Shinhan, KB, Hana and Woori are preparing up to 1.6 trillion won of high-yield contingent convertible bond sales as they expand securities units and step up shareholder returns tied to ROE, growth and capital ratios.
Shinhan Financial Group, KB Financial Group, Hana Financial Group and Woori Financial Group are preparing contingent convertible bond sales that could total as much as 1.6 trillion won ($1.1 billion), even as funding costs approach 5% and the same groups formalize larger shareholder return plans linked to profitability, growth and capital strength. Shinhan and KB each plan bookbuilding next month for 270 billion won ($184.8 million) of subscriptions, with issuance sizes potentially rising to 400 billion won ($273.8 million) apiece depending on demand, while Hana and Woori are also preparing sales of up to about 400 billion won each. The proceeds are intended to support securities subsidiaries, improve regulatory capital ratios and expand corporate finance capacity as securities firms’ return on equity approaches 20%. At the same time, the four groups are accelerating buybacks and share cancellations. Edaily reported that, as of the 29th, the Big Four had resolved to buy back and cancel 4.1 trillion won in treasury shares this year, above last year’s 3.68 trillion won, with KB planning 1.9 trillion won of buybacks and cancellations plus a separate 1.4022 trillion won cancellation of existing treasury shares, Shinhan 1.2 trillion won, Hana 650 billion won and Woori 350 billion won. Hana and Shinhan have introduced payout frameworks that first reserve capital needed for growth and return the remainder to shareholders, while KB and Woori tie execution more directly to Common Equity Tier 1, or CET1, thresholds. Industry observers cited in the report said Hana and Shinhan could each post total shareholder return ratios above 50% this year. The strategy comes as asset quality weakens despite record earnings. The four groups posted combined first-half net profit of about 11.34 trillion won ($7.8 billion), but non-performing loans rose 19.3% from the end of last year to above 14 trillion won, and the average household loan delinquency rate at the four major banks reached 0.29% at the end of the second quarter. An investment banking industry source said the groups are using contingent convertible bonds to pursue both securities-unit funding and shareholder returns at once, although the nearly 5% fixed annual interest burden makes early redemption likely if a rate-cutting cycle begins.