[Korea] Banks April 26, 2021

Shinhan Financial Group Buy (055550 KS ) (Maintain)

Strong growth in non -bank and non -interest income, TP: W49,000 ▲▲▲ plus rebound in bank NIM Upside: 31.7%

Mirae Asset Securities Co., Ltd. Heather Kang [email protected]

1Q21 review: Record quarterly Net profit attributable to owners of the parent of W1.19tr (+28% YoY) earnings ó Shinhan Financial Group’s (SFG) 1Q21 net profit came in 11-14% above consensus estimates (which had been continuously revised upward) and 6% above our expectation. ó Net profit from non-bank operations grew 84% YoY to W620bn (a record high), contributing 48% of group net profit. Group non-interest income increased 40% YoY. ó The quarter included a one-off charge of W62.6bn due to the Financial Dispute Settlement Committee’s ruling on compensation for those who invested in Lime Asset Management’s credit- insured fund. ó New NPL formation remained benign, and credit cost ratio fell to 21bps (-14bps YoY, -18bps QoQ).

Strong across the board Recurring profit expands on the back of diversified income base ó SFG’s subsidiaries displayed visibly stronger fundamentals, with 1Q21 net profit growing more than 20% in most cases. ó Securities profit recovered, and the credit card and capital subsidiarie s posted robust growth. Earnings improved across all matrix business lines, including Group & Global Investment Banking (GIB) and Global Markets & Securities (GMS). ó The bank subsidiary saw net interest margin (NIM) gain 5bps and loans grow 2.5% QoQ, expanding the income base. ó The NIM improvement was largely attributable to lower funding costs resulting from deposit repricing and deposit portfolio improvements (+17% QoQ for low-cost demand deposits vs. -0.1% QoQ for time deposits).

Valuation and recommendation Reaffirm Buy and raise TP to W49,000 ó We revise up our 2021-23 net profit estimates by 2.4-4.0%, reflecting the stronger-than-expected 1Q21 results. We raise our target price from W48,000 to W49,000 (target P/B of 0.55x based on a sustainable ROE of 7.8%). ó SFG boasts earnings stability supported by its diversified business portfolio and the growth of its global division. ó SFG has finished amending its articles of incorporation to allow for quarterly dividend distributions. The group plans to pay out quarterly dividends and repurchase shares as soon as external circumstances permit.

Key data

Current price (4/22/21, W) 37,200 Market cap (Wbn) 19,218 180 Shinhan Financial Group KOSPI NP (21F, Wbn) 4,048 Shares outstanding (mn) 534 160 Consensus NP (21F, Wbn) 3,795 Free float (%) 75.0 140

120 EPS growth (21F, %) 11.3 Foreign ownership (%) 60.1

100 P/E (21F, x) 4.8 Beta (12M) 0.96

80 Market P/E (21F, x) 14.0 52-week low (W) 27,150 4.20 8.20 12.20 4.21 KOSPI 3,177.52 52-week high (W) 37,700

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute 4.5 23.2 34.8 Net interest income (Wbn) 8,580 9,720 9,883 10,553 10,922 11,307 Relative -0.2 -8.7 -19.6 Net non -interest income (Wbn) 1,399 1,415 1,650 1,958 1,904 1,885

OP (Wbn) 4,499 5,049 4,930 5,784 6,027 6,218 NP (Wbn) 3,157 3,403 3,415 4,048 4,205 4,327 EPS (W) 6,657 7,170 6,906 7,685 7,873 8,101 EPS growth (%) 8.2 7.7 -3.7 11.3 2.4 2.9 P/E (x) 5.6 5.2 5.4 4.8 4.7 4.6 P/PPOP (x) 3.7 3.2 3.0 2.7 2.6 2.5 P/B (x) 0.49 0.46 0.45 0.42 0.38 0.35 ROE (%) 9.2 9.1 8.2 8.9 8.5 8.0 Div. yield (%) 4.3 5.0 4.0 5.4 5.8 6.3 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. April 26, 2021 Shinhan Financial Group

Figure 1. SFG: Earnings breakdown by subsidiary in 1Q20 Figure 2. SFG: Earnings breakdown by subsidiary in 1Q21P (before reflecting consolidation adjustments and other (before reflecting consolidation adjustments and other factors) factors)

