The Real Reason Hana Financial Could Not Decide on Interim Dividends: 'Foreign Investors'

Concerns Over Soundness Amid COVID-19 Crisis Despite FSC's Restraint Request
Foreign Ownership Exceeds 65%, Raising Fears of Shareholder Exodus and Stock Price Plunge
Deliberation on Interim Dividend Implementation

[Asia Economy Reporter Kangwook Cho] Hana Financial Group has entered a period of deliberation over whether to proceed with the interim dividend scheduled for the end of this month. Despite the Financial Supervisory Service's request for restraint, the real reason for their hesitation is the major player in the financial market: foreign investors. With foreign ownership exceeding 65%, Hana Financial has no choice but to consider the interests of its foreign shareholders.

According to financial circles on the 9th, Hana Financial, which usually announces the 'record date for the closure of the shareholder register for interim dividends' around mid-month, has yet to decide whether to implement the interim dividend.

A Hana Financial official stated, "We have not yet reached a conclusion on whether to proceed with the interim dividend," adding, "Since the board meeting to decide will be held after the first half financial results are released around the end of July, there is still sufficient time to consider the matter."

Hana Financial's dilemma, having never skipped an interim dividend in the past 10 years, began in April when Financial Supervisory Service Governor Yoon Seok-heon emphasized restraint on cash dividends, share buybacks, and performance bonuses. This was due to growing concerns about bank soundness amid the COVID-19 pandemic.

The interim dividend has been a representative shareholder return policy implemented only by Hana Financial among financial holding companies. Hana Financial set a goal to raise the payout ratio to 30%, steadily increasing the interim dividend per share from 150 KRW in 2015, 250 KRW in 2016, 300 KRW in 2017, 400 KRW in 2018, to 500 KRW last year. Accordingly, the payout ratio rose to 22.53% in 2017, 25.54% in 2018, and 25.78% in 2019.

The Financial Supervisory Service's recommendation for restraint is somewhat reasonable. If Hana Financial proceeds with the interim dividend at last year's level (150 billion KRW), its financial burden will inevitably increase. Based on the financial status in the first quarter of this year, Hana Financial's BIS ratio would drop by about 0.07 percentage points.

Experts point out that the biggest reason Hana Financial finds it difficult to forgo the interim dividend, even amid an unprecedented situation like COVID-19 and the appearance of confrontation with the Financial Supervisory Service, is foreign investors. Of the over 300 million Hana Financial shares listed, nearly 200 million are held by foreigners. The foreign ownership ratio reaches 65.04%. Financial holding companies with high foreign ownership typically rank high in foreign dividend amounts, and Hana Financial's foreign dividend amount last year was 318.9 billion KRW, ranking 6th among all listed companies. Recently, Hana Financial has consistently appeared among the top stocks for net foreign purchases, and its stock price has followed an upward trend, which is analyzed to be due to expectations for the interim dividend.

A financial industry insider said, "For Hana Financial, where foreign investor supply and demand have a significant impact, the interim dividend event serves as a driving force supporting the stock price," adding, "If the interim dividend, which has been steadily conducted for over 10 years, is suddenly stopped due to regulatory recommendations, foreign investors will not understand, and there is a risk of a sharp decline in the stock price thereafter."

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