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지나쌤

Foreign holdings of top 4 Korean finance giants hit record high

KB tops with 76.8%, driven by favorable shareholder policy

By Choi Ji-won

Published : May 20, 2024 - 18:25

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Automated teller machines are installed at a building in Seoul on April 9. (Newsis) Automated teller machines are installed at a building in Seoul on April 9. (Newsis)

Foreign holdings in South Korean banking groups' shares have surged to a record high, driven by government and corporate efforts to boost local stock values.

Industry reports indicate that the average foreign ownership of shares in four major local finance groups -- KB, Shinhan, Hana and Woori -- reached 62.7 percent Friday, marking an all-time high.

This figure reflects a 3.1 percent increase from the end of last year, significantly higher than the average 1 percent increase observed on Kospi, Korea's main stock exchange.

KB Financial Group led in foreign ownership, reaching 76.8 percent as of Friday, up from 72 percent at the end of last year. This surge reached a record high since the company's listing in October 2008.

In the same period, Shinhan Financial Group saw foreign holdings rise from 60.2 percent to 61.2 percent, Hana Financial Group from 68.6 percent to 70.1 percent, and Woori Financial Group from 37.9 percent to 42.5 percent during the same period.

Industry analysts attribute this increased interest from foreign investors to companies' efforts to expand shareholder returns.

"In order for shareholder returns to drive value improvement, two things are essential: profits must increase steadily and the management's commitment must be strong. The local banking firms have shown both," said Kim In, an analyst at BNK Securities.

In February, local regulators initiated the Corporate Value-up Program to address the persisting underperformance of Korean stocks.

As representatives of low price-to-book ratio stocks, finance giants have unveiled various schemes to boost shareholder returns, including increased volumes of treasury share cancellations. Shinhan plans to cancel 450 billion won ($331.22 million) worth of treasury shares, while Hana aims to cancel 300 billion won.

In case of KB, it attempted the industry's first equal quarterly dividends based on this year's total amount to further ensure predictability for shareholders. With an annual total dividend set at 1.2 trillion won, the firm will pay out 300 billion won per quarter. Woori initiated quarterly dividends this year last among the four finance giants.

As a result of these continued efforts to boost shareholder returns, the shareholder returns rate of finance firms has improved significantly. KB recorded the highest rate at 38.6 percent at the end of last year, up 4.1 percent, followed by Hana at 37.1 percent and Shinhan at 36.3 percent. Woori, although the lowest among the four finance giants at 33.7 percent, saw the highest on-year increase at 7.5 percent.

"Banking is traditionally a strictly regulated sector by government policies, which has kept its PBR especially low. Due to the 'value-up' drive, they are now benefiting the most from this initiative," Kim said.

The stock prices of the four banking groups have surged by an average of 35 percent since the start of this year. KB Financial showed the biggest jump at 52 percent, closing at 81,600 won on Monday. Hana Financial's stock surged by 50.2 percent, followed by Shinhan at 24.5 percent and Woori at 14.8 percent.

Kim noted that foreign interest in Korean finance stocks is likely to continue, with the government's effective value enhancement efforts being a key element in bolstering this trend.

"Despite the recent development, the average PBR for banking stocks is still hovering at 0.4. While it's likely that foreigners will sustain the rally for a while, the decisive factor in the long run will be whether the government unveils effective plans for the value-up scheme."