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The Industrial Bank of Korea (IBK) will pay 220.8 billion won ($196 million) in dividends to the Ministry of Economy and Finance, the state lender's largest shareholder with a 59.2 percent stake. This is an increase of about 55 billion from 166.2 billion paid out to the ministry in 2019.
The amount was set after the lender decided to pay 471 won per share at a board meeting Wednesday; but it will be finalized at a regular shareholders meeting, March 25.
The total dividends to be paid out is expected to be 372.9 billion won. Given the lender's net profit was 1.26 trillion won in 2020, the payout ratio measured by dividends total divided by net profit is 29.5 percent.
The ratio was 30.8 percent in 2016, 30.9 percent in 2017, 30.1 percent in 2018 and 32.5 in 2019.
The figure of 29.5 percent is far higher than the maximum of 20 percent recommended by Financial Services Commission (FSC), in order to get financial institutions to increase their reserves to cushion against any possible financial shock triggered by uncertainties involving the COVID-19 pandemic.
Also at play was fast-souring public sentiment over what many consider "undue profit" since all lenders' outstanding performances over the past year have been bolstered largely by an increase in loans amid the pandemic, not because they had superior growth strategies.
Most local and foreign commercial lenders capped the ratio at 20 percent including Citibank Korea. But the IBK was able to keep the ratio higher alongside other state lenders including the Korea Development Bank, and the Export-Import Bank of Korea as the financial authorities judged that setting a limit for them was pointless because any possible shortfall in bank reserves would be drawn from taxpayers' money.
