With tax benefits on dividend income set to be fully implemented from next year, analysts predict that bank stocks will become established as "national stocks." In particular, the already high shareholder return rates are expected to increase further, raising expectations for additional stock price gains.

Dividend Tax System Reform Brings 'Favorable Winds' to Bank Stocks
Introduction of Reduced Dividends Provides Tax Exemption Benefits
Individual Investors Show Increased Preference for 'National Stocks'
Strengthening Shareholder Returns Using Surplus Capital

According to the financial investment industry on October 13, major financial holding companies such as KB Financial, Shinhan Financial Group, Hana Financial Group, Industrial Bank of Korea, and KakaoBank are expected to introduce separate taxation for dividend income starting next year. Once this system is applied, dividend income will not be included in comprehensive income, which could reduce the tax burden.

Even more anticipated than separate taxation on dividend income is 'reduced dividends'. Reduced dividends are a method in which a company reduces its capital reserve and distributes cash to shareholders. Unlike regular dividends, dividend income tax is not imposed on these distributions.

Woori Financial Group will be the first in the industry to implement reduced dividends, granting tax exemption benefits on dividend income for individual investors starting next year. KB Financial, Shinhan Financial Group, and Hana Financial Group are also expected to begin reduced dividends from 2027, following their annual general meetings next year.

Financial Holding Stocks Still Undervalued Analysis
Shinhan and Woori Financials Identified as Top Picks
Expectations for KB and Hana Financials' Treasury Stock Burn
Attention on Whether the Golden Age of Bank Stocks Will Return

Amid this positive environment, the market expects that the banking sector will continue to maintain high shareholder return rates, even under government regulatory conditions. Jung Joonseop, a researcher at NH Investment & Securities, analyzed, "Since most banks have a Common Equity Tier 1 (CET1) ratio exceeding 13%, they can maintain capital efficiency and return on equity (ROE) by reinvesting surplus capital or increasing shareholder returns, despite slowing loan growth."

In fact, there is analysis that, despite a clear upward trend in bank stock prices since last year, they remain undervalued. Currently, the average price-to-book ratio (PBR) of the top five financial holding companies (KB Financial, Shinhan Financial Group, Hana Financial Group, Woori Financial Group, and Industrial Bank of Korea) stands at 0.58 times. Although this is a 64% increase compared to the end of 2023, it still reflects a 59% discount compared to the theoretical value.

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Researcher Jung recommended Shinhan Financial Group and Woori Financial Group as his top picks. He stated, "Shinhan Financial Group has rapidly improved its capital ratio and shareholder return rate, while its valuation remains attractive and its share buyback ratio in the second half of the year is the highest in the industry relative to its market capitalization. Woori Financial Group will be the first to apply tax exemption to dividends from next year, making it the best choice for individual investors who prioritize dividends."

Daol Investment & Securities selected KB Financial and Hana Financial Group. Kim Jiwon, a researcher at Daol Investment & Securities, analyzed, "KB Financial, which is expected to have the highest shareholder return rate in the sector, is our top pick, and Hana Financial Group, which is anticipated to accelerate share buybacks and cancellations, is recommended as a stock to watch."