Korea Value-Up Program Enforcement Begins: Re-evaluating Banking Stocks Momentum
In June 2026, as Korea's Corporate Value-Up Program transitions toward a mandatory phase, actual improvements in capital efficiency and expanded shareholder returns are emerging as key market variables. We deeply analyze the impact of the revised guidelines on banking stocks.
Value-Up Program: Transitioning from Autonomous to De Facto 'Mandatory' Phase
Two years after its initial introduction in May 2024, the 'Corporate Value Enhancement Plan Guidelines' have firmly established themselves as a practical management compass in the capital markets as of June 2026. The policy stance, which relied on corporate autonomy in its early stages, has reached a critical turning point with the mandatory inclusion of value-up plans in the 'Corporate Governance Reports' for all listed companies on the KOSPI market.
Notably, as of the end of May 2026, over 730 listed companies, representing 83.1% of the total market capitalization, have disclosed their value-up plans, making structural changes in the market highly visible. This goes beyond a simple declarative meaning; it acts as a practical pressure to accurately calculate the cost of equity (COE) and return on equity (ROE), and to present specific shareholder return targets based on these metrics.
Stricter Standards for Korea Value-Up Index Inclusion and Exclusion
The Korea Exchange has significantly strengthened the requirements for index inclusion and retention starting with the regular review in June 2026. The core focus is on the execution of disclosures. As the index is restructured around companies that faithfully disclose and implement their corporate value enhancement plans, downward pressure is intensifying on existing constituents that fail to meet these requirements.
These policy changes trigger shifts in passive funds and linked ETF capital. Companies remaining in or newly added to the Value-Up index can expect a premium in terms of supply and demand, while excluded companies face the risk of passive capital outflows from foreign and institutional investors. Consequently, value-up disclosure has elevated from an option to a matter of survival for listed companies.
Banking Stocks: Re-evaluation Centered on 'Total Shareholder Return'
Amidst this stricter value-up environment, the sector receiving the most attention is undoubtedly banking stocks, including major financial groups. As of the first half of 2026, leading financial holding companies have set total shareholder return (TSR) targets of over 40%, deploying shareholder return policies that align with market expectations.
- Regularization of Share Buybacks and Cancellations: Moving away from past dividend-centric return policies, there has been a noticeable increase in the proportion of share cancellations, which directly reduce the number of outstanding shares and improve earnings per share (EPS).
- Defending Profitability and Optimizing Capital Allocation: Despite pressure on net interest margins (NIM), continuous efforts are being made to maintain a stable ROE (around the 8-10% level) through the strengthening of non-banking sectors and efficient cost control.
The market is now less focused on whether a stock is simply undervalued with a price-to-book ratio (PBR) below 1x. Instead, attention has shifted to whether the management's proposed plans for improving capital allocation efficiency are actually proven through quarterly financial statements and actual shareholder return executions.
Future Outlook: Sustainability of Execution
Ultimately, the key variable determining the trajectory of banking stocks after June 2026 is the 'sustainability of execution.' With the financial authorities' specific guidelines and the market's strict evaluation criteria established, only those financial groups that provide a long-term, predictable shareholder return roadmap—rather than a one-off event—will be able to achieve the final goal of resolving the sector discount.