Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Bank stocks losing growth momentum despite year-end dividend season
Logos of the nation's top-four banks are seen in this photo. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Bank stocks are losing their growth momentum, even as the year-end dividend season draws near.
In most cases, stocks of financial holding firms rise around December, as investors turn their eyes on dividend offerings from major banks
But this appears not to be the case this year amid the growing likelihood that dividend payments will decline this year, compared to 2019, as the financial authorities have repeated calls for banks to reduce dividends temporarily in consideration of the virus-induced economic uncertainties.
Banks have fallen victim to the pressure from regulators, with investors paying less attention to financial stocks. For major lenders, their stock prices have been on a gradual rise since late November amid investors' hope for year-end dividends.
The stock prices of the nation's top four financial holding firms ― KB Financial, Shinhan Financial, Hana Financial and Woori Financial groups ― reported outstanding growth in mid-December last year.
But all of them failed to bounce back to the level this year even at a time when the benchmark KOSPI has set new record highs amid a stock investment boom.
“The regulators' pressure does no good for either banks or investors, but we cannot complain,” a banking industry source said. “Bank stocks have remained in the doldrums for the past few years, and most banks agree that they need to expand dividends to drive up the valuation of their stocks.”
Amid the prevailing atmosphere that banks will end up reducing dividends, most of their stocks here have in recent weeks failed to achieve a rebound.
Shinhan Financial Group closed at 33,250 won per share Thursday, down 1.34 percent from the previous day. This is disappointing for Shinhan and its investors, as the share price of the top-tier financial holding firm reached around 46,000 won a year ago.
This is the same for KB Financial Group, which closed at 45,250 won per share, down 1.74 percent from the previous day's trading ― a drop of 8 percent from a year ago.
Analysts, however, remained optimistic for a possible rebound in 2021, as the administration transition in the United States will change the investment trend from current growth stocks to value stocks, such as bank shares.
“In 2020, the profitability of growth stocks went in the opposite direction to that of value stocks,” Hana Financial Investment economist Choi Chung-uk said.
But the chances are growing that investors will pay more attention to value stocks next year amid expectations for a gradual increase in interest rates after U.S. President-elect Joe Biden is inaugurated Jan. 20, 2021, according to the analyst.