36,383) |
Net derivatives held for hedging |
|
- |
|
- |
|
- |
|
75,757 |
|
75,757 |
|
505 |
Allowance for off balance sheet items |
|
- |
|
- |
|
7,847 |
|
- |
|
7,847 |
|
- |
|
|
5,585,995 |
|
197,434 |
|
(243,139) |
|
415,963 |
|
5,956,253 |
|
129,660 |
|
|
December 31, 2017 |
||||||||||
|
|
Interest income (expense) |
|
Fees and commission income (expense) |
|
Impairment loss |
|
Others |
|
Total |
|
Other comprehensive income (loss) |
Trading assets |
|
181,653 |
|
8,795 |
|
- |
|
(136,955) |
|
53,493 |
|
- |
Available-for-sale financial assets |
|
487,712 |
|
- |
|
(178,228) |
|
266,950 |
|
576,434 |
|
(131,022) |
Held-to-maturity financial assets |
|
355,696 |
|
- |
|
- |
|
- |
|
355,696 |
|
- |
Loans and receivables |
|
7,098,340 |
|
164,801 |
|
(481,159) |
|
40,511 |
|
6,822,493 |
|
- |
Trading liabilities |
|
- |
|
(96) |
|
- |
|
- |
|
(96) |
|
- |
Financial liabilities designated at fair value through profit or loss |
|
- |
|
- |
|
- |
|
(43) |
|
(43) |
|
- |
Financial liabilities measured at amortized cost |
|
(3,131,350) |
|
(58) |
|
- |
|
194,559 |
|
(2,936,849) |
|
90,727 |
Net derivatives held for hedging |
|
- |
|
- |
|
- |
|
(200,836) |
|
(200,836) |
|
6,626 |
|
|
4,992,051 |
|
173,442 |
|
(659,387) |
|
164,186 |
|
4,670,292 |
|
(33,669) |
91
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-5. Capital risk management
Capital regulations applicable to banks were adopted in 1988, which focused primarily on capital adequacy and asset soundness as a measure of risk. Building upon the initial Basel Capital Accord of 1988, capital regulations were developed to reflect additional risks as well. For the purpose of improving risk management and increasing capital adequacy of banks, capital adequacy standards based on the new Basel Capital Accord (Basel III) was implemented by the Financial Services Commission regulations beginning on December 1, 2013. Under these regulations, all domestic banks including the Group are required to maintain a capital adequacy ratio of 8% or above and report whether the Group meet the capital adequacy ratio to the Financial Services Commission.
Under the Banking Act, the capital of a bank is divided into two categories.
(a) |
Tier 1 capital (Common equity Tier 1 capital + Additional Tier 1 capital) |
i) Common equity Tier 1 capital: Common equity Tier 1 capital consists of capital stock, capital surplus, retained earnings (excluding regulatory reserve for loan loss), accumulated other comprehensive income, other disclosed reserves, and non-controlling interests that meet certain criteria.
ii) Additional Tier 1 capital: Additional Tier 1 capital consists of equity instrument that meet certain criteria for perpetual nature of the equity instrument, any related capital surplus, instruments issued by consolidated subsidiaries of the Bank and held by third parties that meet certain criteria.
(b) |
Tier 2 capital (Supplementary capital) |
|
Tier 2 capital consists of instruments that meet certain criteria for loss absorption in case of liquidation, any related capital surplus, and instruments issued by consolidated subsidiaries of the Bank and held by third parties that meet certain criteria.
The capital adequacy ratio of the Group is calculated by ratios of Tier 1 and Tier 2 capital (less any capital deductions) to risk-weighted assets. Pursuant to Basel III, operational risk, such as inadequate procedures, loss risk by employees, internal systems, occurrence of unexpected events, as well as credit risk, market risk and additional risk are taken into account in calculating the risk-weighted assets.
The Group evaluates and manages the capital adequacy ratio pursuant to internally developed standards. It means that the Group assesses whether the level on ratio of available capital to economic capital is sufficient, or not. The Group manages the economic adequacy by the amount of each risk type including credit, market, operation, interest rate, liquidity, concentration, and foreign currency settlement risk, as well as the total amounts of all of those risk types.
92
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-5. Capital risk management (continued)
Details of capital categories and the capital adequacy ratio of the Group as of December 31, 2018 and 2017 were as follows:
Category |
|
December 31, 2018 |
|
December 31, 2017 |
|
Capital: |
|
|
|
|
|
Common equity Tier 1 capital |
|
22,113,697 |
|
20,891,478 |
|
Additional Tier 1 capital |
|
698,660 |
|
669,927 |
|
Tier 1 capital |
|
22,812,357 |
|
21,561,405 |
|
Tier 2 capital |
|
4,687,083 |
|
3,829,348 |
|
|
|
27,499,440 |
|
25,390,753 |
|
|
|
|
|
|
|
Risk-weighted assets |
|
|
|
|
|
Credit risk-weighted assets (*1) |
|
154,994,030 |
|
146,784,021 |
|
Market risk-weighted assets |
|
7,227,874 |
|
6,802,866 |
|
Operating risk-weighted assets |
|
9,371,300 |
|
9,287,919 |
|
|
|
171,593,204 |
|
162,874,806 |
|
|
|
|
|
|
|
Capital adequacy ratio: |
|
|
|
|
|
Common equity Tier 1 capital ratio |
|
12.89% |
|
12.83% |
|
Tier 1 capital ratio |
|
13.29% |
|
13.24% |
|
Tier 2 capital ratio |
|
2.73% |
|
2.35% |
|
Total capital ratio |
|
16.03% |
|
15.59% |
(*1) The additional risk weighted assets resulting from the insufficient capital under capital floor is included in credit risk-weighted assets.
Pursuant to related regulations, the Group shall maintain the total capital ratio at 8.0% or above, Tier 1 capital ratio at 6.0% or above and common equity capital ratio at 4.5% or above. In 2016, the minimum regulatory BIS capital requirement to be met by 2019 was raised to 14% due to the enforcement of Basel III capital regulations. This is due to the additions of capital conservation buffer (2.5%p), additional capital buffer for Domestic Systemically Important Bank (“D-SIB”) (1.0%p) and countercyclical capital buffer (2.5%p) to the existing minimum capital ratio. Capital conservation buffer and additional capital buffer for D-SIB will be adjusted upwards by 25%p per year through 2019 based on transitional arrangements. The addition of countercyclical capital buffer can be used up to a maximum of the buffer rate of 2.5%p in a period of excess aggregate credit growth. The minimum regulatory BIS capital ratio to be complied with as of the end of 2018 is 10.625%, which is due to the increases of 1.875%p for capital conservation buffer, 0.75%p for additional capital buffer for D-SIB, and 0%p for countercyclical capital buffer, respectively.
93
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-6. Transaction as a transfer of financial instrument
(a) Transfers financial assets that were not derecognized
i) Bonds sold under repurchase agreements at a fixed price as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Transferred assets: |
|
|
|
|
Securities at FVOCI |
|
50,289 |
|
- |
Securities at amortized cost |
|
156,066 |
|
- |
Available-for-sale financial assets |
|
- |
|
147,562 |
Held-to-maturity financial assets |
|
- |
|
615,352 |
|
|
206,355 |
|
762,914 |
Associated liabilities: |
|
|
|
|
Bonds sold under repurchase agreements |
|
83,028 |
|
297,599 |
ii) When the Group's securities are transferred, the Group transfers the ownership of the securities, but upon the termination, the Group will have to return the securities. As a result, securities loaned as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
|
Lender |
Available-for-sale financial assets |
|
|
|
|
|
|
Government bonds |
|
- |
|
278,956 |
|
Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
|
- |
|
319,580 |
|
Korea Securities Finance Corp., Korea Securities Depository |
Securities at FVOCI: |
|
|
|
|
|
|
Government bonds |
|
595,149 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
|
319,770 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
Securities at amortized cost: |
|
|
|
|
|
|
Government bonds |
|
40,149 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
Financial institutions bonds |
|
90,060 |
|
- |
|
Korea Securities Finance Corp., Korea Securities Depository |
|
|
1,045,128 |
|
598,536 |
|
|
(b) Financial instruments that were qualified for derecognition but under continuing involvement.
There are no financial instrument that meets the conditions of derecognition and in which the Group has continuing involvement as of December 31, 2018 and 2017.
94
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-7. Offsetting financial assets and financial liabilities
Details of financial assets and financial liabilities subject to offsetting, enforceable master netting agreements and similar agreements as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
Gross amounts of recognized financial assets and liabilities |
|
Gross amounts of recognized financial assets and liabilities set off in the statement of financial position |
|
Net amounts of financial assets and liabilities presented in the statement of financial position |
|
Related amounts not set off in the statement of financial position |
|
|
||
|
|
|
|
|
Financial instruments |
|
Cash collateral received |
|
Net amount |
|||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (*1) |
|
1,481,678 |
|
- |
|
1,481,678 |
|
6,594,662 |
|
7,396 |
|
957,276 |
Other financial assets (*1) |
|
6,077,656 |
|
- |
|
6,077,656 |
|
|
|
|||
Bonds sold under repurchase agreements related collateral of securities (*2) |
|
206,356 |
|
- |
|
206,356 |
|
83,028 |
|
- |
|
123,328 |
Bonds purchased under resale agreement (Loans) (*2) |
|
4,720,281 |
|
- |
|
4,720,281 |
|
4,720,281 |
|
- |
|
- |
Securities lent (*2) |
|
1,045,128 |
|
- |
|
1,045,128 |
|
1,045,128 |
|
- |
|
- |
Domestic exchange settlements receivables (*3) |
|
32,337,320 |
|
26,344,937 |
|
5,992,383 |
|
- |
|
- |
|
5,992,383 |
Receivable from disposal of securities, etc. (*4) |
|
22,906 |
|
519 |
|
22,387 |
|
- |
|
- |
|
22,387 |
|
|
45,891,325 |
|
26,345,456 |
|
19,545,869 |
|
12,443,099 |
|
7,396 |
|
7,095,374 |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (*1) |
|
1,757,177 |
|
- |
|
1,757,177 |
|
6,795,260 |
|
- |
|
280,055 |
Other financial liabilities (*1) |
|
5,318,138 |
|
- |
|
5,318,138 |
|
|
|
|||
Bonds sold under repurchase agreements (Borrowings) (*2) |
|
83,028 |
|
- |
|
83,028 |
|
83,028 |
|
- |
|
- |
Trading Securities |
|
20,625 |
|
- |
|
20,625 |
|
20,625 |
|
- |
|
- |
Domestic exchange settlement payables (*3) |
|
27,361,193 |
|
26,344,937 |
|
1,016,256 |
|
1,016,256 |
|
- |
|
- |
Payable from purchase of securities, etc. (*4) |
|
552 |
|
519 |
|
33 |
|
33 |
|
- |
|
- |
|
|
34,540,713 |
|
26,345,456 |
|
8,195,257 |
|
7,915,202 |
|
- |
|
280,055 |
(*1) |
The Group has certain derivative transactions subject to the ISDA (International Swaps and Derivatives Association) agreement. According to the ISDA agreement, when credit events (e.g. default) of counterparties occur, the net amount after offsetting the amounts obligated by each party is settled. |
(*2) |
Resale and repurchase agreement, securities borrowing and lending agreement are also similar to ISDA agreement with respect to enforceable netting agreements. |
(*3) |
The Group has legally enforceable right to set off and settles financial assets and liabilities on a net basis. Therefore, domestic exchanges settlement receivables (payables) are recorded on a net basis in the consolidated statements of financial position. |
(*4) Receivables and payables related to settlement of purchase and disposition of enlisted securities are offset and the net amount is presented in the consolidated statement of financial position because the Group currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis. The effect of offsetting due to the establishment of ‘Central Counter Party (“CCP”)’ system is included in the amount.
95
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
4.Financial risk management (continued)
4-7. Offsetting financial assets and financial liabilities (continued)
|
|
December 31, 2017 |
||||||||||
|
|
Gross amounts of recognized financial assets and liabilities |
|
Gross amounts of recognized financial assets and liabilities set off in the statement of financial position |
|
Net amounts of financial assets and liabilities presented in the statement of financial position |
|
Related amounts not set off in the statement of financial position |
|
|
||
|
|
|
|
|
Financial instruments |
|
Cash collateral received |
|
Net amount |
|||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (*1) |
|
2,598,157 |
|
- |
|
2,598,157 |
|
5,488,818 |
|
271,805 |
|
1,054,938 |
Other financial assets (*1) |
|
4,217,404 |
|
- |
|
4,217,404 |
|
|
|
|||
Bonds sold under repurchase agreements related collateral of securities (*2) |
|
434,631 |
|
- |
|
434,631 |
|
297,599 |
|
- |
|
137,032 |
Bonds purchased under resale agreement (Loans) (*2) |
|
3,421,457 |
|
- |
|
3,421,457 |
|
3,421,457 |
|
- |
|
- |
Securities lent (*2) |
|
598,536 |
|
- |
|
598,536 |
|
598,536 |
|
- |
|
- |
Domestic exchange settlements receivables (*3) |
|
33,071,878 |
|
30,199,944 |
|
2,871,934 |
|
- |
|
- |
|
2,871,934 |
Receivables from disposal of securities, etc. (*4) |
|
15,567 |
|
1,152 |
|
14,415 |
|
- |
|
- |
|
14,415 |
|
|
44,357,630 |
|
30,201,096 |
|
14,156,534 |
|
9,806,410 |
|
271,805 |
|
4,078,319 |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (*1) |
|
2,954,649 |
|
- |
|
2,954,649 |
|
5,553,780 |
|
- |
|
1,060,514 |
Other financial liabilities (*1) |
|
3,659,645 |
|
- |
|
3,659,645 |
|
|
|
|||
Bonds sold under repurchase agreements (Borrowings) (*2) |
|
297,599 |
|
- |
|
297,599 |
|
297,599 |
|
- |
|
- |
Domestic exchange settlement payables (*3) |
|
31,883,393 |
|
30,199,944 |
|
1,683,449 |
|
1,683,449 |
|
- |
|
- |
Payable from purchase of securities, etc. (*4) |
|
1,519 |
|
1,152 |
|
367 |
|
326 |
|
- |
|
41 |
|
|
38,796,805 |
|
30,201,096 |
|
8,595,709 |
|
7,535,154 |
|
- |
|
1,060,555 |
(*1) |
The Group has certain derivative transactions subject to the ISDA (International Swaps and Derivatives Association) agreement. According to the ISDA agreement, when credit events (e.g. default) of counterparties occur, the net amount after offsetting the amounts obligated by each party is settled. |
(*2) |
Resale and repurchase agreement, securities borrowing and lending agreement are also similar to ISDA agreement with respect to enforceable netting agreements. |
(*3) |
The Group has legally enforceable right to set off and settles financial assets and liabilities on a net basis. Therefore, domestic exchanges settlement receivables (payables) are recorded on a net basis in the consolidated statements of financial position. |
(*4) Receivables and payables related to settlement of purchase and disposition of enlisted securities are offset and the net amount is presented in the consolidated statement of financial position because the Group currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis. The effect of offsetting due to the establishment of ‘Central Counter Party (“CCP”)’ system is included in the amount.
96
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
5.Significant estimates and judgments
The preparation of consolidated financial statements requires the application of certain critical estimates and judgments relative to the future. Management’s estimated outcomes may differ from actual outcomes. The change in an accounting estimate is recognized prospectively in profit or loss in the period of the change, if the change affects that period only, or the period of the change and future periods, if the change affects both.
(a) Income taxes
The Group is subject to tax laws from various countries. In the normal course of business, there are various types of transactions and different accounting methods that may add uncertainties to the decision of the final income taxes. The Group has recognized current and deferred taxes that reflect tax consequences based on the best estimates in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, actual income taxes in the future may not be identical to the recognized deferred tax assets and liabilities, and this difference can affect current and deferred tax at the period when the final tax effect is determined.
(b) Fair value of financial instruments
The fair values of financial instruments which are not actively traded in the market are determined by using valuation techniques. The Group determines valuation techniques and assumptions based on significant market conditions at the end of each reporting period. Diverse valuation techniques are used to determine the fair value of financial instruments, from generic valuation techniques to internally developed valuation models that incorporate various types of assumptions and variables.
(c) Allowances for loan losses, guarantees and unused loan commitments
The Group determines and recognizes allowances for losses on debt securities, loans and other receivables measured at amortized cost or FVOCI, and recognizes provisions for guarantees and unused loan commitments through impairment testing. The accuracy of allowances and allowances for credit losses is determined by the estimation of expected cash flows for individually assessed allowances, and methodology and assumptions used for collectively assessed allowances and provisions for groups of loans, guarantees and unused loan commitments.
(d) Defined benefit obligation
The present value of a defined benefit obligation that is measured by actuarial valuation methods uses various assumptions which can change according to various elements. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income. Other significant assumptions related to defined benefit obligations are based on current market situations.
97
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) The general descriptions of the Group’s operating segments as of December 31, 2018 and 2017 were as follows:
The Group has four reportable segments which are strategic business units. Each of these segments is providing different services and managed separately.
Description |
|
Area of business |
Retail banking |
|
Loans to or deposits from individual customers, wealth management customers, and institutions such as hospitals, airports and schools. |
|
|
|
Corporate banking |
|
Loans to or deposits from corporations, including small or medium sized companies and businesses related to investment banking. |
|
|
|
International group |
|
Supervision of overseas subsidiaries and branch operations and other international businesses. |
|
|
|
Others |
|
Treasury management, trading of securities and derivatives, administration of bank operations and merchant banking account. |
(b) The following table provides information of financial performance of each reportable segment for the years ended December 31, 2018 and 2017.
|
|
2018 |
||||||||||
|
|
Retail banking |
|
Corporate banking |
|
International group |
|
Others |
|
Consolidation adjustments |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
3,162,566 |
|
1,627,502 |
|
629,038 |
|
163,899 |
|
2,989 |
|
5,585,994 |
Net fees and commission income (expense) |
|
497,840 |
|
401,691 |
|
99,272 |
|
43,258 |
|
(5,528) |
|
1,036,533 |
Net other expense (*1) |
|
(2,353,192) |
|
(464,361) |
|
(289,296) |
|
(349,919) |
|
(1,073) |
|
(3,457,841) |
Operating income (expense) |
|
1,307,214 |
|
1,564,832 |
|
439,014 |
|
(142,762) |
|
(3,612) |
|
3,164,686 |
Net non-operating income (expenses) |
|
(49,087) |
|
(17,592) |
|
(1,871) |
|
120,301 |
|
(69,056) |
|
(17,305) |
Share of loss of associates |
|
- |
|
- |
|
- |
|
- |
|
(977) |
|
(977) |
Profit (loss) before income tax |
|
1,333,374 |
|
1,566,381 |
|
437,143 |
|
(116,849) |
|
(73,645) |
|
3,146,404 |
Income tax expense |
|
(255,584) |
|
(314,966) |
|
(101,848) |
|
(184,651) |
|
(9,993) |
|
(867,042) |
Profit (loss) for the year |
|
1,077,790 |
|
1,251,415 |
|
335,295 |
|
(301,500) |
|
(83,638) |
|
2,279,362 |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity holder of the Bank |
|
1,077,790 |
|
1,251,415 |
|
335,295 |
|
(301,500) |
|
(83,951) |
|
2,279,049 |
Non-controlling interests |
|
- |
|
- |
|
- |
|
- |
|
313 |
|
313 |
|
|
1,077,790 |
|
1,251,415 |
|
335,295 |
|
(301,500) |
|
(83,638) |
|
2,279,362 |
(*1) Effects of hedging on net investments in foreign operations are included.
98
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
6.Operating segments (continued)
(b) The following table provides information of financial performance of each reportable operating segment for the years ended December 31, 2018 and 2017. (continued) |
|
|
|
2017 |
||||||||||
|
|
Retail banking |
|
Corporate banking |
|
International group |
|
Others |
|
Consolidation adjustments |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
2,823,851 |
|
1,418,209 |
|
462,686 |
|
290,274 |
|
(2,969) |
|
4,992,051 |
Net fees and commission income (expense) |
|
495,188 |
|
351,626 |
|
89,933 |
|
57,133 |
|
(2,805) |
|
991,075 |
Net other expense (*1) |
|
(2,296,934) |
|
(619,909) |
|
(132,132) |
|
(706,532) |
|
(21,904) |
|
(3,777,411) |
Operating income |
|
1,022,105 |
|
1,149,926 |
|
420,487 |
|
(359,125) |
|
(27,678) |
|
2,205,715 |
Net non-operating income (expenses) |
|
1,774 |
|
1,970 |
|
1,046 |
|
(45,173) |
|
(7,539) |
|
(47,922) |
Share of profit of associates |
|
- |
|
- |
|
- |
|
- |
|
1,306 |
|
1,306 |
Profit (loss) before income tax |
|
1,023,879 |
|
1,151,896 |
|
421,533 |
|
(404,299) |
|
(33,911) |
|
2,159,099 |
Income tax expense |
|
(140,915) |
|
(165,589) |
|
(85,590) |
|
(47,971) |
|
(6,719) |
|
(446,784) |
Profit (loss) for the year |
|
882,964 |
|
986,307 |
|
335,943 |
|
(452,270) |
|
(40,630) |
|
1,712,314 |
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity holder of the Bank |
|
882,964 |
|
986,307 |
|
335,943 |
|
(452,270) |
|
(40,871) |
|
1,712,073 |
Non-controlling interests |
|
- |
|
- |
|
- |
|
- |
|
241 |
|
241 |
|
|
882,964 |
|
986,307 |
|
335,943 |
|
(452,270) |
|
(40,630) |
|
1,712,314 |
(*1) Effects of hedging on net investments in foreign operations are included.
99
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
6.Operating segments (continued)
(c) The following table provides information of net interest income of each reportable operating segment from external consumers and net interest income (expenses) between operating segments for the years ended December 31, 2018 and 2017.
|
|
2018 |
||||||||||
|
|
Retail banking |
|
Corporate banking |
|
International group |
|
Others |
|
Consolidation adjustments |
|
Total |
Net interest income of each operating segment from external consumers |
|
3,448,621 |
|
1,165,367 |
|
688,540 |
|
283,466 |
|
- |
|
5,585,994 |
Net interest income (expenses) between operating segments |
|
(286,055) |
|
462,135 |
|
(59,502) |
|
(119,567) |
|
2,989 |
|
- |
|
|
2017 |
||||||||||
|
|
Retail banking |
|
Corporate banking |
|
International group |
|
Others |
|
Consolidation adjustments |
|
Total |
Net interest income of each operating segment from external consumers |
|
2,883,406 |
|
1,208,508 |
|
497,506 |
|
402,631 |
|
- |
|
4,992,051 |
Net interest income (expenses) between operating segments |
|
(59,555) |
|
209,701 |
|
(34,820) |
|
(112,357) |
|
(2,969) |
|
- |
(d) Financial information of geographical area
i) The following table provides information of operating income from external consumers by geographical area for the years ended December 31, 2018 and 2017.
|
|
Operating revenue |
|
Operating expenses (*1) |
|
Operating income |
|||||||
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Domestic |
|
18,024,769 |
|
20,083,129 |
|
15,327,172 |
|
18,226,009 |
|
2,697,597 |
|
1,857,120 |
|
Overseas |
|
1,706,942 |
|
1,157,064 |
|
1,239,853 |
|
808,470 |
|
467,089 |
|
348,594 |
|
|
|
19,731,711 |
|
21,240,193 |
|
16,567,025 |
|
19,034,479 |
|
3,164,686 |
|
2,205,714 |
(*1) As the accounting treatment for the acquisition of ANZ Retail business by Shinhan Bank Vietnam Co., Ltd. was completed, the amount was adjusted retrospectively.
ii) The following table provides information of non-current assets by geographical area as of December 31, 2018 and 2017.
|
|
December 31, 2018 (*1) |
|
December 31, 2017 (*1) (*2) |
Domestic |
|
2,713,113 |
|
2,767,584 |
Overseas |
|
188,821 |
|
186,166 |
|
|
2,901,934 |
|
2,953,750 |
(*1) Non-current assets as of December 31, 2018 and 2017 include property and equipment, intangible assets and investment properties.
(*2) As the accounting treatment for the acquisition of ANZ Retail business by Shinhan Bank Vietnam Co., Ltd. was completed, the amount was adjusted retrospectively.
100
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Cash and due from banks as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Cash |
|
2,568,913 |
|
1,749,897 |
Deposits in won: |
|
|
|
|
Reserve deposits |
|
2,094,612 |
|
8,503,968 |
Others |
|
663,371 |
|
1,869,847 |
|
|
2,757,983 |
|
10,373,815 |
Deposits in foreign currencies: |
|
|
|
|
Deposits |
|
5,030,664 |
|
4,056,086 |
Time deposits |
|
2,585,510 |
|
2,233,200 |
Others |
|
221,992 |
|
263,370 |
|
|
7,838,166 |
|
6,552,656 |
|
|
|
|
|
Allowance for impairment |
|
(14,785) |
|
(14,046) |
|
|
13,150,277 |
|
18,662,322 |
(b) Restricted due from banks as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Deposits in won: |
|
|
|
|
Reserve deposits |
|
2,094,612 |
|
8,503,968 |
Others |
|
620,308 |
|
1,841,602 |
|
|
2,714,920 |
|
10,345,570 |
Deposits in foreign currencies: |
|
|
|
|
Deposits |
|
1,150,767 |
|
741,175 |
Time deposits |
|
30,748 |
|
26,517 |
Others |
|
6,494 |
|
4,031 |
|
|
1,188,009 |
|
771,723 |
|
|
3,902,929 |
|
11,117,293 |
101
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Securities at FVTPL as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Debt securities: |
|
|
|
|
Government bonds |
|
776,979 |
|
855,848 |
Financial institution bonds |
|
2,506,260 |
|
2,301,848 |
Corporate bonds |
|
1,689,256 |
|
1,483,933 |
Bills bought |
|
4,195,776 |
|
2,677,766 |
CMA |
|
3,001,831 |
|
3,157,475 |
Beneficiary Certificate |
|
2,347,090 |
|
- |
Others |
|
817,039 |
|
29,488 |
|
|
15,334,231 |
|
10,506,358 |
Equity securities: |
|
|
|
|
Stocks |
|
123,321 |
|
83,928 |
Beneficiary certificates |
|
- |
|
436,815 |
|
|
123,321 |
|
520,743 |
Other: |
|
|
|
|
Gold/silver deposits |
|
154,881 |
|
189,297 |
|
|
15,612,433 |
|
11,216,398 |
|
|
|
|
|
102
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) The notional amounts of derivatives as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
|
|
|
|
|
Foreign currency related |
|
|
|
|
Over the counter: |
|
|
|
|
Currency forwards |
|
126,084,358 |
|
86,940,859 |
Currency swaps |
|
31,103,735 |
|
29,689,979 |
Currency options |
|
1,942,878 |
|
1,156,619 |
|
|
159,130,971 |
|
117,787,457 |
Exchange traded: |
|
|
|
|
Currency futures |
|
33,543 |
|
48,213 |
|
|
159,164,514 |
|
117,835,670 |
Interest rates related |
|
|
|
|
Over the counter: |
|
|
|
|
Interest rate swaps |
|
28,827,452 |
|
26,310,593 |
|
|
28,827,452 |
|
26,310,593 |
Exchange traded: |
|
|
|
|
Interest rate futures |
|
294,777 |
|
400,159 |
Interest rate swaps (*1) |
|
35,183,073 |
|
30,158,662 |
|
|
35,477,850 |
|
30,558,821 |
|
|
64,305,302 |
|
56,869,414 |
Equity related |
|
|
|
|
Over the counter: |
|
|
|
|
Equity options |
|
344,550 |
|
426,915 |
|
|
344,550 |
|
426,915 |
Exchange traded: |
|
|
|
|
Equity futures |
|
29,514 |
|
5,871 |
Equity options |
|
52,063 |
|
27,815 |
|
|
81,577 |
|
33,686 |
|
|
426,127 |
|
460,601 |
Commodity related |
|
|
|
|
Over the counter: |
|
|
|
|
Commodity forwards |
|
157,416 |
|
128,955 |
|
|
157,416 |
|
128,955 |
Hedge |
|
|
|
|
Fair value hedge: |
|
|
|
|
Interest rate swaps |
|
9,377,731 |
|
7,948,422 |
Net investment hedge: |
|
|
|
|
Currency forwards |
|
223,620 |
|
214,280 |
|
|
9,601,351 |
|
8,162,702 |
|
|
233,654,710 |
|
183,457,342 |
(*1) The notional amount of derivatives which is settled in the ‘Central Counter Party (“CCP”)’ system.