Shinhan Capital Other

Orange Life Shinhan Capital 4.6% 2.6% Orange Life Insurance 4.4% Other 6.2% 1.8% Insurance 8.4% Shinhan Life Insurance Shinhan Life 4.1% Insurance Shinhan Inv. 5.7% 4.8% Banking 51.9% Shinhan Card Shinhan Inv. Banking 13.1% 13.2% 65.5%

Shinhan Card 13.2% NP Stake NP NP Stake NP (Wbn) (%) (Wbn) (%) (a) (b) (a) x (b) (a) (b) (a) x (b) Banking 664.2 662.3 51.9 Banking 632.2 630.7 65.5 Shinhan Bank 656.4 100.0 656.4 51.5 Shinhan Bank 626.5 100.0 626.5 65.0 Jeju Bank 7.8 75.3 5.9 0.5 Jeju Bank 5.6 75.3 4.2 0.4 Non-banking 620.0 613.2 48.1

Non-banking 337.3 332.7 34.5 Shinhan Card 168.1 100.0 168.1 13.2 Shinhan Card 126.5 100.0 126.5 13.1 Shinhan Inv. 168.1 100.0 168.1 13.2 Shinhan Inv. 46.7 100.0 46.7 4.8 Shinhan Life Insurance 72.8 100.0 72.8 5.7 Shinhan Life Insurance 39.7 100.0 39.7 4.1 Orange Life Insurance 107.7 100.0 107.7 8.4 Orange Life Insurance 59.5 100.0 59.5 6.2 Shinhan Asset Mgmt 11.2 100.0 11.2 0.9 Shinhan BNP Paribas 4.6 65.0 3.0 0.3 Shinhan Capital 59.2 100.0 59.2 4.6 Shinhan Capital 42.7 100.0 42.7 4.4 Shinhan Savings Bank 5.4 100.0 5.4 0.4 Shinhan Savings Bank 6.3 100.0 6.3 0.7 Asia Trust 16.7 60.0 10.0 0.8 Asia Trust 7.4 60.0 4.4 0.5 Shinhan DS 1.4 100.0 1.4 0.1 Shinhan DS -0.9 100.0 -0.9 -0.1 Shinhan AITAS 1.9 99.8 1.9 0.2 Shinhan AITAS 3.6 99.8 3.6 0.4 Shinhan Credit Info. 0.8 100.0 0.8 0.1 Shinhan Credit Info. 0.7 100.0 0.7 0.1 Shinhan Alternative Inv. 0.3 100.0 0.3 0.0 Shinhan Alternative Inv. 1.6 100.0 1.6 0.2 Shinhan REITs Mgmt 1.9 100.0 1.9 0.1 Shinhan REITs Mgmt -1.2 100.0 -1.2 -0.1 Shinhan AI 0.2 100.0 0.2 0.0 Shinhan AI 0.1 100.0 0.1 0.0 Shinhan Venture Inv. 4.2 96.8 4.1 0.3 Total 969.5 963.4 100 Total 1,284.2 1,275.5 100

Source: Company data, Mirae Asset Securities Research Notes: Shinhan BNP Paribas has become a fully-owned subsidiary named Shinhan Asset Management. Source: Company data, M irae Asset Securities Research

Table 1. SFG: Low-cost core deposits (Wbn, %, %p) 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 YoY QoQ Won-denominated deposits 205,681 205,408 208,349 216,748 221,795 221,376 232,998 244,183 243,617 251,704 260,212 267,824 9.7 2.9 Low-cost deposits 92,280 94,187 92,950 94,745 96,398 96,317 101,700 111,191 118,058 124,221 131,224 139,799 25.7 6.5 Demand deposits 28,455 28,256 28,455 29,349 30,246 29,899 30,455 34,845 36,499 39,747 40,743 47,502 36.3 16.6 Low-cost savings 63,826 65,931 64,495 65,396 66,152 66,418 71,245 76,346 81,558 84,474 90,481 92,297 20.9 2.0 Time deposits 105,084 102,605 106,684 113,306 116,618 116,052 122,073 124,055 116,620 118,489 120,018 119,859 -3.4 -0.1 Installment deposits 8,317 8,616 8,715 8,697 8,778 9,006 9,225 8,937 8,939 8,993 8,971 8,166 -8.6 -9.0 CDs 8,679 8,709 8,603 7,828 7,708 8,673 8,602 9,233 8,349 6,249 4,870 5,386 -41.7 10.6 RPs/bills sold 212 69 61 78 53 95 123 197 239 209 170 142 -27.9 -16.4 Core deposits as % of total 43.0 44.0 42.8 42.2 42.0 41.9 42.1 45.5 48.5 49.4 50.4 52.2 6.7 1.8 Source: Company data, Mirae Asset Daewoo Research

