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| Seen above are headquarters of Korea’s four major financial holding firms: KB, Shinhan, Hana and Woori. Courtesy of each firm |
KB, Shinhan, Hana, Woori, NH set to pay interim dividends
By Park Jae-hyuk
Domestic banks and financial holding companies will be allowed to pay unlimited interim dividends starting next month, after the Financial Services Commission (FSC) announced Thursday it was lifting its 20 percent dividend cap that it “advised” them to follow throughout the first half of the year.
“We suggested that banks and their holding companies take into account the fact that uncertainties about the COVID-19 pandemic have yet to be resolved completely, although they are allowed to make autonomous decisions on their dividend payouts,” the FSC said in a statement. “They were advised to consider setting their dividend payout ratios at pre-pandemic levels.”
However, it clarified that it will not impose any penalties on those that do not follow the advice.
In January, the financial authorities “recommended” banks and financial holding companies here, including internet-only and foreign banks, to keep their dividend ratios to below 20 percent to bolster their financial soundness amid the COVID-19 pandemic. Based on the Financial Supervisory Service’s stress test for assessing resilience and stability of the financial system, all of them were virtually forced to reduce the size of their dividends.
They passed the latest test conducted between May and June, due to the recent economic recovery.
Following the deregulatory measure, the nation’s five largest financial holding companies are planning to pay additional dividends to their shareholders sometime later this year.
Hana Financial Group, which is the only banking group here that has given out half-yearly dividends regularly, has already decided to do the same this year, making an announcement on its book closure, June 15.
“The specific payout ratio will be determined at the forthcoming board meeting,” a Hana spokesman said.
Shinhan Financial Group, which changed part of its articles of association during its general shareholders meeting in March to establish legal grounds for offering quarterly dividends, has maintained a positive stance on quarterly dividend payouts this year.
“The quarterly dividend offering is a shareholder return policy devised after Shinhan and its board of directors conducted continuous internal discussions,” Shinhan Chairman Cho Yong-byoung said at the meeting in March.
KB Financial Group, whose articles of association allow quarterly dividend payouts, has remained cautious on the issue, saying the specifics will be decided by its board of directors. However, KB Chairman Yoon Jong-kyoo said at a general shareholders meeting in March that the payout ratio should be at least 30 percent.
Woori Financial Group converted its capital reserves of 4 trillion won ($3.5 billion) into an earned surplus to secure financial resources for dividend payouts.
NongHyup Financial Group is considering paying interim dividends to its owner, the National Agricultural Cooperative Federation, so that the money can be used for farmers.
When the FSC announced the dividend cap in January, the financial group expressed concern, citing possible problems for local farmers who have already suffered financial difficulties from the COVID-19 pandemic.
According to the FSC, its recent decision is in line with the plans of its peers in the U.S., the U.K. and the European Union, which are also easing their regulations on bank dividends within this year as their economies recover.
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