Meritz Financial Group (138040.KS) saw its shares rise more than 5% during trading on March 26 after the company decided to cancel approximately 200 billion won ($148 million) worth of treasury shares.
As of 10:48 a.m., Meritz Financial Group was trading at 117,100 won, up 5,700 won (5.12%) from the previous session, according to the Korea Exchange (KRX).
The company disclosed that its board of directors approved the cancellation of 1.654 million common shares at a meeting the previous day. The value of shares to be canceled amounts to 199.4 billion won.
The cancellation targets treasury shares acquired through a trust agreement. The company had been purchasing its own shares from February 9 through the disclosure date, and decided to cancel the entire volume after terminating the contract.
The cancellation is scheduled for April 9. As the cancellation is funded by distributable profits, there will be no reduction in stated capital.
Meritz Financial Group had also decided to cancel approximately 703.4 billion won worth of treasury shares last month.
Strong earnings are also supporting the stock. Meritz Financial Group posted record consolidated net profit of 2.3501 trillion won last year, maintaining its membership in the "2 trillion won club" for the third consecutive year. Although profit at Meritz Fire & Marine Insurance declined slightly, the result was driven by improved performance in investment banking and asset management at Meritz Securities.
Market observers say expectations for shareholder returns are being priced in as treasury share cancellations align with earnings stability. At the shareholders' meeting held the same day, Meritz Financial Group Vice Chairman Kim Yong-beom said, "The reason Meritz Financial's stock lagged behind the industry last year is that we moved preemptively on shareholder returns," adding, "There were few discount factors to begin with."
