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Consolidated Financial Statements (Unaudited) June 30, 2004 (With Independent Accountants’ Review Report Thereon)

SHINHAN FINANCIAL GROUP CO., LTD.

AND SUBSIDIARIES

Independent Accountants’ Review Report

Based on a report originally issued in Korean To the Board of Directors and Stockholders Shinhan Financial Group Co., Ltd.: We have reviewed the consolidated balance sheet of Shinhan Financial Group Co., Ltd. (the “Company”) and its subsidiaries as of June 30, 2004, the related consolidated statements of earnings and cash flows for the quarters and six months ended June 30, 2004 and 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our review. We conducted our review in accordance with the Review Standards for Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. These Standards require that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data and, thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the consolidated financial statements referred to above are not presented fairly, in all material respects, in accordance with the Financial Accounting Standards, as established by accounting principles generally accepted in the Republic of Korea. The consolidated balance sheet of the Company as of December 31, 2003 and the related consolidated statements of earnings, appropriation of retained earnings and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated January 30, 2004, expressed an unqualified opinion. The accompanying consolidated balance sheet of the Company as of December 31, 2003, presented for comparative purposes, is not different from that audited by us in all material respects. The accompanying consolidated financial statements have been translated into United States dollars solely for the convenience of the reader, on the basis set forth in Note 2(b) to the consolidated financial statements.

KPMG Samjong Accounting Corp. P. O. Box KangNam 1989

Star Tower 10th fl., 737YeokSamDong, KangNam-gu Republic of Korea

Tel. 82-2-2112-0100 Fax. 82-2-2112-0101 www.kr.kpmg.com

KPMG Samjong Accounting Corp., a corporation established under Korean law,is a member of KPMG International, a Swiss association.

The following matters may be helpful to the readers in their understanding of the consolidated financial statements: As discussed in Note 2(a) to the consolidated financial statements, accounting principles and review standards and their application in practice vary among countries. The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying consolidated financial statements are for use by those knowledgeable about Korean accounting procedures and review standards and their application in practice. As described in Note 1(b) to the consolidated financial statements, on March 3, 2004, Shinhan Bank sold 10.2% (29,873,295 shares) of total outstanding shares in the Company at W627,339 million (W21,000 per share), through after-hour block trading. As described in Note 1(b) to the consolidated financial statements, the Company decided to acquire 18.85% of minority shares in Chohung Bank through tender offer and share exchange, at the Board of Directors’ Meeting held on April 12, 2004, and provided a tender offer for 3.77% of shares in Chohung Bank at W3,500 per share from April 26, 2004 to May 17, 2004. With respect to share exchange for 15.08% of shares in Chohung Bank, the shareholders, who were against the share exchange, were entitled for a right to sell their shares at W3,067 per share from May 25, 2004 to June 3, 2004, with the resolution of extraordinary shareholders’ meeting of Chohung Bank held on May 24, 2004, and the remaining shares were subject to share exchange, at the exchange ratio of 0.1354 share in the Company to each Chohung Bank share, on June 22, 2004. As a result, the Company’s percentage of ownership was increased to 100% and Chohung Bank became wholly owned subsidiary of the Company. Upon the acquisition of 66,363,126 shares in Chohung Bank from shareholders, who were against the share exchange, Chohung Bank became the shareholder of the Company, with 8,985,567 shares of common stock in the Company. As described in Note 1(b) to the consolidated financial statements, on April 29, 2004, the Company decided to acquire 49% of total outstanding shares in Shinhan Credit Information Co., Ltd. from LSH Holdings LLC. As a result, the Company’s percentage of ownership was increased to 100% and also, Shinhan Credit Information Co., Ltd. and Shinhan Macquarie Financial Advisory Co., Ltd. are included in the Company for consolidation as of June 30, 2004. As described in Note 27(i) to the consolidated financial statements, as of June 30, 2004, Shinhan Bank and Chohung Bank were holding loans (including securities and guarantees and acceptances) provided to SK Networks Co., Ltd., which has been controlled by creditor banks in accordance with the Corporate Restructuring Promotion Act of the Republic of Korea, amounting to W367,257 million and W306,031 million, respectively. As regards to those loans, Shinhan Bank and Chohung Bank provided W43,636 million and W42,319 million of allowance for loan losses, respectively, as of June 30, 2004. Actual losses on those loans might differ materially from management’s assessment. The accompanying consolidated financial statements do not reflect the impact of the uncertainty on the financial position of the Company and its subsidiaries. As described in Note 4 to the consolidated financial statements, as of June 30, 2004, Shinhan Bank and Chohung Bank were holding loans (including securities) provided to LG Card Co., Ltd., which has been controlled by creditor banks due to its liquidity crisis, in total amount of W273,517 million and W235,408 million, respectively. Actual losses on those loans might differ materially from management’s assessment. The accompanying consolidated financial statements do not reflect the impact of the uncertainty on the financial position of the Company and its subsidiaries. In addition, Shinhan Bank and Chohung Bank provided W81,000 million and W73,400 million of additional capital, respectively, for the six months ended June 30, 2004, and converted W121,650 million and W110,250 million of loans, respectively, to equity shares on July 28, 2004.

As described in Note 27(a) to the consolidated financial statements, on July 9, 2003, the Company made an agreement with the Korea Deposit Insurance Corporation (the “KDIC“) to acquire 80.04% (543,570,144 shares) of total outstanding shares in Chohung Bank. In accordance with the agreement, the Company purchased 266,349,371 shares in exchange for the Company’s shares on August 18, 2003 and 277,220,773 shares in cash on August 19, 2003. The acquisition of the shares was accounted for using the purchase method, and the acquisition cost of the shares and goodwill were W1,857,983 million and W840,244 million, respectively. Additionally, pursuant to the acquisition agreement, the Company would be required to pay contingent consideration to the KDIC at the maximum amount of W652,284 million related to Asset Indemnity Payment, W166,516 million related to General Indemnity Payment and additional Earn Out Payment based on earnings of Chohung Bank in future periods. These contingent considerations are not included in the acquisition cost on the date of acquisition, for the amount is not determinable. KPMG Samjong Accounting Corp. Seoul, Korea June 23, 2004

This report is effective as of July 23, 2004, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

Shinhan Financial Group Co., Ltd. and Subsidiaries

Consolidated Balance Sheets

June 30, 2004 and December 31, 2003

(In millions of Won and thousands of U.S. dollars, except share data)

(Unaudited)

Won U.S. dollars (note 2) 2004 2003 2004 2003

Assets Cash and due from bank (notes 4, 16, 17 and 18) W 5,978,830 6,418,280 $ 5,187,705 5,569,007 Securities (notes 5, 16 and 18) 28,810,010 28,003,660 24,997,840 24,298,186 Loans (notes 6, 18 and 28) 97,948,103 94,921,178 84,987,508 82,361,109 Fixed assets (notes 7, 16 and 17) 2,787,607 2,853,681 2,418,748 2,476,079 Other assets (notes 8, 9, 18 and 26) 11,693,655 7,012,593 10,146,338 6,084,679

W147,218,205 139,209,392 $ 127,738,139 120,789,060

Liabilities and Stockholders’ equity

Liabilities:

Deposits (notes 10 and 18) W 89,554,652 87,592,605 $ 77,704,687 76,002,260 Borrowings (notes 11 and 18) 17,686,607 17,209,576 15,346,297 14,932,387 Debentures (notes 12 and 18) 17,241,610 17,747,879 14,960,182 15,399,461 Retirement and severance benefits (note 13) 83,651 205,951 72,582 178,700 Other liabilities (notes 14, 18 and 26) 15,643,659 10,345,750 13,573,674 8,976,789

Total liabilities 140,210,179 133,101,761 121,657,422 115,489,597 Stockholders’ equity:

Capital stock of W 5,000 par value (note 19) 2,031,942 1,958,530 1,763,073 1,699,375 Common stock

Authorized - 1,000,000,000 shares Issued - 309,083,850 shares in 2004 294,401,300 shares in 2003

Preferred stock Issued - 97,304,564 shares

Consolidated capital surplus 3,332,441 3,200,805 2,891,489 2,777,271 Consolidated retained earnings 1,040,215 872,053 902,573 756,662 Consolidated capital adjustments (notes 20 and 21) 236,230 (519,362) 204,972 (450,639)Minority interest in consolidated subsidiaries 367,198 595,605 318,610 516,794

Total stockholders’ equity 7,008,026 6,107,631 6,080,717 5,299,463

Commitments and contingencies (note 27)

W147,218,205 139,209,392 $ 127,738,139 120,789,060

See accompanying notes to consolidated financial statements.


Consolidated Statements of Earnings

For the quarters and six months ended June 30, 2004 and 2003

(In millions of Won and thousands of U.S. dollars, except earnings per share)

(Unaudited)

Won U.S. dollars (note 2) Quarter ended

June 30, Six months ended

June 30,

Quarter ended

June 30,

Six monthsended

June 30, 2004 2003 2004 2003 2004 2003

Operating revenue:

Interest income:

Interest on due from banks W 9,254 15,344 22,714 32,494 $ 8,030 19,708 Interest on securities 300,531 233,912 637,376 485,084 260,765 553,038 Interest on loans 1,400,796 722,594 2,847,713 1,400,581 1,215,441 2,470,901 Other 11,897 4,098 17,720 7,182 10,323 15,375

1,722,478 975,948 3,525,523 1,925,341 1,494,559 3,059,022

Fees and commission income 495,234 264,718 977,007 480,625 429,704 847,728

Insurance income 4,757 495 11,327 685 4,127 9,828

Other operating income:

Dividends on securities 20,188 1,826 60,756 4,534 17,517 52,717 Realized gain from sale of trading securities 35,608 33,102 79,095 53,905 30,896 68,629 Unrealized gain on trading securities 60,355 17,281 111,316 15,729 52,369 96,586 Gain on foreign currency transactions 80,312 26,070 201,105 79,873 69,685 174,495 Gain on derivatives 532,808 144,972 1,245,168 405,963 462,306 1,080,406 Other 90,028 13,773 169,281 34,543 78,115 146,882

819,299 237,024 1,866,721 594,547 710,888 1,619,715

3,041,768 1,478,185 6,380,578 3,001,198 2,639,278 5,536,293

Operating expenses:

Interest expense:

Interest on deposits 640,055 360,759 1,317,315 724,429 555,362 1,143,007 Interest on borrowings 113,024 122,604 239,673 232,087 98,068 207,959 Interest on debentures 219,552 124,472 435,628 245,089 190,501 377,985 Other 7,090 3,685 21,324 8,821 6,152 18,502

979,721 611,520 2,013,940 1,210,426 850,083 1,747,453

Fees and commission expense 70,950 37,120 150,025 61,117 61,562 130,173

Insurance expense 8,823 1,597 16,833 2,654 7,655 14,606

Other operating expenses:

Realized loss from sale of trading securities 32,753 17,391 61,328 43,062 28,419 53,213 Unrealized loss on trading securities 55,133 8,807 93,512 11,664 47,838 81,138 Bad debt expense 371,134 330,467 853,478 483,737 322,025 740,545 Loss on derivatives 472,500 100,537 1,095,277 339,612 409,978 950,349 Loss on foreign currency transactions 56,190 37,134 168,314 73,005 48,755 146,043 General and administrative expenses

(note 22) 490,467 226,700 1,024,245 503,434 425,568 888,716

Other 84,854 51,786 171,882 92,611 73,626 149,138

1,563,031 772,822 3,468,036 1,547,125 1,356,209 3,009,142

2,622,525 1,423,059 5,648,834 2,821,322 2,275,509 4,901,374

Operating income 419,243 55,126 731,744 179,876 363,769 634,919


Consolidated Statements of Earnings, Continued


(In millions of Won and thousands of U.S. dollars, except earnings per share)

(Unaudited)



June 30,

Quarter ended

June 30,

Six monthsended

June 30, 2004 2003 2004 2003 2004 2003

Non-operating income (expense):

Realized gain from sale of available-for-sale securities, net 33,961 15,782 53,968 12,490 29,467 46,827

Gain (loss) from equity method 123 (379) 865 (378) 107 751 Loss from disposition of securities

accounted for by equity method - (166) - (166) - -

Impairment loss on available-for-sale securities (42,328) (7,749) (58,515) (18,388) (36,727) (50,772)

Reversal of impairment loss on available-for-sale securities 1,972 4,134 2,804 5,773 1,711 2,433

Gain from sale of loans, net 950 - 3,619 - 824 3,140 Other 11,101 36,469 (101,172) 26,716 9,632 (87,786)

5,779 48,091 (98,431) 26,047 5,014 (85,407)

Ordinary income 425,022 103,217 633,313 205,923 368,783 549,512

Extraordinary gain (loss) - - - - - -

Earnings before income taxes 425,022 103,217 633,313 205,923 368,783 549,512

Income taxes (note 23) 66,651 36,203 105,072 91,316 57,832 91,169

Net earnings before minority interest 358,371 67,014 528,241 114,607 310,951 458,343

Net income in minority interest 34,074 21,045 57,873 12,221 29,565 50,215

Consolidated net earnings W 324,297 45,969 470,368 102,386 $ 281,386 408,128 Ordinary income and net earnings per

share in Won and U.S. dollars (note 24) W 1,003 175 1,453 390 $ 0.87 1.26

Diluted ordinary income and net earnings

per share in Won and U.S. dollars (note 24)

W 881 - 1,279 - $ 0.76 1.11

See accompanying notes to consolidated financial statements


Consolidated Statements of Cash Flows


(In millions of Won and thousands of U.S. dollars)

(Unaudited)



June 30,

Quarter ended

June 30,

Six monthsended

June 30, 2004 2003 2004 2003 2004 2003

Cash flows from operating activities:

Net earnings W 324,297 45,970 470,368 102,386 281,386 408,128

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Depreciation expense 42,117 26,138 82,383 51,608 36,544 71,482 Amortization expense 20,925 5,801 41,938 11,461 18,156 36,389 Bad debt expense 371,134 330,467 853,478 483,737 322,025 740,545 Provision for retirement and severance benefits 15,024 9,442 45,516 30,902 13,036 39,493 Realized gain from sale of trading

securities, net (2,855) (15,711) (17,767) (10,843) (2,477) (15,416)

Unrealized gain on trading securities, net (5,222) (8,474) (17,804) (4,065) (4,531) (15,448)Realized gain from sale of available-for-

sale securities, net (33,961) (15,782) (53,968) (12,490) (29,467) (46,827)

Impairment loss on of available-for-sale securities 42,328 7,749 58,515 18,388 36,727 50,772

Reversal of impairment loss on securities (1,972) (4,134) (2,804) (5,773) (1,711) (2,433)Loss (gain) from equity method, net (124) 379 (865) 378 (108) (751)Loss on investment securities accounted

for by the equity method - 166 - 166 - -

Gain from sale of loans, net (950) - (3,619) - (824) (3,140)Loss (gain) on foreign currency

transactions, net (4,524) 10,504 (19,569) (6,561) (3,925) (16,980)

Gain on derivatives, net (41,004) (31,027) (127,547) (52,943) (35,579) (110,669)Stock compensation costs (1,479) 5,366 (782) 4,047 (1,283) (678) Net income in minority interest 34,074 21,045 57,873 12,221 29,565 50,215 Increase in trading securities (504,869) (582,396) (1,545,647) (654,233) (438,064) (1,341,125)Increase in other assets (1,180,571) (88,401) (4,224,554) (907,796) (1,024,356) (3,665,556)Increase(Decrease) in other liabilities 1,165,284 (309,568) 4,300,335 420,241 1,011,092 3,731,310 Retirement and severance benefits paid (2,655) (6,253) (253,942) (11,331) (2,304) (220,340)Decrease (increase) in deposit for

severance benefit insurance 80 1,543 77,796 (2,924) 69 67,502

Decrease in National Pension Fund 252 183 8,200 350 219 7,115 Other, net 24,166 (5,094) 40,087 6,377 20,968 34,782

Net cash provided by (used in) operating activities

259,495 (602,087) (232,379) (526,697) 225,158 (201,630)

Cash flows from investing activities:

Cash provided by investing activities:

Decrease in securities 5,530,793 4,467,510 7,644,167 7,442,332 4,798,953 6,632,683 Decrease in loans 1,490,694 676,076 1,648,848 955,320 1,293,443 1,430,671 Disposition of fixed assets 930 47,937 15,292 48,720 807 13,268 Decrease in other assets 94,398 122,361 483,276 227,361 81,907 419,328 Increase in other liabilities 251,547 - - - 218,262 - Transfer of business segment 1,181 - 1,181 - 1,025 1,025

7,369,543 5,313,884 9,792,764 8,673,733 6,394,397 8,496,975


Consolidated Statements of Cash Flows, Continued


(In millions of Won and thousands of U.S. dollars)

(Unaudited)



June 30,

Quarter ended

June 30,

Six monthsended

June 30, 2004 2003 2004 2003 2004 2003

Cash used in investing activities:

