Will KB and Hana Financial Open Their Vaults More... Shareholder Return Expectations Rise

As KB Financial Group and Hana Financial Group prepare to announce their third-quarter earnings, market interest is rising regarding their capital policies and shareholder return plans. Both KB Financial and Hana Financial, previously regarded as model companies for value enhancement, were unusually excluded from the value-up index last month. This has raised expectations for stronger and more concrete shareholder return measures aimed at special inclusion in the year-end rebalancing.

According to KB Financial Group on the 22nd, they plan to announce their third-quarter earnings on the 24th along with a value-up (corporate value enhancement) disclosure. KB Financial completed a preliminary value-up disclosure in May and is preparing the main disclosure alongside the third-quarter earnings announcement.

A KB Financial Group official stated, "As previously announced, we are in the final stages of preparing the main value-up disclosure for October," adding, "The profitability improvement indicators, which the market most eagerly anticipates, will definitely be included."

Hana Financial Group is scheduled to announce its third-quarter earnings on the 29th, and it is expected to release its value-up plan at that time.

Until now, KB Financial Group and Hana Financial Group have been recognized as model companies for value enhancement by actively announcing and implementing mid- to long-term capital policies.

Over the past decade, KB Financial has been the most proactive among financial holding companies in shareholder return policies, recording the highest total shareholder return ratio of 37.7% among the four major financial holding companies as of the end of last year.

The total shareholder return ratio represents the proportion of net income returned to shareholders through dividends, share buybacks, and other means. A higher ratio indicates that a company returns more profits to its shareholders.

Hana Financial Group has also taken a leading role in shareholder returns since Chairman Ham Young-joo took office. This year, Hana Financial has completed dividends totaling 350 billion KRW and share buybacks and cancellations amounting to 300 billion KRW.

KB Financial and Hana Financial were excluded from the index due to not meeting the requirements for return on equity (ROE) and price-to-book ratio (PBR). In contrast, Woori Financial Group and Shinhan Financial Group, which succeeded in joining the value-up index, received high marks for early disclosure of corporate value enhancement plans, as explained by the Korea Exchange. Woori Financial Group was the first among banks to announce a corporate value enhancement plan. Shinhan Financial Group also received high praise for presenting specific mid- to long-term targets, including a shareholder return ratio of 36-40% in 2024 and reducing the number of shares to less than 500 million through its corporate value enhancement plan.

Accordingly, KB Financial and Hana Financial are expected to present strengthened shareholder return measures and specific targets based on solid performance alongside their third-quarter earnings announcements. KB Financial's PBR stood at 0.39% (as of the end of 2023), and its dividend payout ratio was around 25.2%. The company intends to maintain the current upward trend in stock price while providing predictable shareholder return policies. Kiwoom Securities analyst Kim Eun-gap said, "KB Financial has implemented quarterly equal cash dividends on a total amount basis since the first quarter and is also conducting share buybacks and cancellations."

Hana Financial's common equity tier 1 (CET1) ratio for the third quarter improved by 0.35 percentage points from the previous quarter to 13.15%, expanding the resources available for shareholder returns. This is expected to lead to the announcement of a mid- to long-term shareholder return policy. KB Securities analyst Kang Seung-geon said, "The management of Hana Financial is highly committed to increasing the shareholder return ratio," adding, "Hana Financial is expected to buy back and cancel an additional 100 billion KRW worth of shares in the fourth quarter, which would bring the total shareholder return ratio to approximately 37%."

NH Investment & Securities analyst Jung Joon-seop commented, "Since KB Financial and Hana Financial were not included in the previous value-up index components, their capital policies are expected to be clearer and more proactive than before," adding, "While we need to observe the actual announcements, they are likely to include raising the target PBR that serves as the benchmark for share buybacks and cancellations, as well as accelerating the expansion of shareholder return ratios."