Korean Banks Limit Dividends to 20% Net Profits
Citibank Korea and Standard Chartered Korea are planning to fix their dividends through board and shareholder meetings next month. Late last month, financial authorities told them to limit the dividends to 20 percent or less of their net profits.
Earlier, KB Financial Group and Hana Financial Group adjusted their dividend payout ratios to 20 percent, despite record profits, to follow the same advice. Shinhan Financial Group and Woori Financial Group are likely to follow suit next month.
The foreign banks, which have maintained much higher dividend payout ratios, need to slash the dividends to follow the advice. Specifically, in 2019, Standard Chartered Korea’s dividend payment to major shareholder Standard Chartered NEA totaled 655 billion won, equivalent to a dividend payout ratio of 208.3 percent. That year, the figures of Citibank Korea were 65.2 billion won and 22.2 percent, respectively.
According to the financial authorities, the advice is common in many countries and far from an excessive intervention. “The European Union and the United Kingdom prohibited the payment last year and limited it this year to up to 15 percent and 25 percent of the net profit, respectively,” the authorities explained, adding, “In the United States, it cannot exceed the previous quarterly payment and the latest net profit.”