Shinhan Financial Group will advance its plan to buy back and retire treasury shares worth 500 billion won originally scheduled for August by more than two months. A maximum of 1 trillion won in treasury share retirements is expected by the second half of the year.
According to the financial sector on the 25th, Shinhan Financial Group will retire approximately 500 billion won (10,347,131 shares) worth of treasury shares on the 26th.
Shinhan Financial Group decided in February to buy back and retire treasury shares worth 500 billion won and announced it would sequentially purchase the shares by August 6 this year. To enhance its swift shareholder return policy, Shinhan Financial Group has bought back treasury shares four times since February 25 and has brought the completion date forward by two months. On April 30, it also purchased 5.2 million shares (246.3 billion won) in a single transaction.
Including the amount from January this year, 650 billion won worth of Shinhan Financial Group’s circulating shares will disappear in the first half of the year. A reduction in circulating shares will have a positive effect on earnings per share (EPS) and book value per share (BPS). Reducing the number of circulating shares through buybacks and retirements is the key to enhancing Shinhan Financial Group's value.
Since Shinhan Financial Group has completed the planned treasury share retirements in the first half of the year, the market expects an additional buyback of treasury shares worth 300 billion to 385 billion won in the second half. When announcing its first-quarter business results, Shinhan Financial Group decided to raise its common equity tier 1 (CET1) capital ratio target from 13.0% to 13.1%.
The CET1 ratio is calculated by dividing common equity capital by risk-weighted assets (RWA), and a higher ratio indicates better capital soundness. Shinhan Financial Group's first-quarter CET1 ratio is 13.27%. Since it has already raised its target level, there are sufficient resources for additional shareholder returns. KB Financial Group and Hana Financial Group are using capital exceeding a CET1 ratio of 13% for shareholder returns.
The won-dollar exchange rate, which surpassed 1,500 won earlier this year, has recently stabilized around the mid-1,300 won range, creating expectations for an additional rise in the CET1 ratio. Generally, a decrease of 100 won in the exchange rate results in a 25 basis point (1 bp = 0.01 percentage point) increase in the CET1 ratio.
Including the expected amounts for the second half of the year, the total buyback and retirement of treasury shares for Shinhan Financial Group this year is projected to reach a maximum of 1.035 trillion won. Last year, Shinhan Financial Group reduced its circulating shares to below 500 million shares through treasury share buybacks and retirements. If the treasury share retirements in the first half are completed, the number of circulating shares is expected to decrease to 485 million shares. Shinhan Financial Group plans to reduce the number of circulating shares to 450 million shares by 2027. Additionally, it aims to achieve a total shareholder return rate of 50% through expanded dividends.