4 Major Financial Holding Companies Increase Dividend Payout Ratio This Year to Strengthen Shareholder Returns

[Asia Economy Reporter Song Hwajeong] With the four major financial holding companies strengthening shareholder returns, the average dividend payout ratio this year is expected to rise to the mid-26% range, recovering to pre-COVID-19 levels. Since the financial holding companies have set a mid- to long-term dividend payout ratio target of 30%, the upward trend is expected to continue.

According to Yuanta Securities on the 11th, the average dividend payout ratio of the four major financial holding companies is expected to be 26.1% this year, compared to 25.5% last year. The dividend payout ratio of the four major financial holding companies was in the 26% range before COVID-19 in 2019, but fell to the 20% range in 2020 as financial authorities recommended dividend restrictions due to COVID-19, then recovered to 25% last year. The dividend payout ratio refers to the proportion of dividends paid in cash out of net income.

By financial holding company, KB Financial Group is expected to rise from 26.0% last year to 26.3%, Shinhan Financial Group from 25.2% to 25.9%, Hana Financial Group from 25.6% to 26.3%, and Woori Financial Group from 25.3% to 25.9%. Dividend yields, which represent the ratio of dividends per share to stock price, are also expected to increase. KB is projected to rise from 5.2% to 6.6%, Shinhan from 5.3% to 6.7%, Hana from 7.4% to 8.1%, and Woori from 7.1% to 9.3%.

This rise in dividend payout ratios and dividend yields is because the four major financial holding companies have actively pursued shareholder returns this year. KB conducted quarterly dividends of 500 KRW per share in both the first and second quarters, and following a share buyback in February, decided on an additional 150 billion KRW share buyback. Hana decided to pay an interim dividend of 800 KRW per share, an increase of 100 KRW from last year. Shinhan paid a quarterly dividend of 400 KRW per share in the first quarter and plans to finalize the second quarter dividend amount through the board meeting this month. Woori Financial Group decided on an interim dividend of 150 KRW per share. Jeong Taejun, a researcher at Yuanta Securities, analyzed, "Although Shinhan has not yet finalized the second quarter dividend amount, if it pays 400 KRW per share as in the first quarter, KB, Shinhan, and Hana will achieve total shareholder returns exceeding 10% of this year's expected earnings in the first half alone. Woori paid the same 150 KRW per share as last year despite increased earnings in the first half compared to the previous year, because capital management was necessary for acquiring non-bank subsidiaries."

Since the financial holding companies have set a mid- to long-term dividend payout ratio target of 30%, the upward trend in dividend payout ratios is expected to continue. Seo Youngho, CFO of KB Financial Group, said at the first half earnings conference call last month regarding shareholder return policy, "We will do our best to raise the dividend payout ratio to 30% as soon as possible, including cash dividends and share buybacks," and added, "If net income this year is even 1 KRW more than last year, we will do our best to increase the dividend per share compared to last year." Lee Huiseung, CFO of Hana Financial Group, also said at the first half earnings conference call, "We plan to meet the 30% dividend payout ratio through dividends alone, and share buybacks and cancellations are planned separately."