Shinhan Financial : SFG FY2023 Audit Report (Separate)

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Financial Statements

December 31, 2023 and 2022

(With Independent Auditor's Report Thereon)

Contents

	Page
Independent Auditors' Report	1
Separate Statements of Financial Position	4
Separate Statements of Comprehensive Income	5
Separate Statements of Changes in Equity	6
Separate Statements of Cash Flows	7
Notes to the Separate Financial Statements	9
Independent Auditors' Report on Internal Control over Financial Reporting	76
ICFR Operating Status Report by CEO and IAM	78

152, Teheran-ro,Gangnam-gu, Seoul 06236

(Yeoksam-dong, Gangnam Finance Center 27th Floor)

Republic of Korea

Independent Auditors' Report

Based on a report originally issued in Korean

The Board of Directors and Stockholders

Shinhan Financial Group Co., Ltd.

Opinion

We have audited the separate financial statements of Shinhan Financial Group Co., Ltd. ("the Company"), which comprise the separate statement of financial position as of December 31, 2023, the separate statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of material 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 Company as of December 31, 2023, and its separate financial performance and its cash flows for the year then ended in accordance with Korean International Financial Reporting Standards ("KIFRS").

We have also audited, in accordance with Korean Standards on Auditing (KSAs), the Company's Internal Control over Financial Reporting ("ICFR") as of December 31, 2023 based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting issued by the Operating Committee of Internal Control over Financial Reporting in the Republic of Korea, and our report dated March 4, 2024 expressed an unmodified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

We conducted our audit in accordance with 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 Company 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.

Key Audit Matters

We have determined that there are no key audit matters to communicate in our report.

Other Matters

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.

The separate financial statements of the Company for the year ended December 31, 2022 were audited by another auditor in accordance with KSAs, and their report thereon, dated March 6, 2023, expressed an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements

Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of separate 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 Company'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 Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company'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 separate 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.
• 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 Company'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 Company 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 the internal controls that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors' report is Min-Seon Chae.

KPMG Samjong Accounting Corp.

Seoul, Korea

March 4, 2024

This report is effective as of March 4, 2024, 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.

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Statements of Financial Position

For the years ended December 31, 2023 and 2022

(In millions of won)	Note		2023	2022
Assets
Cash and due from banks at amortized cost	5, 6, 8, 33	W	22	2,187
Financial assets at fair value through profit or loss	5, 7, 33		1,985,760	1,778,475
Loans at amortized cost	5, 8, 33		4,051,004	4,009,467
Property and equipment	9, 11, 33		7,586	5,820
Intangible assets	10, 33		7,745	5,591
Investments in subsidiaries	12, 31		30,723,087	30,730,364
Net defined benefit assets	16		7,077	1,746
Deferred tax assets	29		-	18,311
Other assets	5, 8, 13, 33		507,274	904,353
Total assets		W	37,289,555	37,456,314

Liabilities
Borrowings	5, 14	223,722	20,000
Debt securities issued	5, 15, 33	10,389,276	9,815,457
Deferred tax liabilities	29	9,589	-
Other liabilities	5, 17, 33	567,827	944,308
Total liabilities		11,190,414	10,779,765
Equity	18
Capital stock		2,969,641	2,969,641
Hybrid bonds		4,001,731	4,196,968
Capital surplus		11,350,744	11,350,819
Capital adjustments		(148,464)	(46,114)
Accumulated other comprehensive loss		(6,642)	(5,210)
Retained earnings		7,932,131	8,210,445
Total equity		26,099,141	26,676,549
Total liabilities and equity	W	37,289,555	37,456,314

See accompanying notes to the separate financial statements.

4

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Statements of Comprehensive Income

For the years ended December 31, 2023 and 2022

(In millions of won, except earnings per share data)	Note		2023	2022
Interest income	28, 33
Financial assets at amortized cost		W	93,504	87,451
Interest expense	33		(286,642)	(222,413)
Net interest expense	20		(193,138)	(134,962)
Fees and commission income	28, 33		69,517	70,141
Fees and commission expense	33		(439)	(548)
Net fees and commission income	21		69,078	69,593
Dividend income	22, 28, 33		1,785,967	1,470,893
Net gain (loss) on financial assets at fair
value through profit or loss	24, 28		151,698	(102,228)
Net foreign currency transaction gain	28		27,525	46,983
	8, 23, 28,
Reversal of credit loss allowance	33		1,363	2,082
General and administrative expenses	25, 33		(135,853)	(134,923)
Operating income			1,706,640	1,217,438
Non-operating income (expense)	27		(7,223)	3,478
Profit before income taxes			1,699,417	1,220,916
Income tax expense (benefit)	29		28,406	(28,335)
Profit for the year			1,671,011	1,249,251
Other comprehensive income (loss) for the
year, net of income tax	16, 18		(1,432)	2,043
Items that will not be reclassified
subsequently to profit or loss:
Re-measurements of the defined benefit
asset			(1,432)	2,043
Total comprehensive income for the year		W	1,669,579	1,251,294
Basic and diluted earnings per
share in Korean won	30	W	2,853	2,060

See accompanying notes to the separate financial statements.

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SHINHAN FINANCIAL GROUP CO., LTD.

