KB Financial Group, which recorded the steepest stock price rise among the four major financial holding companies following the government's corporations value-up program announcement, has recently stalled. This is believed to be due to the scale of shareholder returns announced by KB Financial Group falling short of market expectations. Woori Financial Group is performing relatively well.
KB Financial Group's stock closed at 84,200 won on the KOSPI market on the 11th. After reaching a closing price of 91,300 won on the 4th, it fell by 7.8% (7,100 won) in just five trading days. During the same period, Woori Financial Group rose by 4.6%. Hana Financial Group and Shinhan Financial Group's declines were also smaller at -1.5% and -3.7%, respectively, compared to KB Financial Group.
The fact that KB Financial Group's shareholder returns were smaller than expected seems to have had an impact. When looking at the annual dividend yield based on the year-end closing price, Woori Financial Group stands at 3.82%. This is lower than Shinhan Financial Group at 4.53%, Hana Financial Group at 6.33%, and Woori Financial Group at 7.8%.
While KB Financial Group is relatively aggressive in shareholder returns through share buybacks and cancellations, the scale of this for the first half of the year was set at 520 billion won. This fell short of the market's expectations for KB Financial Group to be at 578.9 billion won. KB Financial Group's share buybacks and cancellations accounted for 1.45% of its market capitalization, while Hana Financial Group had a higher percentage at 2.25%. The difference with Woori Financial Group at 1.28% was not significant.
The reason KB Financial Group's shareholder return policy does not meet market expectations is because its Common Equity Tier 1 (CET1) ratio has declined. Last year, KB Financial Group's CET1 ratio was 13.51%, down 0.33 percentage points from the previous year's end (13.84%).
Even considering factors such as the rise in the exchange rate between the won and the U.S. dollar, the decline was larger compared to other financial holding companies. During the same period, Shinhan Financial Group's and Hana Financial Group's CET1 ratios only decreased by 0.1 percentage points and 0.04 percentage points, respectively, while Woori Financial Group even increased by 0.08 percentage points.
The CET1 ratio is an indicator of a bank's financial soundness, showing the resources that corporations can allocate to shareholder returns. KB Financial Group uses capital exceeding 13% of the year-end CET1 ratio for shareholder returns the following year; therefore, as the CET1 ratio decreases, the money available for shareholder returns also decreases.
Securities firms assessed that since expectations for KB Financial Group regarding shareholder returns were high, disappointment could be significant. Choi Jeong-wook, a Research Institute member at Hana Securities, noted, “The scale of KB Financial Group's share buybacks and cancellations for the first half of the year is disappointing compared to market expectations,” adding, “Efforts to raise the CET1 ratio seem to have been insufficient compared to other financial holding companies.”
Kim Do-ha, a Research Institute member at Hanwha Investment & Securities, also mentioned, “KB Financial Group's CET1 ratio of 13.51% is lower than expected,” and added, “The scale of share buybacks and cancellations in the first half of the year is also less than expected.”
KB Financial Group's CET1 ratio at the end of June this year is expected to be crucial going forward. Since KB Financial Group's CET1 ratio is projected to exceed 13.5% at the end of June, it will be utilized as a resource for shareholder returns in the second half of the year. Namin-wook, a Research Institute member at DB Financial Investment, commented, “KB Financial Group did not reflect the risk-weighted asset (RW) easing measures, indicating that they seem to be aiming for a capital ratio increase due to a potential decrease in the won to U.S. dollar exchange rate,” and noted, “Given the application of RW easing measures, additional share buybacks and cancellations are expected in the second half of the year.”