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Foreign investors likely to get half of dividends at financial holdings

July 18, 2011 - 20:20 By 김주연
Foreign investors are expected to scoop more than half of the coming dividends at Korea’s four major financial holdings companies this year, spurring concerns about capital flight in the industry increasingly tapped by foreign investors.

A study by Daishin Securities Co. said Monday that 53 percent, or 1.24 trillion won ($1.17 billion), of the total net profit set aside as dividends at the four major banking institutions would go to foreign investors. The four ― KB Financial Group Inc., Woori Finance Holdings Co., Shinhan Financial Group Co. and Hana Financial Group Inc. ― are forecast to post a combined net profit of 9.89 trillion won for the first two quarters this year, of which 24 percent, or 2.3 trillion won, will be paid out to shareholders.

“Foreigners in the past year scooped a record amount of dividends off the local banking industry. The banking industry is especially popular because dividends come quite regularly and it is still considered as an undervalued sector,” said a senior analyst on condition of anonymity.

Apart from state-run Woori Financial Holdings where foreign ownership is 21.7 percent, the majority stake at three other major financial institutions belongs to foreign investors. Foreign investors currently have 63.4 percent of KB, 61.1 percent of Shinhan and 65.7 percent of Hana.

Euh Yoon-dae, chairman of KB Financial, said he would consider allocating a higher dividend than planned should it fail to meet the investment target for the $1.7 billion proceeds from share sale of its banking unit.

The hefty dividends going to foreign investors has been a concern after Lone Star, the major shareholder of Korea Exchange Bank, recouped billions of dollars in dividends against the regulator’s efforts to sto capital flight.

The nation’s sixth-largest bank, owned by the Dallas-based company, paid out 1,085 won per share last year across three slots for about 70 percent of net profits. Financial regulators recommend that 30 percent is an appropriate dividend ratio.

“Local institutional investors need to own more of the major banks to channel the profit back to the industry, which would make them healthier in the long run,” a market analyst said.

By Cynthia J. Kim (