Shinhan Financial Group (055550 KS ) Continuing growth via M&A

Banks SFG to acquire 59.15% stake in Orange Life Insurance; positive in the medium/long term Company Report On September 5 th , Shinhan Financial Group (SFG) announced that it would acquire September 6, 2018 48,500,000 shares (59.15% stake) of Orange Life Insurance (formerly ING Life Insurance) for W2.29tr, or W47,400 per share. The purpose of the acquisition is to

strengthen non-bank operations, particularly the life insurance business, in light of Korea’s aging population. While the planned date of the acquisition has not been (Maintain) Buy confirmed, we think it will likely take place by the end of 1Q19. SFG issued hybrid securities worth W150bn (won) in April and another W963bn (won Target Price (12M, W) 59,000 and foreign currency combi ned) in August. The average financing rate was 5.02%. SFG’s double leverage ratio, a key indicator of the financial stability of financial holding Share Price (09/05/18, W) 42,450 companies, has fallen from 123% at end-2Q18 to 117% at end-August. Due to the latest acquisition, SFG’s doubl e leverage ratio will rise roughly 10%p to 128%, but this would Expected Return 39% still be below the 130% limit for Class 2 rating under the Management Status Evaluation scheme.

NP (18F, Wbn) 3,403 The W47,400 per share purchase price equates to a 2019F P/B of 1.0x (ROE of 9.6%) and 2019 F P/E of 10.5x (net profit growth of 5.2%) based on Bloomberg consensus Consensus NP (18F, Wbn) 3,231 estimates. We do not view this as a high purchase price, given that SFG is gaining a EPS Growth (18F, %) 16.6 controlling stake. Our 2019-20 forecasts for SFG’s net profit attributable to controlling Market EPS Growth (18F, %) 13.8 interests are W3.49tr and W3.68tr, respectively. Based on SFG’s 59.15% stake and P/E (18F, x) 5.9 Orange Life Insurance’s net profit forecasts, the acquisition would add W219.7bn and Market P/E (18F, x) 8.9 W231.6bn, respectively, to SFG’s 2019-20 net profit attributable to controlling interests, or 6.3% of our 2019-20 forecasts. Because the equity increase resulting from the KOSPI 2,291.77 hybrid securities issuance has been reflected while the earnings effects of the Market Cap (Wbn) 20,130 acquisition have not, SFG’s ROE may temporarily decline. However, once earnings Shares Outstanding (mn) 474 effects are reflected, we project SFG to deliver ROE of 10% in 2019 and 9.8% in 2020. Free Float (%) 85.8 W200bn share repurchase announced Foreign Ownership (%) 69.5 Beta (12M) 0.78 SFG additionally disclosed that it had signed a trust agreement for a W200bn share th th 52-Week Low 41,450 repurchase that will last from September 10 , 2018 to September 9 , 2019. While t he share repurchase—which is intended to enhance shareholder value—may not be 52-Week High 53,400 significant in size, it does underscore SFG’s efforts to boost its shareholder value. In (%) 1M 6M 12M the longer run, we think SFG could use its own shares to acquire the remaining sta ke Absolute -1.4 -6.0 -13.3 in Orange Life Insurance. Relative -1.6 -2.6 -12.0 Maintain Buy and TP of W59,000 120 Shinhan Financial Group KOSPI From a medium/long-term perspective, we are encouraged by SFG’s strategy to 110 enhance its profitability and growth by diversifying its business portfolio and 100 geographical presence in response to low interest rates, low growth, and population 90 aging. We maintain our Buy rating and target price of W59,000 on SFG, given its 80 earnings stability, robust risk management, compelling valuation, and attractive 70 dividend yields. 60 8.17 12.17 4.18 8.18

