Record windfalls for financial giants means big payouts for investors

A pedestrian walks by ATMs in Seoul on April 27. [YONHAP]

 
Korea’s biggest financial groups reported record-breaking profits this year and are rewarding investors at an unprecedented pace, using their windfalls to raise dividends and cancel shares as they step up efforts to close a lingering valuation gap with global peers.
 
KB Financial Group on Thursday said its cumulative net profit for the first three quarters reached 5.12 trillion won ($3.6 billion), up 16.6 percent from 4.39 trillion won a year earlier, marking an all-time high. KB became the first of the country’s four major financial groups to surpass 5 trillion won in cumulative profit for that period.
 
KB Kookmin Bank, its flagship unit, also earned 3.36 trillion won in net profit, maintaining its lead among local lenders.
 
“Fee income growth and solid performance across key affiliates drove the results,” a KB representative said.
 
On the same day, KB’s board approved a quarterly cash dividend of 930 won per share, up 135 won from a year earlier, totaling 335.7 billion won. The group also announced plans to buy back and cancel 1.67 trillion won worth of its own shares this year, including 850 billion won in the second half.
 
Earlier, Hana, Shinhan and Woori financial groups also decided to expand shareholder return measures such as share cancellations and quarterly dividends.
 

Stocks are shown on a screen in Korea Exchange’s office in Yeouido, western Seoul, on Sept. 15. [YONHAP]

 
Analysts expect the shareholder return ratio among financial holding groups to surpass 50 percent this year. The ratio represents the portion of annual net profit distributed to shareholders, with higher figures indicating greater shareholder friendliness.
 
Based on its buyback plan, KB’s total shareholder return ratio is estimated at more than 54 percent. Hana, which had originally aimed to raise its shareholder return ratio to 50 percent by 2027, is now on track to exceed 44 percent this year.
 
Hana’s figure is expected to exceed last year’s 37.8 percent, according to a Shinhan Investment & Securities report released Wednesday. Market watchers also projected Shinhan’s return ratio at around 45.8 percent and Woori’s at 38 percent.
 
The expanded returns stem from the groups’ strong capital buffers built since the Covid-19 pandemic. All four reported common equity tier-one ratios near or above the Financial Services Commission’s target of 13 percent at the end of the third quarter, signaling stable capital adequacy and dividend capacity.
 
Low price-to-book ratios (PBRs) have also motivated the moves. As of October, all four major financial groups had PBRs under 1, indicating that the stocks trade below their book values, with KB at 0.72.
 
“Domestic and foreign shareholders, as well as authorities, are urging companies to tackle ‘the Korea Discount’ through share cancellations and other means,” said an official from a financial regulator.
 
The trend also aligns with the Lee Jae Myung administration’s market policy direction. President Lee, who has pledged to achieve a “Kospi 5000″ era, has emphasized investor-friendly policies and transparent corporate governance.
 
“We aim to move beyond the image of relying solely on interest income and to build trust with investors while aligning with policy priorities,” a financial group representative said. “We are balancing actual return levels with long-term sustainability.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SEON-MI [[email protected]]