Increase in securities (4,969,749) (3,766,751) (6,639,705) (8,125,548) (4,312,146) (5,761,132)Increase in loans (2,681,113) (3,405,130) (5,634,365) (5,762,222) (2,326,345) (4,888,820)Purchases of fixed assets (35,316) (21,995) (65,808) (46,805) (30,643) (57,100)Increase in other assets (873,107) (283,778) (352,798) (265,646) (757,577) (306,116)Decrease in other liabilities - (99,500) (263,761) (140,317) - (228,860)

(8,559,285) (7,577,154) (12,956,437) (14,340,538) (7,426,711) (11,242,028)

Net cash used in investing activities

(1,189,742) (2,263,270) (3,163,673) (5,666,805) (1,032,314) (2,745,053)

Cash flows from financing activities:

Cash provided by financing activities:

Increase in deposits 2,522,915 1,144,182 2,473,870 3,745,122 2,189,080 2,146,525 Increase in borrowings 7,943,871 6,145,497 11,266,945 15,773,530 6,892,730 9,776,091 Increase in debentures 2,243,283 1,958,357 4,716,982 3,493,077 1,946,449 4,092,826 Increase in other liabilities 671,981 472,539 802,452 282,875 583,064 696,270 Disposition of treasury stock - - 619,497 - - 537,525

13,382,050 9,720,575 19,879,746 23,294,604 11,611,323 17,249,237

Cash used in financing activities:

Decrease in deposits - - (487,745) - - (423,206)Decrease in borrowings (10,013,326) (5,515,635) (10,786,109) (13,197,903) (8,688,353) (9,358,880)Decrease in debentures (2,792,998) (761,516) (5,076,338) (2,168,559) (2,423,425) (4,404,632)Payments of issuance cost

on debentures (2,024) (3,608) (90,931) (40,906) (1,756) (78,899)

Decrease in other liabilities (429,382) (903,794) (43,347) (494,130) (372,566) (37,611)Dividends paid (209,064) (127,549) (238,016) (158,078) (181,400) (206,521)Acquisition of treasury stock (203,536) - (203,536) (25) (176,604) (176,604)

(13,650,330) (7,312,102) (16,926,022) (16,059,601) (11,844,104) (14,686,353)

Net cash provided by (used in) financing activities (268,280) 2,408,473 2,953,724 7,235,003 (232,781) 2,562,884

Increase in cash and cash equivalents due to changes in consolidation scope 1,187 - 2,878 - 1,030 2,497

Net increase (decrease)

in cash and cash equivalents (1,197,340) (456,884) (439,450) 1,041,501 (1,038,907) (381,302)

Cash and cash equivalents at beginning of period 7,176,170 4,345,519 6,418,280 2,847,134 6,226,612 5,569,007

Cash and cash equivalents at end of period W 5,978,830 3,888,635 5,978,830 3,888,635 $ 5,187,705 5,187,705

See accompanying notes to consolidated financial statements.


Notes to Consolidated Financial Statements

June 30, 2004

(Unaudited)

(1) General Description on Consolidated Companies

Shinhan Financial Group Co., Ltd., the controlling company, and its subsidiaries included in consolidation or accounted for by the equity method are summarized as follows:

(a) Controlling Company

Shinhan Financial Group Co., Ltd. (the “Company”), was incorporated on September 1, 2001 by way of the transfer of all issued shares owned by shareholders of Shinhan Bank, Shinhan Securities Co., Ltd., Shinhan Capital Co., Ltd. and Shinhan BNP Paribas Investment Trust Management Co., Ltd. (formerly Shinhan Investment Trust Management Co., Ltd.) to the Company. The Company was formed for the purpose of providing management services and financing to subsidiaries with W1,461,721 million of initial capital stock and the Company’s shares were listed on the Korea Stock Exchange on September 10, 2001.

As of June 30, 2004, the Company has 23 subsidiaries, which are consolidated or accounted for by the equity method, and its capital stock amounts to W1,545,419 million in common stock and W486,523 million in preferred stock, respectively.

In addition, on September 16, 2003, the Company’s American depository shares were listed on the New York Stock Exchange.

(b) Subsidiaries included in Consolidation

a. Shinhan Bank

Shinhan Bank was established on September 15, 1981 under the bank act of the Republic of Korea to engage in commercial banking, trust and foreign exchange business and other related operations as permitted under the bank act and other relevant laws and regulations in the Republic of Korea. Its capital stock as of June 30, 2004 amounts to W1,224,034 million and it has 369 branch offices and 169 automated teller machine locations. Additionally, on March 3, 2004, Shinhan Bank sold 10.2% (29,873,295 shares) of total outstanding shares in the Company at W627,339 million (W21,000 per share), through after-hour block trading.

b. Chohung Bank

Chohung Bank was established on October 1, 1943 under the General Banking Act of the Republic of Korea through the merger of Han Sung Bank, which was established on February 19, 1897, and Dong Il Bank, which was established on August 8, 1906, to engage in commercial banking and trust operations. The shares of Chohung Bank were listed on the Korea Stock Exchange on June 3, 1956, and Chohung Bank operates through 450 domestic branches, 82 depositary offices and 6 overseas branches and its capital stock amounts to W3,595,592 million as of June 30, 2004.

On July 9, 2003, the Company made an agreement with the Korea Deposit Insurance Corporation (the “KDIC”) to acquire 80.04% (543,570,144 shares) of total outstanding shares in Chohung Bank. Additionally, the Company’s percentage of ownership increased to 81.15% through additional equity acquisition at W200,000 million on December 30, 2003.

Additionally, the Company decided to acquire 18.85% of minority shares in Chohung Bank through tender offer and share exchange, at the Board of Directors’ Meeting held on April 12, 2004, and provided a tender offer for 3.77% of shares in Chohung Bank at W3,500 per share from April 26, 2004 to May 17, 2004.

2


Notes to Consolidated Financial Statements, Continued

June 30, 2004

(Unaudited)

(1) General Description on Consolidated Companies, Continued

With respect to share exchange for 15.08% of shares in Chohung Bank, the shareholders, who were against the share exchange, were entitled for a right to sell their shares at W3,067 per share from May 25, 2004 to June 3, 2004, with the re solution of extraordinary shareholders’ meeting of Chohung Bank held on May 24, 2004, and the remaining shares were subject to share exchange, at the exchange ratio of 0.1354 share in the Company to each Chohung Bank share, on June 22, 2004. As a result, the Company’s percentage of ownership was increased to 100% and Chohung Bank became wholly owned subsidiary of the Company. Upon the acquisition of 66,363,126 shares in Chohung Bank from shareholders, who were against the share exchange, Chohung Bank became the shareholder of the Company, with 8,985,567 shares of common stock in the Company.

c. Goodmorning Shinhan Securities Co., Ltd.

Goodmorning Shinhan Securities Co., Ltd. ("Goodmorning Shinhan Securities") was incorporated on April 2, 1973 to engage in securities trading, underwriting and brokerage services. Its shares were listed on the Korea Stock Exchange on December 19, 1986. On June 18, 2002, the Company acquired a 29% share of Good Morning Securities Co., Ltd. from its largest shareholders and on July 31, 2002, Good Morning Securities Co., Ltd. was merged with Shinhan Securities Co., Ltd., which was one of subsidiaries of the Company, and renamed to Goodmorning Shinhan Securities. As of June 30, 2004, it operates through 79 branches and its capital stock amounts to W796,998 million (including W19,117 million of preferred stocks).

d. Shinhan Card Co., Ltd.

Shinhan Card Co., Ltd. (“Shinhan Card”) was established on June 1, 2002 under the Credit Specialty Finance Law through the spin-off of the credit card division of Shinhan Bank. Shinhan Card is engaged principally in credit card services, factoring, consumer loan and installment financing. As of June 30, 2004, Shinhan Card holds 2.88 million of franchise accounts and 2.31 million of credit card holders, and its capital stock amounts to W152,847 million.

e. Shinhan Capital Co., Ltd.

Shinhan Capital Co., Ltd. (“Shinhan Capital”) was incorporated on April 19, 1991 to engage in the leasing and rental business and it changed its name on May 27, 1999 from Shinhan Leasing Co., Ltd. to Shinhan Capital. Its capital stock as of June 30, 2004 amounts to W80,000 million.

f. Shinhan BNP Paribas Investment Trust Management Co., Ltd.

On August 1, 1996, Shinhan BNP Paribas Investment Trust Management Co., Ltd. (“Shinhan BNP Paribas ITMC”) was established and obtained a license to engage in the business of investment and trust of securities and advisory services under the Investment and Trust of Securities Law. Additionally, on October 24, 2002, the Company sold 3,999,999 shares (50% of total outstanding shares - 1 share) of Shinhan Investment Trust Management Co., Ltd., which has been renamed to Shinhan BNP Paribas ITMC, to BNP Paribas Asset Management Group. Its capital stock as of June 30, 2004 amounts to W40,000 million.

g. Jeju Bank

Jeju Bank was incorporated on March 18, 1969 under the General Banking Act of the Republic of Korea to engage in the commercial banking and trust business and listed its shares on the Korea Stock Exchange on December 28, 1972. On April 4, 2002, Jeju Bank became one of subsidiaries of the Company through acquiring a 51% share from the KDIC. Additionally, the Company’s percentage of ownership increased to 62% with the acquisition of additional common shares at W20,177 million on July 5, 2002 and its capital stock as of June 30, 2004 amounts to W77,644 million.

3



June 30, 2004

(Unaudited)


h. SH&C Life Insurance Co., Ltd.

SH&C Life Insurance Co., Ltd. (“SH&C Life Insurance”) was established in October 1, 2002 to engage in insurance business and other related business. Its capital stock as of June 30, 2004 amounts to W30,000 million.

i. Shinhan Macquarie Financial Advisory Co., Ltd.

Shinhan Macquarie Financial Advisory Co., Ltd. (“Shinhan Macquarie”) was incorporated on August 1, 2001 to engage in the business of financial advisory services and cross border leasing. Its capital stock as of June 30, 2004 amounts to W1,000 million.

j. Shinhan Credit Information Co., Ltd.

Shinhan Credit Information Co., Ltd. (“Shinhan Credit Information”) was established on July 8, 2002 to engage in the business of debt collection services and credit research. Its capital stock as of June 30, 2004 amounts to W3,000 million. On April 29, 2004, the Company decided to acquire 49% of total outstanding shares in Shinhan Credit Information from LSH Holdings LLC. As a result, the Company’s percentage of ownership was increased to 100% and Shinhan Credit Information will become wholly owned subsidiary of the Company.

k. Trust accounts of Shinhan, Chohung and Jeju Bank

Trust accounts in which Shinhan, Chohung and Jeju Bank guarantees repayment of principal and, in certain cases, minimum interest earnings are included in consolidation.

l. Shinhan Finance Ltd.

Shinhan Finance Ltd. (“Shinhan Finance”) was incorporated in November 1990 in Hong Kong as a wholesale bank and its capital stock as of June 30, 2004 amounts to US$ 55.6 million.

m. Chohung Investment Trust Management Co., Ltd.

Chohung Investment Trust Management Co., Ltd. (“Chohung ITMC) was established in 1988 and engages in securities management services and conducts surveys of the economic and capital markets. Its capital stock as of June 30, 2004 amounts to W45,000 million.

n. Chohung Finance Ltd.

Chohung Finance Ltd. (“Chohung Finance”) engages in merchant banking activities in Hong Kong. Its capital stock as of June 30, 2004 amounts to US$15,000 thousand.

o. CHB America Bank

CHB America Bank (“CHB America”) was established on March 24, 2003 through the merger of Chohung Bank of New York and California Chohung Bank. Its capital stock as of June 30, 2004 amounts to US$14,000 thousand.

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p. Chohung Bank (Deutschland) GmbH

Chohung Bank (Deutschland) GmbH (“Chohung Deutschland”) was established in 1994 and its capital stock as of June 30, 2004 amounts to EUR 15,339 thousand.

q. Good Morning Securities Europe Limited

Good Morning Securities Europe Limited (“Good Morning Europe”) was established in 1991 and has been providing securities trading, underwriting and derivative brokerage services in Europe under the Securities and Futures Authority (SFA) of UK. Its capital stock as of June 30, 2004 amounts to GBP 5,000 thousand.

r. Good Morning Securities USA Inc.

Good Morning Securities USA Inc. (“Good Morning USA”) was established in 1993 and has been providing securities trading, underwriting and derivative brokerage services under the Federal Securities Act of USA. Its capital stock as of June 30, 2004 amounts to US$4,200 thousand.

Ownerships between the Company and its subsidiaries included in consolidation as of June 30, 2004 and December 31, 2003 are as follows:

2004 2003

Investor Investee Number of shares

Ownership (%) Number of

shares Ownership

(%) The Company Shinhan Bank 244,806,782 100.0 244,806,782 100.0

〃 Chohung Bank 719,118,429 100.0 583,570,144 81.2

〃 Goodmorning Shinhan Securities 94,084,384 (*) 59.4 94,084,384 (*) 59.4

〃 Shinhan Card 30,569,400 100.0 30,569,400 100.0〃 Shinhan Capital 16,000,000 100.0 16,000,000 100.0〃 Shinhan BNPP ITMC 4,000,001 50.0 4,000,001 50.0〃 Jeju Bank 9,692,369 62.4 9,692,369 62.4〃 SH&C Life Insurance 3,000,001 50.0 3,000,001 50.0 Shinhan Macquarie (***) 102,000 51.0 - -〃 Shinhan Credit Information (***) 306,000 51.0 - -

Shinhan Bank The Company - (**) - 29,873,359 (**) 10.2〃 Shinhan Finance 55,600 100 55,600 100.0

Chohung Bank The Company 8,985,567 2.9 - -〃 Chohung ITMC 7,179,678 79.8 7,179,678 79.8〃 Chohung Finance 149,999 100.0 149,999 100.0〃 CHB America 400,000 100.0 400,000 100.0〃 Chohung Deutschland - 100.0 - 100.0

Goodmorning Shinhan Securities Good Morning Europe 5,000,000 100.0 5,000,000 100.0

〃 Good Morning USA 15,000 100.0 15,000 100.0

(*) 1,047,213 shares of treasury stock were considered.

(**) Preferred stocks were excluded and 10.2% (29,873,295 shares) of shares in the Company were sold at W627,339 million (W21,000 per share) on March 3, 2004 through after-hour block trading.

(***) Those subsidiaries are included in the Company for consolidation as of June 30, 2004.

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(c) Subsidiaries accounted for by the Equity Method a. e-Shinhan Inc.

e-Shinhan Inc. (“e-Shinhan”) was incorporated on February 21, 2001 to engage in the business of internet brokerage service and comprehensive management services on customer accounts. Its capital stock as of June 30, 2004 amounts to W2,820 million.

b. Shinhan Data System Co., Ltd. (Formerly Shinhan System Co. Ltd.)

Shinhan Data System Co., Ltd. (“Shinhan Data System”) was incorporated in May 1991 to engage in computer services and its capital stock as of June 30, 2004 amounts to W1,000 million.

c. Chohung Vina Bank

Chohung Vina Bank (“Chohung Vina”) engages in banking activities in Vietnam. Its capital stock as of June 30, 2004 amounts to US$20,000 thousand, in which Chohung Bank owns 50%.

Ownerships in subsidiaries accounted for by the equity method of accounting as of June 30, 2004 and December 31, 2003 is as follows:

2004 2003

Investor Investee (equity method) Number of

shares Ownership

(%) Number of

shares Ownership

(%)

Reason for

exclusion from the scope of consolidation

The Company e-Shinhan 415,495 73.7 415,495 73.7 Asset underW 7 billion

〃 Shinhan Macquarie (*) - - 102,000 51.0 〃〃 Shinhan Credit Information (*) - - 306,000 51.0 〃

Shinhan Bank Shinhan Data System 200,000 100.0 200,000 100.0 〃

Chohung Bank Chohung Vina - 50.0 - 50.0 Absence of control

(*) Those subsidiaries are included in the Company for consolidation as of June 30, 2004.

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(2) Basis of Financial Statements Presentation and Summary of Significant Accounting Policies

(a) Basis of Financial Statements Presentation

The Company maintains its accounting records in Korean Won and prepares statutory consolidated financial statements in the Korean language (Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these consolidated financial statements are intended for use only by those who are informed about Korean accounting principles and practices. The accompanying consolidated financial statements have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language financial statements.

(b) Basis of Financial Statements Translation

The consolidated financial statements are expressed in Korean Won and, solely for the convenience of the reader, have been translated into U.S. dollars at the rate of W1,152.50 to US$1, the basic exchange rate on June 30, 2004. These translations should not be construed as a representation that any or all of the amounts shown could be converted into U.S. dollars at this or any other rate.

(c) Investments in Securities

Debt and equity securities should be classified into one of the three categories of held-to-maturity, available-for-sale, or trading securities at the time of acquisition and such determination should be reassessed at each balance sheet date. Investments in debt securities that the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) are classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are generally used to generate profit on short-term differences in price. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities.

Trading securities are carried at fair value, with unrealized holding gains and losses included in earnings. Available-for-sale securities are carried at fair value, with unrealized holding gains and losses reported as a capital adjustment. Investments in equity that do not have readily determinable fair values are stated at cost. Declines in value judged to be other-than-temporary on available-for-sale securities are charged to current results of operations. Investments in debt securities that are classified into held-to-maturity are reported at amortized cost at the balance sheet date and such amortization is included in interest income.

