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| KakaoBank CEO Yun Ho-young speaks during an online press briefing held Tuesday before the company's planned listing next month. Courtesy of KakaoBank |
By Kim Yoo-chul
Ahead of the planned initial public offering (IPO) of KakaoBank, Korea's largest mobile-only bank, major local banking groups are planning for the highest dividends payout this year.
While the spread of the Delta variant of COVID-19 is expected to have a negative impact on banks' profitability, the pick-up in economic activity and recent signals of shifting inflationary anticipation here have led to steeper yield curves. This, combined with gradually higher rates, sees banks set to benefit considerably in terms of profit and profit margins.
KakaoBank CEO's recent defense of the company's valuation method ― against worries raised by some investors and financial regulators that the internet-only bank was "highly overvalued" ― could lead investors in banking stocks to flock to it. Thus, traditional banks are seeking to "lock-in" their existing customers.
KakaoBank set its price-to-book ratio at 7.3, up significantly from last year's 4.3. This is considered a barometer for gauging the market valuation of a company relative to its book value. For Korea's traditional banks, the ratio remains below 1. The figure is 0.52 for KB Financial Group and 0.5 for Shinhan Financial Group; but because KakaoBank's ratio is based on figures from innovative platforms, its IPO could skew the existing market order.
KB, Shinhan, Hana and Woori Financial banking groups, the country's four major players, are moving to increase each of their year-end dividend payouts. Plus, they are also shifting towards quarterly dividend payouts, following the financial regulator's recent decision to remove the dividends cap for domestic financial companies, starting this month.
KB's board approved 750 won per ordinary share as an interim dividend payment. Hana Bank's board decided, late Thursday, to resume paying interim dividends on ordinary shares for this year, which it didn't last year, saying the bank was sufficiently capitalized ― it will pay 700 won per ordinary share.
Woori Bank said that it aims to increase its year-end dividend payout ratio to 30 percent.
"Because repeated indications of an interest hike during the latter half of this year have come from the Bank of Korea, local banking groups are expecting an increase in their future net interest margins (NIM) and net interest income (NII). I would say that, with the debut of KakaoBank, banks will keep increasing dividend payments to shareholders," said Kim Jae-woo, an analyst at Samsung Securities.
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