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Financial stocks set for rally amid hopes of high dividends

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Automated teller machines of major banks in Korea are seen in this file photo. Yonhap
Automated teller machines of major banks in Korea are seen in this file photo. Yonhap

By Lee Min-hyung

Financial stocks here are set to rally amid growing hopes of high dividends following solid earnings growth this year. A move by the financial watchdog agency to reduce its intervention in the shareholder return policies of banks and other financial institutions also comes as a boon to rev up banking stocks, according to market analysts.

Korea Exchange data show shares of the nation's four major financial institutions have been on a sharp rise this week. The KRX Bank Index closed at 669 on Thursday, up 13.78 points or 2.1 percent from the previous session. The index has been on a gradual rise for three consecutive days from Nov. 29.

Market experts also presented a rosy outlook for bank stocks, which face limited risks of a fresh liquidity crisis. Investors are also drawn to financial stocks due to their attractive year-end dividend offerings, they said.

"Bank stocks will continue to maintain their momentum for a rebound for the time being, as chances remain slim of financial firms facing any liquidity-related risks this year," Hana Securities analyst Choi Chung-uk said. "They look enticing as dividend investment sources in early December."

"We advise investors to pick bank stocks that are attractive in terms of dividend offerings, and our top picks are Hana Financial Group and the Industrial Bank of Korea," he added.

Shares of KB Financial Group, the nation's most valuable financial holding firm by market capitalization, bottomed out at 43,100 won on Sept. 28, but has since been recovering gradually to around 52,000 won per share as of Friday. Shares of other major firms also showed a similar pattern during the same period for similar reasons.

Other analysts also maintained optimistic short-term outlooks on bank shares.

"Bank shares have secured enough room to offer stable dividends in line with their robust earnings growth and management stability," IBK Investment & Securities analyst Kim Eun-gap said. "Hopes of banks' dividend offerings are also escalating after the top financial watchdog eased rules on putting an upper limit on their dividend payout ratios."

Back in 2020, the financial watchdog agency did not allow financial firms to set their dividend payout ratios over 20 percent, and it was considered the main reason that blocked their stock growth at the time.

But Financial Supervisory Service Governor Lee Bok-hyun recently said that the authority will respect any dividend-related decisions from financial firms and minimize its intervention in the financial sector.
Lee Min-hyung

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