Marketable securities are at the quoted market prices as of the period end. Non-marketable debt securities are recorded at the fair values derived from the discounted cash flows by using an interest rate deemed to approximate the market interest rate. The market interest rate is determined by the issuers’ credit rate announced by the accredited credit rating agencies in Korea. Money market funds are recorded at the fair value determined by the investment management companies.

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(2) Basis of Financial Statements Presentation and Summary of Significant Accounting Policies, Continued

(d) Investment Securities Accounted for by the Equity Method

Investments in affiliated companies with the Company’s ownership of 20% or more or over which the Company has significant management control are stated at an amount as determined using the equity method.

Under the equity method of accounting, the Company’s initial investment is recorded at cost and is subsequently increased to reflect the Company’s share of the investee income and reduced to reflect the Company’s share of the investee losses or dividends received. Any excess in the Company’s acquisition cost over the Company’s share of the investee’s identifiable net assets is generally recorded as goodwill or other intangibles and amortized by the straight-line method over the estimated useful life. Goodwill (negative goodwill) is amortized over a reasonable period, generally less than 20 years. When events or circumstances indicate that carrying amount may not be recoverable, the Company reviews goodwill for any impairment. Under the equity method of accounting, the Company does not record its share of losses of affiliate companies when such losses would make the Company’s investment in such entity less than zero.

In case of translating financial statements denominated in foreign currencies, where the balances are determined by the equity method, assets and liabilities are translated at current rate as of the balance sheet date and capital accounts at historical rate. Any differences resulting from such foreign currency translation are accounted for as valuation gains (losses) under the equity method, a component of capital adjustments in the stockholder’s equity.

(e) Allowance for Loan Losses

The Company establishes the credit risk-rating model, which considers the borrowers’ capacity to repay and credit risk (“Forward Looking Criteria: FLC”) in classifying its corporate loans and making provisions for loan losses, while household loans and credit card loans are classified by considering current financial status including delinquency period, bankruptcies and collaterals value.

(f) Troubled Loans Structuring

The Company adopted Statements of Korea Accounting Standards (“SKAS”) No. 13, “Troubled Debt Structuring”, effective from the first fiscal year beginning after December 31, 2003. In accordance with SKAS No. 13, a loan which contractual terms are modified in a troubled debt structuring program is accounted for at present value of future cash flows in the modified contract discounted using the effective interest rate in the original contract. If the present value differs from the face value of the loans, the difference is recorded as an allowance for loan losses or provision for loan losses in the current period if additional allowances need to be provided for.

Additionally, a loan, which is to be payable through transfer of assets or issuance of equity interest by debtors, is recorded at the lower of fair value of assets transferred or equity issued or nominal value of restructured loans, and the differences are recorded as an allowance for loan losses or provision for loan losses in the current period if additional allowances need to be provided for.

Unamortized present value discounts as of the beginning of the current period are reclassified to allowance for loan losses pursuant to the SKAS No. 13.

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(g) Fixed Assets

i) Tangible Assets

Tangible assets are stated at cost, except for the case of revaluation made in accordance with the Asset Revaluation Law. Significant additions or improvements extending value or useful lives of assets are capitalized, while normal maintenance and repairs are charged to expense when incurred. Depreciation is computed using the declining-balance method, except straight-line method for building and leasehold improvement, over estimated useful lives of the related assets

ii) Intangible Assets

Intangible assets are stated at acquisition cost less amortization computed using the straight-line method over useful lives of related intangible assets.

(h) Discount on Debentures

Discount on debenture issued, which represents the difference between the face value and issuance price of debentures, is amortized using the effective interest method over the life of the debentures. The amount amortized is included in interest expense.

(i) Retirement and Severance Benefits

Employees who have been with the Company for more than one year are entitled to lump-sum payments based on current rates of pay and length of service when they leave the Company. The Company's estimated liability under the plan which would be payable if all employees left on the balance sheet date is accrued in the accompanying balance sheets. A portion of the liability is covered by an employees’ severance pay insurance where the employees have a vested interest in the deposit with the insurance companies. The deposits for retirement insurance is, therefore, reflected in the accompanying balance sheet as a deduction from the liability for retirement and severance benefits.

Under the National Pension Scheme of Korea, the Company transferred a certain portion of retirement allowances of employees to the National Pension Fund. The amount transferred will reduce the retirement and severance benefit amount to be payable to the employees when they leave the Company and is accordingly reflected in the accompanying financial statements as a reduction from the retirement and severance benefit liability.

(j) Allowance for Guarantees and Acceptances

The Company provides an allowance for losses on guarantees and acceptances, which are classified as substandard, doubtful and estimated loss using the same method as that used to provide for losses on its corporate loans.

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(k) Income Taxes

Income tax on the earnings or loss for the year comprises current and deferred tax. Income tax is recognized in the statement of earnings except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity. Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable earnings will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(l) Translation of Foreign Currency Denominated Assets and Liabilities

Assets and liabilities denominated in foreign currencies are translated into Korean Won at the balance sheet date, with the resulting gains and losses recognized in current results of operations. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at W1,152.50 and W1,197.80 to US$1, the rate of exchange on June 30, 2004 and December 31, 2003, respectively, that is permitted by the Financial Accounting Standards. Financial statements of overseas branches are also translated into Korean Won at the above base rates on the balance sheet dates.

(m) Derivatives

Derivative instruments are presented as assets or liabilities valued principally at the fair value of rights or obligations associated with the derivative contracts. The unrealized gain or loss from derivative transactions is recognized in current operations.

However, for derivative instruments for the purpose of hedging the exposure to the variability of cash flows of a forecasted transaction, the hedge-effective portion of the derivative’s gain or loss is deferred as a capital adjustment, a component of stockholder’s equity. The ineffective portion of the gain or loss is charged or credited to current results of operations.

(n) Stock Options

The stock option program allows the Company’s employees to acquire shares of the Company or to be compensated for the market price difference. In case of stock grant type, the Company values stock options based upon an option pricing model under the fair value method and recognizes this value as an expense and a capital adjustment over the period in which the options vest. In case of price compensation type, the Company recognizes the compensation expense as an expense and a liability over the period in which the options vest.

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(o) Accounting for Leases and Rentals

The Company accounts for and classifies its lease transactions as either the operating or capital lease, depending on the terms of the lease under the Korean Lease Accounting Standards. If a lease is substantially noncancellable and meets one or more of the criteria listed below, the present value of future minimum lease payments is reflected as an obligation under capital lease. Otherwise, it is classified as an operating lease with lease payments expensed as incurred.

- Ownership of the leased property shall be transferred to the lessee at the end of the lease term without additional payment or for a contract price.

- The lease has a bargain purchase option.

- The lease term is equal to 75% or more of the estimated economic useful life of the leased property.

- The present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

In case of capital leases, the portion originated from principal is accounted for as collections of outstanding receivables and the remaining interest income is accounted for as revenue in the current period. Revenue from operating leases is recognized on a straight-line basis over the lease term.

All costs and charges incurred in connection with acquiring lease assets by inception date of the lease are recorded as advance payments on operating lease assets or capital lease receivables.

Additionally, depreciation of assets for operating leases is computed using the straight-line method over the economic useful lives (or lease terms if contracted before April 1, 1998).

(p) Interest Income Recognition

Interest income on loans is recognized on the accrual basis, except for interest income on loans having overdue interest and principal and loans to customers who are bankrupt.

(q) Contingent Liabilities

Contingent losses are generally recognized as a liability when probable and reasonably estimable.

(r) Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the Republic of Korea requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to financial statements. Actual results could differ from those estimates.

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(3) Standards applied for Preparing Consolidated Financial Statements

(a) The investment account of the Controlling Company is offset against the stockholders’ equity account of each subsidiary as of the date of acquisition.

(b) The Company records differences between the cost of investment accounts and the corresponding fair

value of subsidiaries’ net assets at the time of acquisition as goodwill (negative goodwill) and those are amortized over certain periods, which are less than 20 years.

(c) All significant inter-company transactions and account balances among the consolidated companies have

been fully eliminated in consolidation. (d) With respect to same borrowers’ loans with same credit risk, allowance for loan losses accounts are

maintained on the same with subsidiaries in consolidation. As results, additional allowance for loan losses of Chohung Bank and Jeju Bank, amounts to W33,533 million as of June 30, 2004.

(4) Cash and Due from Banks

(a) Cash and due from banks as of June 30, 2004 and December 31, 2003 consist of the following:

(in millions of Won and thousands of U.S. dollars)

Won U.S. dollars (Note 2) 2004 2003 2004 2003

Cash on hand in Won W 1,913,859 1,742,777 $ 1,660,615 1,512,171Cash on hand in foreign currencies 162,355 165,006 140,872 143,172

2,076,214 1,907,783 1,801,487 1,655,343

Due from banks in Won 3,112,738 4,119,983 2,700,857 3,574,823Due from banks in foreign currencies 789,878 390,514 685,361 338,841

3,902,616 4,510,497 3,386,218 3,913,664

W 5,978,830 6,418,280 $ 5,187,705 5,569,007

(b) Restricted due from banks as of June 30, 2004 and December 31, 2003 are as follows:

(in millions of Won)

2004 2003 Restrictions Due from banks in Won:

Reserve deposits in the Bank of Korea W 2,102,401 2,407,044 General banking act Due from banks for customers' accounts 715,048 1,038,745 Reserve for customers’ deposits

Other 83,399 157,037 Deposit for severance benefit insurance and other

2,900,848 3,602,826

Due from banks in foreign currencies 284,132 72,833 Pledged for contract performance

W 3,184,980 3,675,659

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(4) Cash and Due from Banks, Continued

(c) The maturities of the due from banks by remaining period as of June 30, 2004 and December 31, 2003 are as follows:


At June 30, 2004 Due from banks in Won

Due from banks in foreign currencies Total

Due in 3 months or less W 883,874 771,640 1,655,514Due after 3 months through 6 months 57,006 9,118 66,124Due in 12 months 46,561 1,326 47,887Due in 3 years 1,302 1,083 2,385Thereafter 2,123,995 6,711 2,130,706

W 3,112,738 789,878 3,902,616


At December 31, 2003 Due from banks in Won

Due from banks in foreign currencies Total

Due in 3 months or less W 1,482,708 366,364 1,849,072Due after 3 months through 6 months 40,254 11,990 52,244Due in 12 months 38,335 3,371 41,706Due in 3 years - - -Thereafter 2,558,686 8,789 2,567,475

W 4,119,983 390,514 4,510,497

(5) Securities

Securities as of June 30, 2004 and December 31, 2003 consist of the following:



Trading securities W 6,424,939 4,876,614 $ 5,574,786 4,231,335Available-for-sale securities 18,630,445 19,443,355 16,165,244 16,870,590Held-to-maturity securities 3,738,356 3,664,060 3,243,693 3,179,228Investment securities accounted for

by the equity method 16,270 19,631 14,117 17,033

W 28,810,010 28,003,660 $ 24,997,840 24,298,186

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June 30, 2004

(Unaudited)

(5) Securities, Continued

(a) Trading securities

i) Trading securities as of June 30, 2004 and December 31, 2003 consist of the following:



Equity securities:

Stocks W 136,303 188,922 $ 118,267 163,924

Debt securities:

Government bonds 2,536,303 1,712,070 2,200,697 1,485,527Finance debentures 1,404,247 1,656,756 1,218,436 1,437,532Corporate bonds 1,493,254 996,699 1,295,666 864,815

5,433,804 4,365,525 4,714,799 3,787,874

Beneficiary certificates 81,726 57,446 70,912 49,845Commercial paper 381,478 59,579 331,000 51,695Securities in foreign currencies 30,422 1,330 26,397 1,154Other 361,206 203,812 313,411 176,843

W 6,424,939 4,876,614 $ 5,574,786 4,231,335

ii) Details of debt securities classified as trading securities as of June 30, 2004 and December 31, 2003 are as follows:


2004 Face value Acquisition cost Fair value (*) Book value (**)

Government bonds W 2,538,849 2,537,114 2,555,458 2,536,303Finance debentures 1,425,813 1,178,659 1,406,665 1,404,247Corporate bonds 1,473,344 1,490,344 1,497,795 1,493,254

W 5,438,006 5,206,117 5,459,918 5,433,804


2003 Face value Acquisition cost Fair value (*) Book value (**)

Government bonds W 1,730,282 1,716,317 1,723,726 1,712,070Finance debentures 1,696,152 1,671,623 1,677,283 1,656,756Corporate bonds 991,446 1,005,953 999,576 996,699

W 4,417,880 4,393,893 4,400,585 4,365,525

(*) Debt securities are recorded at fair value using the market yield of bonds provided by the bondcredit rating and pricing associations.

(**) The difference between fair value and book value is recorded as accrued income.

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June 30, 2004

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(b) Available-for-sale securities

i) Available-for-sale securities as of June 30, 2004 and December 31, 2003 consist of the following:



Equity securities:

Stocks W 1,596,090 1,123,476 $ 1,384,894 974,816Investment in special fund 24,327 64,489 21,108 55,956

1,620,417 1,187,965 1,406,002 1,030,772

Debt securities:

Government bonds 2,748,346 2,575,282 2,384,682 2,234,518Finance debentures 3,709,361 4,625,283 3,218,534 4,013,261Corporate bonds 6,223,111 6,481,937 5,399,662 5,624,240

12,680,818 13,682,502 11,002,878 11,872,019

Beneficiary certificates 2,544,645 2,525,018 2,207,935 2,190,905Securities in foreign currencies 1,345,906 1,415,713 1,167,814 1,228,384Other 438,659 632,157 380,615 548,510

W 18,630,445 19,443,355 $ 16,165,244 16,870,590

ii) Details of debt securities classified as available-for-sale securities as of June 30, 2004 and December 31, 2003 are as follows:


2004 Face value Acquisition cost Fair value(*) Book value(**)


W 12,866,572 12,642,396 12,850,115 12,680,818


2003 Face value Acquisition cost Fair value(*) Book value(**)


W 13,917,227 13,618,066 13,842,138 13,682,502


(**) The difference between fair value and book value is recorded as accrued income.

15



June 30, 2004

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iii) Equity securities classified as available-for-sale securities as of June 30, 2004 and December 31, 2003 are as follows:


2004

Ownership (%) Acquisition

cost Net asset or fair value

Book value

Stock:

SK Telecom Co., Ltd. 0.10 W 13,556 15,752 15,752SK Networks Co., Ltd. 8.22 70,792 95,139 95,139SK Networks Co., Ltd. (Preferred shares) 0.87 74,895 87,546 87,546LG Card Co., Ltd. 4.46 20,228 2,017 2,017Hyundai Engineering and Construction Co., Ltd. 6.91 76,185 48,470 48,470Hynix Semiconductor Inc. 10.24 177,208 574,549 576,600Ssang Yong Motors Co., Ltd. 10.31 80,758 97,379 97,379Samyang Foods Co., Ltd. 44.82 4,918 4,822 4,822Feel Max Co., Ltd. 12.00 3,000 3,393 3,000Shinho Paper Manufacturing Co., Ltd. 0.53 2,345 301 301NamSun Co., Ltd. 4.87 3,195 694 694Daewoo Electronics Corp. 4.00 5,186 10,126 10,126Korea Securities Finance Corporation 3.39 11,573 17,227 11,573Other 676,879 649,717 642,671

1,220,718 1,607,132 1,596,090

Investment in special fund:

Stock Market Stabilization Fund 4,612 9,275 9,275Korea Stock Exchange 2,612 24,015 2,612Good KDB 2nd Securitization Specialty Co., Ltd. 3,000 2,646 3,000Other 9,440 8,289 9,440

19,664 44,225 24,327

W 1,240,382 1,651,357 1,620,417

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June 30, 2004

(Unaudited)



2003

Ownership (%) Acquisition

cost Net asset or fair value

Book value

Stock:

Hyundai Engineering and Construction Co., Ltd. 5.07 W 54,514 29,413 29,413Hynix Semiconductor Inc. 10.24 175,398 254,346 254,346Ssang Yong Motors Co., Ltd. 10.31 68,506 128,292 129,292Ssang Yong Cement Industrial Co., Ltd. 10.16 54,096 54,096 54,096Ssang Yong Corporation 45.22 30,589 30,589 30,589Daewoo Engineering and Construction Co., Ltd. 2.82 11,487 24,609 24,609Korea Securities Finance Corporation 6.35 21,633 25,597 21,633SK Telecom Co., Ltd. 0.12 17,106 20,478 20,478Handsome Co., Ltd. 1.43 3,533 3,288 3,288Ssangyong Engineering and Construction Co., Ltd. 5.37 6,080 3,248 3,248NamSun Co., Ltd. 4.87 3,195 1,639 1,639Feel Max Co., Ltd. 12.00 3,000 3,000 3,000Other - 609,366 554,972 547,845

1,058,503 1,133,567 1,123,476

Investment in special fund:

Stock Market Stabilization Fund 21,438 48,039 48,039Korea Stock Exchange 2,612 21,134 2,612Good KDB 2nd Securitization Specialty Co., Ltd. 3,000 3,088 3,000Other 6,012 6,092 10,838

