Seoul, South Korea – In a surprising move signaling confidence in its valuation, Meritz Financial Group has opted to forgo cash dividends in favor of allocating its entire shareholder return fund to a share buyback and cancellation program. The decision, announced earlier this week, reflects a belief that the company’s stock is currently undervalued and that reducing the share count will be the most effective way to boost shareholder value. This strategy represents a significant shift in how Meritz intends to reward investors, prioritizing long-term capital appreciation over immediate cash payouts.
The move comes as Meritz Financial Group reported record profits for 2025, with a consolidated net profit of 2.3501 trillion Korean won. Despite the strong financial performance, the company’s stock price has not kept pace, leading management to believe a buyback is warranted. Kim Yong-beom, Vice Chairman of Meritz Financial Group, explained during a fourth-quarter earnings conference call that while some investors prefer dividends, a share repurchase and cancellation is “the fastest way to raise shareholder value” at the current stock price. He indicated the company intends to maintain this approach “until the undervaluation is resolved.”
Meritz’s Financial Performance and the Buyback Decision
Meritz Financial Group’s strong 2025 results were driven by robust performance across its subsidiaries. Meritz Fire & Marine recorded a net profit of 1.6810 trillion won, while Meritz Securities contributed 701.6 billion won, and Meritz Capital generated 134.2 billion won. The securities arm saw double-digit growth thanks to improved investment banking (IB) performance and increased operating profit. The company’s total assets grew by 17.2% year-over-year to 135 trillion won, and its return on equity (ROE) stood at 22.7%. Earnings per share (EPS) increased by 5.4% to 12,903 won, and book value per share (BPS) rose by 8.5% to 59,139 won.
The decision to prioritize share buybacks over dividends is a notable departure from previous practices. Last year, Meritz Financial Group spent 1.4 trillion won on share repurchases, and its shareholder return ratio reached 61.7%. Over the past three years, the company’s total shareholder return (TSR) has been 173.6%, demonstrating a commitment to enhancing shareholder value. The current strategy intensifies this commitment, signaling a strong belief in the company’s future prospects.
Investigation into Allegations of Insider Trading
The buyback announcement comes amid an ongoing investigation by South Korean prosecutors into allegations of insider trading related to Meritz Financial Group’s past share buybacks and a merger between Meritz Fire & Marine and Meritz Securities in November 2022. According to reports from AlphaBiz, prosecutors have expanded the scope of the investigation to cover the past five years of share buyback activity, from 2021 to 2025.
The investigation initially focused on claims that two Meritz Fire & Marine executives allegedly traded stocks based on non-public information regarding the merger and shareholder return plans, reportedly netting hundreds of millions of won in profits. Financial authorities initially reported the case to prosecutors in July 2023. Now, authorities are examining whether internal information was leaked to securities firm employees involved in the buyback process and whether any executives engaged in personal stock transactions based on that information. Prosecutors have reportedly seized computers and internal documents from NH Investment & Securities and Samsung Securities, both of which were involved in managing Meritz Financial Group’s share buyback program.
The Merger and its Aftermath
The merger between Meritz Fire & Marine and Meritz Securities, completed in November 2022, initially triggered the scrutiny. KBS News reported that the securities firms involved had been exclusively handling Meritz Financial Group’s share buyback operations since early 2021. The current investigation is examining whether any irregularities occurred during this period, potentially extending the scope of the alleged insider trading beyond the initial merger-related claims.
Impact on Shareholders and Future Outlook
The decision to prioritize share buybacks is expected to have a positive impact on remaining shareholders by increasing earnings per share and potentially driving up the stock price. But, it may disappoint investors who rely on dividend income. Meritz Financial Group’s management believes the long-term benefits of a higher stock price outweigh the immediate appeal of cash dividends, particularly given the company’s current valuation.
Looking ahead, the company plans to continue its aggressive shareholder return policy as long as its stock remains undervalued. The next key event for investors will be the release of the first-quarter 2026 earnings report, which will provide further insight into the company’s financial performance and the effectiveness of its share buyback program. Investors will also be closely watching for updates on the ongoing investigation into alleged insider trading, as the outcome could have significant implications for the company’s reputation and future operations.
Disclaimer: This article provides information for general knowledge and informational purposes only, and does not constitute financial advice. Investing in the stock market involves risks, and Try to consult with a qualified financial advisor before making any investment decisions.
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