Financial Holding CEOs Buy Back Shares Amid 'Corona Panic'... Effects Are 'Minimal'

[Asia Economy Reporter Kangwook Cho] Heads of domestic financial holding companies are attempting to boost stock prices through share buybacks, but the effects have been underwhelming. As the prolonged COVID-19 pandemic continues to impact the real economy in various sectors, concerns are growing that even the financial industry, the 'lifeline' of our economy, could fall into crisis.

According to the financial sector on the 14th, among the seven financial holding companies listed on the domestic stock market, more than half?four executives?have repurchased shares this year. The most active in share buybacks is Sohn Tae-seung, Chairman of Woori Financial Group. Chairman Sohn purchased 5,000 shares through on-market transactions yesterday. This is his second purchase since buying 5,000 shares on January 6, the first trading day of the year. Including shares held in the employee stock ownership association account, Chairman Sohn’s total shareholding amounts to 73,127 shares.

Including Chairman Sohn, executives of Woori Financial Group such as Vice Presidents Lee Won-duk, Park Kyung-hoon, Shin Myung-hyuk, and Executive Director Jung Seok-young collectively purchased 11,782 shares on the market that day.

Kim Jung-tae, Chairman of Hana Financial Group, bought 2,000 shares on February 5. Chairman Kim’s total shareholding reaches 60,000 shares.

Kim Tae-oh, Chairman of DGB Financial Group, purchased 10,000 shares on the 4th through on-market transactions. Since his inauguration, Chairman Kim has repurchased shares four times. With this latest purchase, his total shareholding increased to 25,000 shares.

Not only Chairman Kim but also executives of DGB Financial Group and DGB Daegu Bank have joined in share buybacks. The total shares and employee stock ownership shares purchased this year amount to approximately 80,000 shares.

Kim Ji-wan, Chairman of BNK Financial Group, bought 21,800 shares on the 6th. Since his first purchase in May 2018, his current shareholding stands at 56,800 shares. Additionally, BNK Financial Group signed a trust contract worth 7 billion KRW with Korea Investment & Securities for acquiring treasury shares to stabilize stock prices and enhance shareholder value.

Although the urgent need to defend stock prices amid the spread of COVID-19 prompted these buybacks, the effects have been disappointing. The stock prices of financial holding companies have fallen more than 30% this year, more than double the decline of the KOSPI during the same period. Since the beginning of the year, as stock prices began to fall sharply due to the COVID-19 crisis, bank stocks alone have lost over 10 trillion KRW in market capitalization.

Overseas IR (Investor Relations) events planned for stock price support at the beginning of the year have also come to a halt. With the uncertainty surrounding overseas business approvals, the roadmap to strengthen global competitiveness, represented by the 'New Southern Strategy,' is inevitably facing setbacks.

As countries cut benchmark interest rates to counter the economic shock of COVID-19, concerns dominate that the profitability of bank stocks will weaken. Moreover, recent issues such as compensation payments and fines due to incomplete sales of financial products have added to the domestic and international challenges.

However, experts point out that despite all these risk factors, the current prices of bank-related stocks are 'abnormal.'

Kim Soo-hyun, a researcher at Shinhan Financial Investment, stated, "Even assuming a 0% benchmark interest rate, current stock prices are only 20-40% of their intrinsic value, and the default risk reflected in the stock price is more than ten times the current non-performing loan (NPL) ratio of banks. Although profit forecasts must be revised downward due to interest rate cuts and increased loan losses caused by COVID-19, from the point when COVID-19 stabilizes, an approach based on the relationship between intrinsic value and price will be necessary."

This content was produced with the assistance of AI translation services.