33,062 78,353 64,489

W 1,091,565 1,211,920 1,187,965

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iv) The maturity of available-for-sale securities by remaining period as of June 30, 2004 and December 31, 2003 are as follows:


At June 30, 2004 Governmentbonds

Finance debentures

Corporate bonds

Total

Due in 3 months or less W 65,744 1,196,994 267,095 1,529,833Due after 3 months through 6 months 63,873 164,542 234,107 462,522Due in 12 months 104,412 840,948 216,793 1,162,153Due in 3 years 1,502,391 1,466,659 4,478,312 7,447,362Thereafter 1,011,926 40,218 1,026,804 2,078,948

W 2,748,346 3,709,361 6,223,111 12,680,818


At December 31, 2003 Governmentbonds

Finance debentures

Corporate bonds

Total

Due in 3 months or less W 103,419 1,128,796 178,732 1,410,947Due after 3 months through 6 months 95,735 799,242 448,949 1,343,926Due in 12 months 168,840 1,262,752 630,835 2,062,427Due in 3 years 1,252,751 1,385,682 4,161,545 6,799,978Thereafter 954,537 48,811 1,061,876 2,065,224

W 2,575,282 4,625,283 6,481,937 13,682,502

v) Available-for-sale securities denominated in foreign currencies classified by issuing country as of June 30, 2004 and December 31, 2003 are as follows:

(in millions of Won and thousands of U.S. dollars, except ratio)

2004 2003 U.S. dollar Equivalent

Won Ratio (%) U.S. dollar Equivalent Won Ratio (%)

Korea $ 715,470 W 824,579 61.27 $ 731,852 W 876,612 61.92U.S.A. 322,283 371,431 27.60 317,771 380,626 26.89Malaysia 11,703 13,488 1.00 11,703 14,018 0.99Philippines 5,293 6,100 0.45 588 704 0.05Germany - - - 14,037 16,814 1.19Japan 7,933 9,143 0.68 5,029 6,023 0.43Other 105,132 121,165 9.00 100,946 120,916 8.53

$ 1,167,814 W 1,345,906 100.00 $ 1,181,926 W 1,415,713 100.00

18



June 30, 2004

(Unaudited)


(c) Held-to-maturity securities

i) Held-to-maturity securities as of June 30, 2004 and December 31, 2003 consist of the following:



Government bonds W 509,308 558,336 $ 441,916 484,456Finance debentures 947,159 543,791 821,830 471,836Corporate bonds 2,125,233 2,389,916 1,844,020 2,073,680Securities in foreign currencies 156,656 172,017 135,927 149,256

W 3,738,356 3,664,060 $ 3,243,693 3,179,228

ii) Details of debt securities classified as held-to-maturity securities as of June 30, 2004 and December 31, 2003 consist of the following:


2004

Face value Acquisition cost Fair value (*) Book value

Government bonds W 501,055 507,982 584,490 509,308Finance debentures 964,944 949,418 984,394 947,159Corporate bonds 2,121,043 2,131,484 2,211,074 2,125,233

W 3,587,042 3,588,884 3,779,958 3,581,700


2003

Face value Acquisition cost Fair value (*) Book value

Government bonds W 550,292 553,294 632,545 558,336Finance debentures 551,144 544,773 569,935 543,791Corporate bonds 2,380,892 2,398,606 2,461,181 2,389,916

W 3,482,328 3,496,673 3,663,661 3,492,043


19



June 30, 2004

(Unaudited)

(5) Securities, Continued iii) The maturity of held-to-maturity securities by remaining period as of June 30, 2004 and December 31,

2003 are as follows:


At June 30, 2004 Governmentbonds

Finance debentures

Corporate bonds

Total

Due in 3 months or less W 59,305 95,928 147,994 303,227Due after 3 months through 6 months 81,619 159,817 607,485 848,921Due in 12 months 11,044 372,188 96,510 479,742Due in 3 years 243,980 198,895 416,711 859,586Thereafter 113,360 120,331 856,533 1,090,224

W 509,308 947,159 2,125,233 3,581,700


At December 31, 2003 Governmentbonds Finance

debentures Corporate

bonds Total

Due in 3 months or less W 354 82,160 45,005 127,519 Due after 3 months through 6 months 476 66,650 91,340 158,466 Due in 12 months 65,171 57,672 1,301,399 1,424,242 Due in 3 years 301,321 146,381 1,119,998 1,567,700 Thereafter 172,183 49,905 655,661 877,749

W 539,505 402,768 3,213,403 4,155,676

iv) Held-to-maturity securities denominated in foreign currencies classified by issuing country as of June 30, 2004 and December 31, 2003 are as follows:

(in millions of Won and thousands of U.S. dollars, except ratio)

2004 2003 U.S. dollar Equivalent

Won Ratio (%) U.S. dollar Equivalent Won Ratio (%)

Korea $ 103,471 W 119,250 76.12 $ 127,308 W 152,489 88.65U.S.A. 26,354 30,373 19.39 1,965 2,354 1.37Indonesia 3,132 3,610 2.30 3,449 4,131 2.40 Other 2,970 3,423 2.19 10,889 13,043 7.58

$ 135,927 W 156,656 100.00 $ 143,611 W 172,017 100.00

20



June 30, 2004

(Unaudited)


(d) Investment securities accounted for by the equity method

i) Details of investment securities accounted for by the equity method as of June 30, 2004 and December 31, 2003 are as follows:


2004

Subsidiaries Beginningbalance

Investmentand

sale, net

Equity method

gain (loss)

Retained earnings Capital

adjustments Ending balance

e-Shinhan W 2,725 - (278) - - 2,447Shinhan Data System 2,153 - 261 - - 2,414Chohung Vina 10,940 - 882 - (413) 11,409

W 15,818 - 865 - (413) 16,270

Shinhan Macquarie and Shinhan Credit Information is included in the Company for consolidation as of June 30, 2004.


2003

Subsidiaries Beginningbalance

Investmentand

sale, net

Equity method

gain (loss)

Retained earnings Capital

adjustments Ending balance

e-Shinhan W 3,892 - (1,166) (1) - 2,725Shinhan Macquarie 423 - 1,446 (26) - 1,843Shinhan Credit Information 3,121 (1,695) 544 - - 1,970Shinhan Data System 2,001 - 152 - - 2,153Chohung Vina - 9,166 1,434 - 340 10,940

W 9,437 7,471 2,410 (27) 340 19,631

21



June 30, 2004

(Unaudited)

(6) Loans (a) Loans outstanding as of June 30, 2004 and December 31, 2003 consist of the following:


Won U.S. dollars (Note 2) 2004 2003 2004 2003 Loans in Won W 73,007,519 72,853,369 $ 63,347,088 63,213,335Loans in foreign currencies 6,141,328 6,779,634 5,328,701 5,882,546Domestic import usance bills 3,075,824 2,714,909 2,668,828 2,355,669Call loans 2,627,081 1,438,737 2,279,463 1,248,362Korean Won bills bought 3,225,417 1,058,981 2,798,627 918,856Foreign currency bills bought 4,109,488 3,610,006 3,565,716 3,132,327Payments on guarantees and acceptances 59,994 107,743 52,056 93,486Credit card loans 4,097,177 4,931,496 3,555,034 4,278,955Bonds purchased with resale agreements 265,016 470,300 229,949 408,069Privately placed bonds 2,414,060 2,416,843 2,094,629 2,097,044Factoring receivables 94,430 174,955 81,935 151,805Loans convertible into equity securities 272,843 80,933 236,740 70,224Financing lease receivables 758,759 807,396 658,359 700,561Cash management account 341,349 186,369 296,181 161,708Other 23,168 17,390 20,102 15,089

100,513,453 97,649,061 87,213,408 84,728,036

Less: allowance for loan losses (2,652,021) (2,835,642) (2,301,103) (2,460,427)Add: present value premiums 86,671 107,759 75,203 93,500

W 97,948,103 94,921,178 $ 84,987,508 82,361,109

(b) The maturities of loans by remaining period as of June 30, 2004 and December 31, 2003 are as follows:


At June 30, 2004 Loans in Won Loans in foreign currencies (*) Other Total

Due in 3 months or less W 14,250,307 2,469,784 11,329,207 28,049,298Due after 3 months through 6 months 12,237,192 1,531,421 2,201,384 15,969,997Due in 12 months 24,890,045 1,275,084 1,766,561 27,931,690Due in 3 years 11,937,981 938,578 1,617,305 14,493,864Thereafter 9,691,994 1,162,959 3,213,651 14,068,604

W 73,007,519 7,377,826 20,128,108 100,513,453

(*) W1,236,498 million of domestic import usance bills of Chohung Bank included.


At December 31, 2003 Loans in Won Loans in foreign currencies Other Total

Due in 3 months or less W 15,160,538 885,099 8,318,745 24,364,382Due after 3 months through 6 months 13,263,016 1,451,347 1,324,392 16,038,755Due in 12 months 21,080,434 2,039,158 1,552,614 24,672,206Due in 3 years 16,806,243 1,156,538 3,868,644 21,831,425Thereafter 6,543,138 1,247,492 2,951,663 10,742,293

W 72,853,369 6,779,634 18,016,058 97,649,061

22



June 30, 2004

(Unaudited)

(6) Loans, Continued

(c) Loan classified by country as of June 30, 2004 and December 31, 2003 are as follows: (in millions of Won, except ratio)

2004

Loans in Won Loans in foreign

Currencies (*) Other loans Total Ratio (%)

Korea W 73,007,519 4,714,762 18,540,756 96,263,037 95.77U.S.A. - 627,798 198,183 825,981 0.82U.K. - 79,113 70,077 149,190 0.15Japan - 978,284 166,177 1,144,461 1.14Germany - 28 - 28 -Italy - 4,193 4,193 -Panama - 83,439 - 83,439 0.08Russia - 1,441 - 1,441 -Ireland - - - -Indonesia - 33,479 41,290 74,769 0.07Thailand - 576 - 576 -Vietnam - 58,545 45,972 104,517 0.10Hong Kong - 33,942 8,602 42,544 0.04Singapore - - - -China - 465,770 389,834 855,604 0.85Other - 300,649 663,024 963,673 0.98

W 73,007,519 7,377,826 20,128,108 100,513,453 100.00


(in millions of Won, except ratio)

2003

Loans in Won Loans in foreign

currencies Other loans Total Ratio (%)

Korea W 72,853,369 4,426,217 17,910,007 95,189,593 97.48U.S.A. - 803,204 678 803,882 0.82U.K. - 63,047 19,182 82,229 0.09Japan - 936,055 1,105 937,160 0.96Germany - 1,165 - 1,165 -Ireland - - 62,168 62,168 0.07Indonesia - 31,605 - 31,605 0.03Thailand - 599 - 599 -Vietnam - 52,456 2,403 54,859 0.06Panama - 78,414 - 78,414 0.08Russia - 2,096 - 2,096 -Hong Kong - 63,486 14,578 78,064 0.08China - 192,572 5,937 198,509 0.20Other - 128,718 - 128,718 0.13

W 72,853,369 6,779,634 18,016,058 97,649,061 100.00

23



June 30, 2004

(Unaudited)


(d) Loans classified by consumer as of June 30, 2004 and December 31, 2003 are as follows:


2004

Loans in Won Loans in foreigncurrencies (*) Other Total Ratio (%)

Corporate W 36,966,095 6,993,736 15,989,554 59,949,385 59.64Household 35,195,757 91,364 3,858,547 39,145,668 38.95Public and other 845,667 292,726 280,007 1,418,400 1.41

W 73,007,519 7,377,826 20,128,108 100,513,453 100.00



2003

Loans in Won Loans in foreigncurrencies Other Total Ratio (%)

Corporate W 37,321,076 6,134,976 12,729,866 56,185,918 57.53Household 34,527,896 97,993 5,113,230 39,739,119 40.70Public and other 1,004,397 546,665 172,962 1,724,024 1.77

W 72,853,369 6,779,634 18,016,058 97,649,061 100.00

(e) Restructured loans due to commencement of bankruptcy proceedings, composition proceedings or workout programs during the six months ended June 30, 2004 and the year ended December 31, 2003 are as follows:


2004 Workout

Creditor banks

receivershipComposition Bankruptcy Corporate

loans Individuals loans

Total

Loans for equity conversion W 36,850 - 3,451 70,450 - 110,751Loans converted into

convertible bonds 80,250 - - - - 80,250

Reduction in principal - 1,593 15,444 - - 17,037Reduction in interest rate - 1,408 2,632 - 3,333 7,373

Balance before restructuring 117,100 3,001 21,527 70,450 3,333 215,411Balance after restructuring 37,570 1,408 6,083 39,108 2,576 86,745

Loss resulting from restructuringW 79,530 1,593 15,444 31,342 757 128,666

24



June 30, 2004

(Unaudited)



2003 Workout

Bankruptcy Corporate loans Individuals

loans Total

Loans for equity conversion W 29,083 410,140 - 439,223Loans converted into convertible bonds 2,159 38,545 40,704Reduction in interest rate 149,903 164,223 1,539 315,665

Loan balance before restructuring 181,145 612,908 1,539 795,592Loan balance after restructuring 160,019 501,076 1,242 662,337

Loss resulting from restructuring W 21,126 111,832 297 133,255

(f) Changes in allowance for losses on loans, accounts receivable and accrued income for the six months ended June 30, 2004 and the year ended December 31, 2003 are as follows:


2004

Beginning balance (*)

Increase (Decrease)

Ending balance (*)

Shinhan Bank W 873,234 30,083 903,317Shinhan Bank (Trust account) 18,336 (3,772) 14,564Shinhan Finance 3,875 335 4,210Chohung Bank 1,723,689 (175,403) 1,548,286Chohung Bank (Trust account) 23,359 (18,973) 4,386Chohung ITMC 11 10 21Chohung Finance 4,549 (172) 4,377Chohung America 4,252 (1,534) 2,718Chohung Deutschland 2,696 (188) 2,508Goodmorning Shinhan Securities 36,260 (11,513) 24,747Shinhan Card 119,553 (18,939) 100,614Shinhan Capital 18,936 2,890 21,826Shinhan BNPP ITMC 14 2 16Jeju Bank 35,270 8,795 44,065SH&C Life Insurance - 8 8

W 2,864,034 (188,371) 2,675,663

(*) Additional allowance for loan losses of Chohung Bank and Jeju Bank, amounting to W33,533 millionas of June 30, 2004 and W28,170 million as of December 31, 2003, is included.

(**) Allowance for losses on other assets and disposition of operating lease assets is included.

25



June 30, 2004

(Unaudited)



2003

Beginning balance (*)

Increase (decrease) (**)

Ending balance (***)

The Company W 3,846 (3,846) -Shinhan Bank 576,329 296,905 873,234Shinhan Bank (Trust account) 24,023 (5,687) 18,336Shinhan Finance 3,266 609 3,875Chohung Bank - 1,723,689 1,723,689Chohung Bank (Trust account) - 23,359 23,359Chohung ITMC - 11 11Chohung Finance - 4,549 4,549Chohung America - 4,252 4,252Chohung Deutschland - 2,696 2,696Goodmorning Shinhan Securities 56,260 (20,000) 36,260Shinhan Card 96,104 23,449 119,553Shinhan Capital 34,883 (15,947) 18,936Shinhan BNPP ITMC 10 4 14Jeju Bank 29,318 5,952 35,270Jeju Bank (Trust account) 142 (142) -

W 824,181 2,039,853 2,864,034

(*) Additional allowance for loan losses of Goodmorning Shinhan Securities, Shinhan Capital and JejuBank, amounting to W12,952 million, is included.

(**) Allowance for loan losses of Chohung Bank, amounting to W2,172,379 million as of August 31,2003 (acquisition date), is reflected.

(***) Additional allowance for loan losses of Chohung and Jeju Bank, amounting to W28,170 million, isincluded.

(****) Allowance for losses on other assets and disposition of operating lease assets is included.

26



June 30, 2004

(Unaudited)

(7) Fixed Assets

Fixed assets as of June 30, 2004 and December 31, 2003 consist of the following:


Won U.S. dollars (Note 2) 2004 2003 2004 2003 Tangible assets:

Land W 995,753 995,168 $ 863,994 863,486Buildings 742,554 729,315 644,298 632,811Other 1,134,549 1,129,104 984,425 979,700

2,872,856 2,853,587 2,492,717 2,475,997Less: accumulated depreciation (1,021,585) (974,792) (886,408) (845,806)

1,851,271 1,878,795 1,606,309 1,630,191

Intangible assets:

Goodwill 926,277 964,788 803,711 837,126Negative goodwill (5,312) (5,655) (4,609) (4,907)Other 15,059 15,440 13,066 13,397

936,024 974,573 812,168 845,616

Other fixed assets 312 313 271 272

W 2,787,607 2,853,681 $ 2,418,748 2,476,079

The officially declared value of land used in domestic branches at June 30, 2004 and December 31, 2003, as announced by the Minister of Construction and Transportation, is as follows:


Book value Declared value 2004 2003 2004 2003

Land (Domestic only) W 997,207 991,993 962,615 975,097

The officially declared value, which is used for government purposes, does not represent the fair value.