103
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
9. |
Derivatives (continued) |
|
(b) Fair values of derivative instruments as of December 31, 2018 and 2017 were as follows:
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
Foreign currency related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Currency forwards |
|
847,778 |
|
778,233 |
|
1,597,789 |
|
1,433,300 |
Currency swaps |
|
394,428 |
|
373,512 |
|
830,658 |
|
864,623 |
Currency options |
|
7,651 |
|
12,273 |
|
11,601 |
|
12,070 |
|
|
1,249,857 |
|
1,164,018 |
|
2,440,048 |
|
2,309,993 |
Interest rates related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
191,343 |
|
133,152 |
|
148,685 |
|
160,828 |
|
|
191,343 |
|
133,152 |
|
148,685 |
|
160,828 |
Equity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Equity options |
|
145 |
|
509 |
|
4,444 |
|
1,545 |
|
|
145 |
|
509 |
|
4,444 |
|
1,545 |
Exchange traded: |
|
|
|
|
|
|
|
|
Equity options |
|
- |
|
953 |
|
33 |
|
55 |
|
|
145 |
|
1,462 |
|
4,477 |
|
1,600 |
Commodity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Commodity forwards |
|
2,026 |
|
- |
|
657 |
|
- |
|
|
2,026 |
|
- |
|
657 |
|
- |
Hedge |
|
|
|
|
|
|
|
|
Fair value hedge: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
35,093 |
|
467,381 |
|
8,433 |
|
518,948 |
Net investment hedge: |
|
|
|
|
|
|
|
|
Currency forwards |
|
5,994 |
|
5,572 |
|
1,790 |
|
1,567 |
|
|
41,087 |
|
472,953 |
|
10,223 |
|
520,515 |
|
|
1,484,458 |
|
1,771,585 |
|
2,604,090 |
|
2,992,936 |
104
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Gain or loss on valuation of derivatives for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
||||
|
|
Gain |
|
Loss |
|
Gain |
|
Loss |
Foreign currency related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Currency forwards |
|
878,840 |
|
808,621 |
|
1,564,305 |
|
1,578,777 |
Currency swaps |
|
454,604 |
|
490,414 |
|
1,289,089 |
|
1,215,008 |
Currency options |
|
10,999 |
|
2,760 |
|
12,574 |
|
6,906 |
|
|
1,344,443 |
|
1,301,795 |
|
2,865,968 |
|
2,800,691 |
Interest rates related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
139,748 |
|
62,881 |
|
124,250 |
|
136,690 |
|
|
139,748 |
|
62,881 |
|
124,250 |
|
136,690 |
Equity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Equity options |
|
6,234 |
|
4,056 |
|
2,026 |
|
1,426 |
Exchange traded: |
|
|
|
|
|
|
|
|
Equity options |
|
24 |
|
152 |
|
65 |
|
5 |
|
|
6,258 |
|
4,208 |
|
2,091 |
|
1,431 |
Commodity related |
|
|
|
|
|
|
|
|
Over the counter: |
|
|
|
|
|
|
|
|
Commodity forwards |
|
2,026 |
|
- |
|
657 |
|
- |
|
|
2,026 |
|
- |
|
657 |
|
- |
Hedge |
|
|
|
|
|
|
|
|
Fair value hedge: |
|
|
|
|
|
|
|
|
Interest rate swaps |
|
142,154 |
|
86,909 |
|
38,958 |
|
246,661 |
Net investment hedge: |
|
|
|
|
|
|
|
|
Currency forwards |
|
- |
|
2,483 |
|
3,580 |
|
4,232 |
|
|
142,154 |
|
89,392 |
|
42,538 |
|
250,893 |
|
|
1,634,629 |
|
1,458,276 |
|
3,035,504 |
|
3,189,705 |
105
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Hedge accounting
i) Purpose of risk hedge and strategy
The Group transacts with derivative financial instruments to hedge its interest rate risk and currency risk arising from the assets and liabilities of the Group. The Group applies fair value hedge accounting that uses interest rate swaps to hedge fair value movements risk arising from changes in the market interest rates of the Korean won structured notes, foreign currency issued financial debentures, structured deposits in foreign currencies, foreign currency structured deposits and foreign currency investment receivables. In order to hedge the foreign exchange risk of the net investment from the overseas, the Group applies the net investment hedge accounting for foreign operations using non-derivative financial instruments.
ii) Nominal amounts and average hedge ratios for hedging instruments as of December 31, 2018 were as follows:
|
|
1 year or less |
|
1 year ~ 2 years or less |
|
2 years ~ 3 years or less |
|
3 years ~ 4 years or less |
|
4 years ~ 5 years or less |
|
More than 5 years |
|
Total |
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
110,000 |
|
687,632 |
|
723,177 |
|
657,254 |
|
715,584 |
|
6,484,084 |
|
9,377,731 |
Average hedge ratio |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency forwards |
|
223,620 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
223,620 |
Borrowings in foreign currencies |
|
73,789 |
|
20,264 |
|
- |
|
- |
|
- |
|
- |
|
94,053 |
Debt securities issued in foreign currencies |
|
40,933 |
|
219,860 |
|
31,512 |
|
534,588 |
|
271,698 |
|
- |
|
1,098,591 |
|
|
338,342 |
|
240,124 |
|
31,512 |
|
534,588 |
|
271,698 |
|
- |
|
1,416,264 |
Average hedge ratio |
|
100% |
|
100% |
|
100% |
|
100% |
|
100% |
|
- |
|
100% |
(e) Impact of hedge accounting on the consolidated financial statements
i) Impact on hedging instruments in the consolidated statement of financial position as of December 31, 2018 and consolidated statement of comprehensive income and consolidated statement of changes in equity for the year then ended was as follows:
|
|
Notional amounts |
|
Consolidated statement of financial position |
|
Consolidated statement of comprehensive income |
|
|
|||||||||||
|
Derivative assets |
|
Derivative liabilities |
|
Borrowings |
|
Debt securities issued |
|
|
Net other operating expenses |
|
Other comprehensive income (loss) for the year |
|
Changes in fair value for the year |
|||||
Fair value hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Interest rate risk |
Interest rate swaps |
|
9,377,731 |
|
35,093 |
|
467,381 |
|
- |
|
- |
|
|
79,635 |
|
- |
|
55, 245 |
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange risk |
Currency forwards |
|
223,620 |
|
5,994 |
|
5,572 |
|
|
- |
- |
|
|
(3,765) |
|
505 |
|
(3,260) |
|
Borrowings in foreign currencies |
|
94,053 |
|
- |
|
- |
|
94,053 |
|
- |
|
|
- |
|
(7,401) |
|
(7,401) |
||
Debt securities issued in foreign currencies |
|
1,098,592 |
|
- |
|
- |
|
- |
|
1,092,739 |
|
|
- |
|
(28,983) |
|
(28,983) |
||
|
|
10,793,996 |
|
41,087 |
|
472,953 |
|
94,053 |
|
1,092,739 |
|
|
75,870 |
|
(35,879) |
|
15,601 |
106
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(e) Impact of hedge accounting on the consolidated financial statements (continued)
ii) Impact on hedged items in the consolidated statement of financial position as of December 31, 2018 and consolidated statement of comprehensive income and consolidated statement of changes in equity for the year then ended was as follows:
|
|
Hedging instruments |
|
Consolidated statement of financial position |
|
Consolidated statement of comprehensive income |
|
Changes in fair value for the year |
|
Reserve of exchange differences on translation |
||||||
Securities at FVOCI |
|
Deposits |
|
Debt securities issued |
Other comprehensive income for the year |
|
Net other operating expenses |
|||||||||
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk |
|
Debt securities issued |
|
- |
|
- |
|
7,058,950 |
|
- |
|
(357,232) |
|
(47,772) |
|
- |
|
Investment bonds |
|
293,215 |
|
- |
|
- |
|
- |
|
(2,832) |
|
800 |
|
- |
|
|
Time deposits |
|
- |
|
1,814,109 |
|
- |
|
- |
|
(167,226) |
|
(9,490) |
|
- |
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange risk |
|
Net investments in foreign operations |
|
- |
|
- |
|
- |
|
35,879 |
|
- |
|
(35,879) |
|
138,416 |
|
|
|
|
293,215 |
|
1,814,109 |
|
7,058,950 |
|
35,879 |
|
(527,290) |
|
(92,341) |
|
138,416 |
iii) Gains (losses) on fair value hedged items and hedging instruments attributable to the hedged risk for the year ended December 31, 2018 were as follows:
|
|
Gains on fair value hedges (hedged items) |
|
Gains on fair value hedges (hedging instruments) |
|
Hedge ineffectiveness recognized in profit or loss (*1) |
Fair value hedges: |
|
|
|
|
|
|
Interest rate swaps |
|
(76,573) |
|
79,635 |
|
3,062 |
|
|
|
|
|
|
|
Hedge of net investments in foreign operations: |
|
|
|
|
|
|
Foreign exchange risk |
|
35,879 |
|
(39,644) |
|
(3,765) |
|
|
(40,694) |
|
39,991 |
|
(703) |
(*1) Recognized hedge ineffectiveness is included in other operating income and expenses in the consolidated statement of comprehensive income.
107
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Details of loans as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||
|
|
Loans at amortized cost |
|
Loans at FVOCI |
Household loans |
|
112,594,439 |
|
- |
Corporate loans |
|
133,399,567 |
|
645,237 |
Public and other loans |
|
2,729,075 |
|
- |
Loans to banks |
|
3,586,594 |
|
- |
Credit card receivables |
|
103,580 |
|
- |
|
|
252,413,255 |
|
645,237 |
Deferred loan origination costs and fees |
|
496,263 |
|
- |
|
|
252,909,518 |
|
645,237 |
Less: Allowance for impairment |
|
(1,675,712) |
|
- |
|
|
251,233,806 |
|
645,237 |
|
|
December 31, 2017 |
Household loans |
|
103,724,329 |
Corporate loans |
|
123,835,486 |
Public and other loans |
|
2,203,307 |
Loans to banks |
|
2,961,877 |
Credit card receivables |
|
87,618 |
|
|
232,812,617 |
Deferred loan origination costs and fees |
|
426,096 |
|
|
233,238,713 |
Less: Allowance for impairment |
|
(1,506,557) |
|
|
231,732,156 |
108
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value
i) Changes in allowance for impairment for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||||||||||||||||||||||||||||
|
|
Due from banks |
|
Loans |
|
Other assets |
|
|
|||||||||||||||||||||||||
|
|
|
Household |
|
Corporate |
|
Others |
|
|||||||||||||||||||||||||
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
|||
Beginning balance (*1) |
|
14,026 |
|
1,023 |
|
- |
|
71,220 |
|
119,469 |
|
138,537 |
|
420,080 |
|
555,531 |
|
544,904 |
|
13,042 |
|
3,108 |
|
3,925 |
|
22,325 |
|
2,298 |
|
2,300 |
|
1,911,788 |
|
Transfer to 12 month expected credit losses |
|
261 |
|
(261) |
|
- |
|
44,654 |
|
(44,285) |
|
(369) |
|
47,190 |
|
(47,040) |
|
(150) |
|
438 |
|
(438) |
|
- |
|
258 |
|
(257) |
|
(1) |
|
- |
|
Transfer to lifetime expected credit losses |
|
(5) |
|
5 |
|
- |
|
(5,374) |
|
10,910 |
|
(5,536) |
|
(39,016) |
|
75,175 |
|
(36,159) |
|
(249) |
|
252 |
|
(3) |
|
(114) |
|
124 |
|
(10) |
|
- |
|
Transfer to credit- impaired financial assets |
|
- |
|
- |
|
- |
|
(168) |
|
(2,618) |
|
2,786 |
|
(595) |
|
(11,234) |
|
11,829 |
|
(53) |
|
(141) |
|
194 |
|
(3) |
|
(66) |
|
69 |
|
- |
|
Provision for (reversal of) allowance |
|
(99) |
|
(447) |
|
- |
|
(16,698) |
|
(3,589) |
|
157,882 |
|
(59,946) |
|
(56,123) |
|
208,896 |
|
894 |
|
3,553 |
|
10,790 |
|
(2,160) |
|
83 |
|
677 |
|
243,713 |
|
Write-offs |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(207,453) |
|
- |
|
- |
|
(274,444) |
|
- |
|
- |
|
(2,567) |
|
- |
|
- |
|
(65) |
|
(484,529) |
|
Effect of discounting |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(15,086) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(15,086) |
|
Allowance related to loans transferred |
|
- |
|
- |
|
- |
|
- |
|
(17) |
|
(4,159) |
|
- |
|
(357) |
|
(52,094) |
|
- |
|
- |
|
(2,454) |
|
- |
|
(7) |
|
(2,736) |
|
(61,824) |
|
Recoveries |
|
- |
|
- |
|
- |
|
- |
|
- |
|
49,222 |
|
- |
|
- |
|
62,337 |
|
- |
|
- |
|
847 |
|
- |
|
- |
|
547 |
|
112,953 |
|
Others (*2) |
|
262 |
|
20 |
|
- |
|
560 |
|
84 |
|
231 |
|
3,444 |
|
7,228 |
|
(5,196) |
|
90 |
|
14 |
|
7 |
|
2,350 |
|
- |
|
- |
|
9,094 |
|
Ending balance |
|
14,445 |
|
340 |
|
- |
|
94,194 |
|
79,954 |
|
131,141 |
|
371,157 |
|
523,180 |
|
444,837 |
|
14,162 |
|
6,348 |
|
10,739 |
|
22,656 |
|
2,175 |
|
781 |
|
1,716,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
(*2) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
109
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value (continued)
i) Changes in allowance for impairment for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
2017 |
||||||||||
|
|
Due from banks |
|
Loans |
|
|
|
|
||||
|
|
|
Household (*2) |
|
Corporate |
|
Others |
|
Other assets |
|
Total |
|
Beginning balance |
|
15,738 |
|
286,220 |
|
1,153,613 |
|
16,051 |
|
25,896 |
|
1,497,518 |
Provision for (reversal of) allowance |
|
(1,692) |
|
138,928 |
|
339,452 |
|
5,015 |
|
630 |
|
482,333 |
Write-offs |
|
- |
|
(126,906) |
|
(242,739) |
|
(565) |
|
(388) |
|
(370,598) |
Effect of discounting |
|
- |
|
- |
|
(17,483) |
|
- |
|
- |
|
(17,483) |
Allowance related to |
|
- |
|
(2,042) |
|
(58,299) |
|
(402) |
|
- |
|
(60,743) |
Recoveries |
|
- |
|
41,108 |
|
74,446 |
|
35 |
|
493 |
|
116,082 |
Others (*1) |
|
- |
|
(1,174) |
|
(98,701) |
|
- |
|
(379) |
|
(100,254) |
Ending balance |
|
14,046 |
|
336,134 |
|
1,150,289 |
|
20,134 |
|
26,252 |
|
1,546,855 |
(*1) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
(*2) During 2018, the accounting treatment for Shinhan Vietnam's acquisition of ANZ Retail Business Division was finalized. The Group retrospectively adjusted the provisional amount of the identifiable net assets recognised at the acquisition date. The retrospective adjustment details and the effect on the financial statements are given in Note 45.
110
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in allowance for impairment and book value (continued)
ii) Changes in book value of due from banks, loans and other assets for the year ended December 31, 2018 were as follows:
|
|
December 31, 2018 |
||||||||||||||||||||||||||||||||
|
|
Due from banks |
|
Loans |
|
Other assets |
|
|
||||||||||||||||||||||||||
|
|
|
Household |
|
Corporate |
|
Others |
|||||||||||||||||||||||||||
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
||||
Beginning balance |
|
16,562,220 |
|
364,251 |
|
- |
|
96,289,682 |
|
7,168,246 |
|
266,402 |
|
104,824,273 |
|
17,479,091 |
|
926,327 |
|
4,752,669 |
|
487,039 |
|
13,094 |
|
9,048,043 |
|
54,931 |
|
4,181 |
|
258,240,449 |
||
Transfer to 12 month expected credit losses |
|
13,815 |
|
(13,815) |
|
- |
|
3,344,109 |
|
(3,340,492) |
|
(3,617) |
|
3,478,038 |
|
(3,477,544) |
|
(494) |
|
71,331 |
|
(71,331) |
|
- |
|
14,068 |
|
(14,066) |
|
(2) |
|
- |
||
Transfer to lifetime expected credit losses |
|
3,777 |
|
(3,777) |
|
- |
|
(4,825,295) |
|
4,840,362 |
|
(15,067) |
|
(14,534,008) |
|
14,582,658 |
|
(48,650) |
|
(367,927) |
|
367,931 |
|
(4) |
|
(50,666) |
|
50,677 |
|
(11) |
|
- |
||
Transfer to credit- impaired financial assets |
|
- |
|
- |
|
- |
|
(504,905) |
|
(28,097) |
|
533,002 |
|
(1,327,660) |
|
(34,445) |
|
1,362,105 |
|
(25,023) |
|
(8,558) |
|
33,581 |
|
(14,206) |
|
(248) |
|
14,454 |
|
- |
||
Origination |
|
5,499,513 |
|
- |
|
- |
|
35,343,577 |
|
- |
|
- |
|
67,962,815 |
|
- |
|
- |
|
5,300,176 |
|
- |
|
- |
|
10,762,919 |
|
- |
|
- |
|
124,869,000 |
||
Recoveries |
|
(11,627,567) |
|
(348,973) |
|
- |
|
(24,189,594) |
|
(2,011,870) |
|
(202,453) |
|
(48,964,496) |
|
(7,991,089) |
|
(650,015) |
|
(4,030,497) |
|
(170,856) |
|
(12,898) |
|
(5,590,569) |
|
(35,824) |
|
(3,628) |
|
(105,830,329) |
||
Write-offs |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(207,453) |
|
- |
|
- |
|
(274,444) |
|
- |
|
- |
|
(2,567) |
|
- |
|
- |
|
(65) |
|
(484,529) |
||
Allowance related to loans transferred |
|
- |
|
- |
|
- |
|
- |
|
(3,059) |
|
(74,664) |
|
- |
|
(15,997) |
|
(491,107) |
|
- |
|
- |
|
(14,554) |
|
- |
|
(495) |
|
(13,082) |
|
(612,958) |
||
Others (*1) |
|
140,575 |
|
6,130 |
|
- |
|
214,915 |
|
264 |
|
447 |
|
498,688 |
|
119,731 |
|
(24,209) |
|
95,408 |
|
2,224 |
|
9 |
|
- |
|
- |
|
- |
|
1,054,182 |
||
Ending balance |
|
10,592,333 |
|
3,816 |
|
- |
|
105,672,489 |
|
6,625,354 |
|
296,597 |
|
111,937,650 |
|
20,662,405 |
|
799,513 |
|
5,796,137 |
|
606,449 |
|
16,661 |
|
14,169,589 |
|
54,975 |
|
1,847 |
|
277,235,815 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) Other changes were due to debt restructuring, debt-equity swap, foreign exchange rate, etc.
111
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Changes in deferred loan origination costs for the year ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Beginning balance (*1) |
|
426,523 |
|
376,821 |
Loan origination |
|
269,788 |
|
214,996 |
Amortization |
|
(200,049) |
|
(165,721) |
Ending balance |
|
496,263 |
|
426,096 |
(*1) The beginning balance for 2018 was restated in accordance with K-IFRS No.1109.
11.Securities at fair value through other comprehensive income and securities at amortized cost
|
(a) |
Details of securities at FVOCI and securities at amortized cost as of December 31, 2018 and available-for-sale financial assets and held-to-maturity financial assets as of December 31, 2017 were as follows: |
|
|
December 31, 2018 |
Securities at FVOCI: |
|
|
Debt securities: |
|
|
Government bonds |
|
7,712,975 |
Financial institutions bonds |
|
15,404,298 |
Corporate bonds |
|
8,318,273 |
|
|
31,435,546 |
Equity securities: |
|
|
Stocks |
|
438,570 |
Equity investments |
|
4,232 |
|
|
442,802 |
|
|
31,878,348 |
Securities at amortized cost: |
|
|
Debt securities: |
|
|
Government bonds |
|
11,695,562 |
Financial institutions bonds |
|
929,756 |
Corporate bonds |
|
4,129,043 |
Others |
|
74,803 |
|
|
16,829,164 |
Allowance for impairment |
|
(4,764) |
|
|
16,824,400 |
112
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
11.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
|
(a) |
Details of securities at FVOCI and securities at amortized cost as of December 31, 2018 and available-for-sale financial assets and held-to-maturity financial assets as of December 31, 2017 were as follows: (continued) |
|
|
December 31, 2017 |
Available-for-sale financial assets: |
|
|
Debt securities: |
|
|
Government bonds |
|
6,074,937 |
Financial institutions bonds |
|
15,777,732 |
Corporate bonds |
|
8,094,699 |
Others |
|
11,801 |
|
|
29,959,169 |
Equity securities (*1): |
|
|
Stocks |
|
600,523 |
Equity investments |
|
275,653 |
Beneficiary certificates |
|
1,660,196 |
|
|
2,536,372 |
|
|
32,495,541 |
Held-to-maturity financial assets: |
|
|
Debt securities: |
|
|
Government bonds |
|
9,808,234 |
Financial institutions bonds |
|
1,224,816 |
Corporate bonds |
|
3,789,848 |
|
|
14,822,898 |
(*1) Equity securities with no quoted market prices in active markets and of which the fair value cannot be measured reliably was recorded at cost of W28,300 million as of December 31, 2017.
113
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
11.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
|
(a) |
Details of securities at FVOCI and securities at amortized cost as of December 31, 2018 and details of available-for-sale financial assets and held-to-maturity financial assets as of December 31, 2017 were as follows: (continued) |
Details of equity instruments designated at FVOCI as of December 31, 2018 were as follows:
|
|
December 31, 2018 |
Marketable securities |
|
136,170 |
Non-marketable securities |
|
302,400 |
Others |
|
4,232 |
|
|
442,802 |
The Group designated the above equity instruments at FVOCI, in accordance with the Group’s policy.
Cumulative net losses reclassified in equity upon disposition of equity securities for the year ended December 31, 2018 were W4,399 million.
|
(b) |
Gains and losses on sale of securities at FVOCI for the year ended December 31, 2018 and gains and losses on sale of available-for sale financial assets for the year ended December 31, 2017 were as follows: |
|
|
2018 |
|
2017 |
|
Gain on sale of securities at FVOCI |
|
18,049 |
|
- |
|
Loss on sale of securities at FVOCI |
|
(1,662) |
|
- |
|
Gain on sale of available-for-sale financial assets |
|
- |
|
217,585 |
|
Loss on sale of available-for-sale financial assets |
|
- |
|
(21,740) |
|
|
|
16,387 |
|
195,845 |
|
The Group disposed equity instruments that are measured at FVOCI for debt-equity swap. At the time of disposal, fair value of equity instruments and cumulative net losses were W2,379 million and W4,399 million, respectively.
|
(c) |
There were no gains and losses on sale of securities at amortized cost for year ended December 31, 2018. |
114
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
11.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
|
(d) |
Changes in allowance for credit loss of securities at FVOCI and securities at amortized cost |
i) Changes in allowance for credit loss of securities at FVOCI and securities at amortized cost for the year ended December 31, 2018 were as follows:
|
|
Securities at FVOCI |
|
Securities at amortized cost |
|||||||||||||
|
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
|
Beginning balance (*1) |
|
15,161 |
|
1,938 |
|
- |
|
17,099 |
|
5,353 |
|
2,232 |
|
- |
|
7,585 |
|
Transfer to 12-month expected credit losses |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Transfer to lifetime expected credit losses |
|
(234) |
|
234 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Transfer to impaired financial assets |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Provision (reversal) |
|
11,615 |
|
(3,220) |
|
- |
|
8,395 |
|
1,093 |
|
(2,214) |
|
- |
|
(1,121) |
|
Disposals |
|
(5,223) |
|
(229) |
|
- |
|
(5,452) |
|
- |
|
- |
|
- |
|
- |
|
Others (*2) |
|
(1,117) |
|
1,639 |
|
- |
|
522 |
|
(1,700) |
|
- |
|
- |
|
(1,700) |
|
Ending balance |
|
20,202 |
|
362 |
|
- |
|
20,564 |
|
4,746 |
|
18 |
|
- |
|
4,764 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
(*2) Other changes were due to foreign exchange rate changes, etc.
ii) The Group recognized impairment loss on available-for-sale financial assets amounted to W178,228 million for the year ended December 31, 2017.
115
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
11.Securities at fair value through other comprehensive income and securities at amortized cost (continued)
|
(e) |
Changes in book value of securities at FVOCI and securities at amortized cost for the year ended December 31, 2018 were as follows: |
|
|
Securities at FVOCI |
|
Securities at amortized cost |
|||||||||||||
|
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
|
12-month expected credit losses |
|
Lifetime expected credit losses |
|
Credit-impaired financial assets |
|
Total |
|
Beginning balance |
|
29,931,489 |
|
15,878 |
|
- |
|
29,947,367 |
|
14,801,454 |
|
21,444 |
|
- |
|
14,822,898 |
|
Transfer to 12-month expected credit losses |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Transfer to lifetime expected credit losses |
|
(26,187) |
|
26,187 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Transfer to impaired financial asset |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Acquisitions |
|
23,600,909 |
|
98,778 |
|
- |
|
23,699,687 |
|
3,751,191 |
|
- |
|
- |
|
3,751,191 |
|
Disposals |
|
(4,881,887) |
|
(18,687) |
|
- |
|
(4,900,574) |
|
- |
|
- |
|
- |
|
- |
|
Redemption |
|
(18,199,108) |
|
- |
|
- |
|
(18,199,108) |
|
(1,846,929) |
|
(3) |
|
- |
|
(1,846,932) |
|
Others (*1) |
|
904,500 |
|
(16,326) |
|
- |
|
888,174 |
|
100,974 |
|
1,033 |
|
- |
|
102,007 |
|
Ending balance |
|
31,329,716 |
|
105,830 |
|
- |
|
31,435,546 |
|
16,806,690 |
|
22,474 |
|
- |
|
16,829,164 |
(*1) Other changes were due to foreign exchange rate changes, etc.
