Korea Exchange Bank (KEB) decided Friday to pay out an interim dividend of 1,510 won ($1.42) per share for the second quarter, a move that will allow its biggest shareholder Lone Star Funds to rake in large profits.
This marks the record amount of quarterly dividends that Korea's fifth-largest lender has ever paid out, enabling U.S.
buyout fund Lone Star to receive dividends worth 496.8 billion won.
A large amount of the interim dividend came as the bank is estimated to have posted solid second-quarter earnings due mainly to a one-off profit from a stake sale of Hyundai Engineering & Construction Co.
After paying out yearly dividends for five years on end, the bank has begun to offer quarterly dividends since the second quarter of last year. It did not pay an interim dividend in the first quarter.
For fiscal 2010, Lone Star earned a combined 357 billion won in dividends including 77 billion won of quarterly dividend income.
Lone Star has raked in profits of around 2.4 trillion won by receiving dividends and selling part of its controlling stake in 2007, topping its original 2.15 trillion won investment of the KEB takeover in 2003.
Lone Star's receipt of dividends and its stake sale have drawn strong public criticism that the U.S. private equity fund is trying to exit from the Korean market after fattening its pockets.
Korea's financial regulators also expressed concerns over the KEB's hefty dividend plan.
"We met KEB CEO Larry Klane today morning and delivered our concerns over the plan to pay high dividends," said an official at the Financial Supervisory Service.
"Also, we conveyed our stance that excessive dividends could undermine the bank's growth potential and its corporate value,"
said the official, requesting anonymity.
The dividend payout came as Hana Financial Group Inc. is seeking to extend a deal to buy a controlled 51.02 percent stake in KEB.
In November, Korea's No. 4 banking group clinched a deal to buy KEB,. But the financial watchdog's decision to delay its review of Lone Star Funds' eligibility as the top shareholder of KEB has complicated Hana Financial Group's attempt to buy KEB.
Unionized workers at KEB has called for the Financial Services Commission to review the appropriateness of the payment of large interim dividend.(Yonhap News)