Mirae Asset Daewoo Co., Ltd. Fiscal year Ending 12/15 12/16 12/17 12/18F 12/19F 12/20F Net interest inc. (Wbn) 6,693 7,205 7,843 8,521 8,877 9,295 [ Banks/Credit card ] Net non-interest inc. (Wbn) 1,786 1,577 1,341 1,624 1,558 1,562 Operating profit (Wbn) 2,973 3,109 3,829 4,715 4,818 5,077 Heather Kang +822 -3774 -1903 Net profit (Wbn) 2,367 2,775 2,918 3,403 3,491 3,677 [email protected] EPS (W) 4,878 5,767 6,153 7,177 7,361 7,755

EPS growth (%) 13.7 18.2 6.7 16.6 2.6 5.3 P/E (x) 8.7 7.4 6.9 5.9 5.8 5.5 P/PPOP (x) 5.0 4.7 4.6 3.7 3.6 3.4

P/B (x) 0.67 0.65 0.61 0.56 0.52 0.49 ROE (%) 7.9 9.0 9.1 9.9 9.4 9.2 Dividend yield (%) 2.8 3.4 3.4 4.1 4.4 4.6 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

September 6, 2018 Shinhan Financial Group

Orange Life Insurance acquisition to strengthen non-bank, non-card businesses and support financial stability; downside to CET-1 ratio to be limited

On September 5th, SFG announced that it will acquire 48,500,000 shares (59.15% stake) of Orange Life Insurance (formerly ING Life Insurance) for W2.29tr, or W47,400 per share. The purpose of the acquisition is to strengthen non-bank operations, particularly the life insurance business, in light of Korea’s aging population.

SFG has relatively high exposure to the card business. In light of the current unfavorable regulatory conditions for the domestic card business, we are positive on the firm’s move to reduce its exposure to the banking and card businesses by beefing up its life insurance operations, which have so far had a relatively small contribution to company-wide profit.

While the planned date of the acquisition has not been confirmed, we think it will likely take place by the end of 1Q19.

SFG plans to take over Orange Life Insurance only with cash (without additional funding). SFG issued hybrid securities worth W150bn (won) in April and another W963bn (won and foreign currency combined) in August. The average financing rate was 5.02%. SFG’s double leverage ratio, a key indicator of the financial stability of financial holding companies, has fallen from 123% at end-2Q18 to 117% at end-August. Due to the latest acquisition, SFG’s double leverage ratio will rise roughly 10%p to 128%, but this would still be below the 130% limit for Class 2 rating under the Management Status Evaluation scheme.

The acquisition is projected to drive down SFG’s common equity capital (CET-1) ratio (which stands at 13.02%, as of end-2Q18) by 66bps. However, we estimate the actual CET-1 ratio reduction to be around 40-50bps, given that the firm’s CET-1 ratio is likely to continue to rise through the actual acquisition date (sometime in 1H19).

Table 1. Overview of SFG’s hybrid security issuance Annual interest expenses Issuance date Amount (Wbn) Interest rate (%) Maturity (dividends on hybrid securities) (Wbn) W 2015-06-25 199 4.38 2045-06-25 8.7 W 2017-09-15 135 3.77 - 5.1 W 2017-09-15 90 4.25 - 3.8 W 2018-04-13 135 4.08 - 5.5 W 2018-04-13 15 4.56 - 0.7 US$ 2018-08-13 563 5.875 - 33.1 W 2018-08-29 400 4.15 - 16.6 Note: For the aforementioned hybrid securities, SFG can opt for early redemption five or 10 years after the issuance, while the maturity can be extended based on the same terms; should the BOD agree not to pay dividends on common shares, interest on the securities will not be paid Source: SFG, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 2 September 6, 2018 Shinhan Financial Group

Table 2. Financial holding companies’ financial structure stability grade based on quantitative indicators 1st 2nd 3rd 4th 5th Debt ratio Below 30% Below 50% 50% and above 70% and above 100% and above Double leverage ratio Below 120% Below 130% 130% and above 150% and above 170% and above Source: FSS, Mirae Asset Daewoo Research