116
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Details of property and equipment as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
1,251,039 |
|
- |
|
1,251,039 |
Buildings (*1) |
|
852,029 |
|
(279,649) |
|
572,380 |
Others |
|
1,337,159 |
|
(1,146,166) |
|
190,993 |
|
|
3,440,227 |
|
(1,425,815) |
|
2,014,412 |
(*1) W494 million of government subsidy was deducted from book value.
|
|
December 31, 2017 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
1,260,239 |
|
- |
|
1,260,239 |
Buildings (*1) |
|
845,742 |
|
(240,439) |
|
605,303 |
Others |
|
1,316,225 |
|
(1,125,892) |
|
190,333 |
|
|
3,422,206 |
|
(1,366,331) |
|
2,055,875 |
(*1) W666 million of government subsidy was deducted from book value.
(b) Changes in property and equipment for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Land |
|
Buildings |
|
Others |
|
Total |
Beginning balance |
|
1,260,239 |
|
605,303 |
|
190,333 |
|
2,055,875 |
Acquisitions (*1)(*2)(*3) |
|
- |
|
11,558 |
|
82,757 |
|
94,315 |
Disposals and write-offs (*4) |
|
(17,262) |
|
(1,742) |
|
(8,188) |
|
(27,192) |
Depreciation |
|
- |
|
(41,228) |
|
(77,339) |
|
(118,567) |
Amounts transferred from (to) investment properties |
|
6,529 |
|
(2,314) |
|
- |
|
4,215 |
Amounts transferred to non-current assets held for sale |
|
(33) |
|
(46) |
|
- |
|
(79) |
Effects of foreign currency movements |
|
1,566 |
|
849 |
|
3,430 |
|
5,845 |
Ending balance |
|
1,251,039 |
|
572,380 |
|
190,993 |
|
2,014,412 |
(*1) W6,319 million transferred from construction-in progress was included.
(*2) W1,810 million of provision for the asset retirement related to newly acquired assets was included.
(*3) W897 million among acquisition cost of others was accounted for as accounts payable.
(*4) W1,521 million of write-off was included.
117
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
12.Property and equipment (continued)
(b) Changes in property and equipment for the years ended December 31, 2018 and 2017 were as follows (continued):
|
|
December 31, 2017 |
||||||
|
|
Land |
|
Buildings |
|
Others |
|
Total |
Beginning balance |
|
1,203,810 |
|
631,525 |
|
208,224 |
|
2,043,559 |
Acquisitions (*1)(*2)(*3) |
|
1,460 |
|
22,938 |
|
62,371 |
|
86,769 |
Disposals and write-offs (*4) |
|
(5,487) |
|
(357) |
|
(2,146) |
|
(7,990) |
Depreciation |
|
- |
|
(38,616) |
|
(81,458) |
|
(120,074) |
Amounts transferred from investment properties |
|
62,456 |
|
(5,392) |
|
- |
|
57,064 |
Amounts transferred from non-current assets held for sale |
|
(1,815) |
|
(3,521) |
|
- |
|
(5,336) |
Effects of foreign currency movements |
|
(185) |
|
(1,274) |
|
3,342 |
|
1,883 |
Ending balance |
|
1,260,239 |
|
605,303 |
|
190,333 |
|
2,055,875 |
(*1) W14,285 million transferred from construction-in progress was included.
(*2) W1,761 million of provision for the asset retirement related to newly acquired assets was included.
(*3) W538 million from acquisition of retail business of ANZ Vietnam was included. (Note 45)
(*4) W847 million of write-off was included.
(c) Insured assets and liability insurances as of December 31, 2018 were as follows:
Type of insurance |
|
Insured assets |
|
Amount covered |
|
Insurance company |
Comprehensive insurance for financial institutions |
|
Cash & securities |
|
20,000 |
|
Samsung Fire & Marine Insurance Co., Ltd. |
Property insurance |
|
Real estate & movable properties for business purpose |
|
893,955 |
|
Samsung Fire & Marine Insurance Co., Ltd., etc. |
Burglary insurance |
|
Cash & securities |
|
60,000 |
|
Samsung Fire & Marine Insurance Co., Ltd., etc. |
Compensation liability insurance for officers |
|
- |
|
50,000 |
|
Meritz Fire & Marine Insurance Co., Ltd., etc. |
Compensation liability insurance for gas accident |
|
Real estate |
|
500 |
|
Meritz Fire & Marine Insurance Co., Ltd. |
Compensation liability insurance for personal information protection |
|
- |
|
10,000 |
|
Samsung Fire & Marine Insurance Co., Ltd. |
Compensation liability insurance for electronic financial transaction |
|
- |
|
2,000 |
|
DB Insurance Co., Ltd., etc. |
Compensation liability insurance for casualty |
|
Real estate |
|
1,000 |
|
Samsung Fire & Marine Insurance Co., Ltd. |
|
|
|
|
1,037,455 |
|
|
Besides the insurances listed above, the Group also has automobile liability insurance, medical insurance for employees, and casualty insurance for protecting property and employees.
118
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Changes in intangible assets for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
Goodwill |
|
Software |
|
Development cost |
|
Memberships(*3) |
|
Others |
|
Total |
Beginning balance |
|
73,374 |
|
49,117 |
|
43,416 |
|
46,916 |
|
86,756 |
|
299,579 |
Acquisitions (*1) |
|
- |
|
36,867 |
|
18,020 |
|
4,286 |
|
35,157 |
|
94,330 |
Disposals |
|
- |
|
- |
|
- |
|
(2,619) |
|
- |
|
(2,619) |
Amortization (*2) |
|
- |
|
(26,401) |
|
(14,937) |
|
- |
|
(36,127) |
|
(77,465) |
Effects of foreign currency movements |
|
- |
|
3,681 |
|
- |
|
14 |
|
(1,291) |
|
2,404 |
Ending balance |
|
73,374 |
|
63,264 |
|
46,499 |
|
48,597 |
|
84,495 |
|
316,229 |
(*1) W1,047 million among acquisition cost of other intangible assets was accounted for as accounts payable.
(*2) W33,573 million among amortization cost of other intangible assets was included in other operating expenses.
|
|
December 31, 2017 |
||||||||||
|
|
Goodwill |
|
Software |
|
Development cost |
|
Memberships |
|
Others |
|
Total |
Beginning balance |
|
45,175 |
|
60,113 |
|
32,162 |
|
46,833 |
|
76,283 |
|
260,566 |
Acquisitions (*1)(*2) |
|
28,199 |
|
13,171 |
|
22,904 |
|
4,977 |
|
54,982 |
|
124,233 |
Disposals |
|
- |
|
- |
|
- |
|
(4,788) |
|
(245) |
|
(5,033) |
Amortization (*3) |
|
- |
|
(24,564) |
|
(11,650) |
|
- |
|
(44,237) |
|
(80,451) |
Effects of foreign currency movements |
|
- |
|
397 |
|
- |
|
(106) |
|
(27) |
|
264 |
Ending balance (*4) |
|
73,374 |
|
49,117 |
|
43,416 |
|
46,916 |
|
86,756 |
|
299,579 |
(*1) Goodwill was recognized as a result of acquisition of ANZ Vietnam retail business.
(*2) W5,061 million among acquisition cost of other intangible assets was accounted for as accounts payable.
(*3) W41,570 million among amortization cost of other intangible assets was included in other operating expenses.
(*4) As the accounting treatment for the acquisition of ANZ Vietnam retail business by Shinhan Vietnam was finalized, the amount was adjusted retrospectively.
119
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Goodwill
i) The carrying amounts of goodwill allocated to each Cash-Generating Unit (“CGU”) as of December 31, 2018 and 2017 were as follows:
CGU |
|
December 31, 2018 |
|
December 31, 2017 |
PT Bank Shinhan Indonesia
|
|
45,175 |
|
45,175 |
Shinhan Bank Vietnam Co., Ltd. (*1) |
|
28,199 |
|
28,199 |
|
|
73,374 |
|
73,374 |
(*1) On December 17, 2017, Shinhan Bank Vietnam Co., Ltd. acquired the retail business of ANZ Vietnam in an effort to increase business competitiveness and a synergy effect in the banking business in Vietnam. As of December 31, 2017, management was in the process of performing identification of intangible assets and valuation of identifiable assets and liabilities for allocation of acquisition costs. The amount was retrospectively restated as the accounting treatment for business combinations was finalized during the year ended December 31, 2018. (Note 45)
ii) Impairment test
The recoverable amounts of CGUs are determined on the basis of value-in-use calculations using discounted cash flow (DCF) model.
Impairment test results on goodwill of PT Bank Shinhan Indonesia and Shinhan Bank Vietnam Co., Ltd. were as follows:
ⓐ Measurement date and projection period
The recoverable amounts are measured as of June 30, 2018. The projection period used in value-in-use calculations is 5.5 years (July 2018 through December 2023) considering synergy effect of business combinations and the value-in-use after projection period is estimated on the assumption that the future cash flows will increase by perpetual growth rate for every year.
ⓑ Significant assumptions
The expected future cash flows from the cash-generating unit are based on the CPI growth rate, market size and the market share of the Group. Major unobservable assumptions applied during the forecast period are as follows:
(Unit: %) |
||||||||
Cash-generating units |
|
Net interest income growth rate |
|
Net commission income growth rate |
|
General administrative expenses growth rate |
|
Net income growth rate |
PT Bank Shinhan Indonesia |
|
15.18 |
|
22.13 |
|
13.29 |
|
18.19 |
Shinhan Bank Vietnam Co., Ltd. |
|
2.68 |
|
6.00 |
|
7.14 |
|
(-)0.61 |
120
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Goodwill (continued)
ⓑ Significant assumptions (continued)
The cost of equity capital is calculated by taking into account the systematic risk of the company in the market risk premium paid in return for risk free rate. Permanent growth rate was estimated based on inflation and did not exceed the projected long-term average growth rate of the relevant industry report.
(Unit: %) |
||||
Cash-generating units |
|
Discount rate |
|
Permanent growth rate |
PT Bank Shinhan Indonesia |
|
12.20 |
|
2.90 |
Shinhan Bank Vietnam Co., Ltd. |
|
13.80 |
|
2.90 |
ⓒ Significant assumptions
The carrying amounts and recoverable amounts of the CGUs to which goodwill has been allocated as of valuation date were as follows:
|
|
PT Bank Shinhan Indonesia |
|
Shinhan Bank Vietnam Co., Ltd. |
Recoverable amount |
|
450,967 |
|
717,953 |
Carrying amount |
|
407,628 |
|
617,057 |
Recoverable amount in excess of carrying amount amount |
|
43,339 |
|
100,896 |
As a result of the impairment test of goodwill, the recoverable amounts of the CGUs to which goodwill is allocated exceeded the carrying amounts, therefore no impairment is recognized.
121
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) |
Investments in associates as of December 31, 2018 and 2017 were as follows: |
|
|
|
|
|
|
Ownership (%) |
||
Investees |
|
Location |
|
Reporting date |
|
December 31, 2018 |
|
December 31, 2017 |
BNP Paribas Cardif Life Insurance Co., Ltd.(*1)(*2) |
|
Korea |
|
September 30 |
|
14.99 |
|
14.99 |
Daewontos Co., Ltd. (*3)(*4) |
|
Korea |
|
December 31 |
|
36.33 |
|
36.33 |
Inhee Co., Ltd. |
|
Korea |
|
- |
|
- |
|
15.36 |
DAEGY Electrical Construction Co., Ltd. (*3)(*4) |
|
Korea |
|
September 30 |
|
27.45 |
|
27.45 |
YEONWOONG SYSTEM (*1)(*3) |
|
Korea |
|
December 31 |
|
21.77 |
|
21.77 |
DOODOO LOGITECH (*1)(*3) |
|
Korea |
|
September 30 |
|
27.96 |
|
27.96 |
Neoplux Technology Valuation Investment Fund (*1) |
|
Korea |
|
September 30 |
|
33.33 |
|
33.33 |
JAEYOUNG SOLUTEC CO., LTD. (*5) |
|
Korea |
|
- |
|
- |
|
9.61 |
Partners 4th Growth Investment Fund (*1) |
|
Korea |
|
September 30 |
|
25.00 |
|
25.00 |
KTB Newlake Global Healthcare PEF (*1) |
|
Korea |
|
September 30 |
|
20.00 |
|
20.00 |
Jaeyang Industry (*3)(*4) |
|
Korea |
|
March 31 |
|
25.90 |
|
25.90 |
Tigris-Aurum Fund 1 (*1) |
|
Korea |
|
September 30 |
|
27.27 |
|
27.27 |
Chungyoung INC. |
|
Korea |
|
- |
|
- |
|
18.94 |
DAEKWANG SEMICON DUCTOR Co., Ltd. (*1)(*3) |
|
Korea |
|
September 30 |
|
20.94 |
|
20.94 |
Branbuil Co., Ltd. |
|
Korea |
|
- |
|
- |
|
15.53 |
Songrim Co., Ltd. (*1)(*3) |
|
Korea |
|
September 30 |
|
35.34 |
|
35.34 |
Taihan Industrial System Co., Ltd. (*1)(*3) |
|
Korea |
|
September 30 |
|
28.29 |
|
28.29 |
Hyungje art printing (*3) |
|
Korea |
|
September 30 |
|
31.54 |
|
- |
ICSF (The Korea’s Information Center for Savings & Finance) (*4) |
|
Korea |
|
December 31 |
|
32.26 |
|
32.26 |
Shinhan-Albatross Technology Investment Fund |
|
Korea |
|
December 31 |
|
33.33 |
|
3.33 |
Loggia |
|
Korea |
|
- |
|
- |
|
16.29 |
Quantum-Nvestor Fund No.1 (*5) |
|
Korea |
|
- |
|
- |
|
16.67 |
Lodestone 1st Private Equity Fund |
|
Korea |
|
- |
|
- |
|
17.53 |
Miraeequity-Incus Venture Business Fund No.4 (*1) |
|
Korea |
|
September 30 |
|
23.53 |
|
23.53 |
LB Technology Fund 1 |
|
Korea |
|
- |
|
- |
|
18.52 |
Shinhan-Neoplux Energy Newbiz Fund (*1) |
|
Korea |
|
September 30 |
|
23.33 |
|
23.33 |
Stassets-DA Value Healthcare Fund I (*6) |
|
Korea |
|
September 30 |
|
24.10 |
|
- |
|
|
|
|
|
|
|
|
|
122
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
|
(a) |
Investments in associates as of December 31, 2018 and 2017 were as follows (continued): |
(*1) |
Financial statements as of September 30, 2018 were used for the equity method accounting since the financial statements as of December 31, 2018 were not available. Significant trades and events occurred within the period were properly reflected. |
(*2) |
The Group used equity method accounting as the Group has significant influence over the investee through significant operating transactions. |
(*3) |
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. |
(*4) |
The latest financial statements available were used for the equity method accounting since the financial statements as of December 31, 2018 were not available. Significant trades and events occurred within the period were properly reflected. |
(*5) |
These investees were sold and excluded from associates during the year ended December 31, 2018. |
(*6) |
The Group newly acquired these associates during the year ended December 31, 2018. |
123
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
|
(b) |
Changes in investments in associates for the years ended December 31, 2018 and 2017 were as follows: |
|
|
December 31, 2018 |
|||||||||||||||||
Associates |
|
Acqui-sition cost |
|
Beginning balance |
|
Acqui-sition (redemp-tion) |
|
Gain (loss) from disposal |
|
Share of profit (loss) of associates |
|
Share of other comprehe-nsive income (loss) of associates |
|
Dividends received |
|
Impair-ment loss |
|
Ending balance |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
35,279 |
|
52,652 |
|
- |
|
- |
|
771 |
|
(1,540) |
|
(2,042) |
|
- |
|
49,841 |
|
Daewontos Co., Ltd. |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Inhee Co., Ltd. (*1) |
|
- |
|
205 |
|
- |
|
(205) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
DAEGY Electrical Construction Co., Ltd. |
|
- |
|
109 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
109 |
|
YEONWOONG SYSTEM |
|
- |
|
77 |
|
- |
|
- |
|
(1) |
|
- |
|
- |
|
- |
|
76 |
|
DOODOO LOGITECH |
|
- |
|
163 |
|
- |
|
- |
|
(119) |
|
- |
|
- |
|
- |
|
44 |
|
Neoplux Technology Valuation Investment Fund |
|
17,068 |
|
13,470 |
|
6,000 |
|
- |
|
(242) |
|
(490) |
|
- |
|
- |
|
18,738 |
|
JAEYOUNG SOLUTEC CO., LTD. (*2) |
|
6,238 |
|
3,848 |
|
(9,375) |
|
6,500 |
|
(836) |
|
(137) |
|
- |
|
- |
|
- |
|
Partners 4th Growth Investment Fund |
|
17,722 |
|
13,390 |
|
2,596 |
|
- |
|
626 |
|
- |
|
- |
|
- |
|
16,612 |
|
KTB Newlake Global Healthcare PEF |
|
162 |
|
1,769 |
|
4,980 |
|
- |
|
(159) |
|
- |
|
- |
|
- |
|
6,590 |
|
Jaeyang Industry |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Tigris-Aurum Fund 1 |
|
1,500 |
|
1,436 |
|
- |
|
- |
|
(45) |
|
- |
|
- |
|
- |
|
1,391 |
|
Chungyoung INC. |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
DAEKWANG SEMICON DUCTOR Co., Ltd. |
|
4,776 |
|
3,824 |
|
- |
|
- |
|
(490) |
|
- |
|
- |
|
- |
|
3,334 |
|
Branbuil Co., Ltd. (*1) |
|
183 |
|
- |
|
(163) |
|
163 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Songrim Co., Ltd. |
|
11 |
|
48 |
|
- |
|
- |
|
(48) |
|
- |
|
- |
|
- |
|
- |
|
Taihan Industrial System Co., Ltd. |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
ICSF (The Korea’s Information Center for Savings & Finance) |
|
300 |
|
156 |
|
- |
|
- |
|
(7) |
|
- |
|
- |
|
- |
|
149 |
|
Shinhan-Albatross Technology Investment Fund |
|
4,000 |
|
1,782 |
|
4,000 |
|
- |
|
(146) |
|
306 |
|
- |
|
- |
|
5,942 |
|
Loggia |
|
37 |
|
26 |
|
- |
|
(26) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Quantum-Nvestor Fund No.1 (*1) |
|
1,000 |
|
993 |
|
(1,000) |
|
738 |
|
- |
|
- |
|
(731) |
|
- |
|
- |
|
Lodestone 1st Private Equity Fund (*1) |
|
2,000 |
|
1,991 |
|
(2,170) |
|
179 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Miraeequity-Incus Venture Business Fund No.4 |
|
2,000 |
|
1,997 |
|
- |
|
- |
|
(40) |
|
- |
|
- |
|
- |
|
1,957 |
|
LB Technology Fund 1 (*1) |
|
1,000 |
|
1,000 |
|
(820) |
|
(180) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Shinhan-Neoplux Energy Newbiz Fund |
|
1,400 |
|
1,400 |
|
2,800 |
|
- |
|
(226) |
|
- |
|
- |
|
- |
|
3,974 |
|
Stassets-DA Value Healthcare Fund I |
|
1,000 |
|
- |
|
1,000 |
|
- |
|
(15) |
|
- |
|
- |
|
- |
|
985 |
|
|
|
95,676 |
|
100,336 |
|
7,848 |
|
7,169 |
|
(977) |
|
(1,861) |
|
(2,773) |
|
- |
|
109,742 |
124
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
14.Investments in associates (continued)
(b) Changes in investments in associates for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
December 31, 2017 |
|||||||||||||||||
Associates |
|
Acqui-sition cost |
|
Beginning balance |
|
Acqui-sition (redemp-tion) |
|
Gain (loss) from disposal |
|
Share of profit (loss) of associates |
|
Share of other comprehe-nsive income (loss) of associates |
|
Dividends received |
|
Impair-ment loss |
|
Ending balance |
|
Aju Capital Co., Ltd. |
|
36,971 |
|
40,836 |
|
(62,507) |
|
22,748 |
|
438 |
|
334 |
|
(1,849) |
|
- |
|
- |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
35,279 |
|
60,268 |
|
- |
|
- |
|
3,663 |
|
(11,024) |
|
(255) |
|
- |
|
52,652 |
|
Pohang TechnoPark 2PFV |
|
4,470 |
|
1,975 |
|
(4,470) |
|
2,472 |
|
- |
|
23 |
|
- |
|
- |
|
- |
|
Daewontos Co., Ltd. |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Inhee Co., Ltd. |
|
- |
|
215 |
|
- |
|
- |
|
(10) |
|
- |
|
- |
|
- |
|
205 |
|
DAEGY Electrical Construction Co., Ltd. |
|
- |
|
128 |
|
- |
|
- |
|
(19) |
|
- |
|
- |
|
- |
|
109 |
|
YEONWOONG SYSTEM |
|
- |
|
77 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
77 |
|
DOODOO LOGITECH |
|
- |
|
247 |
|
- |
|
- |
|
(84) |
|
- |
|
- |
|
- |
|
163 |
|
Neoplux Technology Valuation Investment Fund |
|
13,068 |
|
7,526 |
|
5,400 |
|
- |
|
1,564 |
|
490 |
|
(1,510) |
|
- |
|
13,470 |
|
EQP Global Energy Infrastructure Private Equity Fund |
|
280 |
|
- |
|
(280) |
|
280 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
JAEYOUNG SOLUTEC CO., LTD. (*2) |
|
6,238 |
|
5,736 |
|
- |
|
- |
|
(2,009) |
|
121 |
|
- |
|
- |
|
3,848 |
|
Partners 4th Growth Investment Fund |
|
14,100 |
|
4,555 |
|
9,220 |
|
- |
|
(385) |
|
- |
|
- |
|
- |
|
13,390 |
|
PSA 1st Fintech Private Equity Fund |
|
2,000 |
|
1,965 |
|
(2,000) |
|
211 |
|
(38) |
|
- |
|
(138) |
|
- |
|
- |
|
KTB Newlake Global Healthcare PEF |
|
162 |
|
779 |
|
1,134 |
|
- |
|
(144) |
|
- |
|
- |
|
- |
|
1,769 |
|
Jaeyang Industry |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Tigris-Aurum Fund 1 |
|
1,500 |
|
1,481 |
|
- |
|
- |
|
(45) |
|
- |
|
- |
|
- |
|
1,436 |
|
Treenkid |
|
92 |
|
79 |
|
- |
|
(79) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Chungyoung INC. |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Semantic |
|
249 |
|
249 |
|
- |
|
213 |
|
(462) |
|
- |
|
- |
|
- |
|
- |
|
DAEKWANG SEMICON DUCTOR Co., Ltd. |
|
4,776 |
|
4,777 |
|
- |
|
- |
|
(952) |
|
- |
|
- |
|
- |
|
3,825 |
|
Branbuil Co., Ltd. |
|
183 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Songrim Co., Ltd. |
|
11 |
|
- |
|
11 |
|
- |
|
37 |
|
- |
|
- |
|
- |
|
48 |
|
Taihan Industrial System Co., Ltd. |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
ICSF (The Korea’s Information Center for Savings & Finance) |
|
300 |
|
- |
|
300 |
|
- |
|
- |
|
- |
|
- |
|
(144) |
|
156 |
|
Shinhan-Albatross Technology Investment Fund |
|
2,000 |
|
- |
|
2,000 |
|
- |
|
(218) |
|
- |
|
- |
|
- |
|
1,782 |
|
Loggia |
|
37 |
|
- |
|
37 |
|
- |
|
(11) |
|
- |
|
- |
|
- |
|
26 |
|
Quantum-Nvestor Fund No.1 |
|
1,000 |
|
- |
|
1,000 |
|
- |
|
(7) |
|
- |
|
- |
|
- |
|
993 |
125
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in investments in associates for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
December 31, 2017 |
|||||||||||||||||
Associates |
|
Acqui-sition cost |
|
Beginning balance |
|
Acqui-sition (redemp-tion) |
|
Gain (loss) from disposal |
|
Share of profit (loss) of associates |
|
Share of other comprehe-nsive income (loss) of associates |
|
Dividends received |
|
Impair-ment loss |
|
Ending balance |
|
Lodestone 1st Private Equity Fund |
|
2,000 |
|
- |
|
2,000 |
|
- |
|
(8) |
|
(1) |
|
- |
|
- |
|
1,991 |
|
Miraeequity-Incus Venture Business Fund No.4 |
|
2,000 |
|
- |
|
2,000 |
|
- |
|
(4) |
|
- |
|
- |
|
- |
|
1,996 |
|
LB Technology Fund 1 |
|
1,000 |
|
- |
|
1,000 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,000 |
|
Shinhan-Neoplux Energy Newbiz Fund |
|
1,400 |
|
- |
|
1,400 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1,400 |
|
|
|
129,116 |
|
130,893 |
|
(43,755) |
|
25,845 |
|
1,306 |
|
(10,057) |
|
(3,752) |
|
(144) |
|
100,336 |
(*1) Redemption represents disposal amounts by reclassification without any cash flows.
(*2) The market value of the investments in associates was W6,826 million as of December 31, 2017 based on the quoted market price as of December 28, 2017.
