At the Request of Financial Authorities
Foreign banks in South Korea are decreasing their dividend payments to a large extent as told by the financial authorities. Until recently, they paid a lot of dividends despite criticisms related to national wealth outflow. However, they are now following suit as the other financial holding companies are adjusting their payout ratios in compliance with advice from the authorities.
Standard Chartered Korea held a board meeting on March 15 and set its payout ratio for 2020 at less than 20 percent and the total dividend at 49 billion won. Its exact net profit, payout ratio, and so on are scheduled to be made public late this month.
Those foreign banks’ payout ratios have been much higher than those of South Korean banks for years. Especially, Standard Chartered Korea has maintained a high payout ratio regardless of pressure from the authorities. Specifically, it raised the ratio from 45.68 percent to 50.59 percent in 2018 and then to 208.31 percent in 2019. It paid an interim dividend of no less than 500 billion won in 2019 alone.
The bank’s decision for last year is because it accepted the authorities’ advice. Earlier, the Financial Services Commission told those banks to reduce their payout ratios to 20 percent or so by June this year as COVID-19 is leading to more and more financial uncertainties and financial holding companies and banks need to become less vulnerable to losses based on reduced dividends.
Citibank Korea fixed the ratio at 20 percent on March 2. Its upcoming cash dividend is 46,468.44 million won. In the case of Citibank Korea, the ratio of the dividend that goes to the headquarters is almost 100 percent. This year, the amount is 18,778.56 million won less than last year’s. In 2019, the payout ratio and dividend of the bank were 22.2 percent and 65.247 billion won, respectively.
Despite record net profits, Woori, KB and Hana Financial Groups already cut their payout ratios for 2020 to 20 percent, 16 percent to 20 percent less than last year’s. The ratio is 22.7 percent in the case of Shinhan Financial Group, which is the only bank in South Korea that has passed the authorities’ latest stress test.