Mirae Asset Securities Research 2 April 26, 2021 Shinhan Financial Group

Table 2. SFG: 1Q21 review YoY chg. QoQ chg. (Wbn) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 (%, %p) (%,%p) Net interest income 2,472.7 2,466.6 2,463.4 2,446.1 2,452.7 2,520.5 2,556.4 3.8 1.4 Net fee/commission income 530.3 522.2 531.5 598.4 625.2 627.9 681.5 28.2 8.5 Net other income -138.1 -369.3 -256.9 21.8 -125.5 -372.3 -88.6 RR RR Total net operating income 2,864.9 2,619.5 2,738.1 3,066.3 2,952.3 2,776.2 3,149.2 15.0 13.4 SG&A expenses 1,225.6 1,504.3 1,197.9 1,271.3 1,256.2 1,487.1 1,279.0 6.8 -14.0 PPOP 1,639.2 1,115.2 1,540.2 1,795.0 1,696.1 1,289.1 1,870.2 21.4 45.1 Provisions 221.3 203.8 282.8 539.3 228.4 340.1 187.8 -33.6 -44.8 OP 1,417.9 911.4 1,257.4 1,255.7 1,467.7 949.0 1,682.4 33.8 77.3 Non-operating income -1.6 -152.8 19.2 -24.9 94.0 -264.2 -37.0 TTR RR Pretax profit 1,416.3 758.6 1,276.6 1,230.9 1,561.6 684.8 1,645.3 28.9 140.3 NP 981.6 507.5 932.4 873.1 1,144.7 464.4 1,191.9 27.8 156.7

Total assets 546,005 552,420 578,240 578,422 591,812 605,328 618,817 7.0 2.2 Total loans/receivables 317,058 323,245 334,162 338,355 352,758 356,253 368,137 10.2 3.3 Won-denominated loans (bank) 220,737 225,002 231,468 237,212 242,284 248,813 255,079 10.2 2.5 Total credit 305,648 312,243 321,834 329,243 334,412 341,897 349,696 8.7 2.3 Total deposits 284,142 297,874 308,911 310,865 319,150 326,459 336,693 9.0 3.1 Total shareholders' equity 41,757 41,930 41,943 42,934 45,930 46,356 46,742 11.4 0.8

(%) NIM (bank) 1.53 1.46 1.41 1.39 1.36 1.34 1.39 -0.02 0.05 Cost-to-income ratio 42.8 57.4 43.7 41.5 42.6 53.6 40.6 -3.1 -13.0 NPL (substandard & below) ratio 0.60 0.52 0.54 0.56 0.54 0.56 0.56 0.02 0.00 NPL coverage ratio 265.4 290.6 280.2 267.8 274.9 272.9 267.8 -12.4 -5.1 ROA 0.18 0.09 0.16 0.15 0.20 0.08 0.19 0.03 0.12 ROE 2.55 1.30 2.35 2.14 2.69 1.06 2.69 0.34 1.64 Credit cost ratio 0.07 0.07 0.09 0.16 0.07 0.10 0.05 -0.03 -0.05 BIS ratio 14.17 13.90 14.06 14.07 15.97 15.74 15.90 1.83 0.16 Tier 1 ratio 12.61 12.34 12.60 12.63 14.59 14.37 14.66 2.06 0.28 CET1 ratio 11.40 11.12 11.34 11.40 13.13 12.87 12.95 1.62 0.08 Notes: ROA, ROE, and credit cost data are non-annualized. Source: Company data, M irae Asset Securities Research

