Hana aims to raise dividend payout ratio to 30% amid record profits

Analysts expect banking group to achieve W4 tril. in net profit under new leadership

By Yi Whan-woo

Hana Financial Group is seeking to raise its target dividend payout ratio to 30 percent, up from the current 26 percent, on the back of a record net profit of 3.53 trillion won ($2.94 billion) in 2021, the group said Sunday.

The group's plan is also based on optimism that it will achieve a net profit of over 4 trillion won this year under new leadership of Ham Young-joo, who was nominated as the group's new chairman on Feb. 8.

The 30-percent dividend target is above the market standard, which has been hovering at around 23 to 24 percent since 2015, except for the pandemic-stricken year of 2020, when it dropped to an all-time low of 21 percent.

Against this backdrop, the banking group appears to be confident about reaching the goal.

In a regulatory filing, Friday, its top finance officer said that it finds it “regretful not being able to pay higher dividends to its shareholders due to the ongoing pandemic,” after it made an announcement that it would pay dividends of 3,100 won per share. The amount was decided in accordance with the 26-percent dividend cap.

“The dividend payout ratio should increase if the pandemic ends this year and things return to normal,” the officer said. “We will head toward the goal of a 30-percent dividend ratio in an orderly fashion.”

A sculpture in the shape of Hana Financial Group's logo is seen on the entrance of the firm's headquarters building in central Seoul in this undated photo. Korea Times file

Analysts are also positive about Hana Financial Group's growth potential, assessing that its stocks have been the most undervalued among those of the four major banking groups, including KB, Shinhan and Woori.

“Such valuation is largely attributed to uncertainties linked to the governance structure, and the latest nomination of the new chairman is anticipated to clear up concerns over the leadership in a substantial manner,” Meritz Securities analyst Eun Kyung-wan said.

Ham will replace outgoing chairman Kim Jung-tae, who led the company for the past 10 years. He will officially take office for a three-year term upon the confirmation of the shareholders and board of directors in their respective meetings in March.

Ham has been recognized for his expertise, noticeably through the successful integration of Hana Bank and Korea Exchange Bank (KEB) employees, after the former acquired the latter in the mid-2010s.

Concerning other plus factors for Hana Financial Group's growth, Eun said that the group is more competent than rival companies in terms of capital and financial soundness.

Eun went on to say that the company “is also more determined” to return profits to shareholders, as seen from its payment of interim dividends in the midst of the pandemic.

Its non-banking arms have been increasingly contributing to the company's earnings, accounting for 36 percent of the 3.53-trillion won net income reported in 2021. The figure is up 33.7 percent from 2020.

Net interest income and commission earnings combined rose 15.2 percent to 9.3 trillion won during the same time period, over the “balanced growth among the banking and non-banking arms and diversified business portfolios,” according to the banking group.

Daeshin Securities analyst Park Hye-jin forecast Hana Financial Group's net interest income to climb by 17.4 percent from a year earlier to 8.2 trillion won in 2022.

Jung Joon-sup, an analyst at NH Investment & Securities, viewed that the robust performance proves the group's financial health and that the company “will show appeal in terms of valuation going forward.”

Meanwhile, Hana Financial's stock gained 5.35 percent to close at 51,200 won, Friday.