Kakao Bank readies IPO in July after getting preliminary approval

[Photo by Kakao Bank]

Kakao Bank, app-based bank under big technology firm Kakao Corp., is readying an initial public offering (IPO) in July to add a bank stock in the lending category for the first time in 27 years.

The Korea Exchange on Thursday gave preliminary approval for Kakao Bank’s IPO plan, allowing the online-only bank to kick off its schedule to go public on the main Kospi market as early as July.

Kakao Bank will soon detail out its IPO prospectus. The last bank stock on the Kospi was the Industrial Bank of Korea in 1994.

Market watchers project the IPO to be around 2 trillion won ($1.8 billion) which would bolster the bank’s servicing to mid-to lower credit group.

Shares of its parent Kakao Corp. jumped 5 percent to 155,5000 won Friday to comfortably beat Naver for the No. 3 rank in market cap on high expectations for Kakao Bank entry.

Brokerage industry project Kakao Bank to be valued at up to 20 trillion won following the IPO.

According to Seoul Exchange, a platform for unlisted shares in Korea, shares of Kakao Bank in over-the-counter market were trading at 98,500 won apiece on Thursday, making its market cap to top 40 trillion won, higher than those of the country’s leading financial groups KB Financial Group and Shinhan Financial Group at about 23 trillion won. The market cap of other major financial institutes Hana Financial is 14 trillion won and Woori Financial 9 trillion won.

Kakao Bank may be behind other major financial firms in terms of asset size and net profit but its anticipated value is higher due to rapid growth speed, customer base, and productivity per employee, said an unnamed industry official, adding other latecomers in digital banking are benchmarking Kakao Bank model.

But some analysts argue the current market value of Kakao Bank is overrated.

Eun Kyung-wan, a researcher at Meritz Securities, said that when Kakao Bank shares are listed, its value would be worth about 17.5 trillion won, citing the online-only bank’s limited business scope mainly focused on retail banking and its lack of “disruptive innovations” missing the earlier market expectations.

[Photo by Kakao Bank]

Last year, Kakao Bank raised 122.6 billion won in operating income and 113.6 billion won in net profit, more than eight-fold from a year earlier. Its net profit reached 46.7 billion won in the first quarter ended March this year.

Kakao Bank whose largest shareholder is Kakao Corp. with 31.6 percent was founded in January 2016 as Korea’s second online-only bank. It generated profit in six quarter after it officially started servicing in July 2017. Backed by sharp growth, the mobile only bank raised its first annual profit of 13.7 billion won in 2019.

Kakao Bank stands top in the financial sector in terms of mobile app traffic with 14 million monthly active users as of the end of May.

Its net commission profit, in particular, improved significantly after shifting to the black in the third quarter of last year. In the January-March period, its net commission profit reached 13.2 billion won, nearly double the annual figure of 6.8 billion won last year.

As of the end of May, Kakao Bank had 26.07 trillion won in deposits and 22.72 trillion won in loans. Its total assets came to 28.6 trillion won as of end of March, taking rank with other regional banks.

Kakao Bank plans to expand loans to customers with low credits and mid-range interest rate loans this year. It plans to up mid-range interest rate loans to 25 percent of total loans in the end of 2022 and 30 percent in the end of 2023. In the second half of this year, it will also offer corporate loans to small businesses. After IPO, it also plans to offer mobile mortgage loans.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]