Table 3. SFG: Changes in financial stability indicators Post -hybrid securities Post - hybrid securities (Wbn) End-2Q18 issuance in Aug. issuance and M&A Combined value of shareholdings in subsidiaries 25,733 25,733 28,032 Total debt 7,982 7,982 7,982 Total shareholders’ equity ex. regulatory reserve for 20,960 21,923 21,923 loan loss Debt ratio (%) 38.1 36.4 36.4 Double leverage ratio (%) 122.8 117.4 127.9 Source: SFG, Mirae Asset Daewoo Research

Table 4. SFG: Expected change in CET1 ratio (based on end-2Q18 figures) (Wtr) CET1 as of end-2Q18 (a) 28.4 Risk-weighted asset as of 2Q18 (b) 218.1 CET1 ratio (a)/(b) (%) 13.02

CET1 x 10% ① 2.8 Investments in Shinhan Life Insurance/BNP Paribas Cardif ② 1.6 Benefits in capital adequacy ratio calculation (not to be subtracted from CET1) 1.2 ③=①-②

④ Orange Life Insurance acquisition value (59.15% stake) 2.3 Subtraction from CET1 ⑤=④-③ 1.1 Application of risk weight ⑥=③ x 250% 3.1

CET1 (A)=(a)-⑤ 27.3 Risk-weighted asset (B)=(b)+ ⑥ 221.2 CET 1 ratio (A)/(B) (%) 12.36

Change in CET 1 ratio (%p) -0.66 Source: SFG, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 3 September 6, 2018 Shinhan Financial Group

The W47,400 per share purchase price equates to a 2019F P/B of 1.0x (ROE of 9.6%) and 2019F P/E of 10.5x (net profit growth of 5.2%) based on Bloomberg consensus estimates. We do not view this as a high purchase price, given that SFG is gaining a controlling stake. Our 2019-20 forecasts for SFG’s net profit attributable to controlling interests are W3.49tr and W3.68tr, respectively. Based on SFG’s 59.15% stake and Orange Life Insurance’s net profit forecasts, the acquisition would add W219.7bn and W231.6bn, respectively, to SFG’s 2019-20 net profit attributable to controlling interests, or 6.3% of our 2019-20 forecasts.

Because the equity increase resulting from the hybrid securities issuance has been reflected while the earnings effects of the acquisition have not, SFG’s ROE may temporarily decline. However, once earnings effects are reflected, we project SFG to deliver ROE of 10.0% in 2019 and 9.8% in 2020.

Table 5. Valuation of Orange Life Insurance purchase price based on market consensus 2018F 2019F 2020F

Net profit (Wbn) 353.1 371.5 391.6 EPS (W) 4,306 4,530 4,776 BPS (W) 45,076 47,341 49,771 ROE (%) 9.6 9.6 9.8 ROA (%) 1.12 1.09 1.12

P/E (x) 11.0 10.5 9.9 P/B (x) 1.05 1.00 0.95 Source : Bloomberg, Mirae Asset Daewoo Research

Table 6. SFG’s net profit attributable to controlling interests and ROE: Pre- and post- acquisition 2018F 2019F 2020F

Pre-acquisition

SFG’s net profit attributable to controlling interests (Wbn) 3,403 3,491 3,677 SFG’s ROE (%) 9.9 9.4 9.2 Orange Life Insurance’s estimated net profit x 59.15% 208.9 219.7 231.6

Post-acquisition SFG’s net profit attributable to controlling interests (Wbn) 3,403 3,711 3,909 Change in SFG’s net profit attributable to controlling interests NA 6.3 6.3 SFG’s ROE (%) 9.9 10.0 9.8 Source: Bloomberg, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 September 6, 2018 Shinhan Financial Group