126
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
|
(c) |
The condensed financial statements of associates as of December 31, 2018 and 2017 were as follows: |
Associates |
|
December 31, 2018 |
||||||||||
|
Assets |
|
Liabilities |
|
Operating revenue |
|
Profit (loss) for the year |
|
Other comprehensive income (loss) |
|
Total comprehensive income (loss) |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
3,995,746 |
|
3,662,567 |
|
53,756 |
|
5,191 |
|
(10,268) |
|
(5,077) |
Daewontos Co., Ltd. |
|
400 |
|
2,492 |
|
- |
|
- |
|
- |
|
- |
DAEGY Electrical Construction Co., Ltd. |
|
590 |
|
193 |
|
- |
|
- |
|
- |
|
- |
YEONWOONG SYSTEM |
|
492 |
|
147 |
|
- |
|
(6) |
|
- |
|
(6) |
DOODOO LOGITECH |
|
204 |
|
45 |
|
536 |
|
(427) |
|
- |
|
(427) |
Neoplux Technology Valuation Investment Fund |
|
57,018 |
|
804 |
|
390 |
|
(724) |
|
(1,969) |
|
(2,693) |
Partners 4th Growth Investment Fund |
|
67,403 |
|
954 |
|
4,424 |
|
3,025 |
|
- |
|
3,025 |
KTB Newlake Global Healthcare PEF |
|
32,508 |
|
123 |
|
69 |
|
(793) |
|
- |
|
(793) |
Jaeyang Industry |
|
2,146 |
|
4,717 |
|
- |
|
- |
|
- |
|
- |
Tigris-Aurum Fund 1 |
|
5,142 |
|
42 |
|
- |
|
(165) |
|
- |
|
(165) |
DAEKWANG SEMICON DUCTOR Co., Ltd. |
|
25,459 |
|
9,537 |
|
15,794 |
|
(2,341) |
|
- |
|
(2,341) |
Songrim Co., Ltd. |
|
2,288 |
|
2,311 |
|
1,898 |
|
(164) |
|
- |
|
(164) |
Taihan Industrial System Co., Ltd. |
|
12,317 |
|
13,478 |
|
48,457 |
|
433 |
|
- |
|
433 |
Hyungje art printing |
|
1,020 |
|
1,139 |
|
2,688 |
|
(1,171) |
|
- |
|
(1,171) |
ICSF (The Korea’s Information Center for Savings & Finance) |
|
703 |
|
241 |
|
102 |
|
(22) |
|
- |
|
(22) |
Shinhan-Albatross Technology Investment Fund |
|
18,009 |
|
182 |
|
299 |
|
(435) |
|
917 |
|
482 |
Miraeequity-Incus Venture Business Fund No.4 |
|
8,358 |
|
43 |
|
- |
|
(171) |
|
- |
|
(171) |
Shinhan-Neoplux Energy Newbiz Fund |
|
17,347 |
|
315 |
|
19 |
|
(968) |
|
- |
|
(968) |
Stassets-DA Value Healthcare Fund I |
|
4,089 |
|
1 |
|
1 |
|
(62) |
|
- |
|
(62) |
|
|
4,251,239 |
|
3,699,331 |
|
128,433 |
|
1,200 |
|
(11,320) |
|
(10,120) |
127
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Condensed financial statements of associates as of December 31, 2018 and 2017 were as follows: (continued)
Associates |
|
December 31, 2017 |
||||||||||
|
Assets |
|
Liabilities |
|
Operating revenue |
|
Profit (loss) for the year |
|
Other comprehensive income (loss) |
|
Total comprehensive income (loss) |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
4,133,674 |
|
3,781,688 |
|
78,010 |
|
24,230 |
|
(73,495) |
|
(49,265) |
Daewontos Co., Ltd. |
|
400 |
|
2,492 |
|
- |
|
- |
|
- |
|
- |
Inhee Co., Ltd. |
|
10,019 |
|
8,678 |
|
4,685 |
|
(62) |
|
- |
|
(62) |
DAEGY Electrical Construction Co., Ltd. |
|
590 |
|
193 |
|
17 |
|
(57) |
|
- |
|
(57) |
YEONWOONG SYSTEM |
|
498 |
|
147 |
|
39 |
|
1 |
|
- |
|
1 |
DOODOO LOGITECH |
|
624 |
|
39 |
|
339 |
|
(271) |
|
- |
|
(271) |
Neoplux Technology Valuation Investment Fund |
|
40,692 |
|
283 |
|
5,895 |
|
4,691 |
|
1,471 |
|
6,162 |
JAEYOUNG SOLUTEC CO., LTD. |
|
157,009 |
|
137,916 |
|
142,228 |
|
(22,756) |
|
2,764 |
|
(19,992) |
Partners 4th Growth Investment Fund |
|
53,944 |
|
383 |
|
137 |
|
(1,540) |
|
- |
|
(1,540) |
KTB Newlake Global Healthcare PEF |
|
8,796 |
|
517 |
|
- |
|
(719) |
|
- |
|
(719) |
Jaeyang Industry |
|
2,146 |
|
4,717 |
|
- |
|
- |
|
- |
|
- |
Tigris-Aurum Fund 1 |
|
5,308 |
|
42 |
|
- |
|
(165) |
|
- |
|
(165) |
Chungyoung INC. |
|
3,292 |
|
8,392 |
|
5,568 |
|
(693) |
|
- |
|
(693) |
DAEKWANG SEMICON DUCTOR Co., Ltd. |
|
29,069 |
|
10,806 |
|
13,929 |
|
(4,549) |
|
- |
|
(4,549) |
Branbuil Co., Ltd. |
|
1,944 |
|
2,451 |
|
- |
|
- |
|
- |
|
- |
Songrim Co., Ltd. |
|
4,854 |
|
4,718 |
|
5,485 |
|
106 |
|
- |
|
106 |
Taihan Industrial System Co., Ltd. |
|
13,226 |
|
14,820 |
|
25,306 |
|
(1,112) |
|
- |
|
(1,112) |
ICSF (The Korea’s Information Center for Savings & Finance) |
|
484 |
|
1 |
|
322 |
|
(20) |
|
- |
|
(20) |
Shinhan-Albatross Technology Investment Fund |
|
5,527 |
|
182 |
|
37 |
|
(655) |
|
- |
|
(655) |
Loggia |
|
1,208 |
|
1,046 |
|
955 |
|
(68) |
|
- |
|
(68) |
Quantum-Nvestor Fund No.1 |
|
5,989 |
|
31 |
|
2 |
|
(42) |
|
- |
|
(42) |
Lodestone 1st Private Equity Fund |
|
11,456 |
|
- |
|
37 |
|
(46) |
|
(8) |
|
(54) |
Miraeequity-Incus Venture Business Fund No.4 |
|
8,500 |
|
15 |
|
- |
|
(15) |
|
- |
|
(15) |
LB Technology Fund 1 |
|
5,400 |
|
- |
|
- |
|
- |
|
- |
|
- |
Shinhan-Neoplux Energy Newbiz Fund |
|
6,000 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
4,510,649 |
|
3,979,557 |
|
282,991 |
|
(3,742) |
|
(69,268) |
|
(73,010) |
128
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
|
(d) |
Reconciliation of associates’ financial information presented to the carrying amount of the Group’s interest in the associates as of December 31, 2018 and 2017 were as follows: |
Associates |
|
December 31, 2018 |
|||||||||||
|
Net assets (A) |
|
Proportion of ownership interest (B) |
|
(A) x (B) |
|
Unrealized income and expenses |
|
Other adjustments |
|
Carrying amount |
||
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
333,178 |
|
14.99% |
|
49,977 |
|
(136) |
|
- |
|
49,841 |
|
Daewontos Co., Ltd. (*1) |
|
(2,092) |
|
36.33% |
|
(760) |
|
- |
|
760 |
|
- |
|
DAEGY Electrical Construction Co., Ltd. |
|
397 |
|
27.45% |
|
109 |
|
- |
|
- |
|
109 |
|
YEONWOONG SYSTEM |
|
345 |
|
21.77% |
|
76 |
|
- |
|
- |
|
76 |
|
DOODOO LOGITECH |
|
158 |
|
27.96% |
|
44 |
|
- |
|
- |
|
44 |
|
Neoplux Technology Valuation Investment Fund |
|
56,214 |
|
33.33% |
|
18,738 |
|
- |
|
- |
|
18,738 |
|
Partners 4th Growth Investment Fund |
|
66,449 |
|
25.00% |
|
16,612 |
|
- |
|
- |
|
16,612 |
|
KTB Newlake Global Healthcare PEF (*2) |
|
32,385 |
|
20.00% |
|
6,477 |
|
- |
|
113 |
|
6,590 |
|
Jaeyang Industry (*3) |
|
(2,571) |
|
25.90% |
|
(666) |
|
- |
|
666 |
|
- |
|
Tigris-Aurum Fund 1 |
|
5,101 |
|
27.27% |
|
1,391 |
|
- |
|
- |
|
1,391 |
|
DAEKWANG SEMICON DUCTOR Co., Ltd. |
|
15,922 |
|
20.94% |
|
3,334 |
|
- |
|
- |
|
3,334 |
|
Songrim Co., Ltd. (*3) |
|
(23) |
|
35.34% |
|
(8) |
|
- |
|
8 |
|
- |
|
Taihan Industrial System Co., Ltd. (*2) |
|
(1,161) |
|
28.29% |
|
(328) |
|
- |
|
328 |
|
- |
|
Hyungje art printing (*3) |
|
(119) |
|
31.54% |
|
(38) |
|
- |
|
38 |
|
- |
|
ICSF (The Korea’s Information Center for Savings & Finance) |
|
462 |
|
32.26% |
|
149 |
|
- |
|
- |
|
149 |
|
Shinhan-Albatross Technology Investment Fund |
|
17,827 |
|
33.33% |
|
5,942 |
|
- |
|
- |
|
5,942 |
|
Miraeequity-Incus Venture Business Fund No.4 |
|
8,316 |
|
23.53% |
|
1,957 |
|
- |
|
- |
|
1,957 |
|
Shinhan-Neoplux Energy Newbiz Fund |
|
17,032 |
|
23.33% |
|
3,974 |
|
- |
|
- |
|
3,974 |
|
Stassets-DA Value Healthcare Fund I |
|
4,089 |
|
24.10% |
|
985 |
|
- |
|
- |
|
985 |
|
|
|
551,909 |
|
|
|
107,965 |
|
(136) |
|
1,913 |
|
109,742 |
129
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Reconciliation of associates’ financial information presented to the carrying amount of the Group’s interest in the associates as of December 31, 2018 and 2017 were as follows: (continued)
(*1) Other adjustments represent the unrecognized share of accumulated losses resulting from the Group’s discontinuing the use of equity method since its interest was reduced to zero by the accumulated losses of the investee.
(*2) Other adjustments represent the difference between the cost of the investment and the Group’s share in the net fair value of the investee’s identifiable assets and liabilities on acquisition of the investment.
(*3) Other adjustments represent the difference between the cost of the investment and the Group’s share in the net fair value of the investee’s identifiable net assets on acquisition of the investment as well as the unrecognized share of accumulated losses resulting from the Group’s discontinuing the use of equity method since its interest was reduced to zero by the accumulated losses of the investee.
130
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Reconciliation of associates’ financial information presented to the carrying amount of the Group’s interest in the associates as of December 31, 2018 and 2017 were as follows: (continued)
Associates |
|
December 31, 2017 |
|||||||||||
|
Net assets (A) |
|
Proportion of ownership interest (B) |
|
(A) x (B) |
|
Unrealized income and expenses |
|
Other adjustments |
|
Carrying amount |
||
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
351,986 |
|
14.99% |
|
52,798 |
|
(146) |
|
- |
|
52,652 |
|
Daewontos Co., Ltd. (*1) |
|
(2,092) |
|
36.33% |
|
(760) |
|
- |
|
760 |
|
- |
|
Inhee Co., Ltd. |
|
1,341 |
|
15.36% |
|
205 |
|
- |
|
- |
|
205 |
|
DAEGY Electrical Construction Co., Ltd. |
|
397 |
|
27.45% |
|
109 |
|
- |
|
- |
|
109 |
|
YEONWOONG SYSTEM |
|
351 |
|
21.77% |
|
77 |
|
- |
|
- |
|
77 |
|
DOODOO LOGITECH |
|
585 |
|
27.96% |
|
163 |
|
- |
|
- |
|
163 |
|
Neoplux Technology Valuation Investment Fund |
|
40,409 |
|
33.33% |
|
13,470 |
|
- |
|
- |
|
13,470 |
|
JAEYOUNG SOLUTEC CO., LTD. (*2) |
|
17,484 |
|
9.61% |
|
1,679 |
|
- |
|
2,169 |
|
3,848 |
|
Partners 4th Growth Investment Fund |
|
53,561 |
|
25.00% |
|
13,390 |
|
- |
|
- |
|
13,390 |
|
KTB Newlake Global Healthcare PEF (*3) |
|
8,279 |
|
20.00% |
|
1,656 |
|
- |
|
113 |
|
1,769 |
|
Jaeyang Industry (*4) |
|
(2,571) |
|
25.90% |
|
(666) |
|
- |
|
666 |
|
- |
|
Tigris-Aurum Fund 1 |
|
5,266 |
|
27.27% |
|
1,436 |
|
- |
|
- |
|
1,436 |
|
Chungyoung INC. (*4) |
|
(5,100) |
|
18.94% |
|
(966) |
|
- |
|
966 |
|
- |
|
DAEKWANG SEMICON DUCTOR Co., Ltd. |
|
18,263 |
|
20.94% |
|
3,825 |
|
- |
|
- |
|
3,825 |
|
Branbuil Co., Ltd. (*3) |
|
(507) |
|
15.53% |
|
(79) |
|
- |
|
79 |
|
- |
|
Songrim Co., Ltd. |
|
136 |
|
35.34% |
|
48 |
|
- |
|
- |
|
48 |
|
Taihan Industrial System Co., Ltd. (*3) |
|
(1,594) |
|
28.29% |
|
(451) |
|
- |
|
451 |
|
- |
|
ICSF (The Korea’s Information Center for Savings & Finance) |
|
483 |
|
32.26% |
|
156 |
|
- |
|
- |
|
156 |
|
Shinhan-Albatross Technology Investment Fund |
|
5,345 |
|
33.33% |
|
1,782 |
|
- |
|
- |
|
1,782 |
|
Loggia |
|
162 |
|
16.29% |
|
26 |
|
- |
|
- |
|
26 |
|
Quantum-Nvestor Fund No.1 |
|
5,958 |
|
16.67% |
|
993 |
|
- |
|
- |
|
993 |
|
Lodestone 1st Private Equity Fund |
|
11,456 |
|
17.38% |
|
1,991 |
|
- |
|
- |
|
1,991 |
|
Miraeequity-Incus Venture Business Fund No.4 |
|
8,485 |
|
23.53% |
|
1,996 |
|
- |
|
- |
|
1,996 |
|
LB Technology Fund 1 |
|
5,400 |
|
18.52% |
|
1,000 |
|
- |
|
- |
|
1,000 |
|
Shinhan-Neoplux Energy Newbiz Fund |
|
6,000 |
|
23.33% |
|
1,400 |
|
- |
|
- |
|
1,400 |
|
|
|
529,483 |
|
|
|
95,278 |
|
(146) |
|
5,204 |
|
100,336 |
131
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Reconciliation of associates’ financial information presented to the carrying amount of the Group’s interest in the associates as of December 31, 2018 and 2017 were as follows: (continued)
(*1) Other adjustments represent the unrecognized share of accumulated losses resulting from the Group’s discontinuing the use of equity method since its interest was reduced to zero by the accumulated losses of the investee.
(*2) Net assets do not include non-controlling interests. Other adjustments represent the difference between the cost of the investment and the Group’s share in the net fair value of the investee’s identifiable assets and liabilities on acquisition of the investment.
(*3) Other adjustments represent the difference between the cost of the investment and the Group’s share in the net fair value of the investee’s identifiable assets and liabilities on acquisition of the investment.
(*4) Other adjustments represent the difference between the cost of the investment and the Group’s share in the net fair value of the investee’s identifiable net assets on acquisition of the investment as well as the unrecognized share of accumulated losses resulting from the Group’s discontinuing the use of equity method since its interest was reduced to zero by the accumulated losses of the investee.
|
(e) |
The unrecognized equity method losses and accumulated unrecognized equity losses for the years ended December 31, 2018 and 2017 are as follows : |
|
2018 |
|||||
|
Unrecognized equity method loss |
|
Accumulated unrecognized equity method loss |
|
||
Daewontos Co., Ltd. |
|
- |
|
(760) |
|
|
Jaeyang industry Co., Ltd. |
|
- |
|
(18) |
|
|
Songrim Co., Ltd |
|
(8) |
|
(8) |
|
|
Total |
|
(8) |
|
(786) |
|
|
2017 |
|||||
|
Unrecognized equity method loss |
|
Accumulated unrecognized equity method loss |
|
||
Daewontos Co., Ltd. |
|
- |
|
(760) |
|
|
Jaeyang industry Co., Ltd. |
|
- |
|
(18) |
|
|
Chungyoung INC. |
|
(130) |
|
(130) |
|
|
Total |
|
(130) |
|
(908) |
|
132
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Investment properties as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
417,994 |
|
- |
|
417,994 |
Buildings |
|
222,848 |
|
(69,549) |
|
153,299 |
|
|
640,842 |
|
(69,549) |
|
571,293 |
|
|
December 31, 2017 |
||||
|
|
Acquisition cost |
|
Accumulated depreciation |
|
Book value |
Land |
|
435,722 |
|
- |
|
435,722 |
Buildings |
|
223,216 |
|
(60,642) |
|
162,574 |
|
|
658,938 |
|
(60,642) |
|
598,296 |
(b) Fair value of investment properties as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Investment properties (*1) |
|
605,107 |
|
686,811 |
(*1) Fair value of investment properties is estimated based on the recent market transactions and certain significant unobservable inputs. Accordingly, fair value of investment properties is classified as level 3.
(c) Income and expenses on investment properties for the years ended December 31, 2018 and 2017 were as follows
|
|
2018 |
|
2017 |
Rental income |
|
27,559 |
|
25,169 |
Direct operating expenses for investment properties that generate rental income |
|
5,736 |
|
5,600 |
133
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Other assets as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Unsettled trades and accounts receivable |
|
5,865,729 |
|
4,120,125 |
Domestic exchange settlement receivables |
|
5,992,383 |
|
2,871,934 |
Guarantee deposits |
|
1,020,548 |
|
1,024,763 |
Accrued income |
|
1,290,791 |
|
1,051,311 |
Prepaid expense |
|
104,076 |
|
99,179 |
Suspense payments |
|
69,600 |
|
60,032 |
Sundry assets |
|
125,668 |
|
92,178 |
Others |
|
2,799 |
|
2,243 |
Present value discount |
|
(36,355) |
|
(42,434) |
Allowance for impairment |
|
(25,612) |
|
(26,252) |
|
|
14,409,627 |
|
9,253,079 |
17. |
Non-current assets held for sale |
|
(a) Non-current assets held for sale as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Property and equipment |
|
7,561 |
|
7,534 |
The Group classified property and equipment which were highly expected to be sold within one year from December 31, 2018, as non-current assets held for sale.
(b) The cumulative income or loss recognized in other comprehensive income
There were no cumulative income or loss recognized in other comprehensive income relating to non-current assets held for sale as of December 31, 2018 and 2017.
134
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Assets pledged as collateral as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Loans: |
|
|
|
|
Loans at amortized cost |
|
129,210 |
|
- |
Loans |
|
- |
|
99,158 |
Securities (*1): |
|
|
|
|
Securities at FVOCI |
|
411,371 |
|
- |
Securities at amortized cost |
|
10,565,279 |
|
- |
Available-for-sale financial assets |
|
- |
|
595,373 |
Held-to-maturity financial assets |
|
- |
|
10,346,611 |
|
|
10,976,650 |
|
10,941,984 |
Property and equipment (*2) |
|
5,784 |
|
5,592 |
|
|
11,111,644 |
|
11,046,734 |
(*1) The carrying amounts of assets pledged as collateral that the transferees had the right to sell or repledge regardless of the Group’s default as of December 31, 2018 and 2017 were W684,013 million and W909,195 million, respectively.
(*2) The amounts were based on the notification amount of pledge.
(b) The fair value of collateral held that the Group has the right to sell or repledge regardless of pledger’s default as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Collateral held |
|
Collateral sold or repledged |
|
Collateral held |
|
Collateral sold or repledged |
Securities |
|
5,190,387 |
|
- |
|
3,749,516 |
|
- |
135
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) There were no financial liabilities designated at FVTPL as of December 31, 2018 and 2017.
(b) There was no net gain or loss on financial liabilities designated at FVTPL for the year ended December 31, 2018. Net losses on financial liabilities designated at FVTPL for the year ended December 31, 2017 were as follows:
|
|
||
|
|
|
2017 |
Deposits: |
|
|
|
Loss on transaction |
|
|
(43) |
20. |
Deposits |
|
Deposits as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Demand deposits: |
|
|
|
|
Korean won |
|
92,939,482 |
|
89,453,125 |
Foreign currencies |
|
12,058,823 |
|
12,289,606 |
|
|
104,998,305 |
|
101,742,731 |
Time deposits: |
|
|
|
|
Korean won |
|
119,544,345 |
|
112,021,376 |
Foreign currencies |
|
16,109,446 |
|
13,945,457 |
Gain on fair value hedge |
|
(167,226) |
|
(179,053) |
|
|
135,486,565 |
|
125,787,780 |
Negotiable certificates of deposits |
|
9,213,652 |
|
7,478,278 |
Note discount deposits |
|
4,087,530 |
|
3,423,459 |
CMA |
|
4,084,709 |
|
4,197,146 |
Others |
|
21,963 |
|
24,350 |
|
|
257,892,724 |
|
242,653,744 |
136
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Financial liabilities at FVTPL as of December 31, 2018 and trading liabilities as of December 31, 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
Interest rate (%) |
|
Amount |
|
Interest rate (%) |
|
Amount |
Securities sold |
|
2.75 |
|
20,625 |
|
- |
|
- |
Gold/silver deposits |
|
- |
|
458,934 |
|
- |
|
434,586 |
|
|
|
|
479,559 |
|
|
|
434,586 |
(b) Net gain (loss) on financial liabilities at FVTPL for the year ended December 31, 2018 and net gain (loss) on trading liabilities for the year ended December 31, 2017 were as follows:
|
|
2018 |
|
2017 |
|
Securities sold: |
|
|
|
|
|
Gain on sale |
|
231 |
|
691 |
|
Loss on sale |
|
(384) |
|
(1,277) |
|
Gain on valuation |
|
27 |
|
- |
|
Loss on valuation |
|
(28) |
|
- |
|
|
|
(154) |
|
(586) |
|
Gold/silver deposits: |
|
|
|
|
|
Gain on sale |
|
1,611 |
|
2,834 |
|
Loss on sale |
|
(217) |
|
(395) |
|
Gain on valuation |
|
293 |
|
436 |
|
Loss on valuation |
|
(15,185) |
|
(176) |
|
|
|
(13,498) |
|
(2,699) |
|
|
|
(13,652) |
|
2,113 |
137
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Borrowings as of December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
|
December 31, 2017 |
|||||
|
Interest rate (%) |
|
Amount |
|
Interest rate (%) |
|
Amount |
|
Call money: |
|
|
|
|
|
|
|
|
Korean won |
1.73 |
|
120,000 |
|
- |
|
- |
|
Foreign currencies |
0.00~6.85 |
|
840,162 |
|
0.00~6.20 |
|
561,813 |
|
|
|
|
960,162 |
|
|
|
561,813 |
|
|
|
|
|
|
|
|
|
|
Bill sold |
0.75~1.70 |
|
14,536 |
|
0.65~1.63 |
|
13,605 |
|
Bonds sold under repurchase agreements: |
|
|
|
|
|
|
|
|
Korean won |
1.82 |
|
1,027 |
|
0.00 |
|
903 |
|
Foreign currencies |
2.63~6.50 |
|
82,001 |
|
1.69~6.00 |
|
296,696 |
|
|
|
|
83,028 |
|
|
|
297,599 |
|
Borrowings in Korean won: |
|
|
|
|
|
|
|
|
Borrowings from Bank of Korea |
0.50~0.75 |
|
2,288,991 |
|
0.50~0.75 |
|
2,873,706 |
|
Others |
0.00~4.25 |
|
6,561,883 |
|
0.00~4.25 |
|
5,769,260 |
|
|
|
|
8,850,874 |
|
|
|
8,642,966 |
|
Borrowings in foreign currencies: |
|
|
|
|
|
|
|
|
Overdraft due to banks |
0.00 |
|
77,673 |
|
0.00 |
|
128,634 |
|
Borrowings from banks |
0.00~9.20 |
|
4,576,198 |
|
0.24~9.25 |
|
3,737,367 |
|
Sub-lease |
0.00~3.34 |
|
84,017 |
|
0.00~2.15 |
|
240,380 |
|
Others |
2.60~7.90 |
|
1,510,190 |
|
1.45~7.90 |
|
995,366 |
|
|
|
|
6,248,078 |
|
|
|
5,101,747 |
|
Deferred origination costs |
|
|
(1,857) |
|
|
|
(168) |
|
|
|
|
16,154,821 |
|
|
|
14,617,562 |
138
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Debt securities issued as of December 31, 2018 and 2017 were as follows:
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
Interest |
|
Amount |
|
Interest |
|
Amount |
Debt securities issued in Korean won: |
|
|
|
|
|
|
|
Debt securities issued |
0.00~8.00 |
|
23,425,572 |
|
0.00~8.00 |
|
18,861,594 |
Subordinated debt securities issued |
2.20~4.60 |
|
3,200,145 |
|
2.20~4.60 |
|
3,000,400 |
Gain on fair value hedges |
|
|
(206,985) |
|
|
|
(274,046) |
Discount on debt securities issued |
|
|
(62,944) |
|
|
|
(29,698) |
|
|
|
26,355,788 |
|
|
|
21,558,250 |
Debt securities issued in foreign currencies: |
|
|
|
|
|
|
|
Debt securities issued |
0.02~4.01 |
|
3,356,032 |
|
0.00~4.20 |
|
2,504,859 |
Subordinated debt securities issued |
3.75~5.00 |
|
2,271,799 |
|
3.75~3.88 |
|
1,446,390 |
Gain on fair value hedges |
|
|
(55,251) |
|
|
|
(25,795) |
Discount on debt securities issued |
|
|
(29,102) |
|
|
|
(23,277) |
|
|
|
5,543,478 |
|
|
|
3,902,177 |
|
|
|
31,899,266 |
|
|
|
25,460,427 |
139
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Defined benefit plan assets and liabilities
The Group provides a defined benefit plan for qualified employees. Plan assets are managed by trust companies, funds, and other similar companies that are subject to local regulations and each country’s business environment.
Defined benefit plan assets and liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Present value of defined benefit obligations |
|
1,370,151 |
|
1,263,698 |
Fair value of plan assets |
|
(1,299,502) |
|
(1,294,013) |
Defined benefit liabilities (assets) |
|
70,649 |
|
(30,315) |
Defined benefit assets |
|
- |
|
34,120 |
Defined benefit liabilities |
|
70,649 |
|
3,805 |
(b) Changes in the present value of defined benefit obligations for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Beginning balance |
|
1,263,698 |
|
1,258,473 |
Current service cost |
|
104,538 |
|
128,079 |
Interest expense |
|
44,471 |
|
40,998 |
Remeasurements (*1)(*2) |
|
65,504 |
|
(106,466) |
Effects of foreign currency movements |
|
(853) |
|
67 |
Benefits paid by the plan |
|
(106,995) |
|
(65,624) |
Others |
|
(213) |
|
5,361 |
Past service cost |
|
- |
|
2,810 |
Ending balance |
|
1,370,151 |
|
1,263,698 |
(*1) Remeasurements for the year ended December 31, 2018 consist of W18,399 million of actuarial loss arising from changes in demographic assumptions, W54,933 million of actuarial loss arising from changes in financial assumptions and W7,828 million of actuarial gain arising from changes in experience adjustments, respectively.
(*2) Remeasurements for the year ended December 31, 2017 consist of W4,929 million of actuarial loss arising from changes in demographic assumptions, W78,228 million of actuarial gain arising from changes in financial assumptions and W33,167 million of actuarial gain arising from changes in experience adjustments, respectively.
