Financial holdings likely to lower dividend payout ratio following KB and Hana
Nonghyup’s dividend reduction reduces farmers’ support… “Internal dividend debate”
Rep. Hong Moon-pyo, “Nonghyup Finance Speciality…does not understand the same standards as general financial companies”
[서울=뉴스핌] Reporter Lee Jeong-yoon: Amid controversy over the’reduction of dividend payout ratio’ in the financial sector, financial holdings who have not yet confirmed their dividends plan to discuss with the authorities. However, the outlook is that it is difficult to determine the payout ratio of 20% or more without accepting the recommendations of the financial authorities. However, Nonghyup Finance has room for dividend expansion compared to other financial holdings due to the peculiarity that if dividends are reduced, farm subsidies are also reduced.
According to the financial sector on the 9th, Shinhan and Woori Finance announced their 2020 earnings on the 5th without determining their dividend payout ratio. Usually, the dividend payout ratio has been disclosed along with the annual performance announcement, but this time, that period has been delayed. Both financial holdings announced that they are continuing to worry about the dividend level until the board of directors in early March.
Shinhan and Woori Finance plan to discuss with the authorities for a reasonable reason that increasing dividends will not damage capital adequacy, but the reality is not easy.
The Financial Supervisory Service notified a’cautionary warning’ to Shinhan Finance Chairman Yong-byeong Cho and a censure warning to Shinhan Bank President Jin Ok-dong as a responsibility for poor sales of Lime Fund. Son Tae-seung, chairman of Woori Finance, was notified of the suspension of his job (a significant amount). Although’CEO risk’ is not a direct issue related to dividends, it is difficult to actively express opinions to the authorities. Also, it is a burden that KB and Hana Financial Group set their dividend payout ratio to 20% according to the recommendations of the authorities.
|(Photo = National Agricultural Cooperative Federation)|
Nonghyup Finance, one of the five major financial holding companies, has a different situation. Since Nonghyup Finance is also a holding company with a bank as a subsidiary, it falls under the ‘20% dividend’ that the authorities said. However, due to the nature of the organizational structure of Nonghyup Finance, most of the dividends are returned to the members, whose main axis is farmers. Under this name, the dividend situation of Nonghyup Finance is likely to be different from that of the four major financial holdings.
As of 2019, the dividend payout ratio of Nonghyup Finance was 28.1%, and 500 billion won was paid to the National Assembly. If the dividend payout ratio is lowered as recommended by the authorities, the dividend will decrease by nearly 150 billion won. The question is whether the National Agricultural Cooperative Federation, which determines dividends, will allow it. An official from the National Federation said, “We are currently discussing internally about dividends,” and “Nonghyup Finance will explain to the authorities the structure that if the dividend is reduced, the scale of support for farmers will also decrease.”
Rep. Hong Mun-pyo of the National Assembly’s Agriculture, Forestry, Livestock, Food, Marine and Fishery Committee said, “The Nonghyup Bank is a special bank. 70-80% are members, and if the dividend is reduced, they will have no choice but to be hit.”
“The management of Nonghyup Finance is not difficult, and if we consider the birthplace of Nonghyup, it is not convincing that dividends should be reduced according to the same standards as general financial companies,” he said. “I will discuss when the standing committee opens after New Year’s Day.” Added.
The Ministry of Agriculture, Food and Rural Affairs (Ministry of Agriculture and Forestry), which manages the Agricultural Cooperatives, said, “We have not yet expressed any special opinions on the reduction of dividends, but we are going to hear the position of the National Agricultural Cooperative Federation, such as the impact of farmers due to the reduced dividend.” In the past, the Financial Supervisory Service and the Ministry of Agriculture and Forestry have revealed different positions over the agricultural support project expenses that the Agricultural Cooperative Finance is paying to the National Assembly. At this time, the Ministry of Agriculture and Forestry was a logic that “the funds used for agricultural development should not be cut with financial logic.”
An official from the Financial Services Commission said, “The recommendation to reduce dividends is a temporary measure to overcome the Corona 19 crisis,” and “Even if individual financial holdings pay dividends of 20% or more, the recommendation is only a recommendation.”
Nonghyup Finance does not disclose its dividend payout ratio in its earnings announcement on the 16th. The dividend payout ratio is scheduled to be determined at the regular shareholders’ meeting of the National Agricultural Cooperative Federation at the end of March.