SC, Citibank to send hefty dividends to HQs despite regulator's recommendations

Standard Chartered (SC) Bank Korea CEO Park Jong-bok, left, and Citibank Korea CEO Yoo Myung-soon / Courtesy of SC Bank Korea and Citibank Korea
Standard Chartered (SC) Bank Korea CEO Park Jong-bok, left, and Citibank Korea CEO Yoo Myung-soon / Courtesy of SC Bank Korea and Citibank Korea

By Anna J. Park

Major foreign banks stationed in Korea plan to send over 230 billion won ($175 million) to their overseas headquarters as dividend payments from last year’s business performance.

According to the financial industry, Standard Chartered (SC) Bank Korea decided to pay dividends amounting to 160 billion won at their regular board meeting on Thursday. The amount of dividends will be confirmed at its shareholders’ meeting slated for March 31. The British bank posted a net profit of 390 billion won in 2022, tripling its annual net profit for the previous year.

Given that SC Bank Korea paid dividends of 49 billion won in 2020 and 80 billion won in 2021, the bank’s dividend payment for 2022 has doubled from the previous year.

Citibank Korea also decided to pay cash dividends of 73.2 billion won at its regular board meeting held on Wednesday. The U.S. bank will confirm the amount at its shareholders’ meeting on March 30, and the money will be sent in April.

Nearly all of the dividends of the two foreign banks will be sent to their overseas headquarters. The entire 100 percent stake of SC Bank Korea is owned by Standard Chartered NEA Limited, while Citibank Overseas Investment Corporation holds a 99.98 percent stake in Citibank Korea.

The move comes amid local financial authorities’ heightened emphasis on strengthening lenders’ capital buffer reserves, following the sudden collapse of Silicon Valley Bank (SVB). Prior to SVB’s failure, local financial authorities had already been pressuring local lenders to restrain from paying hefty dividends to shareholders, in order to make sure that the lenders hold a sound level of capital reserves to absorb any losses they might incur.

Yet, both SC Bank Korea and Citibank Korea stress that their dividend payments align with sound capital buffer requirements.

“The amount of dividend payments for 2022 was decided, after considering both global and local guidelines for capital soundness, including capital adequacy ratio set by the Bank for International Settlements (BIS),” an official at SC Bank Korea told The Korea Times, Friday. “Even after paying out the dividends, SC Bank Korea’s BIS capital adequacy ratio and Tier 1 capital ratio would remain at 17.83 percent and 14.73 percent, respectively, which far exceed requirements set by both global and local financial authorities.”

An official from Citibank Korea also stressed that the bank maintains one of the highest capital adequacy ratios among lenders operating in Korea.

“The amount of the dividend was determined, after fully factoring in the largest possible losses that could happen under possible crises and calculating the amount of capital reserves needed for such scenarios,” the official said.