Table 7. Orange Life: Summary of financial position and income statement (Wbn) 2016A 2017A 1Q18A 2Q18A Investment assets 23,984 24,558 24,738 24,965 Cash and deposits 565 560 603 580 Financial assets at fair value through profit or loss 1 10 - - Available-for-sale securities 21,329 21,854 11,906 11,876 Held-to-maturity securities - - 9,811 10,093 Loans 2,089 2,134 2,418 2,416 Other assets 1,332 1,319 1,222 1,225 Separate account assets 5,353 5,578 5,465 5,348 Total assets 30,669 31,455 31,425 31,537 Policy reserves 19,878 21,166 21,348 21,688 Policyholders' equity adjustment 213 135 118 116 Other liabilities 1,018 837 927 743 Separate account liabilities 5,411 5,648 5,521 5,400 Total liabilities 26,521 27,787 27,915 27,947 Capital stock 82 82 82 82 Capital surplus 498 489 489 489 Retained earnings 1,766 1,882 1,831 1,926 Accumulated other comprehensive income 1,801 1,216 1,109 1,094 Total shareholders' equity 4,147 3,669 3,511 3,591

RBC (%) 319 455 441 438

(Wbn) 2016A 2017A 1Q18A 2Q18A Insurance operating results 795 744 36 187 Insurance operating revenues 3,520 3,268 822 855 Insurance operating expenses & claims 2,455 2,525 786 669 Investment operating results 852 863 228 243 Investment operating revenues 901 921 238 257 Investment operating expenses 49 58 10 14 Increase in policy reserves 1,419 1,285 181 339 Operating Income 228 321 82 91 Non-operating income (expenses) 87 131 38 38 Profit before tax 315 452 120 129 Income tax expenses 74 112 31 34 Net profit 241 340 89 95

ROE (%) 5.7 8.7 9.9 10.4 Source: Orange Life, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 September 6, 2018 Shinhan Financial Group

Figure 1. SFG: Earnings contribution by subsidiary in 1Q18 (before reflecting consolidation adjustments and other factors)

Shinhan Life Shinhan Capital, Others, 1.0% Insurance, 3.7% 2.8%

Shinhan Inv. Crop., 10.7%

Shinhan Card, 15.3% Bank, 66.5%

Net Income Ownership Net Income (Wbn) (a) (b) (a) x (b) % Bank 605.9 604.2 66.5 600.5 100 600.5 66.1 Jeju Bank 5.4 68.9 3.7 0.4 Non-bank 306.5 304.5 33.5 Shinhan Card 139.1 100 139.1 15.3 Shinhan Inv. Corp. 97 100 97.0 10.7 Shinhan Life Insurance 33.8 100 33.8 3.7 Shinhan BNPP AM 5.6 65 3.6 0.4 Shinhan Capital 25.8 100 25.8 2.8 Shinhan Savings Bank 4.1 100 4.1 0.5 Shinhan Data System -0.6 100 -0.6 -0.1 Shinhan AITAS 1.4 99.8 1.4 0.2 Shinhan Credit Info. 0.7 100 0.7 0.1 Shinhan Alternative Investment 0.1 100 0.1 0.0 Shinhan REITs Management -0.5 100 -0.5 -0.1 Total 912.4 908.8 100.0

Source: Company data, Mirae Asset Daewoo Research

Figure 2. SFG: Earnings contribution by subsidiary in 2Q18 (before reflecting consolidation adjustments and other factors)

Shinhan Life Shinhan Capital, Others, 1.1% Insurance, 3.7% 3.8%

Shinhan Inv. Corp., 8.7%

Shinhan Card, 14.4% Bank, 68.3%

Net Income Ownership Net Income (Wbn) (a) (b) (a) x (b) % Bank 677.7 675.7 68.3 Shinhan Bank 671.3 100 671.3 67.8 Jeju Bank 6.4 68.9 4.4 0.4 Non-Bank 315.1 314.1 31.7 Shinhan Card 142.8 100 142.8 14.4 Shinhan Inv. Corp. 85.8 100 85.8 8.7 Shinhan Life Insurance 36.2 100 36.2 3.7 Shinhan BNPP AM 2.9 65 1.9 0.2 Shinhan Capital 38 100 38.0 3.8 Shinhan Savings Bank 4 100 4.0 0.4 Shinhan Data System 0.7 100 0.7 0.1 Shinhan AITAS 2.3 99.8 2.3 0.2 Shinhan Credit Info. 0.7 100 0.7 0.1 Shinhan Alternative Investment 1 100 1.0 0.1 Shinhan REITs Management 0.7 100 0.7 0.1 Total 992.8 989.8 100.0 Source: Company data, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 6 September 6, 2018 Shinhan Financial Group