(c) Changes in the fair value of plan assets for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
||
Beginning balance |
|
1,294,013 |
|
1,208,370 |
||
Interest income |
|
50,725 |
|
41,085 |
||
Remeasurements |
|
(31,570) |
|
(21,188) |
||
Contributions paid into the plan |
|
92,000 |
|
120,000 |
||
Benefits paid by the plan |
|
(105,666) |
|
(54,254) |
||
Ending balance |
|
1,299,502 |
|
1,294,013 |
140
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) The amount of major categories of the fair value of plan assets as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Deposits |
|
1,281,069 |
|
1,275,313 |
Others |
|
18,433 |
|
18,700 |
|
|
1,299,502 |
|
1,294,013 |
(e) Actuarial assumptions as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
|
Descriptions |
|
Discount rate |
|
3.18% |
|
3.92% |
|
AA0 Corporate bond yields |
|
Future salary increasing rate |
|
2.33% + Upgrade rate |
|
2.63% + Upgrade rate |
|
Average for last 5 years |
(f) Sensitivity analysis
Sensitivity analysis of the present value fluctuations of defined benefit obligations as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||
|
|
Change in present value when the factor rises by 100 basis points |
|
Change in present value when the factor falls by 100 basis points |
Discount rate |
|
(121,918) |
|
140,734 |
Future salary increasing rate |
|
137,918 |
|
(120,557) |
|
|
December 31, 2017 |
||
|
|
Change in present value when the factor rises by 100 basis points |
|
Change in present value when the factor falls by 100 basis points |
Discount rate |
|
(109,226) |
|
125,770 |
Future salary increasing rate |
|
126,331 |
|
(111,638) |
(g) The maturity analysis of undiscounted retirement benefit payments as of the end of the current term is as follows
|
|
1 year or less |
|
1 year~ 2 years or less |
|
2 years~ 5 years or less |
|
5 years~ 10 years or less |
|
More than 5 years |
|
Total |
Salary payment amount |
|
58,231 |
|
80,625 |
|
277,853 |
|
395,171 |
|
1,094,529 |
|
1,906,409 |
(h) The weighted average durations of defined benefit obligations as of December 31, 2018 and 2017 were 9.90 years and 9.33 years, respectively.
141
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) |
Changes in provisions for unused credit commitments and financial guarantee contracts issued for the year ended December 31, 2018 were as follows: |
|
|
2018 |
|||||||||||||
|
|
Loan commitments and other liabilities for credit |
|
Financial guarantee contracts |
|
Total |
|||||||||
|
|
|
Lifetime expected credit losses |
|
|
Lifetime expected credit losses |
|
||||||||
|
|
12-month expected credit losses |
|
Credit-unimpaired financial asset |
|
Credit-impaired financial asset |
|
12-month expected credit losses |
|
Credit-unimpaired financial asset |
|
Credit-impaired financial asset |
|
||
Beginning balance |
|
69,350 |
|
17,341 |
|
- |
|
30,338 |
|
3,346 |
|
2,464 |
|
122,839 |
|
Transfer to 12-month expected credit losses |
|
2,929 |
|
(2,929) |
|
- |
|
1,139 |
|
(1,139) |
|
- |
|
- |
|
Transfer to lifetime expected credit losses |
|
(2,605) |
|
2,605 |
|
- |
|
(1,804) |
|
1,804 |
|
- |
|
- |
|
Transfer to impaired financial asset |
|
- |
|
- |
|
- |
|
(13) |
|
- |
|
13 |
|
- |
|
Provision (reversal) |
|
(3,586) |
|
(800) |
|
- |
|
(3,226) |
|
455 |
|
(690) |
|
(7,847) |
|
Foreign exchange movements |
|
719 |
|
105 |
|
- |
|
757 |
|
481 |
|
449 |
|
2,511 |
|
Others (*2) |
|
- |
|
- |
|
- |
|
27,237 |
|
940 |
|
(479) |
|
27,698 |
|
Ending balance |
|
66,807 |
|
16,322 |
|
- |
|
54,428 |
|
5,887 |
|
1,757 |
|
145,201 |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
(*2) Other changes were mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
142
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Changes in provisions for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|||||||||
|
|
Asset retirement |
|
Litigation |
|
Non-financial guarantee contracts |
|
Others |
|
Total |
|
Beginning balance |
|
30,874 |
|
11,850 |
|
46,340 |
|
43,567 |
|
132,631 |
|
Provision (reversal) |
|
6,474 |
|
(971) |
|
(2,833) |
|
3,583 |
|
6,253 |
|
Provision used |
|
(2,388) |
|
(5,492) |
|
- |
|
(6,467) |
|
(14,347) |
|
Foreign exchange movements |
|
- |
|
386 |
|
1,677 |
|
(1,006) |
|
1,057 |
|
Others (*1) |
|
1,810 |
|
- |
|
(1,713) |
|
13,824 |
|
13,921 |
|
Ending balance |
|
36,770 |
|
5,773 |
|
43,471 |
|
53,501 |
|
139,515 |
(*1) Other changes were mainly due to newly issued financial guarantee contracts recognized at their fair values, termination, effect of discount rate changes, etc.
|
|
2017 |
||||||||||
|
|
Asset retirement |
|
Litigation |
|
Unused credit |
|
Guarantee |
|
Others |
|
Total |
Beginning balance |
|
36,098 |
|
12,044 |
|
94,985 |
|
78,499 |
|
85,305 |
|
306,931 |
Provision (reversal) |
|
(4,853) |
|
423 |
|
(787) |
|
2,084 |
|
(20,222) |
|
(23,355) |
Provision used |
|
(2,132) |
|
- |
|
- |
|
- |
|
(21,464) |
|
(23,596) |
Foreign exchange movements |
|
- |
|
(617) |
|
(3,483) |
|
(4,458) |
|
(52) |
|
(8,610) |
Others (*1) |
|
1,761 |
|
- |
|
2,526 |
|
3,666 |
|
- |
|
7,953 |
Ending balance |
|
30,874 |
|
11,850 |
|
93,241 |
|
79,791 |
|
43,567 |
|
259,323 |
(*1) Other changes were due to originations and maturities of financial guarantees recognized initially at their fair value, effect of discount rate change and acquisition cost of new leased properties relating to asset retirement.
(*2) During 2018, the accounting treatment for Shinhan Vietnam's acquisition of ANZ retail business division was finalized. The Group retrospectively adjusted the provisional amount of the identifiable net assets recognised at the acquisition date. The retrospective adjustment details and the effect on the financial statements are given in Note 45.
(c) Asset retirement obligation liabilities represent the estimated cost to restore the existing leased properties which were discounted to the present value using the appropriate discount rate at the end of the reporting period. Disbursements of such costs were expected to incur at the end of the lease contract. Such costs were reasonably estimated using the average lease period and the average restoration expenses. The average lease period was calculated based on the past ten-year historical data of the expired leases. The average restoration expense was calculated based on the actual costs incurred for the past three years using the three-year average inflation rate.
143
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Other liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Accounts payable |
|
5,847,048 |
|
4,162,381 |
Borrowing from trust account |
|
2,994,798 |
|
4,052,608 |
Accrued expenses |
|
2,631,797 |
|
2,444,803 |
Liability incurred by agency relationship |
|
1,306,075 |
|
935,016 |
Domestic exchange settlement payables |
|
1,016,256 |
|
1,683,449 |
Account for agency business of other institutions |
|
720,171 |
|
600,774 |
Security deposits received |
|
355,867 |
|
602,613 |
Foreign exchange settlement payables |
|
225,921 |
|
223,436 |
Suspense payable |
|
73,426 |
|
77,495 |
Unearned income |
|
96,975 |
|
87,953 |
Withholding value-added tax and other taxes |
|
119,190 |
|
88,222 |
Dividend payable |
|
2,597 |
|
1,367 |
Sundry liabilities |
|
46,845 |
|
57,773 |
Present value discount |
|
(2,118) |
|
(2,913) |
|
|
15,434,848 |
|
15,014,977 |
144
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for share data)
(a) Equity as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Capital stock: |
|
|
|
|
Common stock |
|
7,928,078 |
|
7,928,078 |
Other equity instruments: |
|
|
|
|
Hybrid bonds |
|
698,660 |
|
668,938 |
Capital surplus: |
|
|
|
|
Share premium |
|
398,080 |
|
398,080 |
Others |
|
5,084 |
|
5,084 |
|
|
403,164 |
|
403,164 |
Capital adjustments: |
|
|
|
|
Stock options |
|
4,850 |
|
782 |
Others |
|
(4,204) |
|
(4,089) |
|
|
646 |
|
(3,307) |
Accumulated other comprehensive income (loss): |
|
|
|
|
Net change in fair value of financial assets at FVOCI |
|
(21,118) |
|
- |
Net change in fair value of available-for-sale financial assets |
|
- |
|
46,841 |
Share of other comprehensive income of associates, net |
|
4,859 |
|
6,586 |
Foreign currency translation differences for foreign operations |
|
(313,003) |
|
(337,163) |
Remeasurements of defined benefit plans |
|
(277,435) |
|
(207,036) |
|
|
(606,697) |
|
(490,772) |
Retained earnings: |
|
|
|
|
Legal reserve (*1) |
|
1,835,854 |
|
1,675,077 |
Voluntary reserve (*2) |
|
10,930,547 |
|
10,065,795 |
Other reserve (*3) |
|
112,058 |
|
99,681 |
Unappropriated retained earnings (*4)(*5) |
|
2,884,292 |
|
2,300,992 |
|
|
15,762,751 |
|
14,141,465 |
|
|
|
|
|
Non-controlling interests |
|
5,937 |
|
5,298 |
|
|
24,192,539 |
|
22,652,863 |
|
(*1) |
According to the Article 40 of the Banking Act, the Bank is required to appropriate an amount equal to a minimum of 10% of cash dividends paid for each accounting period as a legal reserve, until such reserve equals 100% of issued capital. The legal reserve is only available to reduce accumulated deficit or transfer to capital stock. |
|
(*2) |
The amounts include regulatory reserve for loan loss based on separate financial statements of |
|
(*3) |
Other reserve was established according to the laws applicable to some oversea branches and it may be used only to reduce their deficit. |
|
(*4) |
The amounts include difference between the regulatory reserve for loan loss based on separate financial statement and the regulatory reserve for loan loss based on consolidated financial statement of |
(*5) As the accounting treatment for the acquisition of ANZ retail business by Shinhan Vietnam was finalized in 2018, the ending balance for 2017 was retroactively adjusted.
145
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for share data)
(b) Capital stock
Capital stock of the Bank as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Number of authorized shares |
|
2,000,000,000 shares |
|
2,000,000,000 shares |
Par value per share in won |
|
|
|
|
Number of issued shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
(c) Hybrid bonds
Hybrid bonds as of December 31, 2018 and 2017 were as follows:
|
|
|
|
Book value |
|
|
||
Date of issuance |
|
Date of maturity |
|
December 31, 2018 |
|
December 31, 2017 |
|
Interest rate (%) |
Hybrid bonds issued in Korean won: |
|
|
|
|
|
|
|
|
March 21, 2008 |
|
March 21, 2038 |
|
- |
|
119,878 |
|
7.30 |
March 25, 2008 |
|
March 25, 2038 |
|
- |
|
49,947 |
|
7.30 |
June 7, 2013 |
|
June 7, 2043 |
|
299,568 |
|
299,568 |
|
4.63 |
June 29, 2017 |
|
Perpetual bond |
|
129,701 |
|
129,701 |
|
3.33 |
June 29, 2017 |
|
Perpetual bond |
|
69,844 |
|
69,844 |
|
3.81 |
October 15, 2018 |
|
Perpetual bond |
|
199,547 |
|
- |
|
3.70 |
|
|
|
|
698,660 |
|
668,938 |
|
|
Dividends on hybrid bond holders |
|
25,228 |
|
29,856 |
|
|
||
Weighted average interest rate (%) |
|
4.36 |
|
5.23 |
|
|
The above hybrid bonds are subject to early redemption option after five years or ten years from the date of issuance, and the maturity can be extended under the same condition at the maturity date. In addition, if no dividend is paid for common shares, the agreed interest is also not paid.
During the year ended December 31, 2018, W169,825 million of hybrid bonds issued in March 2008 were repaid early.
146
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for share data)
(d) Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||||||||
|
|
Items that are or may be reclassified to profit or loss |
|
Items that will not be reclassified to profit or loss |
|
|
||||||||
|
|
Net change in fair value of financial assets at FVOCI |
|
Share of other comprehensive income (loss) of associates, net |
|
Foreign currency translation differences for foreign operations |
|
Net change in fair value of financial assets at FVOCI |
|
Share of other comprehensive income (loss) of associates, net |
|
Remeasurements of the defined benefit plans |
|
Total |
Beginning balance (*1) |
|
(70,683) |
|
6,614 |
|
(334,281) |
|
(58,379) |
|
(28) |
|
(207,036) |
|
(663,793) |
Change due to fair value |
|
135,350 |
|
- |
|
- |
|
21,151 |
|
- |
|
- |
|
156,501 |
Change due to other comprehensive income of associates |
|
- |
|
(1,579) |
|
- |
|
- |
|
25 |
|
- |
|
(1,554) |
Change due to impairment |
|
3,467 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3,467 |
Change due to disposal |
|
11,910 |
|
(286) |
|
- |
|
- |
|
- |
|
- |
|
11,624 |
Effect of hedge accounting |
|
(2,365) |
|
- |
|
(35,879) |
|
- |
|
- |
|
- |
|
(38,244) |
Effect of foreign currency movements |
|
- |
|
- |
|
47,227 |
|
423 |
|
- |
|
- |
|
47,650 |
Remeasurements of defined benefit plans |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(97,076) |
|
(97,076) |
Amounts transferred to retained earnings Effect of tax |
|
- |
|
- |
|
- |
|
(4,399) |
|
13 |
|
- |
|
(4,386) |
|
(52,713) |
|
110 |
|
9,930 |
|
(4,880) |
|
(10) |
|
26,677 |
|
(20,886) |
|
Ending balance |
|
24,966 |
|
4,859 |
|
(313,004) |
|
(46,084) |
|
- |
|
(277,435) |
|
(606,697) |
(*1) The beginning balance was restated in accordance with K-IFRS No.1109.
147
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
2017 |
||||||||
|
|
Net change in fair value of available-for-sale financial assets |
|
Share of other comprehensive income (loss) of associates, net |
|
Foreign currency translation differences for foreign operations |
|
Remeasure-ments of defined benefit plans |
|
Total |
Beginning balance |
|
139,824 |
|
16,583 |
|
(151,936) |
|
(280,916) |
|
(276,445) |
Change due to fair value |
|
(44,185) |
|
- |
|
- |
|
- |
|
(44,185) |
Change due to other comprehensive income of associates |
|
- |
|
(10,043) |
|
- |
|
- |
|
(10,043) |
Change due to impairment |
|
38,383 |
|
- |
|
- |
|
- |
|
38,383 |
Change due to disposal |
|
(119,348) |
|
(!4) |
|
- |
|
- |
|
(119,362) |
Effect of hedge accounting |
|
1,241 |
|
- |
|
97,353 |
|
- |
|
98,594 |
Effect of foreign currency movements |
|
(7,113) |
|
- |
|
(267,693) |
|
- |
|
(274,806) |
Remeasurements of defined benefit plans |
|
- |
|
- |
|
- |
|
84,994 |
|
84,994 |
Amounts transferred from retained earnings |
|
- |
|
414 |
|
- |
|
- |
|
414 |
Effect of tax |
|
38,039 |
|
(354) |
|
(14,887) |
|
(11,114) |
|
11,684 |
Ending balance |
|
46,841 |
|
6,586 |
|
(337,163) |
|
(207,036) |
|
(490,772) |
148
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for par value per share and dividend per share)
(e) Statements of appropriation of retained earnings for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 Expected date of approval: March 26, 2019 |
|
2017 Date of approval: March 21, 2018 |
Unappropriated retained earnings: |
|
|
|
|
Balance at beginning of year |
|
- |
|
- |
Net effect on change due to accounting policy |
|
(90,616) |
|
- |
Transfer from other comprehensive income through the sale of securities at FVOCI |
|
(3,189) |
|
- |
Interest on hybrid bond |
|
(25,228) |
|
(29,857) |
Profit for the year |
|
2,116,606 |
|
1,607,761 |
|
|
1,997,573 |
|
1,577,904 |
Transfer from reserves: |
|
|
|
|
Voluntary reserve |
|
8,453,145 |
|
7,676,276 |
Regulatory reserve for loan loss |
|
- |
|
- |
|
|
8,453,145 |
|
7,676,276 |
|
|
10,450,718 |
|
9,254,180 |
Appropriation of retained earnings: |
|
|
|
|
Legal reserve |
|
211,661 |
|
160,776 |
Regulatory reserve for loan loss |
|
118,844 |
|
87,882 |
Other reserve |
|
11,139 |
|
12,377 |
Voluntary reserves |
|
9,218,899 |
|
8,453,145 |
Loss on redemption of hybrid bond |
|
175 |
|
- |
Dividends on common stock |
|
890,000 |
|
540,000 |
(Dividend per share in won: 2018 2017 |
|
|
|
|
|
|
10,450,718 |
|
9,254,180 |
Unappropriated retained earnings to be carried over to subsequent year |
|
- |
|
- |
These statements of appropriation of retained earnings were based on the separate financial statements of the Bank.
(f) Dividends
Dividends of common stock for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
|
|
2017 |
Number of issued shares outstanding |
|
1,585,615,506 |
|
|
|
1,585,615,506 |
Par value per share in won |
|
5,000 |
|
|
|
5,000 |
Dividend rate per share |
|
11.23% |
|
|
|
6.81% |
Dividend per share in won |
|
561.30 |
|
|
|
340.56 |
.
149
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for earnings per share)
(g) Dividends payout ratio
Dividends payout ratio for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Dividends |
|
890,000 |
|
540,000 |
Profit for the year (*1) |
|
2,279,049 |
|
1,712,073 |
Dividends payout ratio to profit for the year |
|
39.05% |
|
31.54% |
Profit for the year adjusted for regulatory reserve (*1)(*2) |
|
1,962,108 |
|
1,598,117 |
Dividends payout ratio to profit for the year adjusted for regulatory reserve for loan loss |
|
45.36% |
|
33.79% |
(*1) Profit for the year and profit for the year adjusted for regulatory reserve for loan loss were the amount attributable to equity holder of the Bank.
(*2) As the accounting treatment for the acquisition of ANZ retail business by Shinhan Vietnam was finalized, the amount was adjusted retrospectively.
28. |
Regulatory reserve for loan loss |
|
The Group should calculate and disclose regulatory reserve for loan loss, in accordance with the Article 29-1 and 29-2 of Regulation on Supervision of Banking Business.
(a) The regulatory reserve for loan loss as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Regulatory reserve for loan loss |
|
1,902,647 |
|
1,788,691 |
Provision for regulatory reserve for loan loss |
|
113,243 |
|
113,956 |
|
|
2,015,890 |
|
1,902,647 |
(b) Profit for the year adjusted for regulatory reserve for loan loss and earnings per share adjusted for regulatory reserve for loan loss for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Provision for regulatory reserve for loan loss (*1) |
|
316,941 |
|
113,956 |
Profit for the year adjusted for regulatory reserve for loan loss |
|
1,962,421 |
|
1,598,358 |
Earnings per share adjusted for regulatory reserve in won |
|
1,222 |
|
989 |
(*1) The amount was calculated based on the reserve for loan losses that retroactively reflects the effect of adoption of K-IFRS No. 1109.
150
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Net interest income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Interest income: |
|
|
|
|
Cash and due from banks |
|
106,633 |
|
43,583 |
Loans (*1) |
|
8,197,418 |
|
6,443,680 |
Securities at FVTPL |
|
221,569 |
|
- |
Securities at FVOCI |
|
607,771 |
|
- |
Securities at amortized cost |
|
403,707 |
|
- |
Trading assets |
|
- |
|
140,216 |
Available-for-sale financial assets |
|
- |
|
428,647 |
Held-to-maturity financial assets |
|
- |
|
334,008 |
Others |
|
59,627 |
|
59,143 |
|
|
9,596,725 |
|
7,449,277 |
Interest expense: (*2) |
|
|
|
|
Deposits |
|
(3,007,294) |
|
(2,411,147) |
Borrowings |
|
(292,048) |
|
(207,404) |
Debt securities issued |
|
(640,708) |
|
(490,006) |
Others |
|
(70,681) |
|
(22,793) |
|
|
(4,010,731) |
|
(3,131,350) |
Net interest income |
|
5,585,994 |
|
4,317,917 |
(*1) The amounts include an interest income from loans at FVTPL of W15,086 million for the year ended December 31, 2018.
(*2) There were no interest expense from financial liabilities at FVTPL for the years ended December 31, 2018 and 2017.
(b) Interest income recognized on impaired financial assets for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Interest income |
|
15,086 |
|
16,371 |
151
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Net fees and commission income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Fees and commission income: |
|
|
|
|
Credit placement fees |
|
54,672 |
|
55,124 |
Commission received as electronic charge receipt |
|
145,874 |
|
141,646 |
Brokerage fees |
|
97,928 |
|
107,773 |
Commission received as agency |
|
323,796 |
|
324,489 |
Investment banking fees |
|
71,095 |
|
53,621 |
Commission received in foreign exchange activities |
|
189,017 |
|
179,567 |
Asset management fees from trust accounts |
|
192,422 |
|
166,189 |
Guarantee fees |
|
69,729 |
|
60,825 |
Others |
|
113,219 |
|
94,640 |
|
|
1,257,752 |
|
1,183,874 |
Fees and commission expense: |
|
|
|
|
Credit-related fees |
|
(35,006) |
|
(34,105) |
Brand-related fees |
|
(34,769) |
|
(32,757) |
Service-related fees |
|
(25,748) |
|
(17,450) |
Trading and brokerage fees |
|
(9,430) |
|
(8,040) |
Commission paid in foreign exchange activities |
|
(38,722) |
|
(32,258) |
Others |
|
(77,544) |
|
(68,189) |
|
|
(221,219) |
|
(192,799) |
Net fees and commission income |
|
1,036,533 |
|
991,075 |
31. |
Dividend income |
|
Dividend income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
|
|
|
|
|
Securities at fair value through profit or loss |
|
3,905 |
|
- |
Securities at fair value through other comprehensive income |
|
11,757 |
|
- |
Trading assets |
|
- |
|
27,942 |
Available-for-sale financial assets |
|
- |
|
72,574 |
|
|
15,662 |
|
100,516 |
152
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
32. Gain and loss on financial instruments at fair value through profit or loss
Gain and loss on financial instruments at FVTPL for the year ended December 31, 2018 and net trading loss for the year ended 2017 were as follows:
|
|
2018 |
|
Financial instruments at FVTPL |
|
|
|
Debt: |
|
|
|
Gain on valuation of debt securities |
|
101,439 |
|
Gain on sale of debt securities |
|
52,642 |
|
Loss on valuation of debt securities |
|
(38,178) |
|
Loss on sale of debt securities |
|
(44,726) |
|
Others |
|
71,308 |
|
|
|
142,485 |
|
Equity: |
|
|
|
Gain on valuation of equity securities |
|
25,778 |
|
Gain on sale of equity securities |
|
31,564 |
|
Loss on valuation of equity securities |
|
(13,080) |
|
Loss on sale of equity securities |
|
(17,900) |
|
|
|
26,362 |
|
Gold/silver: |
|
|
|
Gain on valuation of gold/silver deposits |
|
19,667 |
|
Gain on sale of gold/silver deposits |
|
1,611 |
|
Loss on valuation of gold/silver deposits |
|
(15,473) |
|
Loss on sale of gold/silver deposits |
|
(217) |
|
|
|
5,588 |
|
Loans at FVTPL |
|
|
|
Gain on valuation of loans |
|
5,292 |
|
Gain on sale of loans |
|
12,181 |
|
Loss on valuation of loans |
|
(1,225) |
|
Loss on sale of loans |
|
(2,420) |
|
|
|
13,828 |
|
|
|
188,263 |
|
|
|
|
|
Derivatives |
|
|
|
Foreign currency related: |
|
|
|
Gain on valuation and transaction |
|
5,855,531 |
|
Loss on valuation and transaction |
|
(5,682,626) |
|
|
|
172,905 |
|
Interest rates related: |
|
|
|
Gain on valuation and transaction |
|
453,291 |
|
Loss on valuation and transaction |
|
(450,679) |
|
|
|
2,612 |
|
Equity related: |
|
|
|
Gain on valuation and transaction |
|
20,203 |
|
Loss on valuation and transaction |
|
(10,863) |
|
|
|
9,340 |
|
Commodity related: |
|
|
|
Gain on valuation and transaction |
|
5,532 |
|
Loss on valuation and transaction |
|
(20,141) |
|
|
|
(14,609) |
|
|
|
170,248 |
|
Net gain on financial instruments at FVTPL |
|
358,511 |
|
153
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
32. Gain and loss on financial instruments at fair value through profit or loss (continued)
Gain and loss on financial instruments at FVTPL for the year ended December 31, 2018 and net trading loss for the year ended 2017 were as follows: (continued)
|
|
|
|
|
2017 |
Trading assets and trading liabilities |
|
|
Debt: |
|
|
Gain on valuation of debt securities |
|
1,577 |
Gain on sale of debt securities |
|
15,214 |
Loss on valuation of debt securities |
|
(36,934) |
Loss on sale of debt securities |
|
(19,779) |
|
|
(39,922) |
Equity: |
|
|
Gain on valuation of equity securities |
|
6,689 |
Gain on sale of equity securities |
|
23,385 |
Loss on valuation of equity securities |
|
(7,509) |
Loss on sale of equity securities |
|
(13,056) |
|
|
9,509 |
Gold/silver: |
|
|
Gain on valuation of gold/silver deposits |
|
6,735 |
Gain on sale of gold/silver deposits |
|
2,834 |
Loss on valuation of gold/silver deposits |
|
(693) |
Loss on sale of gold/silver deposits |
|
(395) |
|
|
8,481 |
|
|
(21,932) |
Derivatives |
|
|
Foreign currency related: |
|
|
Gain on valuation and transaction |
|
7,424,307 |
Loss on valuation and transaction |
|
(7,617,205) |
|
|
(192,898) |
Interest rates related: |
|
|
Gain on valuation and transaction |
|
486,280 |
Loss on valuation and transaction |
|
(455,420) |
|
|
30,860 |
Equity related: |
|
|
Gain on valuation and transaction |
|
7,326 |
Loss on valuation and transaction |
|
(8,722) |
|
|
(1,396) |
Commodity related: |
|
|
Gain on valuation and transaction |
|
24,855 |
Loss on valuation and transaction |
|
(4,387) |
|
|
20,468 |
|
|
(142,966) |
Net trading loss |
|
(164,898) |
154
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
General and administrative expenses for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Employee benefits: |
|
|
|
|
Short and long term employee benefits |
|
1,787,842 |
|
1,751,542 |
Post-employee defined benefits |
|
98,284 |
|
130,802 |
Post-employee defined contributions |
|
154 |
|
133 |
Termination benefits |
|
90,484 |
|
224,033 |
|
|
1,976,764 |
|
2,106,510 |
Amortization: |
|
|
|
|
Depreciation |
|
118,567 |
|
120,074 |
Amortization of intangible assets |
|
43,887 |
|
38,880 |
|
|
162,454 |
|
158,954 |
Other general and administrative expenses: |
|
|
|
|
Rent |
|
283,430 |
|
256,233 |
Service contract expenses |
|
252,445 |
|
234,418 |
Taxes and dues |
|
84,094 |
|
76,187 |
Advertising |
|
74,262 |
|
60,338 |
Electronic data processing expenses |
|
58,096 |
|
56,954 |
Others |
|
170,241 |
|
168,463 |
|
|
922,568 |
|
852,953 |
|
|
3,061,786 |
|
3,118,057 |
155
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for exercise price and fair value)
(a) Stock options as of December 31, 2018 were as follows:
|
|
4th grant |
|
5th grant |
|
6th grant |
|
7th grant |
Grant date |
|
March 30, 2005 |
|
March 21, 2006 |
|
March 20, 2007 |
|
March 19, 2008 |
Exercise price in won (*1) |
|
|
|
|
|
|
|
|
Number of shares granted |
|
1,903,200 |
|
2,157,600 |
|
715,500 |
|
332,850 |
Contractual exercise period |
|
2017.05.18 ~ 2018.08.30 |
|
2017.05.18 ~ 2019.08.21 |
|
2017.05.18 ~ 2020.08.19 |
|
2017.5.18 ~ 2021.5.17 2017.9.18 ~ 2021.9.17 |
Changes in number of shares granted: |
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017 |
|
93,426 |
|
101,963 |
|
50,513 |
|
26,233 |
Exercised |
|
90,926 |
|
99,463 |
|
- |
|
- |
Outstanding at December 31, 2018 (*2) |
|
- |
|
2,500 |
|
50,513 |
|
26,233 |
|
|
|
|
|
|
|
|
|
Fair value in won (*3) |
|
- |
|
2,874 |
|
397 |
|
Expiration date 2021.5.17 : 1,441 Expiration date 2021.9.17 : 1,610 |
(*1) As of December 31, 2018, the granted shares were fully vested, and the weighted-average exercise price of 79,246 options outstanding was W52,241.
