Entering the 50% Shareholder Return Era: 2026 Value-Up Program and Financial Holding Investment Strategy

Value-Up Program Round 2: The Meaning of a 50% Shareholder Return Era

In 2026, the 'Value-up Program' for domestic financial holding companies and banks has moved beyond a mere declaration and entered a concrete implementation phase characterized by a 50% shareholder return rate. As the shareholder return rate, which historically hovered around 30%, is adjusted upward to match the levels of financial institutions in advanced countries, financial stocks are shedding their chronic undervaluation labels and solidifying their positions as dividend growth stocks.

Major Financial Groups Accelerate and Upgrade Targets

Major financial holding companies, such as KB Financial Group and Shinhan Financial Group, have announced early achievement or near-attainment of the 50% shareholder return target. In particular, Shinhan Financial Group achieved its original 2027 target of 50% ahead of schedule and introduced a cap-less shareholder return structure linked to Return on Equity (ROE) and growth rates, maximizing capital efficiency.

Active Pursuit by Regional Financial Groups

The movement of regional financial holding companies is as distinct as that of the major players. JB Financial Group declared an early achievement of the 50% shareholder return rate, while BNK Financial Group and iM Bank (DGB Financial) have presented clear roadmaps toward 40-50%, actively participating in the value-up initiative.

Three Core Trends in 2026 Shareholder Return Policies

The shareholder return policies announced by financial holding companies this year show meaningful changes not only in quantitative expansion but also in qualitative details. The key trends investors should note are as follows.

1. Tax-Free Dividends Utilizing Capital Reserves

Starting in 2026, financial holding companies are actively transferring capital reserves into retained earnings to apply for separate taxation of dividend income. By utilizing the funds raised through this method to distribute tax-free dividends, they have established a structure that maximizes the after-tax dividend yield that shareholders actually receive.

2. Regularization of Quarterly Dividends and Complete Cancellation of Treasury Shares

Equal quarterly dividends to enhance dividend predictability have become the industry standard. Furthermore, the practice of not merely holding repurchased treasury shares but immediately cancelling them in their entirety has taken root. For instance, major holding companies are executing large-scale cancellations of treasury shares amounting to trillions of won annually, reducing the number of outstanding shares and directly enhancing the value per share.

3. Capital Efficiency Centered on ROE over Top-Line Growth

Moving away from past competitions for top-line growth, such as unreasonable expansion of loan assets, the industry is focusing on stably managing the Common Equity Tier 1 (CET1) ratio at around 13%. Based on this, they have established a virtuous cycle of controlling risk-weighted assets, increasing ROE, and fully returning the remaining surplus capital to shareholders.

Risks and Market Outlook from an Investor's Perspective

Concerns of Pre-Pricing and Differences in Detail

While stock prices are showing strength due to the financial authorities' announcement of additional policies to expand shareholder returns, some market analyses suggest that value-up expectations have already been largely priced into the stocks. Therefore, going forward, the key variable determining stock price direction will not be mere participation in the value-up program, but rather the details and execution capabilities of the individual financial holding companies' shareholder return policies, such as the sustainability of quarterly dividends, the frequency of treasury share cancellations, and the ability to maintain CET1 ratios.

It remains crucial to verify the fundamental strength to maintain capital soundness and continue promised shareholder returns even amidst changes in the macroeconomic environment, such as geopolitical risks or the onset of an interest rate cut cycle.