The Industrial Bank of Korea is expected to introduce quarterly dividends starting next year. The dividend payout ratio will also increase to a maximum of 40% according to capital soundness regulations.
According to the financial sector on the 20th, the Financial Services Commission recently approved the Industrial Bank of Korea's amendment to its articles of incorporation for the introduction of quarterly dividends. The content includes a new clause stating that 'quarterly dividends can be declared based on related laws after a resolution by the board of directors.'
The Industrial Bank of Korea held a board meeting at the end of February to pass the quarterly dividend agenda and subsequently approved the amendment to its articles of incorporation at a general shareholders' meeting. The bank is expected to introduce quarterly dividends starting next year. Currently, the Industrial Bank of Korea conducts an annual settlement of account dividend.
Introducing quarterly dividends will allow investors to receive periodic dividend revenue, and it can mitigate market risks by diversifying reinvestment of dividends. From the corporation's perspective, it can minimize stock price volatility that increases around the timing of dividend payments. The Industrial Bank of Korea presents expanding shareholder return as a reason for the dividend decision, which aims to enhance corporate value.
The Industrial Bank of Korea has decided to gradually raise its dividend payout ratio to 40%. Depending on the common equity tier 1 capital (CET1) ratio range, a payout ratio of 35% will apply for 11-12%, while 40% will apply for 12-12.5%. The Industrial Bank of Korea's CET1 for the first quarter is 11.37%.
An official from the Industrial Bank of Korea noted, 'We will gradually improve the CET1 ratio based on stable profits.'
The Industrial Bank of Korea already implement the highest level of cash dividends in the banking sector. Last year, the dividend per share (DPS) was 1,065 won, which is the highest ever. The payout ratio is 35.0%, the highest in the last five years.
The dividends of the Industrial Bank of Korea are determined by the Ministry of Economy and Finance's dividend council. The Ministry is the largest shareholder, holding 59.5% of the bank's equity. Out of the total dividend amount of 849.3 billion won last year, approximately 500 billion won was to the Ministry.