By Lee Kyung-min

Korea’s four major financial groups are putting differing priorities on the course of their business in 2019 indicated by how they are dealing with record earnings in 2018.

Hana Financial Group Chairman Kim Jung-tai

Hana paid out a larger dividend to shareholders to jack up its undervalued share price, while Woori retained much of the capital ahead of planned major mergers and acquisitions (M&As).

Shinhan and KB sought a balanced approach as their business portfolio required the two priorities to be valued equally.

The four posted a combined 2.52 trillion won ($2.21 billion) in 2018 profits, an 8.8 percent increase from a year earlier.

KB recorded the highest at 759.7 billion won, followed by Shinhan (753 billion), Hana (570 billion) and Woori (437.6 billion).

Hana decided to increase the dividend rate to 25.5 percent, up 3 percentage points from the previous year.

Woori’s rate decreased to 21.5 percent, down 5.2 percent from 2017.

KB’s rate is 24.8 percent, while Shinhan’s is 23.9 percent.

Hana paid the highest annual dividends at 5 percent. Both KB and Woori paid 4 percent, while Shinhan delivered 3.9 percent.

The 3 percentage points ― the highest jump in the dividend increase rate among the four ― reflects criticism from shareholders that their losses caused by a nearly 30 percent drop in share prices over the past year should be compensated for by high dividend payouts.

This criticism has intensified given the record-breaking quarter-on-quarter performance of the group’s bank subsidiary KEB Hana in 2018.

Hana has no immediate business expansion plans that require large capital, another reason for the group to be “generous” with shareholders.

Unlike Hana, Woori is in need of substantial capital retention ahead of major M&As in the non-banking sector.

Woori Financial Group Chairman and Woori Bank CEO Sohn Tae-seung

Woori Financial Group Chairman and bank CEO Sohn Tae-seung vowed Woori would become a leading financial group after it returned to holding company status in January, four years after it dropped this in 2014.

Far greater capital will be required to acquire subsidiaries that will handle asset management, real estate investment trusts and savings banks in 2019 alone, and more for further plans to add securities and insurance firms to the portfolio in 2020.

Strengthened standards on accounting and minimum capital requirements are other major burdens.

Woori upon becoming a financial group is subject to industry-standardized regulations instead of in-house rules.

This requires the group to retain more capital, leaving little or no room to share profits in the form of increased dividends.

Shinhan and KB both slightly increased their dividend rates from a year earlier but not as much as Hana.

Both groups need to keep their share prices from becoming undervalued, while pursuing M&As to fend off competitors in the market.


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