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Shinhan Financial Group 07 July 2008

Update Report – 1Q 08 Results

Steady loan growth and integration of LG Card to support long term growth

Common BUY Fundamental research indicates a 27% upside in the common stock over the next 6–12 months. We
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Ticker: 055550.KS
Target price: KRW59,300 We reiterate the common stock a BUY on fundamental grounds, with a 6-12 month target price of
Current price: KRW46,7001 KRW59,300.

ADR BUY The ADR is expected to appreciate by approximately 85% over the next 6–12 months as the 27%
fundamental upside and approximately 57 percentage points’ upside attributable purely to the
anticipated appreciation of the Korean won against the US dollar over the same period is further
augmented by 1 percentage points upside attributable to a reduction in ADR discount2. We continue to
value the company over 6-12 months, as we anticipate a significant currency impact on the ADR in the
medium term3.
Ticker: SHG
Target price: US$162.86
We reiterate the ADR (1 ADR = 2 common shares) a BUY, with a 6-12 month target price of
Current price: US$88.061 US$162.91.

Supervisor: Somnath Banerjee

Analyst: Vishal Narnolia
Editor: Heloise Capon
Global Research Director:
Satish Betadpur, CFA
Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this
report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the
short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for
readers with a shorter trading horizon. These are available online only at www.researchoracle.com.

Next news due:

2Q 08 results, 31 July-04 August
2008
Report summary
Shinhan Financial Group’s (Shinhan) operating revenues witnessed significant growth in 1Q 08, above
our estimate, primarily due to robust growth in its interest, commission and insurance income. While
the bank’s Net Interest Income (NII) rose during 1Q 08, driven by loan portfolio expansion, its asset
quality deteriorated marginally on a q-o-q basis. However, the bank’s Non-performing Loan Ratio (NPL)
has improved on a y-o-y basis, signaling broad improvement in loan portfolio quality. Going forward, we
expect the complete integration of LG Card with Shinhan Card to lead to growth in the client base,
expansion in the company’s credit card operations and cross-selling opportunities. Overall, we believe
that the Shinhan common stock offers an attractive investment opportunity at current levels.

Currency impact for US investors

The impact by itself of the anticipated currency movements on the ADR (now US$88.06), without
considering changes in the share price, is positive and is expected to be:

Over 6 months: US$108.28

Over 12 months: US$126.42

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