'Like Samsung Electronics,' Shinhan Financial Group Initiates First 'Quarterly Dividend' in Financial Sector

Plan for Active Shareholder Return Policy to Support Steep Stock Price Decline
Amendment to Articles of Incorporation Scheduled for March Shareholders' Meeting Next Year

[Asia Economy Reporter Kangwook Cho] Shinhan Financial Group is set to become the first in the financial sector to implement quarterly dividends. Like Samsung Electronics, a financial stock that distributes dividends to shareholders four times a year may emerge as early as next year.

According to the financial sector on the 20th, Shinhan Financial plans to propose an amendment to its articles of incorporation for quarterly dividends at the regular shareholders' meeting in March next year. Currently, Shinhan Financial's Article 59, Paragraph 2 of its articles of incorporation only allows for interim dividends. The plan is to change this to allow up to four dividends per year on a quarterly basis, actively pursuing shareholder returns. However, the timing of implementation has not been decided. Given the prolonged COVID-19 pandemic, the company intends to monitor the situation before determining the timing. Shinhan Financial recently communicated this plan to the Financial Supervisory Service (FSS), which is understood to have accepted it as a mid- to long-term direction after the COVID-19 situation ends.

The reason Shinhan Financial, which has consistently paid year-end dividends, is moving beyond interim dividends to quarterly dividends is due to the notable decline in its stock price this year. The large-scale provision for losses caused by incidents such as the Lime Fund scandal significantly impacted its performance, preventing it from meeting expectations. In the first half of this year, Shinhan Financial's loan loss provisions amounted to 821 billion KRW, 1.5 times higher than the same period last year. The recent rights offering of about 1.2 trillion KRW targeting overseas private equity funds also weighed on the stock price. Existing shareholders criticized this move due to dilution of their equity value.

Shinhan Financial's stock price, which hovered in the mid-40,000 KRW range at the end of last year, dropped to the low 20,000 KRW range in March this year, halving in value. Although there was a brief recovery in June, the price has struggled to surpass 30,000 KRW since then.

Especially amid the spread of COVID-19, most financial holding companies, including Shinhan Financial, experienced downward stock price trends, but Shinhan Financial's decline was particularly steep. Since the beginning of the year, Shinhan Financial's stock price has fallen by more than 34%. This decline is significantly larger compared to KB Financial Group, Hana Financial Group, and Woori Financial Group, which recorded drops in the 10-20% range. Additionally, when comparing relative returns over the past three years, Shinhan Financial's stock performance is the lowest among the four major financial holding companies.

One of the Key Topics at the Board Workshop: 'Recovery of Undervalued Shinhan Financial Group'

For this reason, one of the core topics discussed at the Shinhan Financial board workshop held earlier this month was the 'recovery of the undervalued value of Shinhan Financial Group.' The meeting reportedly included discussions on flexible capital policies such as defending and improving recurring earnings power. The emergence of the quarterly dividend proposal indicates that Chairman Cho Yong-byeong and other top executives are taking the current stock price situation very seriously.

If the agenda is approved and the COVID-19 pandemic ends next year, there is a possibility that quarterly dividends could be implemented sooner than expected. Until now, Shinhan Financial has consistently paid year-end dividends, with last year's dividend per share at 1,850 KRW. Currently, only four stocks on the Korea Exchange have consistently paid quarterly dividends over the past three years: Samsung Electronics, POSCO, Ssangyong Cement Industrial, and Hanon Systems.

A Shinhan Financial official stated, "As part of an active shareholder return policy, we have established a plan to use all possible means to boost the stock price," adding, "Quarterly dividends are one of those means, and rather than implementing them immediately, we are preparing them as a tool to be used after the end of COVID-19."

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