27



June 30, 2004

(Unaudited)

(8) Other Assets Other assets as of June 30, 2004 and December 31, 2003 consist of the following:



Accounts receivable W 5,843,853 1,570,819 $ 5,070,588 1,362,967Advance payments 22,771 42,827 19,758 37,160Prepaid expenses 42,615 29,146 36,976 25,289Prepaid income taxes 5,257 13,988 4,561 12,137Accrued income 613,806 696,940 532,587 604,720Operating lease assets (note 9) 415,617 405,794 360,622 352,099Less: accumulated depreciation (195,390) (182,375) (169,536) (158,243)Less: allowance for loss on disposition (2,019) (2,210) (1,752) (1,917)Guarantee deposits paid 943,054 956,596 818,268 830,018Deferred tax assets 130,260 78,135 113,024 67,796Derivative assets 646,349 518,836 560,824 450,183Other 3,249,105 2,910,279 2,819,180 2,525,188

11,715,278 7,038,775 10,165,100 6,107,397

Less: allowance for losses (21,623) (26,182) (18,762) (22,718)

W11,693,655 7,012,593 $ 10,146,338 6,084,679

(9) Operating Lease Assets

(a) Operating lease assets classified by industry as of June 30, 2004 and December 31, 2003 are as follows:


2004 2003 Machinery and equipment W 352,974 352,535Office equipment 62,643 53,259

415,617 405,794

Less: accumulated depreciation (195,390) (182,375) allowance for losses on disposition of lease assets (2,019) (2,210)

W 218,208 221,209

(b) The collection schedule of future lease receivables as of June 30, 2004 is as follows:


Operating lease

Financing lease Total

July 1, 2004 - June 30, 2005 W 64,321 330,626 394,947July 1, 2005 - June 30, 2006 45,392 249,715 295,107July 1, 2006 - June 30, 2007 36,994 157,514 194,508July 1, 2007 - June 30, 2008 19,105 79,502 98,607

Thereafter 102,497 19,570 122,067

268,309 836,927 1,105,236Unrealized interest income on financing lease - (78,168) (78,168)

W 268,309 758,759 1,027,068

28



June 30, 2004

(Unaudited)

(10) Deposits (a) Deposits as of June 30, 2004 and December 31, 2003 consist of the following:



Korean Won deposits W 77,147,275 75,496,450 $ 66,939,067 65,506,681Foreign currency deposits 5,757,484 4,932,403 4,995,648 4,279,742Negotiable certificates of deposits 6,630,841 7,118,586 5,753,441 6,176,647

89,535,600 87,547,439 77,688,156 75,963,070Add: present value premium 19,052 45,166 16,531 39,190

W 89,554,652 87,592,605 $ 77,704,687 76,002,260

(b) The maturities of deposits by remaining period as of June 30, 2004 and December 31, 2003 are as follows:


At June 30, 2004 Korean Wondeposits

Foreign currency deposits

Negotiable certificates of deposits

Total

Due in 3 months or less W 20,226,095 3,504,933 3,848,938 27,579,966Due after 3 months through 6 months 7,834,985 946,868 2,232,102 11,013,955Due in 12 months 17,703,820 745,042 428,763 18,877,625Due in 3 years 4,225,295 558,739 120,658 4,904,692Thereafter 27,157,080 1,902 380 27,159,362

W 77,147,275 5,757,484 6,630,841 89,535,600


At December 31, 2003 Korean Wondeposits

Foreign currency deposits

Negotiable certificates of deposits

Total

Due in 3 months or less W 22,326,297 3,267,799 3,563,065 29,157,161Due after 3 months through 6 months 6,003,790 357,334 1,759,652 8,120,776Due in 12 months 19,203,989 710,832 1,674,109 21,588,930Due in 3 years 5,373,674 595,357 120,675 6,089,706Thereafter 22,588,700 1,081 1,085 22,590,866

W 75,496,450 4,932,403 7,118,586 87,547,439

29



June 30, 2004

(Unaudited)

(11) Brrowings

(a) Borrowings as of June 30, 2004 and December 31, 2003 consist of the following:



Borrowings in Won W 3,834,245 4,401,380 $ 3,326,894 3,818,985Borrowings in foreign currencies 6,576,449 7,193,596 5,706,246 6,241,732Bonds sold with repurchase agreements 4,404,189 4,427,073 3,821,422 3,841,278Bills sold 588,065 705,954 510,252 612,541Due to the Bank of Korea in foreign currencies 51,080 64,051 44,321 55,576Call money 2,232,579 417,522 1,937,162 362,275

W 17,686,607 17,209,576 $ 15,346,297 14,932,387

(b) Details of subordinated borrowings as of June 30, 2004 and December 31, 2003 are as follows:


Lender Period of contract Interest rate (%) 2004 2003

Hungkuk Life Insurance December 31, 1997 ∼ December 31, 2007 4.0 W - 40,000Kyobo Life Insurance June 30, 1998 ∼ June 30, 2008 5.5 - 30,000

W - 70,000

(c) The maturities of borrowings as of June 30, 2004 and December 31, 2003 are as follows:


At June 30, 2004 Borrowingsin Won

Borrowings in foreign currencies

Other Total

Due in 3 months or less W 1,900,626 3,047,430 4,742,824 9,690,880Due after 3 months through 6 months 162,012 2,023,211 804,235 2,989,458Due in 12 months 220,070 1,046,335 1,575,077 2,841,482Due in 3 years 405,786 428,985 153,518 988,289Thereafter 1,145,751 30,488 259 1,176,498

W 3,834,245 6,576,449 7,275,913 17,686,607


At December 31, 2003 Borrowingsin Won

Borrowings in foreign currencies

Other Total

Due in 3 months or less W 2,309,091 3,855,897 2,871,796 9,036,784Due after 3 months through 6 months 288,131 1,689,287 1,478,867 3,456,285Due in 12 months 191,984 1,162,733 1,110,451 2,465,168Due in 3 years 399,962 387,229 153,179 940,370Thereafter 1,212,212 98,450 307 1,310,969

W 4,401,380 7,193,596 5,614,600 17,209,576

30



June 30, 2004

(Unaudited)

(12) Debentures

(a) Debentures as of June 30, 2004 and December 31, 2003 consist of the following:



Korean Won debentures W 15,908,283 16,177,484 $ 13,803,282 14,036,862Foreign currency debentures 1,469,958 1,591,121 1,275,452 1,380,582

17,378,241 17,768,605 15,078,734 15,417,444Less: discounts (242,126) (156,171) (210,088) (135,506)Add: present value premiums 105,495 135,445 91,536 117,523

W 17,241,610 17,747,879 $ 14,960,182 15,399,461

(b) Details of Korean Won debentures as of June 30, 2004 and December 31, 2003 are as follows:

(in millions of Won, except interest rate)

2004 2003

Face value Interest rate(%) Face value Interest rate

(%) Discounted debentures W 6,064,564 3.93 - 6.91 W 6,436,500 3.93 - 6.91 Coupon debentures 6,118,675 4.17 - 7.47 6,554,434 0.24 - 7.47 Subordinated debentures 3,351,179 5.58 - 14.45 2,910,292 5.58 - 18.00Hybrid securities (*) 272,564 7.80 272,564 7.80 Other 100,950 -

15,907,933 16,173,790 Add: loss on fair value hedge 351 3,694

W 15,908,283 W 16,177,484

(*) Hybrid securities issued by Chohung Bank

Redemption : Redeemable for five years after issuance date

Interest rate : 7.8% for 10 years after issuance date

Thereafter - 50% of the difference between 7.8% and five-year maturity government bonds rate is added.

Interest payment : Quarterly paid

Maturity date : 30 years after issuance date (renewable by Chohung Bank)

31



June 30, 2004

(Unaudited)

(12) Debentures, Continued

(c) Details of foreign currency debentures as of June 30, 2004 and December 31, 2003 are as follows:

(in millions of Won and thousands of U.S. dollars, except interest rate)

2004 2003 U.S. dollars Equivalent

Won Interest rate (%) U.S. dollars Equivalent

Won Interest rate (%)

MTN (*) $ 755,000 W 872,872 1.59~6.25 $ 800,000 W 967,791 1.59~6.25Non-guaranteed debentures 30,000 34,575 L+0.85 30,000 35,934 L+0.85 Subordinated debentures 488,372 562,511 11.50~11.88 490,396 587,396 11.50~11.88

$ 1,273,372 W 1,469,958 $ 1,320,396 W 1,591,121

(*) Shinhan Bank established two programs with Merrill Lynch International Limited and other fourfinancial institutions to issue Euro Medium Term Note (EMTN) on November 9, 1995 and GlobalMedium Term Note (GMTN) on August 20, 1999. Details of the programs are as follows:

Total amount which can be issued : US$ 2,000,000 (including US$500,000 thousand for year 1995) Place of trading : London Stock Exchange Issue price : Face value or discounted value Maturity date and interest date : Various depending on date of issuance Redemption : Lump-sum payment at maturity date

(a) The maturities of debentures by remaining period as of June 30, 2004 and December 31, 2003 are as

follows:


At June 30, 2004 Korean Won debentures Foreign currency

debentures Total

Due in 3 months or less W 1,898,620 63,388 1,962,008Due after 3 months through 6 months 1,335,020 - 1,335,020Due in 12 months 5,159,419 562,512 5,721,931Due in 3 years 3,682,929 265,075 3,948,004Thereafter 3,832,295 578,983 4,411,278

W 15,908,283 1,469,958 17,378,241


At December 31, 2003 Korean Won debentures Foreign currency

debentures Total

Due in 3 months or less W 2,460,384 - 2,460,384Due after 3 months through 6 months 2,735,660 - 2,735,660Due in 12 months 3,144,010 179,670 3,323,680Due in 3 years 4,537,860 388,560 4,926,420Thereafter 3,299,570 1,022,891 4,322,461

W 16,177,484 1,591,121 17,768,605

32



June 30, 2004

(Unaudited)

(13) Retirement and Severance Benefits

Changes in retirement and severance benefits for the six months ended June 30, 2004 and the year ended December 31, 2003 are as follows:



Beginning balance W 347,913 225,188 $ 301,877 195,391Changes in consolidation scope 202 105,794 175 91,795Adjustment due to foreign exchange rate (26) 42 (23) 37Payment (253,941) (29,114) (220,339) (25,262)Retirement benefit transferred (151) - (131) -Provision 45,619 46,003 39,583 39,916

Ending balance 139,616 347,913 121,142 301,877Less: contribution to National Pension Fund (55,848) (133,645) (48,458) (115,961) deposit for severance benefit insurance (117) (8,317) (102) (7,216)

W 83,651 205,951 $ 72,582 178,700

(14) Other Liabilities

Other liabilities as of June 30, 2004 and December 31, 2003 consist of the following:



Allowance for losses on guarantees and acceptances (note 15) W 41,750 57,398 $ 36,225 49,803

Other allowances 88,106 68,025 76,448 59,024Borrowings from trust accounts 640,642 665,158 555,871 577,144Foreign exchange remittances pending 377,462 159,954 327,516 138,789Securities sold 589,337 353,732 511,355 306,926Accounts payable 5,636,143 1,397,803 4,890,363 1,212,844Accrued expenses 1,939,112 1,742,597 1,682,527 1,512,015Income tax payable 159,172 103,873 138,110 90,128Dividend payable 5,760 1,645 4,998 1,427Advance receipts 2,247 95,116 1,950 82,530Unearned revenues 157,960 163,650 137,059 141,996Taxes withheld 54,458 78,271 47,252 67,914Guarantee deposits received 299,168 270,766 259,582 234,938Derivatives liabilities 580,658 471,442 503,825 409,060Deferred tax liabilities 165 34 143 29Guarantee deposits for stock subscriptions 13,423 19,090 11,647 16,564Miscellaneous 5,058,096 4,697,196 4,388,803 4,075,658

W 15,643,659 10,345,750 $ 13,573,674 8,976,789

33



June 30, 2004

(Unaudited)

(15) Guarantees and Acceptances

(a) The guarantees and acceptances as of June 30, 2004 and December 31, 2003 are as follows:


2004 2003

Guarantees and acceptances outstanding

Guarantees and acceptances in Won:

Guarantees for contract performance W 156,036 122,759Guarantees on loan collaterals 116,912 118,261Guarantees on debentures 19,410 32,331Other 794,378 765,517

1,086,736 1,038,868

Guarantees and acceptances in foreign currencies:

Acceptances on letters of credit 341,719 422,945Acceptances for letters of guarantee for importers 150,638 161,993Other 792,673 651,416

1,285,030 1,236,354

Contingent guarantees and acceptances

Letters of credit 2,896,158 2,611,654Other 596,363 550,917

3,492,521 3,162,571

W 5,864,287 5,437,793

(b) Outstanding commitments as of June 30, 2004 and December 31, 2003 are as follows:


2004 2003 Commitments for loans in Won W 3,122,930 3,383,264Commitments for loans in foreign currencies 203,110 237,610Other commitments in foreign currencies 18,971 42,890

W 3,345,011 3,663,764

34



June 30, 2004

(Unaudited)

(15) Guarantees and Acceptances, Continued

(c) The guarantees and acceptances provided by country as of June 30, 2004 and December 31, 2003 are as follows:


2004 Guarantees and acceptances outstanding in Won Foreign currencies


Balance Ratio (%) Balance Ratio (%) Balance Ratio (%)Korea W 1,086,736 100.00 W 1,055,511 82.14 3,310,176 97.78U.S.A. - - 103,525 8.06 109,388 3.13Japan - - 32,934 2.56 31,172 0.89U.K. - - 2,078 0.16 8,990 0.26China - - 3,753 0.29 6,863 0.20Vietnam - - 1,399 0.11 8,701 0.25Other - - 85,830 6.68 17,231 0.49

W 1,086,736 100.00 W 1,285,030 100.00 W 3,492,521 100.00




Balance Ratio (%) Balance Ratio (%) Balance Ratio (%)Korea W 1,038,868 100.00 W 1,160,272 93.84 W 3,017,786 95.42U.S.A. - - 51,740 4.18 92,943 2.94Japan - - 19,474 1.58 24,972 0.79U.K. - - 2,134 0.17 9,582 0.30China - - 1,222 0.10 3,569 0.11Vietnam - - 445 0.04 12,867 0.41Other - - 1,067 0.09 852 0.03

W 1,038,868 100.00 W 1,236,354 100.00 W 3,162,571 100.00

35



June 30, 2004

(Unaudited)


(d) The guarantees and acceptances provided by consumer as of June 30, 2004 and December 31, 2003 are as follows:




Balance Ratio (%) Balance Ratio (%) Balance Ratio (%)Corporate W 1,044,130 96.08 W 1,283,664 99.89 W 3,420,999 97.95Household 1,410 0.13 29 - 69,152 1.98Public and other 41,196 3.79 1,337 0.11 2,370 0.07

W 1,086,736 100.00 W 1,285,030 100.00 W 3,492,521 100.00




Balance Ratio (%) Balance Ratio (%) Balance Ratio (%)Corporate W 983,361 94.65 W 1,232,823 99.71 W 3,081,786 97.45Household 1,410 0.14 1,575 0.13 78,339 2.48Public and other 54,097 5.21 1,956 0.16 2,446 0.08

W 1,038,868 100.00 W 1,236,354 100.00 W 3,162,571 100.00

(e) The allowances for losses on guarantees and acceptances provided according to the same credit risk classifications on loans as of June 30, 2004 and December 31, 2003 are as follows:


2004 Normal Precautionary Substandard Doubtful Estimated loss Total

Guarantees and acceptances in Won

Balance W 937,830 8,365 140,385 116 40 1,086,736Allowances - - 28,077 70 40 28,187

Ratio (%) - - 20.00 50.00∼95.00 100.00 2.59

Guarantees and acceptances in foreign currencies

Balance W 1,232,986 49,192 695 128 2,029 1,285,030Allowances - 11,273 139 122 2,029 13,563

Ratio (%) - - 20.00 50.00∼95.00 100.00 1.06

Total guarantees and acceptances

Balance W 2,170,815 57,557 141,080 244 2,069 2,371,765Allowances - 11,273 28,216 192 2,069 41,750

Ratio (%) - - 20.00 50.00∼95.00 100.00 1.76

36



June 30, 2004

(Unaudited)



2003 Normal Precautionary Substandard Doubtful Estimated loss Total

Guarantees and acceptances in Won

Balance W 890,423 5,722 140,591 1,901 231 1,038,868Allowances - - 32,039 1,000 231 33,270

Ratio (%) - - 22.79 52.60 100.00 3.20

Guarantees and acceptances in foreign currencies

Balance W 1,159,864 56,471 17,779 144 2,096 1,236,354Allowances - 18,338 3,556 138 2,096 24,128

Ratio (%) - 32.47 35.72 95.00 100.00 1.95

Total guarantees and acceptances

Balance W 2,050,287 62,193 158,370 2,045 2,327 2,275,222Allowances - 18,338 35,595 1,138 2,327 57,398

Ratio (%) - 29.49 22.48 55.65 100.00 2.52

(16) Pledged assets

Assets pledged as collateral as of June 30, 2004 and December 31, 2003 are as follows:


Accounts 2004 2003 Related transactions for Cash and due from banks W 2,267 9,254 Credit card loans and beneficiary certificates Securities 7,551,349 6,884,465 Borrowings, derivatives and settlements Land and buildings 112,568 121,823 Collaterals

W 7,666,184 7,015,542

(17) Insured assets

Details of Insured assets as of June 30, 2004 and December 31, 2003 are as follows:


Assets insured 2004 2003 Cash W 23,415 16,288Tangible assets used in operations 1,172,176 1,195,239Other tangible assets 25,659 27,748

W 1,221,250 1,239,275

In addition, the Company maintains fire insurance for its assets, key employees’ indemnity insurance, worker’s compensation insurance for its employees and other insurance policies covering loss and liability arising from accidents.

