Financial groups expected to pay out half-year dividends

Hana Financial Group is the only financial institution in Korea that continues to offer half-year dividends. Korea Times file

By Anna J. Park

A recommendation made by the financial regulators here capping the dividend payout ratio of local financial groups to a maximum 20 percent is expected to be rescinded by the end of the month, leading the market to focus on whether the groups will offer half-yearly dividends after the second quarter.

The Financial Services Commission (FSC) and Financial Supervisory Service (FSS) said in January that financial holding firms should limit their payout ratios to a maximum 20 percent, citing the need to maintain fiscal soundness amid the continuing shock and financial uncertainties caused by the COVID-19 pandemic. The ratios are calculated by dividing the paid dividend total by net income.

However, the temporary cap is expected to be lifted, as the FSS recently asked local companies, including the five major financial groups ― KB, Shinhan, Hana, Woori and NH Nonghyup ― to submit various documents required for a so-called “stress test” to evaluate their fiscal soundness.

Market watchers say that once the tests are completed, the cap could be lifted as early as the end of the month, allowing the financial companies to resume dividend payouts according to their own metrics, without the intervention of the financial authorities.

During the past three years, the payout ratios of KB, Shinhan, Hana and Woori have ranged from 22.53 percent to 23.57 percent in 2017; 24.8 percent to 25.54 percent in 2018; and 25.78 percent to 25.97 percent in 2019. Given that dividends were on an upward trend until the pandemic hit the global economy, financial groups are expected to be more active in sharing profits with shareholders. Market watchers expect this year’s annual dividend level to be similar to or surpass that of 2019.

Hana Financial Group, which is the only local financial giant among the five groups that has given out half-yearly dividends regularly, is likely to do so this year.

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Other firms appear likely to raise their dividends, while any half-yearly payout remains uncertain.

“The company’s dividend payout plan will become clearer, once the FSS’s stress test is over at the end of the month,” an official from KB Financial Group told The Korea Times, adding that the group will continue to raise shareholder value and returns.

KB Financial Group’s Chairman Yoon Jong-kyu said during a shareholders’ meeting in March that he believes the payout should be at least 30 percent, while offering an apology for the group’s reduced dividend.

Shinhan is in a similar position. “The group revised its articles of incorporation in March to allow it to give out half-yearly or quarterly dividends. While the group always places shareholder value and returns as a priority, a specific timeline or the amount of the dividends have not been determined so far,” a Shinhan official said, adding the group will closely communicate with the financial regulators on the issue.

A Woori Financial Group official said the group and its chairman have stressed the need to raise shareholder value through returns, but added that nothing has been decided about a half-yearly dividend as it waist the result of the stress test.