Value context and insight. lkm@koreatimes.co.kr
Citi, Standard Chartered pressured to cut dividend payouts
Standard Chartered Bank Korea CEO Park Jong-bok, left, and Citibank Korea CEO Yoo Myung-soon
By Lee Kyung-min
By Lee Kyung-min
Citibank Korea and Standard Chartered (SC) Bank Korea are coming under pressure to significantly cut dividend payouts, in line with earlier steps taken by Korea's major financial groups at the recommendation of financial authorities increasingly influenced by public sentiment.
Many Koreans feel that the high net incomes of financial services firms did not result from superior growth strategies, but from an unexpected boom in loans, some of which fueled a stock-investment craze amid the spread of the COVID-19 pandemic.
The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) recently recommended financial holding firms as well as foreign banks to cap their dividend payout ratios at 20 percent, citing the need to maintain fiscal soundness. Dividend payout ratios are calculated by the paid dividend total by net income.
Of Korea's top five financial groups, KB and Hana complied with the recommendation, while Shinhan, Woori and NongHyup are highly likely to follow suit pending their respective board meetings in March.
KB Financial Group said it decided to lower its dividend payout ratio to 20 percent for 2020, down 6 percentage points from 26 percent in 2019. Hana Financial Group's board of directors also decided to cut its dividend payout ratio to 20 percent for 2020 from 25.78 percent in 2019.
Citibank Korea paid 65.2 billion won ($59.1 million) in dividends in 2019. The payout ratio stood at 22.2 percent, far lower than around 35 percent in 2017 and 2018.
SC Korea's payout ratio was 50.6 percent in 2018 and 45.68 percent in 2017. The payout total was 112 billion won and 125 billion won, respectively.
Citibank Korea's net profit in the first three quarters of 2020 stood at 161 billion won, down 38 percent year-on-year. SC Korea's net profit during the same period was 182.9 billion, down 28.1 percent from a year earlier.
“Discussions are taking place within the firm. Nothing has been decided on the recommended payout cut. The final decision will be made in March,” an SC Korea official said.
A Citibank Korea official said the bank "has not reached a decision yet on dividend payments."