(*2) As of December 31, 2018, 4,759 rights of exercise for 7th grant were suspended, and the fair value of the current suspended grants are zero.
(*3) As of December 31, 2018, the fair value consists of intrinsic value and time value, and suspended grants were evaluated based on the intrinsic value, which is the difference between the closing price of Shinhan Financial Group and the exercise price.
(b) Equity-settled share-based payments
i) Equity-settled share-based payments as of December 31, 2018 were as follows:
|
|
Contents |
||
Grant year |
|
2010 ~ 2013 |
|
2014~ |
Type (*1) |
|
Equity-settled share-based payment |
|
Equity-settled share-based payment |
Service period |
|
Upon appointment and promotion since April 1, 2010 (Within 3 years from grant date) |
|
Upon appointment and promotion since January 1, 2014 (Within 1 year from grant date) |
Performance conditions (*2) |
|
Increase rate of stock price and achievement of target ROE |
|
Increase rate of stock price and achievement of target ROE |
(*1) The Group granted shares of Shinhan Financial Group. According to the commitment, the amount that the Group must pay to the Shinhan Financial Group was recognized in liabilities, and the difference between the amount recognized in liabilities and the compensation cost based on equity-settled share-based payments was recognized in equity.
(*2) ROE: Return on Equity
156
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for fair value and share data)
(b) Equity-settled share-based payments (continued)
ii) Granted shares and the fair value of grant date as of December 31, 2018 were as follows:
Grant date |
|
Grant shares |
|
Fair value (*1) (in won) |
|
Estimated shares (*2) |
April 1, 2010 |
|
306,400 |
|
45,150 |
|
10,471 |
January 1, 2014 |
|
109,800 |
|
47,300 |
|
2,364 |
January 1, 2015 |
|
159,000 |
|
44,500 |
|
148,882 |
March 18, 2015 |
|
16,800 |
|
42,650 |
|
12,610 |
April 10, 2015 |
|
2,300 |
|
40,350 |
|
1,591 |
May 1, 2015 |
|
2,300 |
|
46,000 |
|
1,466 |
May 22, 2015 |
|
5,300 |
|
42,800 |
|
3,097 |
May 27, 2015 |
|
2,300 |
|
40,200 |
|
1,314 |
August 1, 2015 |
|
2,300 |
|
41,900 |
|
958 |
August 24, 2015 |
|
2,300 |
|
40,250 |
|
785 |
January 1, 2016 |
|
221,900 |
|
39,000 |
|
212,366 |
January 1, 2017 |
|
221,300 |
|
45,300 |
|
187,467 |
January 23, 2017 |
|
2,700 |
|
45,600 |
|
2,421 |
March 7, 2017 |
|
17,400 |
|
46,950 |
|
13,600 |
March 24, 2017 |
|
8,100 |
|
49,000 |
|
5,961 |
June 1, 2017 |
|
2,700 |
|
49,250 |
|
1,493 |
July 5, 2017 |
|
2,700 |
|
49,550 |
|
1,251 |
July 6, 2017 |
|
2,700 |
|
49,200 |
|
1,244 |
January 1, 2018 |
|
227,500 |
|
49,400 |
|
207,228 |
|
|
1,315,800 |
|
|
|
816,569 |
(*1) The fair value per share was evaluated based on the closing price of Shinhan Financial Group at each grant date. As of December 31, 2018, the fair value per share data evaluated by Shinhan Financial Group amounted to W39,600.
(*2) Grant shares at grant date were adjusted pursuant to increase rate of stock price (33.4% to 2013, 20.0% after 2014) and achievement of target ROE (66.6% to 2013, 80.0% after 2014) based on standard quantity applicable to the days of service among specified period of service, which allows for the determination of acquired quantity at the end of the operation period.
157
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(c) Stock compensation costs calculated for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Compensation costs recorded for the year |
|
11,209 |
|
10,748 |
(d) Accrued expenses of the stock compensation costs and residual compensation costs as of December
31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Accrued expenses |
|
36,446 |
|
30,773 |
158
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Net other operating expenses for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Other operating income |
|
|
|
|
Gain on sale of assets: |
|
|
|
|
Loans at amortized cost |
|
26,872 |
|
48,759 |
Written-off loans |
|
13,119 |
|
116 |
|
|
39,991 |
|
48,875 |
Others: |
|
|
|
|
Gain on hedge activity from hedged items |
|
112,579 |
|
249,223 |
Gain on hedge activity from hedging instruments |
|
166,934 |
|
83,288 |
Reversal of allowance for acceptances and guarantee |
|
2,833 |
|
- |
Reversal of other allowance |
|
- |
|
25,439 |
Others |
|
32,656 |
|
23,197 |
|
|
315,002 |
|
381,147 |
|
|
354,993 |
|
430,022 |
Other operating expense |
|
|
|
|
Loss on sale of assets: |
|
|
|
|
Loans at amortized cost |
|
(13,991) |
|
(8,365) |
Others: |
|
|
|
|
Loss on hedge activity from hedged items |
|
(189,152) |
|
(56,133) |
Loss on hedge activity from hedging instruments |
|
(91,178) |
|
(284,124) |
Provision for allowance for acceptances and guarantee |
|
- |
|
(2,084) |
Provision for other allowance |
|
(9,086) |
|
- |
Contribution to fund |
|
(275,336) |
|
(244,431) |
Deposit insurance fee |
|
(305,860) |
|
(291,750) |
Others |
|
(155,611) |
|
(145,924) |
|
|
(1,040,214) |
|
(1,032,811) |
Net other operating expenses |
|
(685,221) |
|
(602,789) |
159
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
Net non-operating income for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Non-operating income |
|
|
|
|
Gain on sale of assets: |
|
|
|
|
Property and equipment |
|
11,987 |
|
4,430 |
Intangible assets |
|
50 |
|
514 |
Investment properties |
|
4,707 |
|
7 |
Non-current assets held for sale |
|
80 |
|
22,920 |
Assets not used for business purpose |
|
- |
|
126 |
|
|
16,824 |
|
27,997 |
Investments in associates: |
|
|
|
|
Gain from disposition |
|
12,991 |
|
7,983 |
Others: |
|
|
|
|
Rental income on investment property |
|
27,559 |
|
25,169 |
Others |
|
26,834 |
|
47,743 |
|
|
54,393 |
|
72,912 |
|
|
84,208 |
|
108,892 |
Non-operating expenses |
|
|
|
|
Loss on sale of assets: |
|
|
|
|
Property and equipment |
|
(1,687) |
|
(1,030) |
Intangible assets |
|
(21) |
|
(790) |
Investment properties |
|
(1,623) |
|
(1,325) |
Non-current assets held for sale |
|
(1,403) |
|
(349) |
Assets not used for business purpose |
|
- |
|
(11) |
|
|
(4,734) |
|
(3,505) |
Investments in associates: |
|
|
|
|
Impairment loss |
|
- |
|
(144) |
Loss on disposal |
|
(393) |
|
(79) |
|
|
(393) |
|
(223) |
Others: |
|
|
|
|
Investment properties depreciation |
|
(10,377) |
|
(10,521) |
Donations |
|
(59,902) |
|
(121,577) |
Others |
|
(26,107) |
|
(20,988) |
|
|
(96,386) |
|
(153,086) |
|
|
(101,513) |
|
(156,814) |
Net non-operating expenses |
|
(17,305) |
|
(47,922) |
160
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) The components of income tax expense of the Group for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 (*1) |
Current income tax expense |
|
588,655 |
|
394,651 |
Deferred taxes arising from changes in temporary differences |
|
293,870 |
|
56,847 |
Deferred taxes arising from utilization of expired unused tax losses |
|
6,947 |
|
(15,818) |
Tax adjustment charged or credited directly to equity |
|
(22,430) |
|
11,104 |
Income tax expense |
|
867,042 |
|
446,784 |
(*1) As the accounting treatment for the acquisition of ANZ retail business by Shinhan Vietnam was finalized, the amount was adjusted retrospectively.
(b) The income tax expense calculated by applying statutory tax rates to the Group’s taxable income differs from the actual tax expense in the consolidated statements of income for the years ended December 31, 2018 and 2017 for the following reasons:
|
|
2018 |
|
2017 (*1) |
Profit before income tax |
|
3,146,404 |
|
2,159,098 |
Statutory tax rate |
|
27.50% |
|
24.20% |
Income tax expense at statutory tax rates |
|
854,898 |
|
522,502 |
Adjustments: |
|
|
|
|
Non-taxable income |
|
(30,738) |
|
(8,143) |
Non-deductible expense |
|
9,620 |
|
10,425 |
Decrease resulting from consolidated corporate tax system |
|
(34,176) |
|
(25,756) |
Income tax paid (refund) |
|
39,986 |
|
(27,235) |
Impact of tax rate change |
|
- |
|
(46,848) |
Others |
|
27,452 |
|
21,839 |
Income tax expense |
|
867,042 |
|
446,784 |
Effective tax rate (*1) |
|
27.56% |
|
20.69% |
(*1) As the accounting treatment for the acquisition of ANZ retail business by Shinhan Vietnam was finalized, the amount was adjusted retrospectively.
161
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
37. |
Income tax expense (continued) |
|
(c) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||||
|
|
Beginning Balance (*1) |
|
Decreases |
|
Increases |
|
Ending balance |
|
Deferred tax assets (liabilities) (*2) |
Accrued income |
|
(479,275) |
|
(479,275) |
|
(644,318) |
|
(644,318) |
|
(177,187) |
Accounts receivable |
|
(60,062) |
|
(60,062) |
|
(88,065) |
|
(88,065) |
|
(24,218) |
Securities at FVTPL |
|
(49,926) |
|
(106,847) |
|
36,909 |
|
93,830 |
|
25,803 |
Securities at FVOCI |
|
829,525 |
|
401,295 |
|
(149,913) |
|
278,317 |
|
76,537 |
Investments in associates and subsidiaries(*2) |
|
(400,935) |
|
(400,935) |
|
(612,345) |
|
(612,345) |
|
(168,395) |
Deferred loan origination costs and fees |
|
(427,937) |
|
(427,937) |
|
(497,515) |
|
(497,515) |
|
(136,817) |
Revaluation and depreciation on property and equipment |
|
(449,332) |
|
(4,043) |
|
5,691 |
|
(439,598) |
|
(120,469) |
Derivative liabilities |
|
(132,214) |
|
(148,734) |
|
(195,727) |
|
(179,207) |
|
(49,282) |
Deposits |
|
101,468 |
|
15,498 |
|
15,981 |
|
101,951 |
|
28,036 |
Accrued expenses |
|
426,001 |
|
426,001 |
|
283,697 |
|
283,697 |
|
78,017 |
Defined benefit obligations |
|
1,142,677 |
|
105,667 |
|
212,447 |
|
1,249,457 |
|
343,601 |
Plan assets |
|
(1,180,248) |
|
(88,188) |
|
(175,872) |
|
(1,267,932) |
|
(348,681) |
Other provisions |
|
176,675 |
|
178,027 |
|
179,175 |
|
177,823 |
|
48,902 |
Allowance for guarantees and acceptance |
|
63,357 |
|
63,357 |
|
105,542 |
|
105,542 |
|
29,024 |
Allowance for advanced depreciation |
|
(179,393) |
|
(2,256) |
|
- |
|
(177,137) |
|
(48,713) |
Allowance for expensing depreciation |
|
(1,923) |
|
(232) |
|
- |
|
(1,691) |
|
(465) |
Deemed dividends |
|
19,171 |
|
19,171 |
|
- |
|
- |
|
- |
Net change in fair value of securities at FVOCI |
|
(7,233) |
|
(7,233) |
|
21,341 |
|
21,341 |
|
5,869 |
Donation payables |
|
39,429 |
|
39,429 |
|
78,750 |
|
78,750 |
|
21,656 |
Allowance and bad debt |
|
463,135 |
|
463,135 |
|
162,884 |
|
162,884 |
|
45,903 |
Compensation expenses associated with stock option |
|
437 |
|
359 |
|
100 |
|
178 |
|
49 |
Fictitious dividends |
|
4,060 |
|
- |
|
- |
|
4,060 |
|
1,116 |
Others |
|
195,341 |
|
318,316 |
|
271,361 |
|
148,386 |
|
35,161 |
|
|
107,264 |
|
318,979 |
|
(989,877) |
|
(1,201,592) |
|
(334,553) |
Expired unused tax losses |
||||||||||
Appropriation by extinctive |
|
1,281,039 |
|
25,262 |
|
- |
|
1,255,777 |
|
345,339 |
Temporary differences not qualified for deferred tax assets or liabilities: |
||||||||||
Investments in associates and Subsidiaries (*3) |
|
(470,668) |
|
- |
|
(214,788) |
|
(685,456) |
|
(188,500) |
|
|
1, 858,971 |
|
344,241 |
|
(775,089) |
|
739,641 |
|
199,286 |
(*1) The balances ware restated in accordance with K-IFRS No.1109 and K-IFRS No.1115.
(*2) Deferred tax assets of overseas subsidiaries have decreased by W29 million due to foreign currency exchange rate changes.
(*3) The effect of income taxes by the valuation of equity method was reasonably estimated based on the both plausibility and the applicable amount of deferred income tax belonging to each associate investee.
162
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
37.Income tax expense (continued)
(c) Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2018 and 2017 were as follows: (continued)
|
|
2017 |
||||||||
|
|
Beginning balance |
|
Decreases |
|
Increases |
|
Ending balance |
|
Deferred tax assets (liabilities) (*1) |
Accrued income |
|
(343,790) |
|
(343,790) |
|
(479,275) |
|
(479,275) |
|
(131,801) |
Accounts receivable |
|
(36,089) |
|
(36,089) |
|
(60,062) |
|
(60,062) |
|
(16,517) |
Trading assets |
|
(56,431) |
|
(59,629) |
|
(53,124) |
|
(49,926) |
|
(13,730) |
Available-for-sale financial assets |
|
789,164 |
|
463,300 |
|
503,661 |
|
829,525 |
|
228,119 |
Investments in associates (*2) |
|
(217,184) |
|
(217,184) |
|
(400,935) |
|
(400,935) |
|
(110,257) |
Deferred loan origination costs and fees |
|
(378,933) |
|
(378,933) |
|
(427,937) |
|
(427,937) |
|
(117,683) |
Revaluation and depreciation on property and equipment |
|
(458,788) |
|
(5,717) |
|
3,739 |
|
(449,332) |
|
(123,146) |
Derivative liabilities |
|
(141,875) |
|
(152,868) |
|
(143,207) |
|
(132,214) |
|
(36,359) |
Deposits |
|
75,051 |
|
17,938 |
|
44,355 |
|
101,468 |
|
27,904 |
Accrued expenses |
|
299,584 |
|
300,935 |
|
427,352 |
|
426,001 |
|
117,150 |
Defined benefit obligations |
|
1,133,301 |
|
54,254 |
|
63,630 |
|
1,142,677 |
|
314,236 |
Plan assets |
|
(988,597) |
|
(54,253) |
|
(245,904) |
|
(1,180,248) |
|
(324,568) |
Other provisions |
|
228,432 |
|
228,432 |
|
178,180 |
|
178,180 |
|
49,099 |
Allowance for guarantees and acceptance |
|
78,499 |
|
78,499 |
|
79,791 |
|
79,791 |
|
21,942 |
Allowance for advanced depreciation |
|
(179,438) |
|
(45) |
|
- |
|
(179,393) |
|
(49,333) |
Allowance for expensing depreciation |
|
(2,155) |
|
(232) |
|
- |
|
(1,923) |
|
(529) |
Deemed dividends |
|
5,513 |
|
- |
|
13,658 |
|
19,171 |
|
5,272 |
Net change in fair value of available-for-sale financial assets |
|
(190,018) |
|
(190,018) |
|
(58,996) |
|
(58,996) |
|
(12,156) |
Donation payables |
|
35,717 |
|
35,717 |
|
39,429 |
|
39,429 |
|
10,843 |
Allowance and bad debt |
|
318,993 |
|
318,993 |
|
70,748 |
|
70,748 |
|
23,533 |
Compensation expenses associated with stock option |
|
2,344 |
|
2,266 |
|
359 |
|
437 |
|
120 |
Fictitious dividends |
|
4,026 |
|
19 |
|
53 |
|
4,060 |
|
1,117 |
Others |
|
154,613 |
|
(40,242) |
|
486 |
|
195,341 |
|
50,371 |
|
|
131,939 |
|
21,353 |
|
(443,999) |
|
(333,413) |
|
(86,373) |
Expired unused tax losses |
||||||||||
Appropriation by extinctive prescription of deposit |
|
1,390,362 |
|
109,323 |
|
- |
|
1,281,039 |
|
352,286 |
Temporary differences not qualified for deferred tax assets or liabilities: |
||||||||||
Investments in associates (*2) |
|
(280,957) |
|
- |
|
(189,711) |
|
(470,668) |
|
(129,436) |
|
|
1,803,258 |
|
130,676 |
|
(254,288) |
|
1,418,294 |
|
395,349 |
(*1) Deferred tax assets of overseas subsidiaries have increased by W1,653 million due to foreign currency exchange rate changes.
(*2) The effect of income taxes by the valuation of equity method was reasonably estimated based on the both plausibility and the applicable amount of deferred income tax belonging to each associate investee.
163
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(d) Changes in tax effects that were directly charged or credited to equity for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 (*1) |
|
|
|||||
|
|
Amount before tax |
|
Tax effects |
|
Amount before tax |
|
Tax effects |
|
Changes in tax effects |
|
Net change in fair value of securities at FVOCI |
|
(21,341) |
|
223 |
|
(185,414) |
|
60,874 |
|
(60,651) |
|
Share of other comprehensive income (loss) of associates |
|
4,923 |
|
(64) |
|
6,749 |
|
(163) |
|
99 |
|
Foreign currency translation differences for foreign operations |
|
(296,622) |
|
(16,381) |
|
(311,258) |
|
(25,905) |
|
9,524 |
|
Remeasurements of defined benefit plans |
|
(382,774) |
|
105,339 |
|
(285,698) |
|
78,662 |
|
26,677 |
|
Other (stock option) |
|
6,690 |
|
(1,836) |
|
2,899 |
|
(3,757) |
|
1,921 |
|
|
|
(689,124) |
|
87,281 |
|
(772,722) |
|
109,711 |
|
(22,430) |
(*1) The balances ware restated in accordance with K-IFRS No.1109 and K-IFRS No.1115.
|
|
December 31, 2017 |
|
December 31, 2016 |
|
|
|||||
|
|
Amount before tax |
|
Tax effects |
|
Amount before tax |
|
Tax effects |
|
Changes in tax effects |
|
Net change in fair value of available-for-sale financial assets |
|
58,996 |
|
(12,155) |
|
190,018 |
|
(50,194) |
|
38,039 |
|
Share of other comprehensive income (loss) of associates |
|
6,749 |
|
(163) |
|
16,392 |
|
191 |
|
(354) |
|
Foreign currency translation differences for foreign operations |
|
(311,258) |
|
(25,905) |
|
(140,918) |
|
(11,018) |
|
(14,887) |
|
Remeasurements of defined benefit plans |
|
(285,698) |
|
78,662 |
|
(370,692) |
|
89,776 |
|
(11,114) |
|
Other (stock option) |
|
1,079 |
|
(297) |
|
(1,170) |
|
283 |
|
(580) |
|
|
|
(530,132) |
|
40,142 |
|
(306,370) |
|
29,038 |
|
11,104 |
(e) The current tax assets and liabilities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Current tax assets: |
|
|
|
|
Prepaid income taxes |
|
43,026 |
|
24,674 |
|
|
|
|
|
Current tax liabilities: |
|
|
|
|
Payable due to consolidated tax system |
|
265,789 |
|
179,364 |
Income taxes payables |
|
53,639 |
|
31,580 |
|
|
319,428 |
|
210,944 |
164
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won, except for earnings per share)
(f) The deferred tax assets (liabilities) and current tax assets (liabilities) presented on a gross basis prior to any offsetting as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Deferred tax assets |
|
1,713,266 |
|
2,138,000 |
Deferred tax liabilities |
|
1,513,980 |
|
1,742,650 |
Current tax assets |
|
236,015 |
|
240,818 |
Current tax liabilities |
|
512,418 |
|
427,357 |
38. |
Earnings per share |
|
(a) Earnings per share for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Profit for the year |
|
2,279,049 |
|
1,712,073 |
Less: dividends on hybrid bonds |
|
(25,228) |
|
(29,857) |
Profit available for common stock |
|
2,253,821 |
|
1,682,216 |
Weighted average number of common shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
Basic and diluted earnings per share in won |
|
1,421 |
|
1,061 |
Considering that the Bank had no dilutive potential common shares and that stock options were not included in the calculation of diluted earnings per share because they were anti-dilutive for the reporting periods presented, diluted earnings per share equal to basic earnings per share for the years ended December 31, 2018 and 2017.
(b) Weighted average number of common shares outstanding as of December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Number of common shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
Weight |
|
365/365 |
|
365/365 |
Weighted average number of common shares outstanding |
|
1,585,615,506 shares |
|
1,585,615,506 shares |
165
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Guarantees, acceptances and credit commitments as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Guarantees: |
|
|
|
|
Guarantee outstanding |
|
9,415,888 |
|
7,590,785 |
Contingent guarantees |
|
3,984,667 |
|
3,254,846 |
|
|
13,400,555 |
|
10,845,631 |
Commitments to extend credit: |
|
|
|
|
Loan commitments in Korean won |
|
69,126,234 |
|
53,338,916 |
Loan commitments in foreign currencies |
|
19,967,126 |
|
18,992,870 |
ABS and ABCP purchase commitments |
|
2,083,522 |
|
1,950,543 |
Others |
|
1,907,432 |
|
1,456,976 |
|
|
93,084,314 |
|
75,739,305 |
Endorsed bills: |
|
|
|
|
Secured endorsed bills |
|
37,667 |
|
85,456 |
Unsecured endorsed bills |
|
7,758,242 |
|
7,810,788 |
|
|
7,795,909 |
|
7,896,244 |
Loans sold with repurchase agreement |
|
2,099 |
|
2,099 |
(b) Provision for acceptances and guarantees
Allowance for acceptances and guarantees, as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Guarantees outstanding |
|
9,415,888 |
|
7,590,785 |
Contingent guarantees |
|
3,984,667 |
|
3,254,846 |
ABS and ABCP purchase commitments |
|
2,083,522 |
|
1,950,543 |
Secured endorsed bills |
|
37,667 |
|
85,456 |
|
|
15,521,744 |
|
12,881,630 |
Allowance for acceptances and guarantees |
|
105,543 |
|
79,791 |
Ratio (%) |
|
0.68 |
|
0.62 |
166
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
39.Commitments and contingencies (continued)
(c) Legal contingencies
Pending litigations in which the Group was involved as a defendant as of December 31, 2018 were as follows:
Case |
|
Number of claim |
|
Claim amount |
|
Description |
|
Status |
Damage claim |
|
1 |
|
6,893 |
|
According to the asset custody contract, the plaintiff is liable for damages caused by a fire in the property of the real estate investment company in which the Bank is holding assets. |
|
In 2015 and 2017, the plaintiffs prevailed, but the first and second decisions were different and in progress of third order. |
Deposit return |
|
1 |
|
4,606 |
|
The plaintiff alleges that the plaintiff has canceled the money received in his account without his consent, and requested the plaintiff to pay the deposit equivalent to the amount. |
|
Since 2017, the Bank won the first and second trial and the third trial was ongoing as of December 31, 2018. |
Indemnification cost |
|
1 |
|
4,112 |
|
According to the asset custody contract, the plaintiffs filed a lawsuit against the Bank, claiming for a fire damage occurred on a property of the real estate investment company for which the Bank provides the custodian service. |
|
In 2017, the Bank has lost on the first order and in progress for second order. |
Others |
|
107 |
|
51,111 |
|
It includes various cases, such as compensation for loss claim. |
|
|
|
|
110 |
|
66,722 |
|
|
|
As of December 31, 2018, the Group recorded a provision of W5,773 million for litigation for certain of the above lawsuits. Additional losses may be incurred from these legal actions besides the current provision established by the Group, but the amount of loss is not expected to have a material adverse effect on the Group’s consolidated financial statements.
