Interim Dividend 'D-3 Days'... What Decision Will Hana Financial Make? (Comprehensive)

After Receiving the Mid-Year Performance Report at the Board Meeting on the 23rd, Decision Made
Hana Financial Recognized as a Strong Dividend Stock with Annual Dividend Increases
Financial Authorities Pressure Amid COVID-19 Crisis
Foreign Shareholding Ratio Declines Since the Beginning of the Year

[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 that has 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 has been regarded as a high-quality dividend stock among stock market investors.

Hana Financial Group Myeongdong Building, Jung-gu, Seoul

Calls to Halt Interim Dividend Policy Triggered by COVID-19

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 instability in the financial markets.

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 Prudential Regulation Authority (PRA) in the UK 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 prohibiting 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 through provisions for loan losses in preparation for the prolonged COVID-19 crisis.” FSC Chairman Eun Sung-soo also stated, “I think it is appropriate for banks to be cautious about dividends while the COVID-19 situation is not over.”

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.

Due to the uncertainty of interim dividend payments and the exclusion of financial stocks amid COVID-19, the foreign ownership ratio of Hana Financial has been gradually decreasing. The ratio, which reached 67.94% on February 24, has fallen to 64.15% as of the 17th.

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 about 1.3 trillion KRW. A Hana Financial official said, “The board is reviewing the interim dividend with various possibilities in mind.”

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