Banks seek to pay interim dividends following earnings surprise

Seen above are headquarters of Korea's four major financial holding firms including KB, Shinhan, Hana and Woori. Courtesy of each firm

By Park Jae-hyuk

The nation's four major financial holding companies expressed their intentions last week to pay interim dividends to shareholders this year following better-than-expected quarterly earnings.

The move is widely viewed as an effort to win back investors who were disappointed by the relatively low dividend payments in 2020. Domestic financial firms were forced by regulators last year to cut their dividends ratio to below 20 percent to bolster their financial soundness amid the COVID-19 pandemic

Hana Financial Group, the country's only banking group that has paid interim dividends every year, officially said it will also pay one this year.

“We will continue to carry out shareholder return policies through interim dividends,” Chief Financial Officer (CFO) Lee Hoo-seung said in a conference call Friday.

The financial group saw its first-quarter net profit surge 27 percent from 2020 to 834.4 billion won ($748 million), much larger than the consensus among brokerage analysts, who predicted 700 billion won.

KB, Shinhan and Woori financial groups, both of which achieved record-high quarterly earnings, also hinted at paying interim dividends.

“We are closely reviewing the prospect of quarterly dividends, and there is no change in our long-term plan to raise our dividend payout ratio to 30 percent,” KB CFO Lee Hwan-ju said in a conference call Thursday. “If uncertainties involving COVID-19 disappear in the second half, we will make efforts to enhance shareholder value by raising our dividend payout ratio to the previous level.”

Shinhan CFO Roh Yong-hoon emphasized there would be no problem with its plan to pay quarterly dividends during the second half of the year.

“We devised the plan last year, and have finished reviewing a practical way to implement it,” he said.

KB's net profit rose 74.1 percent year-on-year to 1.27 trillion won during the first quarter, allowing the financial group to retain its leading bank title against Shinhan, which posted a 1.19 trillion won net profit, up 27.8 percent.

Woori reiterated that it will pursue a range of active shareholder return policies when the pandemic is under control, something it revealed at a general shareholders meeting last month. The group saw its first-quarter net profit soar 29.7 percent to 671.6 billion won.

NongHyup Financial Group, which surpassed Woori in last year's earnings, will announce its quarterly performance April 30. It is expected to pay an interim dividend this year to its single largest shareholder, the National Agricultural Cooperative Federation, so that it can support farmers.

Plans for expansions

Based on the earnings surprise, financial groups also disclosed plans for business expansions.

Shinhan said it was looking for companies to acquire in Indonesia and Vietnam, indicating that it may participate in a bid to take over Citigroup's Southeast Asian operations, which are highly likely to be put up for sale in the near future.

KB has shown interest in establishing an internet-only bank ― local banking groups have talked about founding wholly-owned app-based banks following a recent survey by the Korea Federation of Banks on demand for internet-only banks.

“If there is any change in the Financial Services Commission's licensing policy, we will review the plan,” Chief Strategy Officer (CSO) Lee Chang-kwon said.

Hana hinted at the possibility of acquiring a credit card company or insurer, saying it still lags behind its rivals in those sectors. The financial group has been mentioned as one of the candidates to acquire Citi's credit card business in Korea.