The Korea Herald


Banking giants set to deliver record dividends

By Choi Si-young

Published : Feb. 13, 2022 - 15:03

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South Korea’s four major bank holding firms are expected to hand out record-high dividends for their highest net profits made last year thanks to a pandemic recovery, officials said Sunday.

Total dividends from the four companies -- KB Financial Group, Hana Financial Group, Shinhan Financial Group and Woori Financial Group -- are estimated to be 3.8 trillion won ($3.1 billion), about 26 percent of the combined net profit of 14.5 trillion won.

“We have enough capital flowing in to compensate our shareholders what we owe them. They will see more dividends in the long run as we step up efforts to share greater profits,” a KB Financial Group official said, adding that the dividend payout margin will gradually reach 30 percent from the current 26 percent.

A Hana Financial Group official echoed a similar sentiment, saying the dividend payouts will increase as financial institutions are moving quicker than ever to transition out of the COVID-19 crisis.

The four banking giants are expected to retain strong profit margins this year as well, as the Bank of Korea looks to lift borrowing costs as part of returning to its pre-pandemic monetary policy amid growing concerns over consumer prices and household debts.

The four companies are projected to earn 15.5 trillion won in net profits this year -- a 6 percent rise over last year -- according to Yonhap Infomax, a local financial data provider.

Those financial firms could do more about their existing dividend payout ratio to net profit, which is one of reasons they are undervalued globally, said Jung Jun-sup, an analyst at NH Investment & Securities.

“They need to go beyond the current cap at 26 percent and return more to shareholders what they are owed,“ he said. With what he sees as solid financial fundamentals, the firms could even go for a monthly payout, he added.

Since 2015, the cap had stayed between 23 percent and 24 percent except in 2020, when it dropped to an all-time low of 21 percent because the four companies were advised to limit cash outflow amid concerns over the coronavirus pandemic.

Experts have called on local banks to step up dividend payouts, saying their rivals in Japan and China are giving out at least 30 percent and up to 40 percent of what they have earned to better compensate and attract shareholders.

“The other reason the banking giants should think about a monthly dividend payout rather than a one-off lump sum at year-end is that they can avoid a share plunge on payout day. So spread it out,” Jung said.