Foreign banks, such as Citibank Korea and Standard Chartered Bank Korea, showed the highest dividend payout ratio in the financial industry last year.
The total amount of cash dividends paid out by six banks, including KB Kookmin, Shinhan, Woori, KEB Hana, Citibank Korea and Standard Chartered Bank Korea, came to 3.93 trillion won (US$3.45 billion) last year, according to the business reports of commercial banks on April 7.
The figure represented a sharp increase from 1.90 trillion won (US$1.67 billion) in 2016 and 2.78 trillion won (US$2.44 billion) in 2017.
The banks were able to pay out more dividends as their performance has significantly improved. The net profit of the nation’s six commercial banks amounted to 9.19 trillion won (US$8.07 billion) last year, up 1.16 trillion won (US$1.02 billion), or 14.5 percent, from a year earlier.
In addition, there was Citibank’s large interim dividend. Citibank paid out an interim dividend of 811.60 billion won (US$713.18 million) last year for capital efficiency. This is to lower its equity capital, which is a denominator, in order to raise its return on equity (ROE). ROE is equal to net income divided by total equity capital. Citibank had some 4 percent of ROE at the end of last year, which was relatively lower than 8 to 9 percent of ROE at domestic commercial banks.
The amount of total dividends, excluding Citibank’s interim dividend, grew on-year but the dividend payout ratio fell 0.67 percentage point to 33.97 percent. Citibank showed the highest dividend payout ratio at 303.42 percent last year thanks to the interim dividend. The bank paid out 934.10 billion won (US$820.83 million) of dividends last year, including the interim dividend. The figure was three times the net profit. Citibank had 37.75 percent of dividend payout ratio in 2017.
Standard Chartered Bank Korea came second with 50.59 percent of dividend payout ratio, higher than 35.64 percent in 2016 to 37.75 percent in 2017. However, the bank paid out only 112 billion won (US$98.42 million) of dividends last year due to a lower net profit. It was the snallest figure among the six commercial banks.
KEB Hana Bank had the highest dividend payout ratio with 42.51 percent among domestic commercial banks, followed by Shinhan Bank with 39.05 percent, KB Kookmin Bank with 29.53 percent and Woori Bank with 21.52 percent.
It is mostly financial holding companies or parent groups that receive dividends from these banks. Financial holding companies own a 100 percent stake in KB Kookmin Bank, Shinhan Bank and KEB Hana Bank. Citibank Overseas Investment Corp. holds a 99.98 percent stake in Citibank Korea and Standard Chartered NEA Ltd. owns a 100 percent stake in Standard Chartered Bank Korea. In the end, dividends go straight into the pockets of financial groups or parent groups which are the owner of the banks.