SHG: A Korean Banking Giant Trading at a Discount

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Shinhan Financial Group (NYSE: SHG) is one of South Korea’s largest banks - a dominant player in a highly concentrated market, with operations spanning retail banking, corporate lending, credit cards, asset management, and insurance. Yet despite its scale and profitability, SHG trades at valuations that look unusually cheap compared to global banking peers.

In this Weekend Watchlist, Cameron Reilly from QAV walks through SHG using the QAV (Quality at Value) methodology created by Tony Kynaston. QAV is a systematic, checklist driven approach to identifying undervalued companies with strong fundamentals, inspired by Warren Buffett and Charlie Munger.

SHG’s numbers stand out. The stock trades at a price to book ratio of around 0.85, meaning investors can buy the bank for less than the value of its assets. Its price to operating cash flow of ~3.26 suggests the business generates enough cash to repay its share price in just over three years. This is xceptionally low for a major financial institution. SHG also earns a QAV score of 0.24, placing it firmly in buy list territory.

But the story isn’t simple. SHG has faced multiple scandals, regulatory fines, and political turbulence. South Korea’s “Value Up” reforms, designed to push companies toward higher valuations, add another layer of intrigue.

For value investors, SHG is a compelling case study: a profitable bank, trading cheaply, in a complex market undergoing structural change.

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