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.
Despite dividends, bank stocks drop on weakening investment sentiment
A dealer at Hana Bank works at its head office in Seoul. Behind him is an electronic signboard indicating a loss for the benchmark KOSPI on Monday morning. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Bank stocks turned in lackluster performances, Monday, a day before the 2021 dividend date of record, as investors remained skeptical of financial stocks seeing an additional rally with the impending introduction of tight regulations next year.
When the year-end dividend season approaches, bank shares typically achieve stable rebound, as shares of KB, Shinhan, Hana and Woori ― four of the nation's largest financial holding firms ― are classified as guaranteeing high dividend offerings.
But this is not the case this year, with most of them failing to extend any outstanding bullish runs. KB Financial Group shares fell by 1.22 percent, closing at 56,700 won per share on Monday. Shinhan Financial Group's share price also finished without gains at 37,900 won, according to data from the Korea Exchange.
KB and Shinhan achieved major earnings growth throughout the year on expanded interest margins. The outlook for financial firms remains somewhat promising for 2022, when the Korean economy will stably enter a cycle of monetary tightening.
Despite the optimism, shares of Hana Financial Group and Woori Financial Group also edged down on the same day amid weakening investor sentiment on financial shares, as watchdogs are set to introduce a tighter set of lending rules next year, which investors consider a major stumbling block for banks' additional earnings growth.
The resurgence of the coronavirus has also hindered global capital influx, leaving the benchmark KOSPI trapped in a boxed pattern at around the 3,000-point mark. Bank shares were also hit by the sluggish growth momentum of the main bourse, failing to achieve a major rebound in the latter half of this year, despite hopes for interest rate hikes after the Bank of Korea started increasing its key rate in August.
Market analysts advised investors to purchase banking shares due to the high dividend payments and decent earnings outlooks.
“The four major financial firms are expected to offer dividends worth 3.7 trillion won in 2021, up 67.9 percent from the previous year,” Daishin Securities analyst Park Hye-jin said. “This is an increase of 31.1 percent, when compared with 2019.”
Financial holding firms will report a historically high net profit this year on key rate hikes and diminished allowance for bad debts, according to the economist.