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[Asia Economy Reporter Kwangho Lee] Ahead of the expiration of the financial authorities' dividend payout ratio restriction on the 30th of this month, interim dividends from the four major financial holding companies?KB, Shinhan, Hana, and Woori Financial Groups?are becoming highly likely. If finalized, this will be the first instance where all four major holding companies pay interim dividends. It is also reported that the financial authorities concluded there are no issues in lifting the dividend payout ratio restrictions based on the stress tests (financial soundness evaluations) conducted on these companies.

According to financial authorities and the financial sector on the 23rd, the financial authorities' policy regarding capital management recommendations for banks and financial holding companies in response to COVID-19 will be announced on the 25th. The Financial Services Commission plans to make a final decision at the regular meeting scheduled for the afternoon of the 24th.

In January, the financial authorities recommended limiting dividends of banks and financial holding companies to within 20% of net profits until the 30th of this month to prepare for the possibility of a prolonged COVID-19 pandemic and to strengthen banks' capital capacity. However, as the global economy recovers and strong performance is expected in both the first and second quarters, the financial authorities collected related data until the 11th and conducted stress tests on eight financial holding companies and 19 banks.

The stress test scenario assumed a ‘V-shaped’ fluctuation in the domestic economy. A V-shape refers to a scenario where the domestic economy enters a short-term recession phase followed by a sharp rebound. Although most financial holding companies failed the stress test under a long-term recession ‘L-shaped’ scenario, they passed under a long-term recovery ‘U-shaped’ scenario, indicating that they have successfully passed this test.

Once the financial authorities' dividend restriction measures end, financial holding companies plan to pursue active shareholder return policies. They have previously expressed intentions to actively engage in interim dividends and other measures to boost stock prices.

Hana Financial Group announced on the 15th that the record date for closing the shareholder registry is the 30th of this month. Typically, closing the shareholder registry is interpreted as a preliminary step for dividends. Hana Financial Group has paid interim dividends every year except in 2005 and 2009, during the global financial crisis. According to FnGuide, Hana Financial Group's consensus net profit for the first half of this year is 1.6442 trillion KRW. Even the lower estimate is 1.5427 trillion KRW, surpassing the record half-year net profit of 1.5162 trillion KRW in the first half of 2012. With expectations of achieving the highest half-year performance ever, there are forecasts that the dividend per share will exceed the previous highest amount of 500 KRW. Hana Financial Group's interim dividend payout ratio increased from 5.9% in 2015 to 10.8% last year, and it is likely to exceed 11% in the first half of this year.

Shinhan Financial Group also has a strong shareholder return intention from its board of directors and plans to expand cash dividends and pay interim dividends depending on the financial authorities' decision. According to its articles of incorporation, Shinhan Financial Group can autonomously declare dividends through board discussions without closing the shareholder registry during interim dividends. To facilitate this, the articles of incorporation were amended at the shareholders' meeting in March. A Shinhan Financial Group official said, "The board has a strong intention for shareholder returns, so a direction will be announced soon."

KB Financial Group has also consistently expressed its intention to expand the dividend payout ratio and is actively considering whether to implement it depending on the situation. Woori Financial Group converted 4 trillion KRW of capital reserves into retained earnings to secure dividend resources.

A financial authority official said, "The final decision is expected after the regular meeting report tomorrow," but declined to elaborate further.

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