Table 3. SFG: Earnings forecast revisions

Revised Previous % chg. (Wbn) 2021F 2022F 2023F 2021F 2022F 2023F 2021F 2022F 2023F Net interest income 10,553 10,922 11,307 10,612 10,915 11,265 -0.6 0.1 0.4 Net non-interest income 1,958 1,904 1,885 1,674 1,669 1,679 17.0 14.1 12.2 Total net operating income 12,511 12,825 13,192 12,286 12,584 12,944 1.8 1.9 1.9 SG&A expenses 5,451 5,433 5,542 5,373 5,366 5,474 1.4 1.2 1.2 PPOP 7,059 7,393 7,650 6,913 7,218 7,471 2.1 2.4 2.4 Provisions 1,276 1,366 1,432 1,313 1,451 1,541 -2.9 -5.9 -7.1 OP 5,784 6,027 6,218 5,600 5,767 5,930 3.3 4.5 4.9 Non-operating income -85 -59 -60 0 -1 -1 N/A N/A N/A Pretax profit 5,699 5,968 6,158 5,600 5,766 5,929 1.8 3.5 3.8 NP (owners of the parent) 4,048 4,205 4,327 3,952 4,059 4,162 2.4 3.6 4.0 Source: M irae Asset Securities Research estimates

Mirae Asset Securities Research 3 April 26, 2021 Shinhan Financial Group

Table 4. SFG: TP calculation

Sustainable ROE 7.80% Growth 2.00% Cost of equity 12.50%

Cost of equity 12.50% Rf 2.00% Beta 1.75 Market premium 6.00%

Fair P/B (x) 0.55 2021F BPS (W) 88,735 TP (W) 49,000 Source: Mirae Asset Securities Research estimates

Table 5. SFG: Valuation metrics at TP of W49,000 2018 2019 2020 2021F 2022F 2023F P/B (x) 0.65 0.60 0.59 0.55 0.51 0.47 P/E (x) 7.4 6.8 7.1 6.4 6.2 6.0

ROE (%) 9.2 9.1 8.2 8.9 8.5 8.0 EPS growth (%) 8.2 7.7 -3.7 11.3 2.4 2.9

Dividend yield (%) 3.3 3.8 3.1 4.1 4.4 4.8 Source: Company data, Mirae Asset Securities Research estimates

Figure 3. SFG: Performance by business unit

Source: Company materials, Mirae Asset Securities Research

Mirae Asset Securities Research 4 April 26, 2021 Shinhan Financial Group

Figure 4. SFG: Digital coverage

Source: Company materials, Mirae Asset Securities Research

Figure 5. SFG: Digital-driven revenue creation and cost efficiencies

Source: Company materials, Mirae Asset Securities Research

Mirae Asset Securities Research 5 April 26, 2021 Shinhan Financial Group

Table 6. SFG: Non-interest income (Wbn) 1Q21P 1Q20 YoY (%) 4Q20 QoQ (%) Net fee & commission income 681 531 28.2 628 8.5 Credit card fees 67 51 29.5 62 7.0 Brokerage commissions 145 76 90.5 110 32.2 Fund/bancassurance commissions 38 40 -3.6 36 6.0 Trust fees 76 68 12.1 74 2.9 FX fees 50 43 17.1 52 -3.8 Electronic banking fees 37 36 3.3 37 0.4 Investment banking commissions 27 25 7.4 65 -57.9 Lease commissions 81 49 64.9 73 10.5 Other 160 143 11.8 119 91.3 Gains/losses on securities, FX, and 423 248 70.7 153 176.9 derivatives Gains/losses on financial products 141 1,554 -91.0 -427 N/A (FVPL) Gains/losses on FX and derivatives 210 -1,444 N/A 555 -62.2 Gains/losses on insurance 282 259 9.1 253 11.6 Other -356 -304 N/A -368 N/A Fund contributions -93 -88 N/A -92 N/A Deposit insurance premiums -99 -99 N/A -99 N/A Total non-interest income 1,031 734 40.4 666 54.8 Source: Company data, Mirae Asset Securities Research

