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.
Major banking groups set to offer interim dividends in latter half of 2021
Financial Services Commission Chairman Eun Sung-soo, right, talks with leaders of the nation's top five financial holding firms, at the headquarters of the Federation of Banks in Seoul on Feb. 16. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Korea's major banking groups are gearing up to pay interim dividends to shareholders in the latter half of 2021, when the Financial Supervisory Service's temporary regulation capping dividends at 20% will come to an end. The move is seen as part of their preemptive efforts to bolster post-coronavirus stock values.
Hana Financial Group has so far been the only financial holding firm here that has carried out an interim dividend policy. But other top-tier financial firms ― namely KB, Shinhan and Woori ― are moving to follow in the footsteps of Hana this year, after they were forced to cut their year-end dividends last year amid pressure from government regulators.
Discussion concerning the enhanced shareholder return policy will pick up steam starting in July, when a temporary regulation that places an upper limit of 20 percent for their dividend payout ratio will likely finish. The Financial Supervisory Service introduced the 20-percent rule to ensure the financial soundness of such aforementioned holding firms amidst the pandemic.
Shinhan Financial Group is in advanced talks to offer quarterly dividends as early as the third quarter of this year, after the firm changed part of its articles of association during a recent shareholders' meeting.
Shinhan Chairman Cho Yong-byoung told investors that the management feels sorry that last year's dividends fell short of shareholders' expectations. He pledged to do his utmost to conduct active shareholder return policies this year to regain trust from investors.
KB Financial Group Chairman Yoon Jong-kyoo also reaffirmed his willingness to increase dividends in the second half of this year during its regular shareholders' meeting last week. He promised to undertake a careful review to increase its dividend payout ratio ― up to 30 percent ― this year, and introduce either semi-annual or quarterly distributions of profits.
Hana Financial Group, which has offered half-yearly dividends since 2006, is also expected to continue the policy this year. Hana Financial Chief Financial Officer Lee Hoo-seung said that Hana would push for the interim and year-end dividend payouts this year to keep enhancing shareholder value.
“Financial firms' quarterly dividends policy is prevalent in developed countries,” a bank industry source said. “It is high time for Korean financial players also to embrace the regular shareholder return drive, so that their stock prices stop hovering in a boxed range.”
Woori Financial Group also reiterated their strong determination to carry out a more diverse set of shareholder return policies throughout this year.
The interim dividend offering is considered most probable and effective in that it can satisfy dividend-hungry shareholders and help rev up their dismal stock performances.
A priority for banking groups' top management is to enhance their stock values, amid widening business uncertainties, following the pandemic outbreak last year. To this end, the most ideal measure is to offer dividends on a more frequent basis.
Some financial firms' stock prices have recently gotten on track for a gradual recovery, but the level of growth remains unimpressive, given the benchmark KOPSI's unprecedented rally throughout last year.
“Even if the pandemic uncertainties remain in place, financial firms will likely carry out the regular dividend payout policies soon after regulators stop the 20-percent dividend rule, possibly at the end of June,” another official from the bank industry said.