Hana in dilemma over dividend payment

Hana Financial Group headquarters in Seoul / Courtesy of Hana Financial Group

By Park Jae-hyuk

Hana Financial Group is in a dilemma over whether to pay dividends to its shareholders at the end of the first half, after the financial authorities urged it to cut such payments during the COVID-19 pandemic to strengthen reserves, according to industry officials, Monday.

The financial services holding company said it has yet to make a decision on the matter.

Given that the deadline for its interim dividend payments is June 30, according to its articles of association, Hana will likely make an announcement around the middle of the month.

Analysts, however, believe the financial firm will pay interim dividends this year, despite the financial authorities' recommendation.

“We expect Hana will continue to pay dividends to its shareholders as usual, given that the financial authorities' recommendation has been considered less reasonable recently,” Meritz Securities analyst Eun Kyung-wan said.

In Korea, Hana is the only financial holding company that pays interim dividends to shareholders.

Ever since it launched a holding company structure in December 2005, it has paid dividends every June.

The payments have continued to grow over the past few years from 150 won ($0.12) in 2015 to 250 won in 2016, 300 won in 2017, 400 won in 2018 and 500 won in 2019.

As shareholders expect to receive dividends in June, Hana Financial Group's shares have come close to 32,000 won this month, after hitting bottom at 18,450 won March 20 when the coronavirus was spreading rapidly in Korea.

Financial Supervisory Service (FSS) Governor Yoon Suk-heun, however, said in an executive meeting in April that Korean financial services firms should follow the trend of global lenders of cutting payments to shareholders, so as to secure enough total loss-absorbing capacity and maintain their ability to support businesses.

Back then, he cited Citigroup in the United States, HSBC and Standard Chartered in the United Kingdom, and ABN AMRO in the Netherlands.

SK Securities analyst Koo Kyung-hoi said Hana and other banking groups' stock prices will depend on whether or not they pay dividends to their shareholders.

HSBC and Standard Chartered suffered stock price falls when the Prudential Regulation Authority urged it to stop dividend payments.

U.S. banks defended their dividend payouts during the pandemic, saying that cutting them would be “destabilizing to investors.”

Hana Financial Group Chief Financial Officer Lee Seung-lyul said during a conference call in April that his company's board of directors would decide whether to pay dividends, after discussing the matter in a forthcoming meeting.

The company said at that time it would continue to pursue shareholder-friendly policies in the medium- to long-term.