Shinhan Financial Group approved a 2,700 billion won subordinated bond issuance on July 23. The company plans to issue in the second half and may increase the scale to 4,000 billion won based on demand forecasting results. The stated purpose is to maintain a stable capital ratio through additional Tier 1 capital and enable flexible refinancing amid the interest rate hike cycle. This marks the second subordinated bond issuance this year for the Korean stocks company, following a 4,000 billion won offering in March.
Shinhan Financial Sets 2,700 Billion Won Base Issuance with 4,000 Billion Won Ceiling
Shinhan Financial held a board meeting on July 23 and resolved to issue 2,700 billion won in subordinated bonds. The issuance is scheduled for the second half, with exact timing and interest rates yet to be determined. The company established a framework to consider increasing the issuance to a maximum of 4,000 billion won depending on demand forecasting outcomes. According to financial industry sources on July 24, the company has not finalized specific use of proceeds, though it is currently examining merger and acquisition targets including Lotte Insurance.
BIS Capital Ratio Stands at 15.74% as of June End
Shinhan Financial's BIS capital ratio stood at 15.74% as of June end (provisional), down slightly from 15.94% at the end of last year. Subordinated bonds, while legally classified as debt, are recognized as additional Tier 1 capital for accounting purposes, providing an effect of improving the Bank for International Settlements capital adequacy ratio. The company stated capital ratio management as one objective for the issuance.
Company Official States Refinancing Focus with Flexible Timing Strategy
A Shinhan Financial official stated there is no particular issue requiring immediate funding. The official noted that if urgent funds were needed, the company would first consider issuing subordinated debt with relatively lower interest rates. The official added that while the issuance has a strong refinancing character, subordinated bonds are issued considering market conditions and do not always align with maturity schedules, making exact one-to-one matching difficult. Financial holding companies and banks commonly exercise call options on subordinated bonds five years after issuance and then issue new bonds for refinancing, but this is not unconditional. Companies flexibly manage funds according to market conditions, as corporate bonds and commercial paper maturities occur regularly and cash holdings can be utilized. Shinhan Financial previously issued 4,000 billion won in subordinated bonds in March for operating funds (2,700 billion won) and debt repayment (1,300 billion won).
FAQ
What did Shinhan Financial Group approve on July 23?
Shinhan Financial Group approved a 2,700 billion won subordinated bond issuance at a board meeting on July 23, with plans to potentially increase the scale to 4,000 billion won based on demand forecasting results and issue in the second half.
Why is Shinhan Financial issuing subordinated bonds?
The company stated the purpose is to maintain a stable capital ratio through additional Tier 1 capital and enable flexible refinancing amid the interest rate hike cycle, rather than addressing an immediate funding need.
What is Shinhan Financial's current BIS capital ratio?
Shinhan Financial's BIS capital ratio stood at 15.74% as of June end (provisional), down from 15.94% at the end of last year.
