NongHyup Financial Group and NongHyup Bank provided 1.5 trillion won to their major shareholder, the National Agricultural Cooperative Federation, through agricultural support funds (land use fees) and dividends last year. While financial authorities pointed out that, despite the capital adequacy being at its lowest level, the organization continued to pay significant dividends to the federation, this practice persisted.
According to the financial sector on the 18th, NongHyup Financial Group paid 611.1 billion won to the federation as land use fees based on last year's performance. This amount is a 24% increase compared to the previous year. The land use fees are fees charged by the federation to subsidiaries using the NongHyup name to support rural areas. Subsidiaries, including NongHyup Financial Group, pay about 2.5% of their annual revenue or operating profits as land use fees to the federation.
NongHyup Bank decided on cash dividends of 890 billion won based on last year's results, with a dividend rate reaching 37.33%. The dividends from NongHyup Bank go to its major shareholder, the National Agricultural Cooperative Federation, through NongHyup Financial Group. The size of the dividends from NongHyup Bank has shown a rising trend each year, increasing from 740 billion won in 2021, 865 billion won in 2022, to 870 billion won in 2023. The total amount paid by NongHyup Financial Group in land use fees and dividends to the National Agricultural Cooperative Federation amounts to 1.5011 trillion won.
The Financial Supervisory Service (FSS) reported the results of its routine inspection of NongHyup Financial Group conducted last year on the 4th, stating that the capital ratio of NongHyup Financial Group was the lowest compared to other financial holding companies. However, it noted that the organization weakened its ability to respond to crises by consistently paying significant dividends to its major shareholder, the federation, without considering medium- to long-term capital management plans. As of the end of September last year, NongHyup Financial Group's simple equity capital ratio was 6.6%, significantly lower than KB Financial Group (8.0%) and Shinhan Financial Group (7.9%). The simple equity capital ratio is one of the key indicators of financial soundness, reflecting the ratio of pure equity capital among the institution's total capital, excluding debt capital.
Last year, NongHyup Financial Group recorded the lowest performance among the five major financial holding companies. However, excluding land use fees, its net income was 3.0648 trillion won, only 212 billion won behind Woori Financial Group (3.0860 trillion won).
A financial authority official said, "NongHyup Financial Group tends to just meet the capital adequacy level set by financial authorities or international organizations," adding, "It is necessary to manage capital adequacy with a margin to handle crises."