Shinhan Financial Group to Introduce 'Quarterly Dividend System' at March General Meeting
Some Holding Companies Also Considering Quarterly Dividends and Share Buybacks
[Asia Economy Reporter Kwangho Lee] Financial holding companies are considering the option of quarterly dividends. Although they recorded record-high earnings last year, concerns about shareholder attrition have arisen as dividend payouts were reduced following regulatory recommendations to restrain dividends. Foreign shareholders account for over 60% of the holdings in each financial holding company. Given their significant influence, quarterly dividends are being mentioned as a measure to appease their dissatisfaction.
According to the financial sector on the 20th, Shinhan Financial Group plans to introduce a quarterly dividend system at the shareholders' meeting scheduled for March. Quarterly dividends involve paying dividends up to four times a year. This is a common practice among U.S. stocks.
Shinhan Financial Group achieved a record net profit of 3.4146 trillion KRW last year. However, due to the Financial Services Commission's request to restrain dividends to 20%, the company has not yet decided on the dividend amount and has deferred the decision to the March board meeting.
No Yong-hoon, Vice President and Chief Financial Officer (CFO) of Shinhan Financial Group, stated during the earnings conference call, "We plan to increase the dividend payout ratio to 30% in the mid to long term," adding, "Regarding quarterly dividends, we will prepare to amend the articles of incorporation in the first half of the year so that it can be implemented even in the second half." He further said, "If quarterly dividends are difficult, we plan to implement shareholder return policies starting in the second half through share buybacks."
Some other holding companies are also considering options such as quarterly dividends or share buybacks.
Lee Hwan-joo, Vice President and CFO of KB Financial Group, expressed, "The reduction in dividend payout ratio is a temporary measure," emphasizing, "The basic dividend policy remains valid." He added, "If uncertainties ease, we will quickly improve shareholder returns through active capital policies," and stated, "We will review and implement various measures such as share buybacks, cancellations, and interim dividends."
Hana Financial Group, which has been paying interim dividends since 2005, echoed similar sentiments. Lee Hu-seung, Executive Director and CFO of Hana Financial Group, emphasized, "We will continuously enhance shareholder value through shareholder return policies such as interim and final dividends."
The financial authorities have shown a firm stance regarding these moves by financial holding companies. Eun Sung-soo, Chairman of the Financial Services Commission, stated at the National Assembly’s Finance and Economy Committee meeting the previous day, "We will review the capital soundness of banks in six months and decide whether to normalize dividend policies," regarding the restraint on dividends by banks and holding companies. However, he added, "The restraint on dividends was not intended to trouble shareholders."
A financial sector official commented, "Regulating dividend payout ratios by financial authorities is inappropriate as it risks damaging corporate and shareholder value," and noted, "Considering the COVID-19 situation, various alternatives such as quarterly or interim dividends and share buybacks seem necessary."
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