Table 7. SFG: Quarterly earnings

(Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21P 2Q21F 3Q21F 4Q21F Net interest income 2,381.5 2,398.9 2,472.7 2,466.6 2,463.4 2,446.1 2,452.7 2,520.5 2,556.4 2,638.4 2,676.9 2,681.2 Net non-interest income 479.9 609.3 530.3 522.2 531.5 598.4 625.2 627.9 681.5 659.9 653.6 633.1 Net other income -131.8 -87.6 -138.1 -369.3 -256.9 21.8 -125.5 -372.3 -88.6 -113.5 -154.1 -313.9 Total net operating income 2,729.5 2,920.5 2,864.9 2,619.5 2,738.1 3,066.3 2,952.3 2,776.2 3,149.2 3,184.8 3,176.4 3,000.4 SG&A expenses 1,168.4 1,236.3 1,225.6 1,504.3 1,197.9 1,271.3 1,256.2 1,487.1 1,279.0 1,324.6 1,331.6 1,516.1 PPOP 1,561.2 1,684.2 1,639.2 1,115.2 1,540.2 1,795.0 1,696.1 1,289.1 1,870.2 1,860.2 1,844.8 1,484.3 Provisions 250.8 274.9 221.3 203.8 282.8 539.3 228.4 340.1 187.8 380.3 329.5 378.0 OP 1,310.3 1,409.3 1,417.9 911.4 1,257.4 1,255.7 1,467.7 949.0 1,682.4 1,480.0 1,515.3 1,106.3 Non-operating income 12.2 4.8 -1.6 -152.8 19.2 -24.9 94.0 -264.2 -37.0 15.0 10.1 -73.0 Pretax profit 1,322.5 1,414.0 1,416.3 758.6 1,276.6 1,230.9 1,561.6 684.8 1,645.3 1,494.9 1,525.4 1,033.3 NP (owners of the parent) 918.4 996.1 981.6 507.5 932.4 873.1 1,144.7 464.4 1,191.9 1,057.0 1,078.4 720.8 Source: Company data, Mirae Asset Securities Research estimates

Table 8. SFG: Annual earnings

(Wbn) 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F Net interest income 6,789.8 6,692.9 7,205.4 7,843.0 8,580.1 9,719.6 9,882.7 10,552.8 10,921.6 11,307.2 Net non-interest income 1,469.2 1,621.0 1,565.5 1,711.0 1,939.0 2,141.7 2,382.9 2,628.0 2,629.1 2,639.8 Net other income -191.3 165.3 11.4 -369.7 -539.5 -726.9 -732.8 -670.1 -725.3 -755.2 Total net operating income 8,067.6 8,479.2 8,782.3 9,184.2 9,979.5 11,134.4 11,532.8 12,510.8 12,825.3 13,191.7 SG&A expenses 4,462.9 4,475.1 4,508.6 4,811.2 4,741.6 5,134.7 5,212.5 5,451.3 5,432.6 5,541.9 PPOP 3,604.8 4,004.2 4,273.8 4,373.0 5,238.0 5,999.7 6,320.3 7,059.5 7,392.8 7,649.9 Provisions 949.9 1,031.0 1,165.1 544.4 738.6 950.8 1,390.6 1,275.6 1,365.6 1,432.0 OP 2,654.8 2,973.1 3,108.6 3,828.6 4,499.4 5,048.9 4,929.7 5,783.9 6,027.2 6,217.9 Non-operating income 212.8 167.4 61.8 -32.4 -32.8 -137.4 -175.9 -85.0 -58.7 -60.3 Pretax profit 2,867.6 3,140.6 3,170.5 3,796.2 4,466.6 4,911.5 4,753.9 5,698.9 5,968.4 6,157.6 NP (owners of the parent) 2,081.1 2,367.2 2,774.8 2,917.9 3,156.7 3,403.5 3,414.6 4,048.1 4,204.8 4,326.6 Source: Company data, Mirae Asset Securities Research estimates

Mirae Asset Securities Research 6 April 26, 2021 Shinhan Financial Group

Shinhan Financial Group (055550 KS)