Shinhan Financial Group (055550 KS/Buy/TP: W59,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Year end 12 (Wbn) 12/17 12/18F 12/19F 12/20F Year end 12 (Wbn) 12/17 12/18F 12/19F 12/20F Interest income 11,799 13,425 14,299 14,974 Cash & dues 22,669 21,558 23,120 24,384 Interest expense 3,956 4,904 5,422 5,679 Securities 103,182 106,348 112,590 117,776 Net interest income 7,843 8,521 8,877 9,295 Net loans and receivables 275,566 289,335 303,594 317,955 Net fees and commissions 1,711 1,926 1,862 1,891 Tangible assets 3,440 7,285 7,264 7,251 Net other non-interest income -370 -302 -305 -329 Other assets 21,449 32,580 31,952 31,370 Total net operating income 9,184 10,146 10,435 10,857 Total assets 426,306 457,106 478,519 498,736 G&A expenses 4,811 4,683 4,765 4,851 Deposits 249,419 269,453 283,303 295,924 PPOP 4,373 5,463 5,670 6,006 Borrowings 27,587 29,445 30,360 31,018 Total provision expenses 544 747 852 929 Debentures 51,341 56,998 59,265 61,085 Operating profit 3,829 4,715 4,818 5,077 Other liabilities 64,256 64,549 66,269 68,579 Net non-operating income -32 20 44 44 Total liabilities 392,603 420,445 439,197 456,607 Income before income taxes 3,796 4,735 4,862 5,121 Capital stock 2,645 2,645 2,645 2,645 Income tax expense 848 1,300 1,337 1,408 Hybrid securities 424 1,537 1,537 1,537 Net profit 2,948 3,436 3,525 3,713 Capital surplus 9,887 9,887 9,887 9,887 Net profit (ex. minority interest) 2,918 3,403 3,491 3,677 Retained earnings 20,791 23,221 25,850 28,620 Normalized net profit 2,642 3,403 3,491 3,677 Capital adjustments -398 -597 -597 -597 Other comprehensive income -530 -755 -755 -755 Core income 9,554 10,448 10,740 11,186 Non-controlling interests 883 722 756 792 Core PPOP 4,743 5,765 5,975 6,335 Total shareholders' equity 33,703 36,661 39,323 42,129

