This year, the four major financial groups in South Korea—KB, Shinhan, Hana, and Woori—recorded over 11 trillion won in net profit, achieving their highest performance ever and intensifying competition for shareholder returns. They have already resolved to invest over 4 trillion won in share buybacks and cancellations, alongside expanding dividends, indicating a shift from performance competition to shareholder return competition.
As of August 18, the total amount allocated for share buybacks and cancellations by the four major financial groups stands at 4.35 trillion won, surpassing last year's total of 3.639 trillion won and nearing Samsung Electronics' cash dividend of 4.9092 trillion won for the first half of the year. Share buybacks are considered a key method for enhancing shareholder returns as they reduce the number of outstanding shares, thereby increasing earnings per share (EPS).
KB Financial has the largest share buyback and cancellation plan, totaling 1.9 trillion won. Shinhan Financial has committed 1.4 trillion won, Hana Financial 700 billion won, and Woori Financial 350 billion won.
The total cash dividends for the four major financial groups in the first half of this year reached 2.4433 trillion won, a 21.0% increase from 2.196 trillion won during the same period last year. This increase in share buybacks and cash dividends, based on record profits, has sparked a competitive environment for shareholder returns among financial holding companies.
KB Financial has proposed a record-high shareholder return of 3.7 trillion won this year. Shinhan Financial also plans to return over 2.8 trillion won to its shareholders. Hana Financial and Woori Financial have set a target of achieving a total shareholder return rate of 50% this year, with major financial groups raising their return goals across the board.
As competition intensifies, the methods of shareholder returns are becoming more sophisticated. Financial groups are not only increasing the scale of dividends and share buybacks but are also establishing their own systems to calculate return capacity linked to common equity tier 1 (CET1) ratios, return on equity (ROE), and asset growth rates. There are also moves to introduce tax-free dividends through reduced dividends to enhance the actual return effect for shareholders.
However, it remains to be seen whether the current level of large-scale shareholder return competition can be sustained. To expand shareholder returns, financial groups must maintain sufficient profits and stable capital capacity to absorb losses. As the burden of delinquencies increases, particularly among vulnerable borrowers, and the need for managing non-performing loans rises, an increase in provisions or a decline in asset quality could reduce return capacity.
Potential interest rate hikes and concerns about economic slowdown also pose risks. If interest rates rise further, borrowers may face increased interest burdens, leading to higher delinquency and default risks. Prolonged economic downturns could also heighten the burden of managing asset quality for financial groups, including corporate loans. Ultimately, the future of shareholder return competition will hinge on maintaining high profit capacity and capital soundness while determining how long these returns can be sustained.
A financial industry official stated, "If asset quality is not managed stably, the capacity for shareholder returns may weaken. Ultimately, the ability to manage both profit capacity and soundness will be the key battleground in this competition."
As of August 18, the total amount allocated for share buybacks and cancellations by the four major financial groups stands at 4.35 trillion won, surpassing last year's total of 3.639 trillion won and nearing Samsung Electronics' cash dividend of 4.9092 trillion won for the first half of the year. Share buybacks are considered a key method for enhancing shareholder returns as they reduce the number of outstanding shares, thereby increasing earnings per share (EPS).
KB Financial has the largest share buyback and cancellation plan, totaling 1.9 trillion won. Shinhan Financial has committed 1.4 trillion won, Hana Financial 700 billion won, and Woori Financial 350 billion won.
The total cash dividends for the four major financial groups in the first half of this year reached 2.4433 trillion won, a 21.0% increase from 2.196 trillion won during the same period last year. This increase in share buybacks and cash dividends, based on record profits, has sparked a competitive environment for shareholder returns among financial holding companies.
KB Financial has proposed a record-high shareholder return of 3.7 trillion won this year. Shinhan Financial also plans to return over 2.8 trillion won to its shareholders. Hana Financial and Woori Financial have set a target of achieving a total shareholder return rate of 50% this year, with major financial groups raising their return goals across the board.
As competition intensifies, the methods of shareholder returns are becoming more sophisticated. Financial groups are not only increasing the scale of dividends and share buybacks but are also establishing their own systems to calculate return capacity linked to common equity tier 1 (CET1) ratios, return on equity (ROE), and asset growth rates. There are also moves to introduce tax-free dividends through reduced dividends to enhance the actual return effect for shareholders.
However, it remains to be seen whether the current level of large-scale shareholder return competition can be sustained. To expand shareholder returns, financial groups must maintain sufficient profits and stable capital capacity to absorb losses. As the burden of delinquencies increases, particularly among vulnerable borrowers, and the need for managing non-performing loans rises, an increase in provisions or a decline in asset quality could reduce return capacity.
Potential interest rate hikes and concerns about economic slowdown also pose risks. If interest rates rise further, borrowers may face increased interest burdens, leading to higher delinquency and default risks. Prolonged economic downturns could also heighten the burden of managing asset quality for financial groups, including corporate loans. Ultimately, the future of shareholder return competition will hinge on maintaining high profit capacity and capital soundness while determining how long these returns can be sustained.
A financial industry official stated, "If asset quality is not managed stably, the capacity for shareholder returns may weaken. Ultimately, the ability to manage both profit capacity and soundness will be the key battleground in this competition."
* This article has been translated by AI.
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