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Global Top Cat

Our Favorite International Stocks

By Yiannis G. Mostrous, on Oct. 22, 2013

Shinhan Financial Group (Seoul: 055550, NYSE: SHG)

Source: Bloomberg

Shinhan Financial Group’s ADR has returned almost 27 percent since we first highlighted the stock in Banking on South Korea and remains one of our favorite financial picks in Asia.

One of the four largest financial institutions in South Korea after the acquisitions of Choheung Bank in 2003 and LG Card in 2007, the company has a foothold in every important product category and boasts a long track record of effective risk management. We expect these advantages to enable Shinhan Financial Group to take advantage of increasing loan demand from corporate and retail customers.

In the second quarter, Shinhan Financial Group was one of the few South Korea-based banks to post better-than expected earnings, thanks to its strong retail and credit card operations. Household credits account for 48 percent of the company’s domestic loan portfolio and the firm is the country’s largest credit card issuer (see graph), providing ample exposure to rising domestic consumption.

Source: Financial Supervisory Service

Although the stock’s value proposition has diminished since we first spotlighted the company, South Korea’s export-weighted economy should benefit significantly from an improving outlook for global trade. Shares of Shinhan Financial Group could enjoy further multiple expansion as South Korea’s economy picks up steam.

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