South Korean shares closed lower on Monday, snapping a two-day winning streak after investors appeared to be disheartened over Samsung Electronics' (KRX:005930) shareholder return plans that it announced on Friday, which led to a sell-off of chip stocks.

The company said last week that it expects to return about 90 trillion won to 110 trillion won to shareholders this year under its 2024-2026 shareholder return policy, conditional on changes in business performance and investment needs.

The Korea Composite Stock Price Index, or Kospi, decreased by 215.99 points, or 3.1%, to close at 6,696.96. The Kosdaq rose by 11.39 points, or 1.4%, to close at 813.33.

In economic news, South Korean domestic banks reported a combined preliminary net income of 13.8 trillion won for the first half, down 6.4% from 14.7 trillion won a year earlier, according to the Financial Supervisory Service's statement on Monday.

The latest data showed commercial and regional banks saw declines while internet-only banks posted growth.

Interest income rose 8.3% year-over-year to 32.2 trillion won, while non-interest income plunged 43% to 2.9 trillion won.

Loan loss expenses rose 8.6% to 3.5 trillion won, while return on assets fell to 0.65% from 0.74% and return on equity declined to 8.89% from 10.04% a year earlier.

In corporate news, Samsung Electronics will contribute 78.9 billion won to a fund providing performance incentives to outstanding small and medium-sized business partners of its Device Solutions division, the company said in a filing with the Korea Exchange on Monday.

The tech company will channel the funds to the Korea Foundation for Cooperation of Large & Small Business, Rural Affairs, which will distribute the incentives to eligible suppliers.

Shares of Samsung fell nearly 9% at market close.