KB, Hana, Woori Financial Shareholders' Meetings on the 22nd... Focus on 'Shareholder Returns and Governance' Reforms

Seeking Changes According to 'Value-Up Program' and 'Good Governance Practices'
Four Major Financial Holding Companies All Have Shareholder Return Rates Above 30%
Attention Also on Whether Woori Bank Announces 'Voluntary Compensation Plan' for Hong Kong H Index After AGM

Major financial holding companies' shareholder meetings are being held one after another. The key topics for this year's financial holding companies' shareholder meetings are strengthening shareholder return policies according to the 'Value-Up Program' and board restructuring that can gauge changes in governance. In particular, a key point to watch is whether the direction of voluntary compensation will become clear based on the dispute mediation standards for the Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) proposed by the Financial Supervisory Service.

According to the financial sector on the 21st, KB Financial will hold its shareholder meeting on the 22nd at the KB Kookmin Bank headquarters in Yeouido, Seoul. Agenda items include approval of the 2023 fiscal year financial statements and dividend payments, election of directors, appointment of outside directors, and approval of director remuneration limits. On the same day, Hana Financial and Woori Financial will also hold shareholder meetings at their bank headquarters. Shinhan Financial will hold its shareholder meeting on the 26th.

These financial holding companies are expected to approve the previously determined year-end dividends after reporting the 2023 financial results. KB Financial set the total annual dividend at 3,060 KRW per share, 110 KRW higher than the previous year. Shinhan Financial and Hana Financial also pre-reported increases of 35 KRW and 50 KRW per share, respectively, to 2,100 KRW and 3,400 KRW. Only Woori Financial set its dividend at 1,000 KRW, 30 KRW lower than the previous year.

As a decision to respond to the government's 'Value-Up Program,' the shareholder return rates all exceed 30%. Financial holding companies aim to sequentially raise the shareholder return rate to a maximum of 60%. KB Financial's shareholder return rate increased nearly 10 percentage points from 27.9% to 37.5%. Shinhan Financial increased from 29.9% to 36%, Woori Financial from 26.2% to 33.7%, and Hana Financial from 27.4% to 32.7%.

Additionally, plans to retire treasury shares will also be resolved. By financial holding company, KB Financial plans 320 billion KRW, Shinhan Financial 150 billion KRW, Hana Financial 300 billion KRW, and Woori Financial 138 billion KRW, totaling 908 billion KRW.

Agenda items related to board composition and operation reflecting the financial authorities' demands for governance restructuring of financial holding companies are also noteworthy. The Financial Supervisory Service's 'Best Practices on Governance' include ▲transparent CEO appointment and succession procedures ▲board composition and operation with independence, expertise, and diversity ▲establishment of independent internal monitoring bodies.

KB Financial has three women among its seven outside directors, while Shinhan Financial plans to increase the number of women among its nine outside directors from two to three. Woori Financial will expand its outside directors from six to seven. Hana Financial will increase its outside directors from eight to nine and expand the number of female outside directors from one to two. Notably, Hana Financial plans to appoint Lee Seung-yeol, Hana Bank CEO, and Kang Sung-mook, Hana Securities CEO, as inside directors to form a three-person system with Chairman Ham Young-joo.

After the shareholder meetings, attention is focused on whether the outline of a voluntary compensation plan related to the Hong Kong ELS compensation, the biggest concern in the banking sector since the beginning of the year, will emerge. Woori Bank plans to report the compensation scale based on the dispute mediation proposal presented by the Financial Supervisory Service on the 11th and discuss voluntary compensation plans at its board meeting on the 22nd. If a resolution on the voluntary compensation agenda is made at the board meeting, Woori Financial may announce the voluntary compensation plan first among major commercial banks immediately after its shareholder meeting.

The expected compensation amount according to Woori Bank's dispute mediation standards is known to be less than 10 billion KRW. Woori Bank's Hong Kong ELS sales amount to 41.3 billion KRW, with a loss rate of about -45% for the first maturity tranche. Based on the loss amount of the first maturity tranche, a simple calculation suggests the voluntary compensation rate will be around 50%. Hana Bank will also hold an extraordinary board meeting on the 27th to discuss the voluntary compensation plan for the Hong Kong H Index ELS. It is expected to announce the voluntary compensation plan once board deliberations and resolutions are completed.

Shinhan Bank and KB Financial are also likely to hold separate extraordinary board meetings only after their shareholder meetings to present their positions on the Financial Supervisory Service's dispute mediation standards. Shinhan Bank, with sales amounting to 2 trillion KRW, finds it difficult to place the agenda on the board meeting on the 21st, and KB Kookmin Bank, which sold 8 trillion KRW worth of Hong Kong ELS, is in a similar situation. Given the large sales volume, if the Financial Supervisory Service's standards are followed, the voluntary compensation amount could reach hundreds of billions of KRW, making it difficult to hastily submit the agenda to the board. However, NH Nonghyup Bank, which plans to hold a board meeting on the 28th, is reportedly considering placing the agenda.

On the 19th, Financial Supervisory Service Governor Lee Bok-hyun told reporters after a regular meeting and private dinner held at the Federation of Banks building, "Regarding the ELS compensation issue, since board meetings or shareholder meetings are scheduled this week and next week, communication will naturally occur through the proper procedures."

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