167
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
39. Commitments and contingencies (continued)
(d) Maturity structure of minimum lease payments
The future minimum lease payments to be paid under non-cancellable operating leases as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Within 1 year |
|
1~5 years |
|
Over 5 years |
|
Total |
Minimum lease payments |
|
175,281 |
|
325,479 |
|
17,756 |
|
518,516 |
|
|
December 31, 2017 |
||||||
|
|
Within 1 year |
|
1~5 years |
|
Over 5 years |
|
Total |
Minimum lease payments |
|
239,105 |
|
320,861 |
|
32,739 |
|
592,705 |
168
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Cash and cash equivalents reported in the accompanying consolidated statements of cash flows as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Cash |
|
2,568,913 |
|
1,749,897 |
Reserve deposits |
|
2,094,612 |
|
8,503,968 |
Other deposits |
|
8,486,752 |
|
8,408,457 |
Cash and due from banks |
|
13,150,277 |
|
18,662,322 |
Less: Restricted due from banks |
|
(3,888,144) |
|
(11,103,030) |
Less: Due with original maturities of more than three months |
|
(2,557,180) |
|
(2,228,189) |
|
|
6,704,953 |
|
5,331,103 |
(b) Significant non-cash activities for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Dividend payable of hybrid bonds |
|
2,597 |
|
1,367 |
Debt-equity swap |
|
28,759 |
|
32,530 |
Accounts payable for purchase of property and equipment |
|
897 |
|
- |
Accounts payable for purchase of intangible assets |
|
1,047 |
|
5,061 |
(c) Changes in liabilities resulting from financing activities for the years ended December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||
|
|
Borrowings |
|
|
Debt securities issued |
|
Total |
Beginning balance |
|
14,617,562 |
|
|
25,460,427 |
|
40,077,989 |
Changes in cash flows |
|
1,094,960 |
|
|
6,447,699 |
|
7,542,659 |
Amortization |
|
(1,722) |
|
|
(76,675) |
|
(78,397) |
Net foreign currencies transaction gain |
|
(459,236) |
|
|
30,211 |
|
(429,025) |
Changes in fair value of hedged items |
|
903,257 |
|
|
37,604 |
|
940,861 |
Ending balance |
|
16,154,821 |
|
|
31,899,266 |
|
48,054,087 |
|
|
December 31, 2017 |
|||||
|
|
Borrowings |
|
|
Debt securities issued |
|
Total |
Beginning balance |
|
14,314,329 |
|
|
21,578,430 |
|
35,892,759 |
Changes in cash flows |
|
958,927 |
|
|
4,470,201 |
|
5,429,128 |
Amortization |
|
802 |
|
|
3,196 |
|
3,998 |
Net foreign currencies transaction gain |
|
(656,496) |
|
|
(448,744) |
|
(1,105,240) |
Changes in fair value of hedged items |
|
- |
|
|
(142,656) |
|
(142,656) |
Ending balance |
|
14,617,562 |
|
|
25,460,427 |
|
40,077,989 |
169
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows:
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
||||||
The parent company |
|
|
|
|
|
|
||||||
Shinhan Financial Group |
|
Other assets |
|
- |
|
934 |
||||||
|
|
Deposits |
|
24 |
|
3 |
||||||
|
|
Other liabilities |
|
309,355 |
|
222,867 |
||||||
Entities under common control |
|
|
|
|
|
|
||||||
Shinhan Card Co., Ltd. |
|
Derivative assets |
|
5,100 |
|
785 |
||||||
|
|
Other assets |
|
1,338 |
|
2,248 |
||||||
|
|
Deposits |
|
23,522 |
|
7,263 |
||||||
|
|
Derivative liabilities |
|
269 |
|
2,539 |
||||||
|
|
Provisions |
|
180 |
|
47 |
||||||
|
|
Other liabilities |
|
22,702 |
|
23,106 |
||||||
Shinhan Investment Corp. |
|
Cash and due from banks |
|
6,281 |
|
3,461 |
||||||
|
|
Derivative assets |
|
13,095 |
|
3,954 |
||||||
|
|
Loans |
|
22,914 |
|
14,984 |
||||||
|
|
Allowance for loan loss |
|
(19) |
|
(4) |
||||||
|
|
Other assets |
|
19,972 |
|
18,240 |
||||||
|
|
Deposits |
|
202,561 |
|
272,064 |
||||||
|
|
Derivative liabilities |
|
1,981 |
|
39,302 |
||||||
|
|
Provisions |
|
67 |
|
34 |
||||||
|
|
Other liabilities |
|
40,338 |
|
39,010 |
||||||
Shinhan Life Insurance |
|
Derivative assets |
|
17,302 |
|
1,558 |
||||||
|
|
Other assets |
|
3 |
|
11 |
||||||
|
|
Deposits |
|
14,335 |
|
6,379 |
||||||
|
|
Derivative liabilities |
|
7,771 |
|
44,928 |
||||||
|
|
Provisions |
|
16 |
|
4 |
||||||
|
|
Other liabilities |
|
14,674 |
|
15,184 |
||||||
Shinhan Capital Co., Ltd. |
|
Deposits |
|
1,504 |
|
754 |
||||||
|
|
Borrowings |
|
12,000 |
|
10,000 |
||||||
|
|
Provisions |
|
14 |
|
14 |
||||||
|
|
Other liabilities |
|
13,611 |
|
12,799 |
||||||
Jeju Bank |
|
Loans |
|
1,621 |
|
2,658 |
||||||
|
|
Allowance for loan loss |
|
(2) |
|
(1) |
||||||
|
|
Other assets |
|
1 |
|
1 |
||||||
|
|
Deposits |
|
11,045 |
|
22,376 |
||||||
|
|
Other liabilities |
|
2,446 |
|
2,475 |
||||||
Shinhan Credit Information |
|
Deposits |
|
3,793 |
|
6,059 |
||||||
Co., Ltd. |
|
Other liabilities |
|
1,599 |
|
1,719 |
||||||
Shinhan Alternative Investment |
|
Deposits |
|
5,405 |
|
168 |
||||||
Management, Inc. |
|
Other liabilities |
|
23 |
|
- |
170
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
Entities under common control (continued) |
|
|
|
|
||
Shinhan BNP Paribas AMC |
|
Deposits |
|
121,976 |
|
117,149 |
|
|
Other liabilities |
|
1,673 |
|
1,512 |
Shinhan DS |
|
Deposits |
|
815 |
|
11,135 |
|
|
Other liabilities |
|
6,567 |
|
6,544 |
Shinhan Savings Bank |
|
Other liabilities |
|
8,987 |
|
8,987 |
Shinhan Aitas |
|
Deposits |
|
14,604 |
|
9,381 |
|
|
Other liabilities |
|
60 |
|
41 |
Shinhan REITs Management |
|
Deposits |
|
79 |
|
71 |
Investments in associates and entities under common control |
||||||
BNP Paribas Cardif |
|
Other assets |
|
- |
|
9,760 |
Life Insurance Co., Ltd. |
|
Deposits |
|
444 |
|
446 |
|
|
Provisions |
|
- |
|
2 |
BNP Paribas Cardif General Insurance |
|
Deposits |
|
157 |
|
221 |
Dream High Fund III |
|
Deposits |
|
4 |
|
3 |
Midas Dong-A Snowball Venture Fund |
|
Deposits |
|
159 |
|
220 |
IBKS-Shinhan Creative Economy New Technology Fund |
|
Deposits |
|
- |
|
78 |
JAEYOUNG SOLUTEC Co., Ltd. |
|
Loans |
|
- |
|
14,847 |
(*1) |
|
Allowance for loan loss |
|
- |
|
(123) |
|
|
Deposits |
|
- |
|
2,659 |
|
|
Provisions |
|
- |
|
4 |
Partners 4th Growth Investment Fund |
|
Deposits |
|
1,855 |
|
2,076 |
Credian Health Care Private Equity Fund II |
|
Deposits |
|
45 |
|
26 |
Snowball Venture Fund II |
|
Deposits |
|
354 |
|
239 |
IBKS-Shinhan Creative Economy New Technology Fund II |
|
Deposits |
|
672 |
|
76 |
YIUM The 3rd Private Investment Joint Stock Company |
|
Deposits |
|
49 |
|
65 |
Branbuil Co., Ltd |
|
Deposits |
|
- |
|
55 |
KTB Newlake Global |
|
Loans |
|
151 |
|
- |
Healthcare PEF |
|
Allowance for loan loss |
|
(1) |
|
- |
|
|
Deposits |
|
- |
|
465 |
|
|
Provisions |
|
- |
|
13 |
Taihan Industrial System Co., Ltd |
|
Deposits |
|
85 |
|
100 |
ICSF (The Korea’s Information Center for Savings & Finance) |
|
Deposits |
|
4 |
|
4 |
171
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Significant balances with the related parties as of December 31, 2018 and 2017 were as follows: (continued)
Related party |
|
Account |
|
December 31, 2018 |
|
December 31, 2017 |
Investments in associates and entities under common control (continued) |
|
|
||||
Key management personnel |
|
|
|
|
|
|
|
|
Loans |
|
2,783 |
|
2,828 |
|
|
Allowance for loan loss |
|
(1) |
|
(3) |
|
|
Provisions |
|
1 |
|
1 |
(*1) These investees were sold and excluded from associates during the year ended December 31, 2018.
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows:
Related Party |
|
Account |
|
2018 |
|
2017 |
The parent company |
|
|
|
|
||
Shinhan Financial Group |
|
Other operating income |
|
1,392 |
|
2,228 |
|
|
Interest expense |
|
(268) |
|
(228) |
|
|
Fees and commission expense |
|
(31,608) |
|
(29,779) |
Entities under common control |
||||||
Shinhan Card Co., Ltd. |
|
Interest income |
|
3,302 |
|
1,868 |
|
|
Fees and commission income |
|
198,589 |
|
187,385 |
|
|
Gain related to derivatives |
|
8,975 |
|
2,694 |
|
|
Other operating income |
|
1,815 |
|
2,092 |
|
|
Interest expense |
|
(256) |
|
(528) |
|
|
Fees and commission expense |
|
(180) |
|
(177) |
|
|
Loss related to derivatives |
|
(371) |
|
(5,111) |
|
|
Other operating expense |
|
(3,561) |
|
(3,064) |
Shinhan Investment Corp. |
|
Interest income |
|
950 |
|
466 |
|
|
Fees and commission income |
|
7,362 |
|
5,167 |
|
|
Gain related to derivatives |
|
45,592 |
|
10,037 |
|
|
Other operating income |
|
4,484 |
|
4,637 |
|
|
Interest expense |
|
(2,247) |
|
(1,499) |
|
|
Loss related to derivatives |
|
(14,150) |
|
(98,769) |
|
|
Provision for Allowance |
|
(15) |
|
(3) |
|
|
Other operating expense |
|
(286) |
|
(785) |
Shinhan Life Insurance |
|
Interest income |
|
49 |
|
47 |
|
|
Fees and commission income |
|
11,286 |
|
7,513 |
|
|
Gain related to derivatives |
|
51,311 |
|
7,117 |
|
|
Other operating income |
|
695 |
|
1,470 |
|
|
Interest expense |
|
(278) |
|
(264) |
|
|
Loss related to derivatives |
|
(8,272) |
|
(109,882) |
|
|
Other operating expense |
|
(641) |
|
(843) |
172
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41.Related party transactions (continued)
(b) Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows: (continued)
Related Party |
|
Account |
|
2018 |
|
2017 |
Entities under common control (continued) |
|
|
|
|
||
Shinhan Capital Co., Ltd. |
|
Other operating income |
|
972 |
|
314 |
|
|
Interest expense |
|
(852) |
|
(979) |
|
|
Fees and commission expense |
|
- |
|
(10) |
|
|
Other operating expense |
|
- |
|
(4) |
Jeju Bank |
|
Interest income |
|
25 |
|
3 |
|
|
Other operating income |
|
52 |
|
44 |
|
|
Interest expense |
|
(79) |
|
(45) |
|
|
Reversal of allowance |
|
(1) |
|
- |
Shinhan Credit Information |
|
Fees and commission income |
|
3 |
|
3 |
Co., Ltd. |
|
Other operating income |
|
83 |
|
76 |
|
|
Interest expense |
|
(84) |
|
(94) |
|
|
Fees and commission expense |
|
(5,095) |
|
(4,645) |
Shinhan Alternative Investment Management, Inc. |
|
Interest expense |
|
(37) |
|
- |
Shinhan BNP Paribas AMC |
|
Fees and commission income |
|
44 |
|
- |
|
|
Other operating income |
|
9 |
|
52 |
|
|
Interest expense |
|
(2,157) |
|
(1,187) |
|
|
Reversal of allowance |
|
- |
|
16 |
|
|
Fees and commission expense |
|
(2,158) |
|
(2,250) |
Shinhan DS |
|
Other operating income |
|
175 |
|
134 |
|
|
Interest expense |
|
(146) |
|
(168) |
|
|
Other operating expense |
|
(41,096) |
|
(34,629) |
Shinhan Savings Bank |
|
Fees and commission income |
|
869 |
|
796 |
|
|
Other operating income |
|
205 |
|
175 |
|
|
Interest expense |
|
(152) |
|
(120) |
Shinhan Aitas |
|
Fees and commission income |
|
31 |
|
31 |
|
|
Other operating income |
|
6 |
|
5 |
|
|
Interest expense |
|
(70) |
|
(71) |
Shinhan BNPP Global Multi Asset Security Trust |
|
Fees and commission income |
|
- |
|
5 |
Shinhan REITs Management |
|
Interest expense |
|
(132) |
|
- |
173
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41.Related party transactions (continued)
(b) |
Significant transactions with the related parties for the years ended December 31, 2018 and 2017 were as follows: (continued) |
|
Related Party |
|
Account |
|
2018 |
|
2017 |
Investments in associates and entities under common control (continued) |
||||||
BNP Paribas Cardif Life |
|
Fees and commission income |
|
2,418 |
|
3,246 |
Insurance Co., Ltd. |
|
Other operating expense |
|
- |
|
(1) |
BNP Paribas Cardif General Insurance |
|
Fees and commission income |
|
5 |
|
2 |
IBKS-Shinhan Creative Economy New Technology Fund |
|
Interest expense |
|
- |
|
(2) |
Midas Dong-A Snowball Venture Fund |
|
Interest expense |
|
(2) |
|
(3) |
JAEYOUNG SOLUTEC |
|
Interest income |
|
347 |
|
654 |
CO.,LTD.(*1) |
|
Fees and commission income |
|
1 |
|
1 |
|
|
Other operating income |
|
3 |
|
3 |
|
|
provision for allowance |
|
(2) |
|
(55) |
|
|
Interest expense |
|
(1) |
|
(4) |
Partners 4th Growth Investment Fund |
|
Interest expense |
|
(19) |
|
(16) |
Shinhan-Albatross Technology |
|
|
|
|
|
|
Investment Fund |
|
Interest expense |
|
- |
|
(21) |
KTB Newlake Global |
|
|
|
|
|
|
Healthcare PEF |
|
Interest income |
|
2 |
|
10 |
Snowball Venture Fund II |
|
Interest expense |
|
(2) |
|
- |
Branbuil CO.,LTD. |
|
Fees and commission income |
|
- |
|
2 |
Taihan Industrial System Co., Ltd. |
|
Fees and commission income |
|
1 |
|
2 |
Hyungje Art Printing |
|
Interest income |
|
13 |
|
- |
|
|
Fees and commission income |
|
1 |
|
- |
|
|
|
|
|
|
|
Key management personnel |
|
|
|
|
|
|
|
|
Interest income |
|
94 |
|
51 |
(*1) |
These investees were sold and excluded from associates during the year ended December 31, 2018. |
174
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
41.Related party transactions (continued)
(c) Details of transactions with key management for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Short and long term employee benefits |
|
14,175 |
|
8,916 |
Post-employment benefits |
|
305 |
|
298 |
Share-based payment transactions |
|
2,393 |
|
4,655 |
|
|
16,873 |
|
13,869 |
(d) The guarantees provided between the related parties as of December 31, 2018 and 2017 were as follows:
|
|
Amount of guarantees |
||||
Guaranteed parties |
|
December 31, 2018 |
|
December 31, 2017 |
|
Account |
Shinhan Investment Corp. |
|
214,955 |
|
218,166 |
|
Unused credit |
Shinhan Card Co., Ltd. |
|
500,000 |
|
500,000 |
|
Unused credit |
Shinhan Life Insurance |
|
50,000 |
|
50,000 |
|
Unused credit |
Shinhan Capital Co., Ltd. |
|
70,000 |
|
70,000 |
|
Unused credit |
Shinhan BNP Paribas AMC |
|
228,216 |
|
53,484 |
|
Security underwriting commitment |
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
10,000 |
|
10,000 |
|
Unused credit |
Shinhan Private Equity, Inc. |
|
3,600 |
|
- |
|
Security underwriting commitment |
Neoplux Technology Valuation Investment Fund |
|
- |
|
6,000 |
|
Security underwriting commitment |
JAEYOUNG SOLUTEC |
|
- |
|
109 |
|
Unused credit |
CO., LTD. (*1) |
|
- |
|
429 |
|
Import letter of credit |
KTB Newlake Global Healthcare PEF |
|
849 |
|
700 |
|
Unused credit |
|
|
1,077,620 |
|
908,888 |
|
|
(*1) This investee was sold and excluded from associates during the year ended December 31, 2018.
(e) Details of collaterals provided to the related parties as of December 31, 2018 and 2017 were as follows:
|
|
Related party |
|
Pledged assets |
|
December 31, 2018 |
|
December 31, 2017 |
||||
|
|
|
|
Carrying amounts |
|
Amounts collateralized |
|
Carrying amounts |
|
Amounts collateralized |
||
Entities under common control |
|
Shinhan Life Insurance |
|
Securities |
|
10,230 |
|
10,230 |
|
10,271 |
|
10,271 |
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
10,230 |
|
10,230 |
|
10,271 |
|
10,271 |
175
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(f) Details of collaterals provided by the related parties as of December 31, 2018 and 2017 were as follows:
|
|
Related party |
|
Pledged assets |
|
December 31, 2018 |
|
December 31, 2017 |
Entities under |
|
Shinhan Investment Corp. |
|
Deposits |
|
135,700 |
|
135,700 |
common control |
|
|
|
Real estate |
|
91,974 |
|
91,974 |
|
|
Jeju Bank |
|
Government bonds |
|
20,000 |
|
20,000 |
|
|
Shinhan Life Insurance |
|
Government bonds |
|
6,000 |
|
7,170 |
|
|
Shinhan Credit Information Co., Ltd. |
|
Deposits |
|
180 |
|
180 |
Investments in associates |
|
BNP Paribas Cardif Life Insurance Co., Ltd. |
|
Government bonds |
|
12,000 |
|
11,666 |
|
|
JAEYOUNG SOLUTEC. |
|
Real estate |
|
- |
|
20,814 |
|
|
CO.,LTD. (*1) |
|
Korea Trade Insurance corporation guarantee |
|
- |
|
7,037 |
|
|
|
|
|
|
265,854 |
|
294,541 |
(*1) This investee was sold and excluded from associates during the year ended December 31, 2018.
(g) Details of major lease and collection of related parties as of December 31, 2018 are as follows.
|
|
Related party |
|
Beginning(*1) |
|
Rental |
|
Recovery |
|
Ending (*1) |
Entities under common control
|
|
Jeju Bank |
|
2,658 |
|
3,223 |
|
(4,260) |
|
1,621 |
|
Shinhan Financial Investment |
|
14,984 |
|
39,307 |
|
(31,377) |
|
22,914 |
|
Investments in associates and entities under common control |
|
KTB Newlake Global Healthcare PEF |
|
- |
|
151 |
|
- |
|
151 |
|
|
|
|
17,642 |
|
42,681 |
|
(35,637) |
|
24,686 |
(*1) The amount is before deducting allowance for bad debts.
(h) Details of significant redemption of borrowings of related parties as of December 31, 2018 are as follows:
|
|
Related party |
|
|
Beginning balance |
|
Rental |
|
Recovery |
|
Ending balance |
Entities under common control |
|
Shinhan Capital Co., Ltd. |
|
|
10,000 |
|
3,000 |
|
(1,000) |
|
12,000 |
176
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Condensed statements of financial positions for the Bank and its subsidiaries as of December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
||||||||
|
|
Total assets |
|
Total liabilities |
|
Total equity |
|
Total assets |
|
Total liabilities |
|
Total equity |
Shinhan Bank |
|
323,875,533 |
|
300,304,150 |
|
23,571,383 |
|
302,936,552 |
|
280,748,048 |
|
22,188,504 |
Shinhan America |
|
1,584,978 |
|
1,358,153 |
|
226,825 |
|
1,431,268 |
|
1,263,477 |
|
167,791 |
Shinhan Canada |
|
607,970 |
|
541,887 |
|
66,083 |
|
586,627 |
|
520,390 |
|
66,237 |
Shinhan Europe |
|
604,022 |
|
522,862 |
|
81,160 |
|
603,810 |
|
522,745 |
|
81,065 |
Shinhan China |
|
5,448,655 |
|
5,031,704 |
|
416,951 |
|
5,192,164 |
|
4,822,109 |
|
370,055 |
Shinhan Asia (*2) |
|
115,360 |
|
- |
|
115,360 |
|
546,377 |
|
339,948 |
|
206,429 |
Shinhan Kazakhstan |
|
122,927 |
|
83,431 |
|
39,496 |
|
97,596 |
|
55,896 |
|
41,700 |
Shinhan Cambodia |
|
282,807 |
|
167,372 |
|
115,435 |
|
202,162 |
|
129,095 |
|
73,067 |
Shinhan Japan |
|
7,704,586 |
|
7,126,117 |
|
578,469 |
|
6,163,835 |
|
5,728,776 |
|
435,059 |
Shinhan Vietnam (*1)(*3) |
|
4,101,845 |
|
3,489,835 |
|
612,010 |
|
3,676,216 |
|
3,140,045 |
|
535,171 |
Shinhan Mexico |
|
118,821 |
|
35,253 |
|
83,568 |
|
80,425 |
|
485 |
|
79,940 |
Shinhan Indonesia (*1) |
|
971,954 |
|
613,185 |
|
358,769 |
|
683,316 |
|
324,426 |
|
358,890 |
Structured entities |
|
8,111,107 |
|
8,108,193 |
|
2,914 |
|
7,577,627 |
|
7,567,521 |
|
10,106 |
(*1) Fair value adjustments at the time of business combination were applied.
(*2) As of November 27, 2018, Shinhan Asia has transferred its assets and liabilities amounting to W727,206 million and W727,194, respectively, to the Shinhan Bank Hong Kong branch. This corresponds to a business transfer between entities under common control, and the Bank accounts for this kind of business transfer transactions based on the carrying amount. As of December 31, 2018, the assets of Shinhan Asia were W115,360 million and liquidation procedures are in progress.
(*3) As the accounting treatment for the acquisition of ANZ retail business by Shinhan Vietnam was completed, the amount was adjusted retrospectively.
177
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Condensed statements of comprehensive income for the Bank and its subsidiaries for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
||||||||
|
|
Operating income |
|
Profit (loss) for the year |
|
Total comprehensive income (loss) |
|
Operating income |
|
Profit (loss) for the year |
|
Total comprehensive income (loss) |
Shinhan Bank |
|
18,611,228 |
|
2,116,606 |
|
2,179,652 |
|
20,380,963 |
|
1,607,761 |
|
1,536,857 |
Shinhan America |
|
69,149 |
|
(2,547) |
|
4,046 |
|
64,897 |
|
9,472 |
|
(11,374) |
Shinhan Canada |
|
23,027 |
|
2,760 |
|
174 |
|
18,055 |
|
3,497 |
|
324 |
Shinhan Europe |
|
14,243 |
|
14 |
|
8 |
|
13,332 |
|
2,227 |
|
3,104 |
Shinhan China |
|
284,885 |
|
31,764 |
|
47,129 |
|
284,447 |
|
21,875 |
|
(10,618) |
Shinhan Asia |
|
39,666 |
|
20,319 |
|
30,886 |
|
25,643 |
|
13,813 |
|
(13,104) |
Shinhan Kazakhstan |
|
10,815 |
|
1,929 |
|
(2,356) |
|
8,620 |
|
2,030 |
|
(2,550) |
Shinhan Cambodia |
|
17,492 |
|
8,102 |
|
12,777 |
|
11,758 |
|
3,593 |
|
(3,399) |
Shinhan Japan |
|
187,806 |
|
64,929 |
|
95,418 |
|
176,392 |
|
68,872 |
|
30,889 |
Shinhan Vietnam (*1)(*2) |
|
292,539 |
|
94,987 |
|
79,317 |
|
194,137 |
|
46,477 |
|
13,998 |
Shinhan Mexico |
|
6,736 |
|
(116) |
|
3,627 |
|
2,026 |
|
(2,986) |
|
(5,003) |
Shinhan Indonesia (*1) |
|
64,006 |
|
10,640 |
|
(120) |
|
42,112 |
|
8,590 |
|
(28,801) |
Structured entities |
|
241,466 |
|
(12,499) |
|
(22,325) |
|
208,978 |
|
23,540 |
|
27,829 |
(*1) Fair value adjustment at the time of business combination was applied.
(*2) As the accounting treatment for the acquisition of ANZ retail business by Shinhan Vietnam was completed, the amount was adjusted retrospectively.
