[Deep Dive] Status of Financial Holding Value-Up Programs and Dividend Expansion: The Era of 50% Shareholder Return

Evolution of Financial Holding Value-Up into Structural Shareholder Returns

In the 2026 Korean stock market, the 'Value-up' policies of financial holding companies are establishing themselves as structural, sustainable shareholder return models rather than temporary events. Moving away from one-off dividend hikes, predictable return policies linked to profitability (ROE) and capital soundness have become the market standard.

Notably, the four major financial groups—KB, Shinhan, Hana, and Woori—have concurrently set a mid-to-long-term target of a '50% Total Shareholder Return Rate,' sparking competition in capital efficiency. This provides clear guidelines to shareholders, elevating bank stocks to stable long-term investments and fixed-income alternatives.

Expansion of Tax-Free Reduction Dividends and Higher Real Yields

The most distinct feature of recent financial holding dividend policies is the adoption and spread of 'reduction dividends' (gam-aek baedang). This method utilizes capital reserves by converting them into retained earnings for dividend distribution.

• Tax Benefits: Dividends issued through this method are exempt from the standard 15.4% dividend income tax under current tax laws.
• Yield Improvement: The absence of tax deductions effectively increases the real dividend yield for shareholders.

Since Woori Financial Group pioneered this approach, most financial holdings have adopted it as a standard option to strengthen shareholder-friendly policies. This serves as a highly attractive factor, particularly for investors concerned about comprehensive financial income taxes, driving new buying momentum.

Value-Up Initiatives by Major Financial Holding Companies

As of the first half of 2026, each financial group is executing differentiated strategies tailored to their capital capacity and business portfolios.

KB Financial: Orthodox Approach Based on Dominant Capital

Leveraging the industry's largest surplus capital, KB is actively combining share buybacks and cancellations. By strictly managing capital efficiency metrics, the firm maintains the highest level of predictability in shareholder returns.

Shinhan Financial: Return Model Linked to 10% ROE

Through its 'Shinhan Value-Up 2.0' strategy, the group has promised shareholder returns without an upper limit, contingent on achieving an ROE of 10% or higher. This represents a strong commitment to returning any additional capital fully to shareholders upon reaching the target.

Hana and Woori Financial: RWA Management and Non-Bank Profit Growth

Hana Financial is pursuing efficient capital allocation relative to profitability through Risk-Weighted Assets (RWA) management. Woori Financial, alongside its proactive implementation of tax-free dividends, is seeking to diversify dividend resources by increasing the profit contribution from non-bank subsidiaries like securities and insurance.

Valuation Comparison with Global Financial Stocks and Future Tasks

Despite the aggressive upward revision of shareholder return rates by domestic financial holding companies, they still trade at a discount in terms of Price-to-Book Ratio (PBR) compared to financial stocks in advanced markets like the US. While leading global banks maintain shareholder return rates above 60% and continuously reduce outstanding shares through buybacks, Korean financial holdings are still in a transitional phase. Therefore, to resolve the long-term 'Korea Discount,' these institutions must prove to the market that they can sustain consistent shareholder returns while stably defending their Common Equity Tier 1 (CET1) capital adequacy ratios, moving beyond simply increasing current dividend payout ratios.

Risk Factors and Market Outlook

Despite the strong commitment of financial holdings to shareholder returns, market uncertainties persist.

• Rate Policy and NIM Compression Concerns: While the Bank of Korea maintains a steady benchmark interest rate (2.50%), there are concerns about core profit declines due to Net Interest Margin (NIM) compression if macroeconomic conditions force rates lower.
• Regulatory Risks: Stricter household lending regulations from authorities and demands for the financial sector's social responsibility (productive finance) could lead to additional cost burdens.

Consequently, the key to investing in financial holding companies in 2026 lies not merely in the Price-to-Book Ratio (PBR), but in their non-bank competitiveness and ability to generate sustainable ROE. A successful value-up will be determined by the 'quality' of capital allocation rather than just the 'quantity' of expanded dividends.