Income statement (summarized) Balance sheet (summarized) (Wbn) 2020 2021F 2022F 2023F (Wbn) 2020 2021F 2022F 2023F Interest income 14,774 14,401 14,807 15,319 Cash & dues 33,428 31,093 31,453 31,817 Interest expenses 4,892 3,848 3,885 4,012 Securities 172,993 142,792 144,852 146,944 Net interest income 9,883 10,553 10,922 11,307 Net loans & receivables 356,253 374,585 391,343 408,449 Net fees & commissions 2,383 2,628 2,629 2,640 Tangible assets 4,628 4,591 4,624 4,658 Net other non-interest income -733 -670 -725 -755 Other assets 38,027 40,396 40,868 41,349 Total net operating income 11,533 12,511 12,825 13,192 Total assets 605,328 593,457 613,139 633,217 G&A expenses 5,212 5,451 5,433 5,542 Deposits 326,459 343,538 356,321 369,221 PPOP 6,320 7,059 7,393 7,650 Borrowings 41,590 39,811 39,289 38,800 Total provisioning expenses 1,391 1,276 1,366 1,432 Debentures 75,156 76,676 77,076 77,480 OP 4,930 5,784 6,027 6,218 Other liabilities 115,767 83,724 86,369 89,103 Net non-operating income -176 -85 -59 -60 Total liabilities 558,972 543,748 559,055 574,604 Pretax profit 4,754 5,699 5,968 6,158 Capital stock 2,969 2,969 2,969 2,969 Income tax 1,256 1,542 1,641 1,693 Hybrid securities 2,180 2,779 2,779 2,779 NP 3,415 4,048 4,205 4,327 Capital surplus 12,235 12,095 12,095 12,095 NP attributable to owners 3,415 4,048 4,205 4,327 Retained earnings 27,777 31,007 35,261 39,652 Normalized NP 3,415 4,048 4,205 4,327 Capital adj. -688 -665 -665 -665 Other comprehensive income -404 -793 -793 -793 Core income 12,266 13,181 13,551 13,947 Minority interests 2,287 2,317 2,439 2,577 Core PPOP 7,053 7,730 8,118 8,405 Total shareholders' equity 46,356 49,709 54,085 58,613

DuPont analysis (%) 2020 2021F 2022F 2023F Key ratios/growth metrics (%) 2020 2021F 2022F 2023F Interest income 2.55 2.40 2.45 2.46 Growth (YoY) Interest expenses 0.85 0.64 0.64 0.64 Won-denominated loan growth (bank) 10.6 7.1 4.7 4.6 Net interest income 1.71 1.76 1.81 1.81 Net loan & receivables growth 10.2 5.1 4.5 4.4 Net commission income 0.41 0.44 0.44 0.42 Deposit growth 9.6 5.2 3.7 3.6 Net other non-interest income -0.13 -0.11 -0.12 -0.12 Shareholders' equity growth 10.6 7.2 8.8 8.4 Total net operating income 1.99 2.09 2.13 2.12 Total asset growth 9.6 -2.0 3.3 3.3 G&A expenses 0.90 0.91 0.90 0.89 Net interest income growth 1.7 6.8 3.5 3.5 PPOP 1.09 1.18 1.23 1.23 Net commission income growth 11.3 10.3 0.0 0.4 Total provisioning expenses 0.24 0.21 0.23 0.23 PPOP growth 5.3 11.7 4.7 3.5 Net non-operating income -0.03 -0.01 -0.01 -0.01 OP growth -2.4 17.3 4.2 3.2 Pretax profit 0.82 0.95 0.99 0.99 NP growth 0.3 18.6 3.9 2.9 Income tax 0.22 0.26 0.27 0.27 Profitability NP attributable to minority interests 0.01 0.02 0.02 0.02 NIS (bank) 1.63 1.69 1.70 1.70 ROA 0.59 0.68 0.70 0.69 NIM (bank) 1.37 1.40 1.41 1.41 Leverage (x) 13.9 13.1 12.2 11.6 PPOP margin 1.1 1.2 1.2 1.2 ROE 8.20 8.85 8.49 8.04 ROA 0.6 0.7 0.7 0.7 Asset quality (%) 2020 2021F 2022F 2023F ROE 8.2 8.9 8.5 8.0 NPL ratio 0.56 0.40 0.39 0.38 Liquidity Broad NPL ratio 1.21 1.06 1.04 1.03 Won-denominated LDR ex-CDs (bank) 98.2 98.2 98.2 98.2 NPL coverage ratio 272.9 374.6 370.3 373.1 Loan/assets 58.9 63.1 63.8 64.5 Reserves/total credit 1.5 1.5 1.4 1.4 Capital adequacy Credit costs/total loans 0.39 0.34 0.35 0.35 Total CAR 15.7 17.0 17.5 18.1 Credit costs/total credit 0.41 0.36 0.36 0.36 Tier 1 CAR 14.4 15.8 16.6 17.3 Per share items (W) 2020 2021F 2022F 2023F Tier 2 CAR 1.4 1.2 1.0 0.8 EPS (reported) 6,906 7,685 7,873 8,101 Operating efficiency EPS (normalized) 6,906 7,685 7,873 8,101 Cost-to-income ratio 45.2 43.6 42.4 42.0 BPS 82,623 88,735 96,700 104,921 Cost-to-asset ratio 0.9 0.9 0.9 0.9 DPS (common) 1,500 2,000 2,150 2,350 Dividends PPOP/share 12,783 13,402 13,842 14,323 Dividend payout ratio 23.5 26.4 27.3 29.0 Source: Company data, Mirae Asset Securities Research estimates