Separate Statements of Changes in Equity

For the years ended December 31, 2023 and 2022

					Accumulated
				Capital	other
(In millions of won)	Capital	Hybrid	Capital	adjust-	comprehe-	Retained	Total
stock	bonds	surplus	ments	nsive loss	earnings	equity
Balance at January 1, 2022	W2,969,641	3,334,531	11,350,819	(45,797)	(7,253)	8,803,435	26,405,376
Total comprehensive income
for the period:
Profit for the period	-	-	-	-	-	1,249,251	1,249,251
Other comprehensive income	-	-	-	-	2,043	-	2,043
	-	-	-	-	2,043	1,249,251	1,251,294
Transactions with owners:
Dividends	-	-	-	-	-	(747,705)	(747,705)
Interim dividends	-	-	-	-	-	(637,598)	(637,598)
Dividend to hybrid bonds	-	-	-	-	-	(156,277)	(156,277)
Repayments to hybrid bonds	-	(134,683)	-	(317)	-	-	(135,000)
Issuance of hybrid bonds	-	997,120	-	-	-	-	997,120
Acquisition of treasury	-	-	-	(300,600)	-	-	(300,600)
stock
Retirement of treasury stock	-	-	-	300,600	-	(300,661)	(61)
	-	862,437	-	(317)	-	(1,842,241)	(980,121)
Balance at December 31,
2022	W2,969,641	4,196,968	11,350,819	(46,114)	(5,210)	8,210,445	26,676,549
					Accumulated
				Capital	other
	Capital	Hybrid	Capital	adjust-	comprehe-	Retained	Total
	stock	bonds	surplus	ments	nsive loss	earnings	equity

Balance at January 1, 2023	W
Total comprehensive income
for the period:
Profit for the period
Other comprehensive income
Transactions with owners:
Dividends
Interim dividends
Dividend to hybrid bonds
Repayments to hybrid
bonds
Replacement of retained
earnings from hybrid
bond repayment losses
Issuance of hybrid bonds
Acquisition of treasury
stock
Retirement of treasury stock
Conversion of convertible
preferred stock into
common stock

2,969,641	4,196,968	11,350,819	(46,114)	(5,210)	8,210,445	26,676,549
-	-	-	-	-	1,671,011	1,671,011
-	-	-	-	(1,432)	-	(1,432)
-	-	-	-	(1,432)	1,671,011	1,669,579
-	-	-	-	-	(455,215)	(455,215)
-	-	-	-	-	(817,122)	(817,122)
-	-	-	-	-	(189,672)	(189,672)
-	(1,092,883)	-	(102,667)	-	-	(1,195,550)
-	-	-	317	-	(317)	-
-	897,646	-	-	-	-	897,646
-	-	-	(486,919)	-	-	(486,919)
-	-	-	486,919	-	(486,999)	(80)
-	-	(75)	-	-	-	(75)

	-	(195,237)	(75)	(102,350)	-	(1,949,325)	(2,246,987)
Balance at December 31,
2023	W2,969,641	4,001,731	11,350,744	(148,464)	(6,642)	7,932,131	26,099,141

See accompanying notes to the separate financial statements.

6

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Statements of Cash Flows

For the years ended December 31, 2023 and 2022

(In millions of won)	Note	2023	2022
Cash flows from operating activities
Profit for the period	W	1,671,011	1,249,251
Adjustments for:
Interest income	20	(93,504)	(87,451)
Interest expense	20	286,642	222,413
Dividend income	22	(1,785,967)	(1,470,893)
Corporate tax expense	29	28,406	(28,335)
Net profit or loss on financial instruments at fair value
through profit or loss	24	(99,802)	124,937
Reversal of credit loss allowance		(1,363)	(2,082)
Employee costs		7,012	5,636
Depreciation and amortization	25	4,066	3,226
Net foreign currency translation gain		(6,090)	(36,802)
Non-operating expense (income)		7,269	(4,832)
		(1,653,331)	(1,274,183)
Changes in assets and liabilities:
Due from banks		-	41,000
Financial instruments at fair value through profit or loss		196,722	122,223
Other assets		(522)	(460)
Net defined benefit assets		(5,508)	(2,839)
Other liabilities		(3,074)	3,255
		187,618	163,179
Interest received		88,680	85,308
Interest paid		(261,617)	(212,555)
Dividend received		1,783,758	1,470,400
Income tax paid		(640)	(3,487)
Net cash provided by operating activities		1,815,479	1,477,913
Cash flows from investing activities
Acquisition of financial instruments at fair value through
profit or loss		(300,000)	(400,000)
Lending of loans at amortized cost		(411,277)	(500,000)
Collection of loans at amortized cost		400,000	568,000
Acquisition of property and equipment		(2,770)	(3,360)
Acquisition of intangible assets		(1,489)	(144)
Increase in other assets		(525)	(1,229)
Decrease in other assets		1,202	990
Acquisition of investment in subsidiary		11	(374,126)
Disposal of investments in subsidiaries		-	20,354
Net cash used in investing activities	W	(314,848)	(689,515)

7

SHINHAN FINANCIAL GROUP CO., LTD.

Separate Statements of Cash Flows (Continued)

For the years ended December 31, 2023 and 2022

(In millions of won)	Note		2023	2022
Cash flows from financing activities
Issuance of hybrid bonds			897,646	997,120
Repayments of hybrid bonds			(1,195,550)	(135,000)
Issuance of debt securities			2,253,173	2,206,672
Repayments of debt securities			(1,709,626)	(2,036,000)
Increase in borrowings			371,713	20,000
Decrease in borrowings			(170,000)	-
Convertible preferred stock conversion cost			(75)	-
Dividends paid			(1,461,371)	(1,540,871)
Acquisition of treasury stock			(486,919)	(300,600)
Payment for disposal of treasury stock			(81)	(60)
Repayments of lease liabilities			(1,708)	(1,431)
Net cash outflow from financing activities			(1,502,798)	(790,170)
Effect on the exchange rate changes of cash
equivalents in foreign currency			-	(3)
Net decrease in cash and cash equivalents			(2,167)	(1,775)
Cash and cash equivalents at the beginning of year	32		2,186	3,961
Cash and cash equivalents at the end of year	32	W	19	2,186

See accompanying notes to the separate financial statements.

8