37



June 30, 2004

(Unaudited)

(18) Foreign Currency Denominated Assets and Liabilities

Assets and liabilities denominated in foreign currency as of June 30, 2004 and December 31, 2003 are as follows:

Foreign currency Equivalent Won 2004 2003 2004 2003

Assets:

Cash and due from banks $ 826,233 952,233 W 952,233 555,520Securities 1,330,170 1,533,021 1,533,021 1,589,060Loans 12,456,246 14,355,823 14,355,823 14,395,371Other assets 121,162 139,639 139,639 147,673

$ 14,733,811 16,980,716 W 16,980,716 16,687,624

Liabilities:

Deposits $ 4,995,648 5,757,484 W 5,757,484 4,932,403Borrowings 6,885,221 7,935,218 7,935,218 8,753,612Debentures 1,275,452 1,469,958 1,469,958 1,591,121Other liabilities 384,505 443,141 443,141 212,719

$ 13,540,826 15,605,801 W 15,605,801 15,489,855

(19) Capital Stock

(a) Details of preferred stocks issued as of June 30, 2004 are as follows:

Number of shares

Predetermined dividend rate (%) Redeemable period

Redeemable preferred stock:

Series 1 9,316,792 4.04 August 19, 2004 ∼ August 18, 2006Series 2 9,316,792 4.04 August 19, 2005 ∼ August 18, 2007Series 3 9,316,792 4.04 August 19, 2006 ∼ August 18, 2008Series 4 9,316,792 4.04 August 19, 2007 ∼ August 18, 2009Series 5 9,316,793 4.04 August 19, 2008 ∼ August 18, 2010Series 6 3,500,000 7.00 July 19, 2006 ∼ August 18, 2006 Series 7 2,433,334 7.46 July 19, 2008 ∼ August 18, 2008 Series 8 66,666 7.86 July 19, 2010 ∼ August 18, 2010

52,583,961

Redeemable convertible preferred stock:

Series 9 (*) 44,720,603 2.02 August 19, 2006 ∼ August 18, 2008

97,304,564

(*) Convertible period : August 19, 2004 ∼ August 18, 2007 Conversion ratio : 1 common share to 1 preferred share Conversion price in Won : W18,086

38



June 30, 2004

(Unaudited)

(19) Capital Stock, Continued

(b) Details of changes in capital stock for the six months ended June 30, 2004 are as follows:

Number of hares Capital stock Balance at beginning of the period 391,705,864 1,958,530Stock exchange 14,628,590 73,412

Balance at end of the period 406,388,454 2,031,942

(20) Consolidated Capital Adjustments

Consolidated capital adjustments as of June 30, 2004 and December 31, 2003 consist of the following:



Treasury stock W (203,536) (391,300) $ (176,604) (339,523)

Unrealized gain (loss) on securities:

Available-for-sale securities 446,282 (153,786) 387,230 (133,437)Investment securities accounted for

by the equity method

(198) 137 (172) 119

446,084 (153,649) 387,058 (133,318)

Stock options: (note 21)

Options granted by the Company 4,673 9,626 4,055 8,353Options granted by the subsidiaries 185 926 160 803

4,858 10,552 4,215 9,156

Cumulative effects on foreign currency translation adjustments (11,176) 15,035 (9,697) 13,046

W 236,230 (519,362) $ 204,972 (450,639)

The treasury stocks held by Shinhan Bank is 29,873,295 shares as of December 31, 2003, and on March 3, 2004, Shinhan Bank sold those treasury stocks through after-hour block trading.

39



June 30, 2004

(Unaudited)

(21) Stock Options

The stock options consist of the Company’s stock options, which were granted to the personnel of the Company and its subsidiaries, and the subsidiaries’ stock options, which were granted to the personnel of the subsidiaries. As of June 30, 2004, details of the stock options granted by the Company under a resolution at the Board of Directors’ meeting are as follows:

(a) Details of the Company’s stock options

Grant date March 25, 2004 May 15, 2003 May 22, 2002

Shares granted 1,301,600 shares 1,156,300 shares 1,004,200 shares Share expired to date 5,200 shares 41,227 shares 133,979 shares

Shares outstanding 1,296,400 shares 1,115,073 shares 870,221 shares

Type of stock options Stock grant or price compensation

Stock grant or price compensation

Price compensation

Exercise price (Won) W21,595 W11,800 W18,910

Exercise period Within 3 years after 2 years from grant date

Within 4 years after 2 years from grant date

Within 4 years after 2 years from grant date

Forfeited period After 5 years from grant date

After 6 years from grant date

After 6 years from grant date

(b) The Company calculated stock compensation costs using the fair value method for stock grant and details

are as follows:

Grant date March 25, 2004 May 15, 2003 May 22, 2002 Risk-free interest rate 4.39% 4.25% - Expected exercise period 3.5 years 4 years - Expected stock price volatility 19.85% 22.11% - Expected dividend yield 0% 0% - Expected ratios of no-exercise 0% 0% - Weighted average fair value in Won W7,696 W5,292 -

With respect to the stock options granted on May 22, 2002, the Company decided to pay the difference between the market price and the exercise price in cash for the six months ended June 30, 2004. As a result, the Company determined to apply intrinsic value method to those stock options, and W7,694 million of stock options, W6,113 million of accounts receivable and W1,581 million of stock compensation costs decreased for the six months ended June 30, 2004.

40



June 30, 2004

(Unaudited)

(21) Stock Options, Continued

(c) Changes in stock compensation costs for the six months ended June 30, 2004 are as follows:


Personnel of Grant date Stock compensation cost

the Company subsidiaries Total

March 25, 2004 Incurred during the period W - - - Incurred during the period 324 1,015 1,339 To be recorded in subsequent periods 2,091 6,546 8,637

May 15, 2003 Recorded at beginning of the period 442 1,489 1,931 Incurred during the period 319 1,083 1,402 To be recorded in subsequent periods 587 1,980 2,567

May 22, 2002 Recorded at beginning of the period 1,581 6,113 7,694 Incurred during the period (1,581) (6,113) (7,694) To be recorded in subsequent periods - - -

(22) General and Administrative Expenses

General and administrative expenses for the six months and quarters ended June 30, 2004 and 2003 consist of the following:



June 30, Six months ended June

30, Quarter ended

June 30,

Six months ended

June 30, 2004 2003 2004 2003 2004 2004

Salaries and wages W 195,207 86,606 406,272 198,349 $ 169,377 352,514Provision for retirement and

severance benefits 15,024 9,442 45,516 30,902 13,036 39,493

Other employees benefits 62,177 25,214 139,271 71,472 53,950 120,842Rent 19,346 8,779 37,934 17,637 16,786 32,915Entertainment 4,482 1,947 9,101 4,444 3,889 7,897Depreciation 42,117 26,138 82,383 51,608 36,544 71,482Amortization 20,925 5,801 41,938 11,461 18,156 36,389Tax and dues 22,649 10,262 41,378 19,466 19,652 35,903Advertising 14,667 11,007 26,887 19,781 12,726 23,329Other 93,873 41,503 193,565 78,314 81,452 167,952

W 490,467 226,699 1,024,245 503,434 $ 425,568 888,716

41



June 30, 2004

(Unaudited)

(23) Income Taxes

(a) The Bank is subject to income taxes based on taxable earnings, which result in the normal tax rate of 29.7%.

The Korean government reduced the corporate income tax rate beginning in 2005. Specifically, effective from January 1, 2005, the income tax rate will be reduced from 29.7% to 27.5%. As a result, the statutory income tax rate of 29.7% is applied to deferred income tax assets (liabilities) that will be realized before 2005 and that of 27.5% is applied to deferred income tax assets (liabilities) that will be realized after 2004. The components of income tax expenses for the quarters and six months ended June 30, 2004 and 2003 are as follows:


Quarter ended June 30, Six months ended

June 30, 2004 2003 2004 2003

Current income tax expense W 74,434 33,317 157,066 68,740

Deferred income tax expense:

Temporary differences (8,322) 3,174 (52,781) 7,038Tax loss carryforwards 539 (288) 787 15,538

W 66,651 36,203 105,072 91,316

(b) Reconciliation of accounting income and taxable income for the six months ended June 30, 2004 and the year ended December 31, 2003 are as follows


Temporary difference Permanent difference Description 2004 2003 2004 2003 Addition W 2,374,130 1,198,264 28,005 -Deduction 2,212,385 1,485,397 372,761 238,742

W 161,745 (287,133) (344,756) (238,742)

(c) Effective tax rates for the six months ended June 30, 2004 and 2003 are as follows:

(in millions of Won, except tax rate)

Temporary difference Permanent difference Description 2004 2003 2004 2003

Earnings before income taxes W 66,651 36,203 105,072 91,316Income taxes W 425,022 103,218 633,313 205,923

Effective income tax rate (%) 15.68 35.07 16.59 44.34

(d) For the six months ended June 30, 2004, the Company account for W67,776 million of income tax expense currently payable, which is reflected in the balance sheet as a deduction from stockholders’ equity, with respect to gain from disposition of treasury stocks.

42



June 30, 2004

(Unaudited)

(23) Income Taxes, Continued

(e) Changes in significant accumulated temporary differences and tax effects for the six months ended and the year ended December 31, 2003 are as follows:


2004

Beginning

balance Increase Decrease Ending balance

Deductible temporary differences:

Securities W 431,991 - 101,741 330,250Impairment loss on securities 791,786 - 102,855 688,931Unrealized loss on securities 36,344 72,854 - 109,198Retirement and severance benefits 93,656 131,573 - 225,229Bad debts 467,403 125,732 - 593,135Stock compensation costs 7,324 - 3,983 3,341Restructured loans 262,845 295,151 - 557,996Allowance for losses on guarantees and acceptances 68,282 - 2,258 66,024Other 275,963 137,105 101,604 311,464

2,435,594 762,415 312,441 2,885,568

Taxable temporary differences:

Securities 22,281 41,339 1,812 61,808Unrealized loan on securities 845,450 156,588 34,278 967,760Accrued income 333,152 - 28,012 305,140Group retirement and severance benefits 89,572 120,250 - 209,822Other 84,295 94,146 61,131 117,310

1,374,750 412,323 125,233 1,661,840

Net (*) 1,060,844 350,092 187,208 1,223,728

Addition/Deduction: Unrealized gain from valuation by the equity method (**) 386,200 418,330Tax effects on subsidiaries (***) (1,193,691) (1,191,368)

Realizable temporary differences 253,353 450,690Tax effect of cumulative temporary difference 71,165 124,001Tax effect of cumulative temporary differences

in overseas subsidiaries 5,745 5,716

Donation in excess of deductible limit 93 67Tax effects of tax loss carryforwards 1,098 311

Net deferred tax assets (****) W 78,101 130,095

(*) W1,006 million and W132 million of temporary differences arising from consolidation of Shinhan Macquarie and Shinhan Credit Information is included.

(**) Tax effects on valuation gain under the equity method are not recognized due to uncertainty of realization of deferred income taxes for each subsidiary.

(***) Tax effects of W (-)28,025 million in the Company, W (-)78,826 million in Shinhan Bank, W1,273,651 million in Chohung Bank, W23,016 million in Shinhan Card, W2,589 million in Jeju Bank and W (-)1,037 million in SH&C Life Insurance are not recognized due to uncertainty of realization in the near future or offset to tax loss carryforwads.

(****) The amount consists of deferred tax asset of W130,260 million and deferred tax liability of W165 million.

(*****) Shinhan Bank has an asset revaluation gain on land amounting to W77,436 million as of June 30, 2004. However, the tax effect is not recognized because of uncertainty of its realization in the near future.

43



June 30, 2004

(Unaudited)

(23) Income Taxes, Continued


2003

Beginning

balance Increase Decrease Ending balance

Deductible temporary differences:

Securities W 252,422 185,135 5,566 431,991Impairment loss on securities 278,886 512,900 - 791,786Unrealized loss on securities 19,897 16,447 - 36,344Retirement and severance benefits 68,295 25,361 - 93,656Bad debts 160,954 306,449 - 467,403Stock compensation costs 2,347 4,977 - 7,324Restructured loans 8,244 254,601 - 262,845Allowance for losses on guarantees and acceptances 35,359 32,923 - 68,282Other 35,296 251,728 11,061 275,963

861,700 1,590,521 16,627 2,435,594

Taxable temporary differences:

Securities 25,470 - 3,189 22,281Unrealized loan on securities 450,866 394,584 - 845,450Accrued income 219,612 113,540 - 333,152Group retirement and severance benefits 59,749 29,823 - 89,572Other 16,326 70,586 2,617 84,295

772,023 608,533 5,806 1,374,750

Net (*) 89,677 981,988 10,821 1,060,844

Addition/Deduction: Unrealized gain from valuation by the equity method (**) 206,689 386,200Tax effects on subsidiaries (***) (47,534) (1,193,691)

Realizable temporary differences 248,832 253,353Tax effect of cumulative temporary difference 73,903 71,165Tax effect of cumulative temporary differences

in overseas subsidiaries - 5,745

Donation in excess of deductible limit - 93Tax effects of tax loss carryforwards 27,886 1,098

Net deferred tax assets (****) W 101,789 78,101

(*) W1,258,300 million of temporary differences arising from the acquisition of Chohung Bank in August, 2003, is included.

(**) Tax effects on valuation gain under the equity method are not recognized due to uncertainty of realization of deferred income taxes for each subsidiary.

(***) Tax effects of W (18,566) million in the Company, W1,205,483 million in Chohung Bank, W7,066 million in Shinhan Card and W (292) million in SH&C Life Insurance are not recognized due to uncertainty of realization in the near future or offset to tax loss carryforwads.

(****) The amount consists of deferred tax asset of W78,135 million and deferred tax liability of W34 million.

(*****) Shinhan Bank has an asset revaluation gain on land amounting to W77,436 million as of December 31, 2003. However, the tax effect is not recognized because of uncertainty of its realization in the near future.

44



June 30, 2004

(Unaudited)

(24) Earnings Per Share

(a) Basic earnings per share

Earnings per common share are calculated by dividing net earnings by the weighted average number of shares of common stock outstanding. Earnings per share for the quarters end six months ended June 30, 2004 and 2003 are computed as follows:



June 30, 2004 2003 2004 2003

Net earnings for quarter W 324,297 45,970 470,368 102,386Plus: extraordinary loss (gain) - - - -Less: income taxes on extraordinary loss (gain) - - - -Less: dividends on preferred stock 28,628 - 57,255 -

Ordinary available for common stock 295,669 45,970 413,113 102,386Weighted average number of shares outstanding in million shares 295 262 284 262

Ordinary income per share in Won and U.S. dollars W 1,003 175 1,453 390

Net earnings per share in Won and U.S. dollars W 1,003 175 1,453 390

(b) Diluted earnings per share

For the six months ended June 30, 2004, if convertible preferred stock and stock options exercised, 47,132,076 shares of common stocks would be issued, and if preferred stock converted into common stock on issue date, weighted average number of common shares outstanding is 329,691,605.

Details of diluted ordinary / net earnings per share due to dilutive effect for the six months ended June 30, 2004 are as follows:

(in millions of Won, except per share)

Quarter ended

June 30, 2004

Six months ended

June 30, 2004

Ordinary income available for common stock W 295,669 413,113Plus: dividends on preferred stock 4,062 8,124Plus: stock compensation costs 193 319

Diluted ordinary income and net earnings 299,924 421,556

Weighted average number of common shares outstanding in million shares 340 330

Diluted ordinary income per share in Won W 881 1,279 Diluted net earnings per share in Won W 881 1,279

Diluted income and earnings per share for the quarter and six months ended June 30, 2003 are not computed because stock options have no dilutive effect.

45



June 30, 2004

(Unaudited)

(24) Earnings Per Share, Continued

(c) Securities applicable to common shares Convertible (exercisable) period Number of shares

to be issued Preferred convertible shares August 19, 2004 - August 18, 2007 44,720,603Stock options May 15, 2005 - June 15, 2009 1,115,073

〃 March 26, 2006 - March 25, 2009 1,296,400

47,132,076

(25) Statements of Cash Flows

(a) Cash and cash equivalents as of June 30, 2004 and December 31, 2003 in statements of cash flows are equivalent to cash and due from banks on the balance sheets.