178
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(a) The nature and extent of interests in unconsolidated structured entities
The Group involved in assets-backed securitization, structured financing, beneficiary certificates 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 able to do so) 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 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 is a type of financial instrument where investment funds raise funds from the general public to invest in a group of assets such as stocks or bonds and distribute their income and capital gains to their investors. The Group is involved in investment fund by investing in various investment funds. |
179
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) The nature and extent of interests in unconsolidated structured entities (continued)
i) The size of unconsolidated structured entities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
Total assets |
|
87,030,471 |
|
71,518,755 |
|
32,031,029 |
|
190,580,255 |
|
|
December 31, 2017 |
||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
Total assets |
|
84,536,825 |
|
44,287,001 |
|
40,337,712 |
|
169,161,538 |
ii) Income and expenses from unconsolidated structured entities for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
Income |
|
|
|
|
|
|
|
|
Interest income |
|
147,318 |
|
109,081 |
|
866 |
|
257,265 |
Fees and commission income |
|
12,660 |
|
20,029 |
|
- |
|
32,689 |
Dividend income |
|
- |
|
5,713 |
|
32,083 |
|
37,796 |
Other |
|
83 |
|
4,868 |
|
9,214 |
|
14,165 |
|
|
160,061 |
|
139,691 |
|
42,163 |
|
341,915 |
Expenses |
|
1 |
|
3 |
|
793 |
|
797 |
|
|
2017 |
||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
Income |
|
|
|
|
|
|
|
|
Interest income |
|
105,569 |
|
79,951 |
|
1,912 |
|
187,432 |
Fees and commission income |
|
10,353 |
|
14,314 |
|
12,449 |
|
37,116 |
Dividend income |
|
- |
|
4,285 |
|
24,467 |
|
28,752 |
Other |
|
23 |
|
3,382 |
|
129 |
|
3,534 |
|
|
115,945 |
|
101,932 |
|
38,957 |
|
256,834 |
Expenses |
|
24 |
|
130,554 |
|
11,261 |
|
141,839 |
180
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(b) Nature of risk associated with interests in unconsolidated structured entities
i) The carrying amounts of the assets and liabilities recognized relating to its interests in unconsolidated structured entities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
||||||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
||||
Assets: |
|
|
|
|
|
|
|
|
||||
Loans at amortized cost |
|
191,160 |
|
3,655,478 |
|
25,151 |
|
25,151 |
||||
Loans at FVTPL |
|
- |
|
- |
|
- |
|
- |
||||
Securities at FVTPL |
|
3,720,323 |
|
178 |
|
2,601,732 |
|
2,601,732 |
||||
Derivative assets |
|
16,445 |
|
673 |
|
- |
|
- |
||||
Securities at FVOCI |
|
1,740,939 |
|
90,866 |
|
- |
|
- |
||||
Securities at amortized cost |
|
2,945,914 |
|
- |
|
- |
|
- |
||||
Others |
|
- |
|
- |
|
56,001 |
|
56,001 |
||||
|
|
8,614,781 |
|
3,747,195 |
|
2,682,884 |
|
2,682,884 |
||||
Liabilities: |
|
|
|
|
|
|
|
|
||||
Derivative liabilities |
|
306 |
|
- |
|
- |
|
306 |
|
|
December 31, 2017 |
||||||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
||||
Assets: |
|
|
|
|
|
|
|
|
||||
Loans |
|
172,319 |
|
2,793,380 |
|
52,600 |
|
3,018,299 |
||||
Trading assets |
|
3,168,191 |
|
- |
|
- |
|
3,168,191 |
||||
Derivative assets |
|
14,218 |
|
- |
|
- |
|
14,218 |
||||
Available-for-sale financial assets |
|
1,352,955 |
|
80,618 |
|
1,755,477 |
|
3,189,050 |
||||
Held-to-maturity financial assets |
|
2,491,933 |
|
- |
|
- |
|
2,491,933 |
||||
Others |
|
- |
|
- |
|
1,013 |
|
1,013 |
||||
|
|
7,199,616 |
|
2,873,998 |
|
1,809,090 |
|
11,882,704 |
||||
Liabilities: |
|
|
|
|
|
|
|
|
||||
Derivative liabilities |
|
4,448 |
|
- |
|
- |
|
4,448 |
181
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
43.Interests in unconsolidated structured entities (continued)
(b) Nature of risk associated with interests in unconsolidated structured entities (continued)
ii) Exposure to risk relating to interests in unconsolidated structured entities as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
|
Assets owned |
|
8,614,780 |
|
3,747,194 |
|
2,678,131 |
|
15,040,105 |
|
Purchase commitments |
|
1,282,874 |
|
- |
|
- |
|
1,282,874 |
|
Providing unused credit |
|
2,328,748 |
|
123,948 |
|
26,100 |
|
2,478,796 |
|
Guarantees |
|
- |
|
142,032 |
|
- |
|
142,032 |
|
|
|
12,226,402 |
|
4,013,174 |
|
2,704,231 |
|
18,943,807 |
|
|
December 31, 2017 |
|||||||
|
|
Assets-backed securitization |
|
Structured financing |
|
Investment fund |
|
Total |
|
Assets owned |
|
7,199,616 |
|
2,873,998 |
|
1,809,090 |
|
11,882,704 |
|
Purchase commitments |
|
1,331,035 |
|
- |
|
35,684 |
|
1,366,719 |
|
Providing unused credit |
|
529,566 |
|
81,547 |
|
31,987 |
|
643,100 |
|
|
|
9,060,217 |
|
2,955,545 |
|
1,876,761 |
|
13,892,523 |
182
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
(a) Total assets with trust business as of December 31, 2018 and 2017 and operating revenue for the years ended December 31, 2018 and 2017 were as follows:
|
|
Total assets |
|
Operating revenue |
||||
|
|
December 31, 2018 |
|
December 31, 2017 |
|
2018 |
|
2017 |
Consolidated |
|
4,521,280 |
|
4,471,457 |
|
128,577 |
|
85,672 |
Unconsolidated |
|
71,639,988 |
|
46,014,514 |
|
996,465 |
|
929,899 |
|
|
76,161,268 |
|
50,485,971 |
|
1,125,042 |
|
1,042,427 |
(b) Significant balances with trust business as of December 31, 2018 and 2017 were as follows:
|
|
December 31, 2018 |
|
December 31, 2017 |
Borrowings from trust accounts |
|
2,994,798 |
|
4,052,608 |
Accrued revenues from asset management fee from trust accounts |
|
34,286 |
|
28,795 |
Accrued interest expenses |
|
1,325 |
|
824 |
(c) Significant transactions with trust business for the years ended December 31, 2018 and 2017 were as follows:
|
|
2018 |
|
2017 |
Asset management fee from trust accounts |
|
192,422 |
|
166,189 |
Termination fee |
|
6,840 |
|
3,415 |
Interest on borrowings from trust accounts |
|
45,154 |
|
37,869 |
183
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
On December 17, 2017, the Group acquired the retail business of ANZ Vietnam to increase business competitiveness and achieve a synergy effect in the banking business in Vietnam.
Goodwill amounted to W28,199 million arising from the acquisition is related to the synergy effect of business combination between the Group and the acquired retail business, as well as the acquired customer base.
As of December 31, 2017, management was in the process of identification of intangible assets and valuation of identifiable assets and liabilities for allocation of consideration, and the financial impact from the business combination was recognized based on the tentative analysis. During the year ended December 31, 2018, the accounting for the business combination was completed, and the tentative balances of identifiable assets and liabilities recognized at the acquisition date were retrospectively adjusted.
(a) Details of retrospective adjustments for transfer price, acquired assets, liabilities and goodwill related to the acquisition of ANZ business were as follows:
|
|
Before adjustments |
|
After adjustments |
|
Adjustment amounts |
Transfer price : |
|
|
|
|
|
|
Cash |
|
(75,480) |
|
(75,480) |
|
- |
|
|
|
|
|
|
|
Amounts recognized as identifiable assets and liabilities : |
|
|
|
|
|
|
Cash and due from banks |
|
8,151 |
|
8,151 |
|
- |
Loans (*1) |
|
301,766 |
|
302,940 |
|
1,174 |
Other current assets (*1) |
|
9,269 |
|
9,269 |
|
- |
Property and equipment |
|
538 |
|
538 |
|
- |
Intangible assets (*2) |
|
- |
|
15,256 |
|
15,256 |
Deposits |
|
(436,285) |
|
(436,285) |
|
- |
Other current liabilities |
|
(1,022) |
|
(1,022) |
|
- |
Provisions (*3) |
|
- |
|
(2,526) |
|
(2,526) |
|
|
(117,583) |
|
(103,679) |
|
13,904 |
Goodwill |
|
42,103 |
|
28,199 |
|
(13,904) |
|
|
|
|
|
|
|
Direct costs related to acquisition (*4) |
|
5,830 |
|
5,830 |
|
- |
(*1) Fair values of the acquired loans and other receivables amounted to W308,084 million. Total amounts of loans and other receivables at the acquisition date were estimated to be W313,277 million, out of which W5,193 million was not expected to be recoverable.
(*2) The identifiable intangible assets acquired as a result of the business combination consisted of W4,454 million of the present value of expected savings of funding costs resulting from the lower interest rates than other funding sources, and the present value of economic benefits that can be generated through credit card customer relationship in the future amounted to W10,802 million.
(*3) Provisions were recognized for possible credit losses on unused limits.
(*4) In relation to the business combination, legal fee and due diligence fee amounted to W1,336 million and payments of value-added tax to Vietnam tax authorities amounted to W4,494 million, which were included in the general and administrative expenses in the consolidated statement of comprehensive income for the year ended December 31, 2017.
184
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
45. Business combination (continued)
(b) Comparative statement of financial position as at December 31, 2017 was retrospectively restated as follows:
|
|
Before adjustments |
|
After adjustments |
|
Adjustment amounts |
Intangible assets |
|
298,227 |
|
299,579 |
|
1,352 |
Deferred tax liabilities |
|
11,723 |
|
11,994 |
|
271 |
Retained earnings |
|
14,141,464 |
|
14,142,545 |
|
1,081 |
46. Transition effects arising from changes in accounting policies
As described in Note 3, the Group has changed its accounting policies upon adoption of K-IFRS No.1109, Financial Instruments, and K-IFRS No.1115, Revenue from Contracts with Customers. With respect to classification, measurement and impairment of financial instruments, the consolidated financial statements as of and for the year ended December 31, 2017 have not been restated in accordance with the exemption not to restate comparative financial statements.
K-IFRS No.1109 replaced K-IFRS No.1039, Financial Instruments: Recognition and Measurement, relating to recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting. Additionally, K-IFRS No.1109 made amendments to other standards relating to financial instruments such as K-IFRS No.1107, Financial Instruments: Disclosures.
K-IFRS No.1115 replaced existing revenue recognition guidance, including K-IFRS No.1018, ‘Revenue’, K-IFRS No.1011, ‘Construction Contracts’, K-IFRS No.2031, ‘Revenue-Barter Transactions Involving Advertising Services’, K-IFRS No.2113, ‘Customer Loyalty Programmes’, K-IFRS No.2115, ‘Agreement for the Construction of Real Estate’, and K-IFRS No.2118, ‘Transfers of Assets from Customers.’
185
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(a) Changes in equity due to application of K-IFRS No.1109 and No.1115
Changes in equity as of January 1, 2018 due to the initial application date of K-IFRS No.1109 and No.1115 were as follows:
|
|
Amounts |
Retained earnings at January 1, 2018 before changes (*1) |
|
14,142,545 |
Adjustments of retained earnings due to the application of K-IFRS No.1109: |
|
|
Reclassification from financial assets at amortized cost to financial assets at FVTPL |
|
2,456 |
Reclassification from available-for-sale financial assets to financial assets at FVTPL |
|
62,635 |
Reclassification from available-for-sale financial assets to financial assets at FVOCI |
|
200,339 |
Increase in loss allowance for financial assets at amortized cost |
|
(372,519) |
Increase in loss allowance for loan commitments and financial guarantee contracts |
|
5,838 |
Increase in loss allowance for debt instruments at FVOCI |
|
(17,099) |
Others (*2) |
|
(4,723) |
|
|
(123,073) |
Adjustments of retained earnings due to the application of K-IFRS No.1115 (*3) |
|
(2,554) |
Tax effects (*4) |
|
35,214 |
Retained earnings at January 1, 2018 after changes |
|
14,052,132 |
|
|
Amounts |
Accumulated other comprehensive loss at January 1, 2018 before changes |
|
(490,772) |
Adjustments of accumulated other comprehensive income due to the application of K-IFRS No.1109: |
|
|
Reclassification from available-for-sale financial assets to financial assets at FVTPL |
|
(62,635) |
Reclassification from available-for-sale financial assets to financial assets at FVOCI |
|
(200,339) |
Increase in loss allowance for debt instruments at FVOCI |
|
17,099 |
Others (*2) |
|
3,285 |
|
|
(242,590) |
Tax effects (*4) |
|
69,569 |
Accumulated other comprehensive loss at January 1, 2018 after changes |
|
(663,793) |
(*1) Retained earnings at January 1, 2018 were retrospectively restated as the accounting treatment for the business combination on ANZ Vietnam retail business was completed during the year ended December 31, 2018.
(*2) Others represent translation difference of foreign currencies, etc.
(*3) Adjustments were resulting from deferred fee income on management of trust accounts under K-IFRS No.1115, which was previously recognized as profit or loss at a point in time.
(*4) Tax effects due to the application of K-IFRS No.1109 were separately shown.
186
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(b) Reclassification of financial instruments upon adoption of K-IFRS No.1109
Details of reclassification of financial instruments as of January 1, 2018, the initial application date of K-IFRS No.1109, were as follows:
|
Classification under K-IFRS No.1039 |
|
Classification under K-IFRS No.1109 |
|
Amounts under |
|
Amounts under |
|
Difference |
||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
||||||||||
Due from banks |
Loans and receivables |
|
Amortized cost |
|
16,926,471 |
|
16,926,471 |
|
- |
||||||||||
Loans |
Loans and receivables |
|
Financial assets at FVTPL |
|
605,367 |
|
606,439 |
|
1,072 |
||||||||||
Loans and receivables |
|
Amortized cost |
|
232,633,346 |
|
232,633,346 |
|
- |
|||||||||||
Other financial assets |
Loans and receivables |
|
Amortized cost |
|
9,107,156 |
|
9,107,156 |
|
- |
||||||||||
Trading assets |
Trading assets |
|
Financial assets at FVTPL |
|
10,506,358 |
|
10,506,358 |
|
- |
||||||||||
Trading assets |
Trading assets |
|
Financial assets at FVTPL |
|
520,743 |
|
520,743 |
|
- |
||||||||||
Trading assets (gold/silver deposits) |
Trading assets |
|
Financial assets at FVTPL |
|
189,297 |
|
189,297 |
|
- |
||||||||||
Derivatives |
Trading assets |
|
Financial assets at FVTPL |
|
2,604,090 |
|
2,599,727 |
|
(4,363) |
||||||||||
Available-for-sale financial assets (debt securities) |
Available-for-sale financial assets |
|
Financial assets at FVTPL |
|
11,801 |
|
11,801 |
|
- |
||||||||||
|
Available-for-sale financial assets |
|
Financial assets at FVOCI |
|
29,947,367 |
|
29,947,367 |
|
- |
||||||||||
Available-for-sale financial assets (equity securities) |
Available-for-sale financial assets |
|
Financial assets at FVTPL |
|
2,130,117 |
|
2,133,398 |
|
3,281 |
||||||||||
|
Available-for-sale financial assets |
|
Financial assets at FVOCI |
|
406,255 |
|
406,255 |
|
- |
||||||||||
Held-to-maturity financial assets (debt securities) |
Held-to-maturity financial assets |
|
Amortized cost |
|
14,822,898 |
|
14,822,898 |
|
- |
||||||||||
|
|
|
|
|
320,411,266 |
|
320,411,256 |
|
(10) |
||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
||||||||||
Deposits |
Financial liability at amortized cost |
|
Financial liabilities |
|
242,653,744 |
|
242,653,744 |
|
- |
||||||||||
Trading liabilities |
Trading liabilities |
|
Financial liabilities |
|
434,586 |
|
434,586 |
|
- |
||||||||||
Derivatives |
Trading liabilities
|
|
Financial liabilities at FVTPL |
|
2,992,936 |
|
2,992,936 |
|
- |
||||||||||
Borrowings |
Financial liabilities at amortized cost |
|
Financial liabilities at amortized cost |
|
14,617,562 |
|
14,617,562 |
|
- |
||||||||||
Debt securities issued |
Financial liabilities at amortized cost |
|
Financial liabilities at amortized cost |
|
25,460,427 |
|
25,460,427 |
|
- |
||||||||||
Others |
Financial liabilities at amortized cost |
|
Financial liabilities at amortized cost |
|
14,934,540 |
|
14,934,521 |
|
(19) |
||||||||||
|
|
|
|
|
301,093,795 |
|
301,093,776 |
|
(19) |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
187
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(c) Impairment of financial assets upon adoption of K-IFRS No.1109
Changes of credit loss allowance as of January 1, 2018, the initial application date of K-IFRS No.1109, were as follows:
Classification K-IFRS No.1039 |
|
Classification K-IFRS No.1109 |
|
Loss allowance under |
|
Loss allowance under |
|
Difference |
Loans and receivables |
|
|
|
|
|
|
|
|
Due from banks |
|
Financial assets at amortized cost |
|
14,046 |
|
15,051 |
|
1,005 |
Loan receivables |
|
Financial assets at amortized cost |
|
1,503,242 |
|
1,869,815 |
|
366,573 |
|
|
Financial assets at FVTPL |
|
3,315 |
|
- |
|
(3,315) |
Other financial assets |
|
Financial assets at amortized cost |
|
26,252 |
|
26,923 |
|
671 |
Available-for-sale financial assets |
|
|
|
|
|
|
|
|
Debt securities |
|
Financial assets at FVOCI |
|
- |
|
17,098 |
|
17,098 |
Held-to-maturity financial assets |
|
|
|
|
|
|
|
|
Debt securities |
|
Financial assets at amortized cost |
|
- |
|
7,585 |
|
7,585 |
|
|
|
|
1,546,855 |
|
1,936,472 |
|
389,617 |
Financial guarantee |
|
Financial guarantee |
|
35,436 |
|
36,148 |
|
712 |
Unused credit line and other credit commitment |
|
Unused credit line and other credit commitment |
|
93,241 |
|
86,691 |
|
(6,550) |
|
|
|
|
128,677 |
|
122,839 |
|
(5,838) |
188
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(d) Details in reclassification of financial instruments from application of K-IFRS No.1109
For the financial assets and liabilities as of January 1, 2018, the date of the initial application of K-IFRS No.1109, details of reclassifications and remeasurements in the Group’s financial assets and liabilities from application of K-IFRS No.1109 were as follows:
1) Effects on gross carrying amounts
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
16,926,471 |
|
- |
|
- |
|
16,926,471 |
|
- |
|
- |
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
233,238,713 |
|
- |
|
- |
|
233,238,713 |
|
- |
|
- |
Reclassification to financial assets at FVTPL (*2) |
|
- |
|
(605,367) |
|
- |
|
(605,367) |
|
- |
|
- |
|
|
233,238,713 |
|
(605,367) |
|
- |
|
232,633,346 |
|
- |
|
- |
Other financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
9,107,156 |
|
- |
|
- |
|
9,107,156 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading assets (debt securities) (*4) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
10,506,358 |
|
- |
|
- |
|
10,506,358 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(10,506,358) |
|
- |
|
(10,506,358) |
|
- |
|
- |
|
|
10,506,358 |
|
(10,506,358) |
|
- |
|
- |
|
- |
|
- |
Trading assets (equity securities) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
520,743 |
|
- |
|
- |
|
520,743 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(520,743) |
|
|
|
(520,743) |
|
- |
|
- |
|
|
520,743 |
|
(520,743) |
|
|
|
- |
|
- |
|
- |
Trading assets (gold deposits) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
189,297 |
|
- |
|
|
|
189,297 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(189,297) |
|
|
|
(189,297) |
|
- |
|
- |
|
|
189,297 |
|
(189,297) |
|
|
|
- |
|
- |
|
- |
Derivative assets |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
2,604,090 |
|
- |
|
|
|
2,604,090 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(4,363) |
|
|
|
(4,363) |
|
- |
|
- |
|
|
2,604,090 |
|
(4,363) |
|
|
|
2,599,727 |
|
- |
|
- |
Available-for-sale financial assets (debt securities) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
29,959,168 |
|
- |
|
|
|
29,959,168 |
|
- |
|
- |
Reclassification to financial assets at FVTPL |
|
- |
|
(11,801) |
|
|
|
(11,801) |
|
- |
|
- |
Reclassification to financial assets at FVOCI |
|
- |
|
(29,947,367) |
|
|
|
(29,947,367) |
|
- |
|
- |
|
|
29,959,168 |
|
(29,959,168) |
|
|
|
- |
|
- |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
189
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(d) Details in reclassification of financial instruments from application of K-IFRS No.1109 (continued)
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Available-for-sale financial assets (equity securities) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
2,536,372 |
|
- |
|
- |
|
2,536,372 |
|
- |
|
- |
Reclassification to financial assets at FVTPL (*3) |
|
- |
|
(2,130,117) |
|
- |
|
(2,130,117) |
|
- |
|
- |
Reclassification to financial assets at FVOCI |
|
- |
|
(406,255) |
|
- |
|
(406,255) |
|
- |
|
- |
|
|
2,536,372 |
|
(2,536,372) |
|
- |
|
- |
|
- |
|
- |
Held-to-maturity financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
14,822,898 |
|
- |
|
- |
|
14,822,898 |
|
- |
|
- |
Reclassification to financial assets at amortized cost |
|
- |
|
(14,822,898) |
|
- |
|
(14,822,898) |
|
- |
|
- |
|
|
14,822,898 |
|
(14,822,898) |
|
- |
|
- |
|
- |
|
- |
Financial assets at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from loans and receivables |
|
- |
|
605,367 |
|
2,456 |
|
607,823 |
|
2,456 |
|
- |
Transfer from trading assets |
|
- |
|
11,216,398 |
|
- |
|
11,216,398 |
|
- |
|
- |
Transfer from available-for-sale financial assets |
|
- |
|
2,141,918 |
|
- |
|
2,141,918 |
|
62,635 |
|
(62,635) |
Transfer from derivative assets |
|
- |
|
4,363 |
|
109 |
|
4,472 |
|
109 |
|
- |
Others |
|
- |
|
(2,575) |
|
- |
|
(2,575) |
|
- |
|
- |
|
|
- |
|
13,965,471 |
|
2,565 |
|
13,968,036 |
|
65,200 |
|
(62,635) |
Financial assets at FVOCI (*5) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from available-for-sale financial assets |
|
- |
|
30,353,622 |
|
- |
|
30,353,622 |
|
200,339 |
|
(200,339) |
|
|
- |
|
30,353,622 |
|
- |
|
30,353,622 |
|
200,339 |
|
(200,339) |
Financial assets at amortized cost (*5) |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from held-to-maturity financial assets |
|
- |
|
14,822,898 |
|
- |
|
14,822,898 |
|
- |
|
- |
|
|
- |
|
14,822,898 |
|
- |
|
14,822,898 |
|
- |
|
- |
|
|
320,411,266 |
|
(2,575) |
|
2,565 |
|
320,411,256 |
|
265,539 |
|
(262,974) |
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
242,653,744 |
|
- |
|
- |
|
242,653,744 |
|
- |
|
- |
Trading liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
434,586 |
|
- |
|
- |
|
434,586 |
|
- |
|
- |
Reclassification to financial liabilities at FVTPL |
|
- |
|
(434,586) |
|
- |
|
(434,586) |
|
- |
|
- |
|
|
434,586 |
|
(434,586) |
|
- |
|
- |
|
- |
|
- |
Financial liabilities at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Transfer from trading liabilities |
|
- |
|
434,586 |
|
- |
|
434,586 |
|
- |
|
- |
|
|
- |
|
434,586 |
|
- |
|
434,586 |
|
- |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
190
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(d) Details in reclassification of financial instruments from application of K-IFRS No.1109 (continued)
|
|
Amounts under K-IFRS No.1039 (*1) |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 (*1) |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
2,992,936 |
|
- |
|
- |
|
2,992,936 |
|
- |
|
- |
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
14,617,562 |
|
- |
|
- |
|
14,617,562 |
|
- |
|
- |
Debt securities issued |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
25,460,427 |
|
- |
|
- |
|
25,460,427 |
|
- |
|
- |
Other financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts under K-IFRS No.1039 as of January 1, 2018 |
|
14,934,540 |
|
- |
|
- |
|
14,934,540 |
|
- |
|
- |
Others |
|
- |
|
- |
|
(19) |
|
(19) |
|
- |
|
- |
|
|
14,934,540 |
|
- |
|
(19) |
|
14,934,521 |
|
- |
|
- |
|
|
301,093,795 |
|
- |
|
(19) |
|
301,093,776 |
|
- |
|
- |
(*1) Represents gross carrying amounts before deferred loan origination costs and fees, allowance for loan loss and credit loss allowance.
(*2) Loans and receivables amounted to W605,367 million under K-IFRS No.1039 have been reclassified to financial assets at FVTPL from application of K-IFRS No.1109. The reasons for reclassification were as follows:
Classification |
|
Amounts |
|
|
|
Reclassification by business model for financial asset management |
|
495,700 |
Financial assets not qualifying characteristics of contractual cash flows that are solely payments of principal and interest |
|
109,667 |
|
|
605,367 |
(*3) Equity securities amounted to W2,130,117 million under K-IFRS No.1039, which were classified as available-for-sale financial assets, have been reclassified to financial assets at FVTPL from application of K-IFRS No.1109. The reasons for reclassification were as follows:
Classification |
|
Amounts |
|
|
|
Financial asset not qualifying characteristics of contractual cash flows that are solely payments of principal and interest of puttable financial instruments |
|
1,979,670 |
No designation of financial assets at FVOCI |
|
150,447 |
|
|
2,130,117 |
(*4) With respect to financial assets and financial liabilities reclassified from financial assets at FVTPL, effective interest rates calculated on the initial application date of K-IFRS No.1109 and interest income or expense recognized shall be disclosed. Such reclassification has not occurred from the application of K-IFRS No.1109.
(*5) With respect to financial assets and financial liabilities reclassified to financial instruments at amortized cost, and financial assets at FVTPL reclassified to financial assets at FVOCI, the gain or loss on fair value measurement that would otherwise have been recognized in profit or loss or other comprehensive income in the reporting period, and the fair value of the financial assets or financial liabilities, shall be disclosed. Such reclassification has not occurred from application of K-IFRS No.1109.
191
SHINHAN BANK AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2018 and 2017
(In millions of won)
46. Transition effects arising from changes in accounting policies (continued)
(iv) Details in reclassification of financial instruments from application of K-IFRS No.1109 (continued)
2) Credit loss allowance
|
|
Amounts under K-IFRS No.1039 |
|
Amounts reclassified |
|
Amounts |
|
Amounts under K-IFRS No.1109 |
|
Changes in retained earnings |
|
Changes in other comprehensive income |
Credit loss allowance for |
|
|
|
|
|
|
|
|
|
|
|
|
Due from banks |
|
14,046 |
|
- |
|
1,005 |
|
15,051 |
|
(1,005) |
|
- |
Loans and receivables |
|
1,506,557 |
|
(3,315) |
|
366,572 |
|
1,869,814 |
|
(363,257) |
|
- |
Financial guarantee |
|
35,436 |
|
- |
|
712 |
|
36,148 |
|
(712) |
|
- |
Unused credit line and other credit commitment |
|
93,241 |
|
- |
|
(6,550) |
|
86,691 |
|
6,550 |
|
- |
Debt securities at FVOCI |
|
- |
|
- |
|
17,098 |
|
17,098 |
|
(17,098) |
|
17,098 |
Debt securities at amortized cost |
|
- |
|
- |
|
7,585 |
|
7,585 |
|
(7,585) |
|
- |
Other financial assets |
|
26,252 |
|
- |
|
671 |
|
26,923 |
|
(671) |
|
- |
|
|
1,675,532 |
|
(3,315) |
|
387,093 |
|
2,059,310 |
|
(383,778) |
|
17,098 |
(v) Hedge accounting
K-IFRS No.1109 maintains the mechanics of hedge accounting (i.e. fair value hedge, cash flow hedge, hedge of a net investment in a foreign operation) as defined in K-IFRS No.1039, whereas a principle-based hedge accounting requirements that focuses on an entity’s risk replaced complex and rule-based hedge accounting requirements in K-IFRS No.1039. Additionally, qualifying hedged items and qualifying hedging instruments have been expanded and hedge accounting requirements have been eased by eliminating a subsequent hedge effectiveness assessment and a quantitative test (80~125%).
Hedge accounting can be applied to certain transactions that fail to qualify for hedge accounting requirements under K-IFRS No.1039 when applying K-IFRS No.1109, and thus alleviates profit or loss volatility.
The Group applied the requirements for hedge accounting under K-IFRS No.1109 as much as possible to the risk management activities that meet the requirements for hedge accounting. As of December 31, 2018, there were no transactions that failed to qualify for hedge accounting requirements under K-IFRS No.1039 but for which hedge accounting was applied under K-IFRS No.1109.
192