Will Foreign Banks Also Accept '20% Dividend' Amid High Dividend Trend?

Financial Authorities Recommend 20% Dividend Payout Ratio to Foreign Banks by End of June
Earlier, Domestic Banks Also Decided on 20% Dividend Despite Record Net Profit

[Asia Economy Reporter Wondara] Attention is focused on whether foreign banks, which have maintained a 'high dividend' policy compared to domestic banks, will also follow the recommendation of a '20% dividend payout ratio.'

According to the banking sector on the 13th, Citibank Korea and SC First Bank plan to finalize dividends through their board of directors and general shareholders' meetings in March. At the end of last month, financial authorities recommended foreign banks such as Citibank Korea and SC First Bank to limit dividends to within 20% of net profit by the end of June this year.

In the financial sector, there is a forecast that foreign banks will have no choice but to adjust their dividend payout ratios according to the financial authorities' recommendation. A financial sector official said, "It is very rare to request dividend restraint even from foreign banks," adding, "Since finance is a regulated business, it will not be easy for foreign banks to ignore the authorities' guidelines."

Among the five major financial holding companies that received the same recommendation earlier, KB Financial Group and Hana Financial Group accepted the financial authorities' recommendation and reduced their dividend payout ratios to '20%' despite recording 'record-high' net profits. Shinhan and Woori Financial Groups, which postponed their decisions until March, are also known to be adjusting to around 20%.

However, since foreign banks had higher dividend payout ratios than domestic commercial banks, the dividend reduction required to comply with the authorities' recommendation is significant. In 2019, SC First Bank paid a total of 655 billion KRW in dividends to its major shareholder, Standard Chartered NEA, resulting in a dividend payout ratio of 208.3%. For Citibank Korea, the dividend amount and payout ratio in 2019 were 65.2 billion KRW and 22.2%, respectively.

Meanwhile, in response to criticism that such dividend payout ratio recommendations constitute 'excessive government intervention,' financial authorities explained that "most overseas financial authorities implement similar measures." On the 8th, the Financial Services Commission and the Financial Supervisory Service issued a press release emphasizing, "The recommendation to reduce dividends is a temporary measure to overcome the COVID-19 crisis and is implemented by most overseas financial authorities." According to the financial authorities, the European Union (EU) and the United Kingdom banned dividends last year and this year limited them to 15% and 25% of net profit, respectively. The United States limited dividends to the amount of the previous quarter's dividend and also within recent net profits.

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