Hana Financial's 'Myosu'... Mid-term Dividends Without Using Bank Funds

Interim Dividend of 500 Won per Share Decided at Board Meeting on 23rd

Kim Jung-tae, Chairman of Hana Financial Group

[Asia Economy Reporter Kim Min-young] Hana Financial Group paid an interim dividend in the first half of this year without touching a single won from the bank’s funds. This dispelled concerns about a reduction in the bank’s capital supply capacity due to dividends while fulfilling its promise to shareholders. The fact that the bank did not pay dividends to the holding company before the holding company’s dividend proved to be a clever move.

Hana Financial’s board of directors held a meeting on the 23rd, received a report on the first half performance, and resolved an interim dividend of 500 KRW per share. The total dividend amount is 145.781738 billion KRW.

Hana Financial is the only one among the four major domestic financial holding companies (Shinhan, KB, Hana, Woori) that has consistently paid interim dividends. Since the holding company was launched in 2005, it has paid interim dividends every year except during the 2009 global financial crisis.

This year, after much deliberation in response to repeated recommendations from financial authorities such as Financial Supervisory Service Governor Yoon Seok-heon and Financial Services Commission Chairman Eun Sung-soo to refrain from dividends, the decision to pay an interim dividend was made. In the financial sector, this is also seen as a testament to Chairman Kim Jung-tae’s steadfast shareholder-friendly policy.

Hana Financial Group Myeongdong Building, Jung-gu, Seoul

Reasons for Deciding on the Interim Dividend?

In the press release announcing the earnings, Hana Financial added a detailed explanation regarding the decision to pay the interim dividend. It cited three main reasons for implementing the dividend: ▲ Securing sufficient loss absorption capacity through proactive provisioning related to COVID-19 ▲ No interim dividend from the bank to avoid impairing the bank’s capital supply capacity, supported by contributions from non-bank and global sectors ▲ An active shareholder return policy.

Hana Financial stated that it secured sufficient loss absorption capacity by proactively provisioning for uncertainties such as the prolonged COVID-19 pandemic and maintaining an appropriate capital ratio.

It mentioned the accumulation of 525.2 billion KRW in provisions and other transfers in the first half, an increase in the NPL coverage ratio to 126.8%, maintaining the best-in-class delinquency rate among commercial banks (Group 0.31%, Bank 0.21%), maintaining a BIS ratio of 14.08% after the interim dividend, and maintaining a common equity tier 1 ratio of 12.04% after the interim dividend.

Additionally, the fact that the holding company did not receive an interim dividend from its 100% subsidiary bank before the holding company’s interim dividend was a ‘masterstroke.’ Financial holding companies usually receive dividends from their banks before interim or year-end dividends and then distribute them to shareholders. This year, due to Hana Financial’s own retained earnings and the strong performance of its non-bank and global sectors, it resolved not to receive an interim dividend from the bank to avoid impairing the bank’s capital supply capacity. Hana Financial explained, “We plan to continue various forms of support for households and businesses struggling due to COVID-19.”

Furthermore, it stated that it could not break its responsibility and promise to shareholders. It expects to keep the promise made to shareholders for 15 years since its founding in 2005 and contribute to revitalizing the domestic economy.

The dividend payout ratio slightly decreased. Despite earning 1.3446 trillion KRW in the first half, an 11.6% (140.1 billion KRW) increase compared to the same period last year, the interim dividend per share remained the same at 500 KRW, resulting in a decrease in the payout ratio from 12.45% in the first half of last year to 10.84%.

Hana Financial also added, “Of the approximately 146 billion KRW expected interim dividend cost, about 90 billion KRW will be paid to foreign shareholders, but the group recorded a larger overseas profit of 169.5 billion KRW in the first half.” As of the end of last month, the foreign shareholder ratio of Hana Financial was 64.11%.

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