Value-Up and Bank Stock ETFs
Bank ETFs Up 36.11% Year-to-Date
Average Dividend Yield of KRX Bank Stocks at 4.82%
Discussions around the so-called “Value-Up Index” are gaining momentum among the Korea Exchange (KRX) and financial regulators. Plans are also underway to list ETFs linked to the index, and investor interest in related products is already running high. From an investor’s perspective, value-up initiatives are likely to center on shareholder return policies—most notably dividends and share buybacks. This is why bank stock ETFs have moved into the spotlight.
Share buybacks and cancellations reduce the number of shares outstanding, effectively increasing existing shareholders’ ownership stakes. They also raise earnings per share (EPS) and book value per share (BPS)—the denominators used in valuation metrics such as the price-to-earnings ratio (PER) and price-to-book ratio (PBR)—thereby lowering valuation multiples. In other words, they enhance valuation appeal and are widely regarded, alongside dividends, as a core component of shareholder return strategies.
Shinhan Financial Group has announced a goal of returning 50% of profits to shareholders and repurchasing more than KRW 3 trillion worth of its own shares—equivalent to a reduction of roughly 50 million shares, or about 10% of shares outstanding. KB Financial Group has introduced equal quarterly cash dividends starting in the first quarter and, in addition to the KRW 320 billion share buyback and cancellation announced in Q1, its board has approved an additional KRW 400 billion buyback.
Hana Financial Group completed the cancellation of KRW 300 billion worth of shares repurchased following its first-quarter announcement, and expectations remain for further buybacks. Woori Financial Group, while continuing to invest heavily through initiatives such as brokerage acquisitions, has emphasized that no capital increase is expected and has set a long-term shareholder return target of 50%. With their robust cash flows and stable business models, banks are playing a central role in Korea’s value-up program.
The average dividend yield of the ten stocks included in the KRX Bank Index stands at 4.82%, rising to 5.44% when considering only the top five banks by market capitalization. This compares with around 1.9% for the KOSPI—more than a 2.5-fold difference. When combined with the sustainability of dividends and shareholder return policies such as share buybacks and cancellations, bank stocks offer an attractive investment proposition.
Year-to-date performance underscores this appeal. While the KOSPI has gained just 1.75%, the average return of bank stock ETFs reached 36.11% as of August 23. The surge reflects heightened interest following the announcement of the value-up program earlier this year. Listed in October last year, TIGER Bank High Dividend Plus TOP10 (466940) has risen 42.36%, leading the sector ETF category. The TIGER ETF includes major financial holding companies—excluding KakaoBank and Jeju Bank—as well as Samsung Life Insurance and Samsung Fire & Marine Insurance. Adjusted for portfolio weights, its average dividend yield is 5.72%, roughly three times that of the KOSPI.
Launched on June 25 this year, SOL Financial Holding Plus High Dividend (484880) has gained 15.7% since listing, even as the KOSPI fell 2.28% over the same period. Unlike pure bank ETFs, the SOL product also includes securities-focused financial holding companies such as Meritz Financial Group and Korea Investment Holdings. Its portfolio’s average dividend yield is 4.77%.
Bank profits are driven primarily by loan growth and the interest rate spread between loans and deposits. Gains accumulated through mortgage loan growth and higher interest rates now appear to be flowing back to shareholders under the value-up framework. Still, doubts persist about the sector’s long-term growth prospects. Shareholder returns supported by earnings growth can drive genuine value creation, but shareholder returns without earnings growth risk eroding corporate value.
Industries such as IT, which require large-scale capital investment, may be better served by reinvesting profits to fuel growth rather than prioritizing dividends. This is why Berkshire Hathaway, led by Warren Buffett—widely regarded as a champion of value and dividend investing—does not pay dividends. The firm views disciplined reinvestment as more beneficial to long-term corporate value than cash payouts.
Ultimately, what matters more than simply increasing dividends or expanding share buybacks is sustained confidence in earnings growth—the foundation of true and durable value creation.