DuPont analysis (%) Key ratios (%) Interest income 2.87 3.04 3.06 3.07 Growth (YoY) Interest expense 0.96 1.11 1.16 1.16 W loan growth (Bank) 5.9 5.2 5.0 4.7 Net interest income 1.91 1.93 1.90 1.90 Net loans & receivables growth 6.4 5.0 4.9 4.7 Net commissions income 0.42 0.44 0.40 0.39 Deposit growth 6.1 8.0 5.1 4.5 Net other non-interest income -0.09 -0.07 -0.07 -0.07 Shareholders' equity growth 6.2 8.8 7.3 7.1 Total net operating profit 2.24 2.30 2.23 2.22 Total assets growth 7.7 7.2 4.7 4.2 G&A expenses 1.17 1.06 1.02 0.99 Net interest income growth 8.8 8.6 4.2 4.7 PPOP 1.06 1.24 1.21 1.23 Net fee income growth 9.3 12.6 -3.3 1.5 Total provision expenses 0.13 0.17 0.18 0.19 PPOP growth 2.3 24.9 3.8 5.9 Net non-operating income -0.01 0.01 0.01 0.01 Operating profit growth 23.2 23.2 2.2 5.4 Income before income taxes 0.92 1.07 1.04 1.05 Net profit growth 5.2 16.6 2.6 5.3 Income tax expense 0.21 0.29 0.29 0.29 Profitability Net profit (non-controlling) 0.01 0.01 0.01 0.01 Net interest spread (Bank) 1.80 1.87 1.88 1.88 ROA 0.71 0.77 0.75 0.75 Net interest margin (Bank) 1.56 1.62 1.62 1.62 Leverage (x) 12.9 12.8 12.6 12.2 PPOP margin 1.1 1.2 1.2 1.2 ROE 9.13 9.90 9.37 9.20 ROA 0.7 0.8 0.7 0.8 Asset quality (%) ROE 9.1 9.9 9.4 9.2 NPL ratio 0.62 0.58 0.56 0.54 Liquidity Broad NPL ratio 1.52 1.42 1.40 1.37 W LDR (excl. CDs) (Bank) 99.2 97.2 97.2 97.2 NPL coverage ratio 259.6 278.4 279.8 285.2 Loans to assets 64.6 63.3 63.4 63.8 Reserves to total credits 1.6 1.6 1.6 1.5 Capital adequacy Credit cost (% of total loans) 0.20 0.26 0.28 0.29 Total CAR 14.8 15.4 15.7 16.0 Credit cost (% of total credit) 0.21 0.27 0.29 0.30 Tier 1 CAR 13.3 14.2 14.6 15.1 Per-share items (W) Tier 2 CAR 1.5 1.3 1.1 0.9 EPS (reported) 6,153 7,177 7,361 7,755 Operating efficiency EPS (normalized) 5,572 7,177 7,361 7,755 Cost to income 52.4 46.2 45.7 44.7 BVPS 69,210 75,787 81,330 87,173 Cost to assets 1.1 1.0 1.0 1.0 DPS (common share) 1,450 1,750 1,850 1,950 Dividend PPOP/ share 9,222 11,520 11,957 12,666 Payout ratio 23.6 24.1 24.9 24.9 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 7 September 6, 2018 Shinhan Financial Group

APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price (W) Shinhan Financial Group Shinhan Financial Group (055550) 07/05/2018 Buy 59,000 80,000 04/16/2018 Buy 63,500 02/08/2018 Buy 67,000 60,000 02/08/2018 Buy 63,500 02/04/2018 Buy 67,000 40,000 10/25/2017 Buy 64,500 20,000 07/21/2017 Buy 63,500

04/21/2017 Buy 61,000 0 04/13/2017 Buy 60,000 Sep 16 Sep 17 Sep 18 02/02/2017 Buy 59,000 01/02/2017 No Coverage 10/21/2016 Buy 57,000 01/25/2016 Buy 54,500

Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell ( ◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Equity Ratings Distribution & Services Buy Trading Buy Hold Sell Equity Ratings Distribution 73.40% 14.78% 11.82% 0.00% Investment Banking Services 77.42% 9.68% 12.90% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2018)

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Shinhan Financial Group as an underlying asset, and other than this, Mirae Asset Daewoo 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 Daewoo Co., Ltd. (“Mirae Asset Daewoo”) 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 Daewoo, 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 division. 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 Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the . 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 Daewoo 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 Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. Mirae Asset Daewoo Research 8 September 6, 2018 Shinhan Financial Group

This report is for general information purposes only and it 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 Daewoo 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 returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, 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 Daewoo 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 Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, 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 Daewoo 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 Daewoo.

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Mirae Asset Daewoo Research 9 September 6, 2018 Shinhan Financial Group

Mirae Asset Daewoo International Network

Mirae Asset Daewoo Co., Ltd. () Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. Global Equity Sales Team Suites 1109-1114, 11th Floor 41st Floor, Tower 42 Mirae Asset Center 1 Building Two International Finance Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 8 Finance Street, Central London EC2N 1HQ Korea Hong Kong United Kingdom China Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000

Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building Vila New York, NY 10019 Los Angeles, California 90071 Olimpia USA USA Sao Paulo - SP 04551-060 Brasil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52 -53 Jakarta Selatan Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City 12190 Vietnam Indonesia Tel: 62-21-515-3281 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building 100 Century Avenue, Pudong New Area Shanghai 91 Pasteur St. 200120 District 1, Ben Nghe Ward, Ho Chi Minh City China Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

Mirae Asset Daewoo Research 10