Hana Financial, Will It Pay Interim Dividends Despite Dividend Restraint Recommendation? Decision on the 23rd

Board Meeting Held on the 23rd to Decide
Increasing Dividends Annually for Quality Dividend Stocks
Financial Authorities Pressure Amid COVID-19 Crisis

Hana Financial Group Myeongdong Building, Jung-gu, Seoul

[Asia Economy Reporter Kim Min-young] Hana Financial Group's board of directors will hold a meeting this week to decide whether to issue an interim dividend. Attention is focused on whether Hana Financial, the only major financial holding company to have consistently paid interim dividends, will heed the financial authorities' recommendation to refrain from dividends.

According to the financial sector on the 20th, Hana Financial's board is scheduled to decide on the interim dividend after reviewing the first half performance on the 23rd.

Among the four major financial holding companies?Shinhan, KB, Woori, and Hana?only Hana Financial has paid interim dividends every year. Since the year after its establishment as a holding company in 2006, it has issued interim dividends annually except for 2009, when the global financial crisis occurred.

Over the past four years, dividends per share have increased annually: 250 KRW in 2016 (total dividend approximately 74 billion KRW), 300 KRW in 2017 (88.8 billion KRW), 400 KRW in 2018 (120 billion KRW), and 500 KRW last year (149.9 billion KRW). Hana Financial was regarded as a high-quality dividend stock among stock market investors.

However, this year, voices have emerged calling for a reduction in dividends due to the prolonged COVID-19 pandemic, the resulting contraction of the real economy, and financial market instability.

In particular, pressure from financial authorities has been strong. The first to speak was Yoon Seok-heon, Governor of the Financial Supervisory Service (FSS). In early April, when COVID-19 was spreading, Governor Yoon stated at an FSS meeting, “The European Central Bank (ECB) and the UK Prudential Regulation Authority (PRA) have recommended banks to suspend dividend payments, share buybacks, and performance bonuses in response to the COVID-19 shock, and global banks are participating. Domestic financial companies should also refer to overseas cases to secure sufficient loss absorption capacity and strive to maintain smooth funding capabilities for the real economy.”

The Financial Services Commission (FSC) also joined in. On the 30th of last month, Son Byung-doo, Vice Chairman of the FSC, said, “The International Monetary Fund (IMF) and the U.S. Federal Reserve (Fed) have stated that measures such as banning share buybacks and restricting dividends are necessary for banks to strengthen capital. We hope the banking sector will maintain its funding function for the real economy while enhancing loss absorption capacity by provisioning for loan losses in preparation for the prolonged COVID-19 crisis.” FSC Chairman Eun Sung-soo also stated, “I believe it is appropriate for banks to be cautious about dividends while the COVID-19 situation has not yet ended.”

Domestically, Hana Financial is the first to face the decision on whether to pay dividends. There is strong opposition arguing that interim dividends should be paid to maintain consistency in dividend policy as a shareholder return. There are also opinions that financial authorities interfering with private financial companies' dividends is an overreach. The decision on Hana Financial's interim dividend is expected to influence the year-end dividends of other financial companies.

According to securities market consensus, Hana Financial's net profit for the second quarter is expected to be 616.9 billion KRW, a 7.4% decrease compared to the same period last year. This could justify not paying an interim dividend. However, the total net profit for the first half is expected to exceed last year's at approximately 1.3 trillion KRW. A Hana Financial official said, “The board is reviewing the interim dividend decision considering various possibilities.”

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