(b) Significant transactions not involving cash inflows or outflows for the quarters and six months ended June

30, 2004 and 2003 are as follows:



June 30, 2004 2003 2004 2003

Write-off loans W 407 - 10,816 -Reclassification of loans to loans convertible into equity securities 156,375 3,939 156,375 4,403Increase in present value discounts from restructuring of loans 32,921 - 32,921 6,923Reclassification of loans to available-for-sale securities - - 14,841 -Reclassification of advance payments to financing leases 58,201 38,512 93,393 78,710Reclassification of advance payments to operating lease assets 564 1,219 2,974 1,962Changes in consolidated capital adjustments due to consolidation 50,622 82,789 384,699 5,891Changes in consolidated retained earnings due to consolidation 2,847 60 930 12,536Amortization offseted to retained earnings due to accounting change - - - 20

46



June 30, 2004

(Unaudited)

(26) Derivatives

(a) Details of unsettled derivative instruments as of June 30, 2004 and December 31, 2003 are as follows:


2004 Trading Hedge Total

Currency related Forwards W 31,093,537 534,906 31,628,443 Swap 5,559,300 21,281 5,580,581 Options bought 2,485,324 - 2,485,324 Options sold 1,468,854 - 1,468,854

40,607,015 556,187 41,163,202

Interest rate related Futures bought 534,216 3,458 537,674 Futures sold 75,443 3,458 78,901 Options bought 70,000 - 70,000 Options sold 78,300 - 78,300 Swap 15,954,339 2,722,095 18,676,434 Government bonds 69,651 - 69,651

16,781,949 2,729,011 19,510,960

Stock price index related Futures 49,898 - 49,898 Stock swap 2,262 - 2,262 Options bought 759,784 - 759,784 Options sold 776,047 - 776,047 Equity linked securities 298,495 - 298,495

1,886,486 - 1,886,486

W 59,275,450 3,285,198 62,560,648


2003 Trading Hedge Total

Currency related Forwards W 14,840,784 351,365 15,192,149 Futures 47,550 - 47,550 Swap 3,644,048 18,039 3,662,087 Options bought 271,465 - 271,465 Options sold 265,730 - 265,730

19,069,577 369,404 19,438,981

Interest rate related Futures 212,670 7,785 220,455 Options bought 70,000 - 70,000 Options sold 75,700 - 75,700 Swap 12,535,881 2,835,600 15,371,481 Government bonds 50,189 - 50,189

12,944,440 2,843,385 15,787,825

Stock price index related Futures 220,022 - 220,022 Stock swap 2 - 2 Options bought 981,590 111,231 1,092,821 Options sold 1,047,973 - 1,047,973 Equity linked securities 21 - 21 Warrants 367 - 367

2,249,975 111,231 2,361,206

W 34,263,992 3,324,020 37,588,012

47



June 30, 2004

(Unaudited)

(26) Derivatives, Continued

(b) Valuation on trading and hedging derivative instruments as of June 30, 2004 and December 31, 2003 are as follows:


2004 Valuation gain (losses) Fair value

Trading Hedge Total Assets LiabilitiesCurrency related:

Forwards W 10,172 2,350 12,522 297,052 292,490Swap 40,822 671 41,493 137,823 81,742Options bought 3,133 - 3,133 13,913 -Options sold (12,309) - (12,309) 8,763 36,994

41,818 3,021 44,839 457,551 411,226

Interest rate related:

Options bought 1,179 - 1,179 2,403 -Options sold (1,209) - (1,209) - 2,398Swap 3,950 (16,877) (12,927) 154,542 143,240Government bonds (240) - (240) 17 560

3,680 (16,877) (13,197) 156,962 146,198

Stock price index related

Futures (254) - (254) - -Shares swap (35) - (35) - 35Options bought 3,206 - 3,206 13,443 -Options sold (560) - (560) 2,333 16,191Equity linked securities (8,059) - (8,059) 16,060 7,008

(5,702) - (5,702) 31,836 23,234

W 39,796 (13,856) 25,940 646,349 580,658

48



June 30, 2004

(Unaudited)

(26) Derivatives, Continued


2003 Valuation gain (losses) Fair value

Trading Hedge Total Assets LiabilitiesCurrency related:

Forwards W (4,905) 1,826 (3,079) 146,208 157,678Swap (3,785) (1,769) (5,554) 63,834 51,769Options bought 924 - 924 5,128 -Options sold (1,134) - (1,134) - 5,515

(8,900) 57 (8,843) 215,170 214,962

Interest rate related:

Options bought 763 - 763 1,225 -Options sold (744) - (744) - 1,176Swap (22,526) (18,583) (41,109) 166,253 138,678Government bonds 57 - 57 - 6

(22,450) (18,583) (41,033) 167,478 139,860

Stock price index related

Futures (248) - (248) - 10,542Shares swap 125 - 125 - 265Options bought 59,271 10,667 69,938 106,119 -Options sold (63,731) - (63,731) - 105,813Equity linked securities 8,739 - 8,739 214 -Warrants (812) - (812) 29,855 -

3,344 10,667 14,011 136,188 116,620

W (28,006) (7,859) (35,865) 518,836 471,442

49



June 30, 2004

(Unaudited)

(27) Commitments and Contingencies

(a) Acquisition of Chohung Bank

On July 9, 2003, the Company made an agreement with the KDIC to acquire 80.04% (543,570,144 shares) of total outstanding shares in Chohung Bank. Additionally, in accordance with the agreement, the Company would be required to pay contingent consideration to the KDIC in relation to the earnings in the future and changes in fair value of assets and liabilities of Chohung Bank and the details are as follows:

Asset Indemnity Payment

Amount : W652,284 million - asset indemnity amount for corporate loans, returned KAMCO loans and credit card loans

Payment date : earlier of 60 days after the date asset indemnity is determined as of June 30, 2005 or the date as agreed on

Interest : 4.3% per annum General Indemnity Payment

Amount : W166,516 million (deductible any amounts due and payable by the KDIC to the Company in connection with the breach of representation or warranty)

Payment date : the second anniversary date of cash portion closing date

Interest : 4.3% per annum Earn Out Payment

Amount : 20% of the total excess amount, which means net earnings of Chohung Bank for fiscal years of 2004, 2005 and 2006 in excess of W1,800 billion

Payment date : within 30 days after the date excess amount is determined for the fiscal year of 2006

These contingent considerations are not included in the acquisition cost on the date of acquisition, for the amount is not determinable.

(b) Guarantees and acceptances

Guarantees and acceptances and commitments as of June 30, 2004 are summarized as follows:


Guarantees and acceptances outstanding W 2,371,766 Contingent guarantees and acceptances 3,492,521 Commitments 3,345,011 Endorsed bills 41,579

The Company and its subsidiaries pledged its four blank notes and three notes amounting to W925 million to financial institutions as collateral for borrowings.

50



June 30, 2004

(Unaudited)

(27) Commitments and Contingencies, Continued

(c) Litigation

As of June 30, 2004, the Company and its subsidiaries has 200 pending lawsuits as a defendant (total amount: W889,226 million). The Company’s management expects that ultimate liability and significant losses as a result of these lawsuits would not materially effect their financial position.

(d) Loans and securities related to companies involved in bankruptcy proceedings, composition proceedings or

workout programs with creditors

As of June 30, 2004, the Company and its subsidiaries are holding loans (including guarantees) provided to and securities issued by companies involved in bankruptcy proceedings, composition proceedings or workout programs with creditors amounting to W1,657,255 million. The Company recorded an allowance for losses on these loans and incurred valuation losses on these securities in accordance with accounting principles generally accepted in the Republic of Korea. However, the ultimate recoverability of these loans and securities will depend on the terms of the companies’ restructuring plans approved by the bankruptcy court or the creditors and the success of the companies in implementing the plans. The ultimate outcome of this matter cannot presently be determined.

(e) Loans sold under repurchase agreements to Korea Asset Management Corporation

As of June 30, 2004, the Company and its subsidiaries have outstanding loans, which were transferred to the Korea Asset Management Corporation (“KAMCO”) and are subject to be repurchased when certain conditions are met, amounting to W52,311 million. Related to these outstanding loans, those subsidiaries established W21,574 million of an allowance for loan losses as of June 30, 2004, however, additional gains or losses will be recorded upon repurchase of or settlement for the loans by KAMCO in accordance with the recourse provisions.

(f) Asset-backed securitization

Prior to the year ended December 31, 2003, Shinhan Bank sold loans through issuing asset backed securities and have provided W84,160 million of reselling rights for the purpose of credit enhancement and W40,000 million of guarantees as of as of June 30, 2004 in relation to those sales. Additionally, Chohung Bank has provided credit line to certain SPCs up to W12,329 million, and as of June 30, 2004, its outstanding credit balance provided amounts to W12,158 million. Also, with respect to the disposition of non-performing loans to SPCs, Chohung Bank has granted W90,000 million of the right of recourse for the disposition, and it provides W40,000 million of debt securities as collaterals to the SPC, as of June 30, 2004. In accordance with those asset-backed securitization plans, additional losses may be recorded upon exercising reselling rights.

(g) Subsidy for trust accounts

As of June 30, 2004, Shinhan Bank, Chohung Bank and Jeju Bank guarantees repayment of principal and, in certain cases, minimum interest earnings on trust account assets in total amount of W2,924 billion. Additional losses will be recorded based upon the results of the future operations of these guaranteed trust accounts.

51



June 30, 2004

(Unaudited)

(27) Commitments and Contingencies, Continued

(h) Loans related to Financially Troubled Companies

As of June 30, 2004, Shinhan Bank and Chohung Bank are holding loans (including securities and guarantees and acceptances) provided to SK Networks Co., Ltd., which has been controlled by creditor banks in accordance with the Corporate Restructuring Promotion Act of the Republic of Korea, amounting to W367,257 million and W306,031 million, respectively. As regards to those loans, Shinhan Bank and Chohung Bank provide W43,636 million and W42,319 million of allowance for loan losses, respectively, as of June 30, 2004. Actual losses on those loans may differ materially from the management’s assessment and the accompanying consolidated financial statements do not reflect the impact of the uncertainty on the financial position of the Company and its subsidiaries. As of June 30, 2004, Shinhan Bank and Chohung Bank are holding loans provided to (including securities) LG Card Co., Ltd., which has been controlled by creditor banks due to its liquidity crisis, amounting to W273,517 million and W235,408 million, respectively. Actual losses on these loans and securities may differ materially from the management’s assessment and the accompanying consolidated financial statements do not reflect the impact of the uncertainty on the financial position of the Company and its subsidiaries. Additionally, Shinhan Bank and Chohung Bank provided W81,000 million and W73,400 million of additional capital, respectively, for the six months ended June 30, 2004, and converted W121,650 million and W110,250 million of loans, respectively, to equity shares, on July 28, 2004.

(28) Significant Transactions among Consolidated Companies

(a) Significant transactions

Significant transactions among consolidated companies for the quarters and six months ended June 30, 2004 and 2003 are as follows:


Quarter ended June 30,

Six months ended June 30,Revenue earned Expense incurred Account

2004 2003 2004 2003

Controlling company and subsidiaries included in consolidation:

The Company Shinhan Bank Interest income W 1,342 1,148 2,351 2,163

〃 Goodmorning Shinhan

Securities Interest income 2,003 2,003 4,026 4,026

〃 Shinhan Card Interest income 16,118 16,700 32,422 22,557〃 Shinhan Capital Interest income 9,669 6,761 18,858 12,720〃 Jeju Bank Interest income 438 410 845 814

Shinhan Bank The Company Rental income - - 9 -〃 Chohung Bank Interest income 1 - 30 -〃〃 Gain on derivatives - - 1,460 -


Securities Interest income 481 487 1,032 873

〃〃 Rental income - 60 8 61〃 Shinhan Card Interest income 421 1,616 800 2,629〃〃 Fees and commission income 9,893 15,932 18,122 36,605〃〃 Rental income 210 190 431 408

52



June 30, 2004

(Unaudited)

(28) Significant Transactions among Consolidated Companies, Continued




2004 2003 2004 2003

Shinhan Bank Shinhan Capital Interest income 1,452 1,508 709 896〃〃 Rental income 68 154 - 71〃〃 Gain on derivatives 530 - 477 -〃 Jeju Bank Interest income 75 119 22 60〃 SH&C Life Insurance Fees and commission income 128 113 67 113

〃 Shinhan Credit Information Rental income 1 - - -

〃 Shinhan Bank (Trust) Trust management income 23,122 22,550 6,074 11,042〃 Shinhan Finance Interest income 878 2,341 - 1,018〃〃 Gain on derivatives 604 - - -

Shinhan Bank (Trust) Shinhan Bank Due from banking account 1,015 840 469 356Shinhan Finance Shinhan Bank Interest income 1,952 604 1,766 225

〃〃 Gain on derivatives 1,286 - 941 -Chohung Bank Shinhan Bank Interest income 51 - 16 -

〃〃 Gain on derivatives 3,743 - 2,295 -〃 Shinhan Capital Interest income 64 - 53 -〃〃 Gain on derivatives 259 - 24 -〃 Shinhan Card Interest income 535 - 312 -


Securities Interest income 20 - 20 -

〃〃 Fees and commission income 8 - 8 -〃 Chohung Bank (Trust) Trust management income 17,116 - 11,649 -〃〃 Interest income 768 - 189 -〃 Chohung Finance Interest income 87 - - -〃 CHB America Interest income 177 - 113 -〃 Chohung Deutschland Interest income 1,489 - 1,067 -

Chohung Bank (Trust) Chohung Bank Due from banking account 1,061 - 539 -Chohung ITMC 〃 Interest income 1,172 - 583 -Chohung Finance Chohung Bank Interest income 1,454 - 1,049 -

Chohung Deutschland Chohung Bank Interest income 652 - - -Goodmorning

Shinhan Securities Shinhan Bank Interest income 322 321 80 121

〃〃 Rental income - 9 - 9〃 Chohung Bank Interest income 193 - 132 -〃 Shinhan Card Rental income 146 105 73 53

〃〃 Fees and commission

income 117 - 1 -

〃 Shinhan BNPP ITMC Rental income 102 - 51 -

53



June 30, 2004

(Unaudited)





2004 2003 2004 2003

Good Morning USA

Goodmorning Shinhan Securities Fees and commission income 2,144 - 1,033 -

Good Morning Europe 〃 Fees and commission income 578 - - -Shinhan Card Shinhan Bank Interest income 66 5 16 5

〃〃 Fees and commission income 45 15 41 15


Securities Fees and commission income 11 - 11 -

〃 SH&C Life Insurance Fees and commission income 1,348 - 1,274 -Shinhan Capital Shinhan Bank Interest income 549 192 299 117

〃〃 Gain on derivatives 959 551 - 1,024〃 Chohung Bank Interest income 344 - 7 -〃〃 Gain on derivatives 91 - 91 -

Shinhan BNPP ITMC Shinhan Bank Interest income 74 179 69 107〃 Jeju Bank (Trust) Trust management income - - 40 9〃 SH&C Life Insurance Fees and commission income - - 52 -

Jeju Bank Shinhan Bank Interest income - 46 - 31〃 Jeju Bank (Trust) Trust management income 79 820 52 -〃 SH&C Life Insurance Fees and commission income 58 -

Jeju Bank (Trust) Jeju Bank Interest income 889 205 846 57SH&C Life Insurance Shinhan Bank Interest income 86 257 - 13

〃〃 Insurance income 488 - 222 -〃 Chohung Bank Insurance income 3,877 - 3,877 -

Shinhan Macquarie Shinhan Bank Interest income 1 - - -Shinhan Credit

Information Shinhan Bank Fees and commission income 1,261 - 685 -

〃〃 Interest income 24 - 14 -〃 Chohung Bank Fees and commission income 1,408 - 821 -

〃 Goodmorning

Shinhan Securities Fees and commission income 6 - 2 -

〃 Shinhan Card Fees and commission income 4,660 - 3,402 -〃 Shinhan Capital Fees and commission income 82 - 52 -〃 Jeju Bank Fees and commission income 141 - 71 -

160,310 113,790 82,332 60,649

54



June 30, 2004

(Unaudited)





2004 2003 2004 2003

Subsidiaries accounted for by the equity method:

Shinhan Bank Shinhan Data System Rental income 22 154 11 154e-Shinhan Shinhan Bank Interest income 38 78 18 36

〃〃 Fees and commission income 35 8 4 3〃 Shinhan Bank Fees and commission income 4 - 1 -〃 The Company Fees and commission income 84 - 51 -

Shinhan Credit Information

Shinhan Bank Fees and commission income - 1,232 - 673

〃〃 Interest income - 20 - 7

〃 Goodmorning

Shinhan Securities Fees and commission income - 7 - 7

〃 Shinhan Card Fees and commission income - 3,576 - 2,152〃 Shinhan Capital Fees and commission income - 37 - 37

Shinhan Credit Information

Jeju Bank Fees and commission income - 284 - 150

Shinhan Data System Shinhan Bank Interest income 24 19 12 7〃〃 Fees and commission income 1,937 1,451 1,290 583

Chohung Vina Chohung Bank Interest income 80 - 40 -

2,224 6,866 1,427 3,809

W 162,534 120,656 83,759 64,458

(b) Account balances

Significant account balances among consolidated companies as of June 30, 2004 and December 31, 2003 are as follows:


Creditor Debtor Account 2004 2003


The Company Shinhan Bank Bank deposits W 7,980 5,327〃〃 Loans 50,000 50,000〃〃 Other assets 10,811 14,644


Securities Loans 130,000 130,000

〃〃 Other assets 110 134〃 Shinhan Card Loans 1,150,000 1,100,000〃〃 Other assets 6,550 6,541〃 Shinhan Capital Loans 700,832 644,905〃〃 Other assets 4,788 5,066

55



June 30, 2004

(Unaudited)




The Company Jeju Bank Loans 23,140 20,000〃〃 Other assets 186 186〃 Shinhan BNPP ITMC Other assets 2,000 -〃 Shinhan Macquarie Other assets 1,730 -〃 Shinhan Credit Information Other assets 52 38

Shinhan Bank Chohung Bank Securities 34,360 132,708〃〃 Other assets 111,465 797


Securities Loans 30,000 30,000

〃〃 Other assets 4,756 4,418〃 Shinhan Card Loans 13,400 28,500〃〃 Other assets 265 87〃 Shinhan Capital Loans 77,398 75,933〃〃 Other assets 312 233〃 Jeju Bank Loans - 3,140〃〃 Other assets - 561〃 SH&C Life Insurance Other assets 1,087 1,455〃 Shinhan Bank (Trust) Other assets 117,076 100,194

Shinhan Bank Shinhan Finance Due from bank 15,065 16,965〃〃 Loans 324,514 280,287〃〃 Other assets 1,240 1,261

Shinhan Bank (Trust) Shinhan Bank Other assets 45,246 224,387Shinhan Finance Shinhan Bank Loans 351,078 230,636

〃〃 Other assets 774 5Chohung Bank Shinhan Bank Bank deposits 75,000 -

〃〃 Loans 110,629 -〃〃 Securities - 96,515〃〃 Other assets 5,213 4,324〃 Shinhan Capital Loans - 392〃〃 Other assets 288 -

Chohung Bank Shinhan Card Loans - -〃 SH&C Life Insurance Other assets - -〃 Chohung Bank (Trust) Other assets 40,383 104,227〃 Chohung Finance Bank deposits 34,650 651〃〃 Loans 18,440 61,088〃 CHB Amreica Bank deposits 34,986 1,067〃〃 Loans - 17,967〃 Chohung Deutschland Bank deposits - 1,197〃〃 Loans 87,691 107,576

56



June 30, 2004

(Unaudited)




Chohung Bank (Trust) Chohung Bank Other assets 40,196 31,893Chohung ITMC Chohung Bank Bank deposits 49,264 50,397

〃〃 Other assets 1,304 1,199Chohung Finance Chohung Bank Bank deposits 414 10,696

〃〃 Loans 6,203 80,958Chohung Deutschland Chohung Bank Loans 121,346 105,539Goodmorning Shinhan

Securities Shinhan Bank Bank deposits 7,250 53,064

〃〃 Other assets 9,325 6,791〃 Chohung Bank Bank deposits 12,386 2,011〃〃 Other assets 200 8〃 Shinhan Card Other assets 24 -

Good Morning USA

Goodmorning Shinhan Securities Other assets 1,033 1,117

Good Morning Europe

Goodmorning Shinhan Securities Other assets - 908

Shinhan Card The Company Other assets 94 906〃 Shinhan Bank Bank deposits 139 102〃〃 Loans 4,000 -〃〃 Other assets 1,189 1,189


Securities Other assets 4,635 4,635

〃 SH&C Life Insurance Other assets 176 338〃 Shinhan Capital Loans 14 -

Shinhan Capital The Company Other assets - 773

〃 Shinhan Bank Short-term financial instruments 62,858 58,231

〃〃 Other assets 2,223 2,341〃 Chohung Bank Securities 6,363 6,714〃〃 Other assets 166 173

Shinhan BNP Paribas ITMC Shinhan Bank Cash and due from banks 12,644 4,436〃〃 Other assets 111 105

〃 Goodmorning Shinhan Securities Other assets 3,496 3,496

Jeju Bank Shinhan Bank Bank deposits 16 -〃〃 Other assets - 561〃 SH&C Life Insurance Other assets 16 -〃 Jeju Bank (Trust) Other assets - 798

Jeju Bank (Trust) Jeju Bank Other assets 5,093 4,382SH&C Life Insurance Shinhan Bank Cash and cash equivalents 4,449 33,563

〃〃 Other assets 40 46

57



June 30, 2004

(Unaudited)




Shinhan Macquarie Shinhan Bank Cash and cash equivalents 2,071 -Shinhan Credit Information Shinhan Bank Cash and cash equivalents 2,575 -

〃〃 Other assets 1,416 -〃 Chohung Bank Cash and cash equivalents - -〃〃 Other assets - -〃 Shinhan Card Other assets - -〃 Shinhan Capital Other assets - -〃 Jeju Bank Other assets 89 -

3,986,313 3,970,782


e-shinhan Shinhan Bank Cash and cash equivalents - 2,158〃〃 Other assets 39 -

Shinhan Macquarie Shinhan Bank Cash and cash equivalents - 1,187Shinhan Credit Information Shinhan Bank Cash and cash equivalents - 1,686

〃〃 Other assets - 1,146〃 Shinhan Card Other assets - 892〃 Jeju Bank Other assets - 161

Shinhan Data System Shinhan Bank Bank deposits 1,982 2,404〃〃 Other assets 502 185

Chohung Vina Chohung Bank Loans - 16,769

2,523 26,588

W 3,988,836 3,997,370 (c) Guarantees and acceptances

Guarantees and acceptances as of June 30, 2004 are as follows:


Guarantor Guarantee Guarantees and acceptances provided on

Amount of guarantees and

acceptances

The Company Goodmorning Shinhan Securities Lease guarantee deposits (*) W 50,000

Shinhan Bank Shinhan Capital Letter of credit 11,039〃 Shinhan Finance Loans 10,791

Chohung Bank Chohung Finance Letter of credit 807

W 72,637

58



June 30, 2004

(Unaudited)

(29) Condensed Financial Statements of Consolidated Companies

(a) Balance sheets

Condensed balance sheets of the Company and its subsidiaries as of June 30, 2004 and December 31, 2003 are as follows:


2004

Subsidiaries Total assets Total liabilities Total stockholders’equity


The Company W 9,046,787 2,380,978 6,665,809Shinhan Bank 72,521,022 68,903,786 3,617,236Shinhan Bank (Trust) 1,795,641 1,795,641 -Shinhan Finance 628,436 561,305 67,131Chohung Bank 64,620,519 62,294,908 2,325,611Chohung Bank (Trust) 1,400,633 1,400,633 -Chohung ITMC 68,966 675 68,291Chohung Finance 131,589 93,799 37,790CHB America 416,891 354,064 62,827Chohung Deutschland 209,436 177,232 32,204Goodmorning Shinhan Securities 2,554,251 1,888,942 665,309Good Morning Europe 7,691 324 7,367Good Morning USA 5,514 155 5,359Shinhan Card 1,436,967 1,283,211 153,756Shinhan Capital 1,348,949 1,240,385 108,564Shinhan BNPP ITMC 51,435 8,173 43,262Jeju Bank 1,761,718 1,657,317 104,401Jeju Bank (Trust) 15,582 15,582 -SH&C Life Insurance 188,844 162,073 26,771Shinhan Macquarie 12,422 12,163 259Shinhan Credit Information 8,605 2,387 6,218

158,231,898 144,233,733 13,998,165 Subsidiaries accounted for by the equity method:

e-Shinhan 3,993 672 3,321Shinhan Data System 2,858 444 2,414Chohung Vina 147,471 124,161 23,310

154,322 125,277 29,045

W 158,386,220 144,359,010 14,027,210

59



June 30, 2004

(Unaudited)

(29) Condensed Financial Statements of Consolidated Companies, Continued


2003

Subsidiaries Total assets Total liabilities Total stockholders’equity


The Company W 8,294,430 2,176,875 6,117,555Shinhan Bank 70,066,189 66,550,821 3,515,368Shinhan Bank (Trust) 1,768,128 1,768,128 -Shinhan Finance 524,180 459,598 64,582Chohung Bank 59,227,864 57,289,224 1,938,640Chohung Bank (Trust) 1,345,158 1,345,158 -Chohung ITMC 69,636 1,495 68,141Chohung Finance 144,708 109,947 34,761CHB America 386,498 322,274 64,224Chohung Deutschland 204,071 171,002 33,069Goodmorning Shinhan Securities 2,928,017 2,290,044 637,973Good Morning Europe 7,364 60 7,304Good Morning USA 5,981 198 5,783Shinhan Card 1,778,191 1,620,555 157,636Shinhan Capital 1,153,907 1,051,683 102,224Shinhan BNPP ITMC 47,461 2,489 44,972Jeju Bank 1,785,961 1,682,328 103,633Jeju Bank (Trust) 14,958 14,958 -SH&C Life Insurance 114,012 87,970 26,042

149,866,714 136,944,807 12,921,907


e-Shinhan 3,924 225 3,699Shinhan Macquarie 11,255 7,642 3,613Shinhan Credit Information 13,588 9,726 3,862Shinhan Data System 2,697 532 2,165Chohung Vina 149,347 126,849 22,498

180,811 144,974 35,837

W 150,047,525 137,089,781 12,957,744

60



June 30, 2004

(Unaudited)


(b) Statements of earnings

Condensed statements of earnings of the Company and its subsidiaries for the quarters and six months ended June 30, 2004 and 2003 are as follows:


Six months 30, 2004

Subsidiaries Operating revenue

Operating expense

Operating income (loss) Ordinary

income (loss) Net earnings(losses)


The Company W 550,199 81,195 469,004 469,458 469,458 Shinhan Bank 2,722,973 2,204,060 518,913 677,175 477,208 Shinhan Bank (Trust) 58,654 57,040 1,614 - - Shinhan Finance 7,917 5,155 2,762 2,827 2,827 Chohung Bank 2,810,913 2,645,046 165,867 129,118 127,508 Chohung Bank (Trust) 54,572 53,126 1,446 - - Chohung ITMC (*) 7,911 3,371 4,540 5,316 3,948 Chohung Finance 2,385 1,473 912 1,231 1,231 CHB America 11,119 9,126 1,993 2,102 1,233 Chohung Deutschland 4,192 2,549 1,643 1,646 1,543 Goodmorning Shinhan Securities (*) 401,694 378,775 22,919 32,234 32,511 Good Morning Europe 778 679 99 99 99 Good Morning USA (*) 3,574 4,197 (623) (626) (227)Shinhan Card 214,350 218,127 (3,777) (3,879) (3,879)Shinhan Capital 98,098 78,586 19,512 19,009 13,267 Shinhan BNPP ITMC (*) 6,624 3,446 3,178 3,183 2,209 Jeju Bank 65,663 65,144 519 1,223 1,223 Jeju Bank (Trust) 1,232 1,260 (28) - - SH&C Life Insurance (*) 16,741 17,447 (706) (282) (282)Shinhan Macquarie (*) 7,817 7,618 199 324 90 Shinhan Credit Information 19,078 19,506 (428) (269) 2,356

7,066,484 5,856,926 1,215,120 1,344,945 1,136,711


e-Shinhan 1,300 1,694 (394) (378) (378)Shinhan Data System 2,488 2,264 224 249 249 Chohung Vina 4,355 2,700 1,655 1,663 1,663

8,143 6,658 1,485 1,534 1,534

W 7,074,627 5,863,584 1,216,605 1,346,479 1,138,245

(*) Operating results from January 1, 2004 to June 30, 2004 are reflected.

61



June 30, 2004

(Unaudited)



Six months ended June 30, 2003


Operating expense




The Company W 156,053 52,645 103,408 102,423 102,423 Shinhan Bank 2,340,516 2,103,162 237,354 219,388 151,701 Shinhan Bank (Trust) 60,499 58,193 2,306 - - Shinhan Finance 8,074 13,910 (5,836) (5,758) (5,758)Goodmorning Shinhan Securities 307,973 296,229 11,744 46,272 23,609 Good Morning Europe 865 1,100 (235) (235) (235)Good Morning USA (*) 131 1,414 (1,283) (1,983) (1,667)Shinhan Card 206,966 280,862 (73,896) (73,921) (73,683)Shinhan Capital 69,695 56,215 13,480 12,190 8,598 Shinhan BNPP ITMC (*) 6,270 6,875 (605) (163) (120)Jeju Bank 70,486 72,529 (2,043) (972) 1,057 Jeju Bank (Trust) 1,213 1,213 - - - SH&C Life Insurance (*) 1,382 2,030 (648) (1,619) (1,619)

3,230,123 2,946,377 283,746 295,622 204,306 Subsidiaries accounted for by the equity method:

e-Shinhan 1,081 1,814 (733) (709) (709)Shinhan Macquarie (*) 3,082 4,295 (1,213) (1,003) (1,352)Shinhan Credit Information 5,882 4,813 1,069 1,089 772 Shinhan Data System 1,774 1,785 (11) 7 7

11,819 12,707 (888) (616) (1,282)

W 3,241,942 2,959,084 282,858 295,006 203,024

(*) Operating results from January 1, 2003 to June 30, 2003 are reflected.

62



June 30, 2004

(Unaudited)



Quarter ended June 30, 2004


Operating expense




The Company W 365,739 41,992 323,747 323,842 323,842 Shinhan Bank 1,282,101 1,007,223 274,878 311,610 223,800 Shinhan Bank (Trust) 24,723 23,388 1,335 - - Shinhan Finance 4,157 3,002 1,155 1,187 1,187 Chohung Bank 1,331,800 1,206,886 124,914 92,378 91,388 Chohung Bank (Trust) 27,423 27,415 8 - - Chohung ITMC (*) 2,648 607 2,041 2,052 1,394 Chohung Finance 1,145 475 670 488 488 CHB America 5,614 4,741 873 936 591 Chohung Deutschland 2,214 1,198 1,016 1,018 1,199 Goodmorning Shinhan Securities (*) 208,309 199,847 8,462 10,118 8,413 Good Morning Europe 1,556 1,358 198 198 198 Good Morning USA (*) 2,911 3,594 (683) (645) (246)Shinhan Card 105,455 104,047 1,408 1,311 1,311 Shinhan Capital 41,853 35,151 6,702 6,868 4,958 Shinhan BNPP ITMC (*) 3,394 1,731 1,663 1,663 1,143 Jeju Bank 33,124 28,616 4,508 5,542 5,542 Jeju Bank (Trust) 210 238 (28) - - SH&C Life Insurance (*) 8,861 8,915 (54) 370 370 Shinhan Macquarie (*) 130 1,431 (1,301) (1,193) (571)Shinhan Credit Information 9,830 9,357 473 446 3,071

3,463,197 2,711,212 751,985 758,189 668,078


e-Shinhan 662 1,070 (408) (412) (412)Shinhan Data System 1,255 964 291 308 308 Chohung Vina 2,227 1,372 855 860 860

4,144 3,406 738 756 756

W 3,467,341 2,714,618 752,723 758,945 668,834

63



June 30, 2004

(Unaudited)



Quarter ended June 30, 2003


Operating expense




The Company W 76,074 31,241 44,833 45,989 45,989 Shinhan Bank 1,133,716 1,059,326 74,390 85,376 57,741 Shinhan Bank (Trust) 30,314 28,638 1,676 - - Shinhan Finance 3,867 10,422 (6,555) (6,572) (6,572)Goodmorning Shinhan Securities 166,164 144,905 21,259 52,578 44,354 Good Morning Europe 575 539 36 38 38 Good Morning USA (*) 131 11 120 158 158 Shinhan Card 108,238 147,774 (39,536) (39,532) (39,532)Shinhan Capital 47,100 38,910 8,190 7,139 5,070 Shinhan BNPP ITMC (*) 3,052 1,876 1,176 1,747 1,231 Jeju Bank 35,014 36,335 (1,321) (1,528) 501 Jeju Bank (Trust) 340 216 124 - - SH&C Life Insurance (*) 837 1,772 (935) (935) (935)

1,605,422 1,501,965 103,457 144,458 108,043 Subsidiaries accounted for by the equity method:

e-Shinhan 509 874 (365) (385) (385)Shinhan Macquarie (*) 110 1,114 (1,004) (999) (1,204)Shinhan Credit Information 3,652 2,908 744 751 434 Shinhan Data System 787 764 23 29 29

5,058 5,660 (602) (604) (1,126)

W 1,610,480 1,507,625 102,855 143,854 106,917

(30) Economic Environment

In common with other Asian countries, the economic environment in the Republic of Korea continues to be volatile. In addition, the Korean government and the private sector continue to implement structural reforms to historical business practices including corporate governance. The Company may be either directly or indirectly affected by these economic conditions and the reform program described above. The accompanying consolidated financial statements reflect management’s assessment of the impact to date of the economic environment on the financial position and results of operations of the Company. Actual results may differ materially from management’s current assessment.

shinhan financial group co., ltd. and subsidiaries · shinhan financial group co., ltd.: we have...

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