Mirae Asset Securities Research 7 April 26, 2021 Shinhan Financial Group

Appendix 1

Important disclosures and disclaimers Two-year rating and TP history

Company Date Rating TP (W) (W) Shinhan Financial Group Shinhan Financial Group (055550) 04/23/21 Buy 49,000 80,000 04/14/21 Buy 48,000 12/29/20 Buy 41,000 60,000 10/28/20 Buy 37,000 10/16/20 Buy 35,500 40,000 09/07/20 Buy 37,000 20,000 07/20/20 Buy 39,000

03/17/20 Buy 41,000 0 Apr 19 Apr 20 Apr 21 01/22/20 Buy 54,000 10/22/19 Buy 57,000 12/04/18 Buy 60,000

Stock ratings Sector ratings Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months Sell Expected 12-month performance: -10% or worse

Rating and TP history: Share price (─), TP (▬), Not Rated ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell ( ◆) * Our investment rating is a guide to the expected return of the stock over the next 12 months. * Outside of the official ratings of Mirae Asset Securities Co., Ltd., analysts may call trading opportunities should technical or short-term material developments arise. * The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings. * TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Ratings distribution and investment banking services Buy Trading Buy Hold Sell Ratings distribution 79.00% 13.00% 7.00% 1.00% Investment banking services 63.16% 31.58% 5.26% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2021)

Disclosures As of the publication date, Mirae Asset Securities Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Shinhan Financial Group as an underlying asset; other than this, Mirae Asset Securities has no other special interests in the covered companies.

Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Securities Co., Ltd. (“Mirae Asset Securities”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Securities, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Securities except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Securities, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Securities makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws, and accounting principles, and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Securities or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person, and such person shall not be treated as a client of Mirae Asset Securities by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future

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returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Securities may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views, and analytical methods of the analysts who prepared them. Mirae Asset Securities may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Securities and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making, or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Securities. For further information regarding company-specific information as it pertains to the representations and disclosures in this Appendix 1, please contact [email protected] or +1 (212) 407-1000.

Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Securities is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Securities or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Securities. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This report is distributed in Hong Kong by Mirae Asset Securities (HK) Limited, which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. India: This report is being distributed by Mirae Asset Capital Markets (India) Private Limited (“MACM”) in India to the customers based in India and is personal information only for those authorised recipient(s). MACM is inter alia a Securities and Exchange Board of India (“SEBI”) registered Research Analyst in India and is not registered outside India. MACM and Mirae Asset, Korea are group entities. MACM makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. The user assumes the entire risk of any use made of this information. This report has been provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Recipient must read the entire Appendix 1 to the report carefully for Important Disclosures & Disclaimers. All other jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Securities or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Securities and its affiliates to any registration or licensing requirement within such jurisdiction.

Mirae Asset Securities Research 9 April 26, 2021 Shinhan Financial Group

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