Kakao financial units perform better than expected, KakaoGames disappoints Q3

Listed units of Korean mobile giant Kakao Corp. faced with confidence issues due to plunging stock prices and system crash in the dominant messaging app delivered mix results for the third quarter.

App-based lender KakaoBank announced in a regulatory filing Wednesday that operating profit came to 104.6 billion won ($73.8 million) in the July-September period, up 40.68 percent on quarter and 46.95 percent on year. Net profit jumped 38 percent on quarter and 51.4 percent on year to 78.7 billion won.

Both net profit and operating income were its quarterly best as the online bank joins other lenders in boom period from greater margin due to higher lending rates versus borrowing terms amid fast rises in interest rates.

Revenue jumped 11.07 on quarter and 48.54 percent on year to 411.8 billion won as individuals migrate to banks to park their money in chase of higher yield and security due to slumping asset market.

Kospi-trading shares of KakaoBank jumped 9.83 percent to 19,000 won on Wednesday morning.

Operating profit in the first nine months of this year reached 267.4 billion won, already surpassing last year’s total of 256.9 billion won.

KakaoBank held 34.6 trillion won in deposits as of the end of September, up 4.6 trillion won from the end of December last year. Low-cost deposits accounted for 62.1 percent of total deposits, the company said.

The loan balance was also up 1.6 trillion won to 27.5 trillion won during the same period. KakaoBank said loans to low- and mid-tier borrowers expanded in addition to mortgage and lump-sum jeonse and monthly rent deposit loans.

The balance of loans extended to unsecured low- and mid-tier borrowers rose 2.4 trillion won from the end of December last year to 3 trillion won in the end of September to account for 23.2 percent of entire loans.

The number of customers reached 19.78 million as of the end of September, nearing its annual target of 20 million by end-year. The cumulated number of subscribers to KakaoBank mini, a financial service dedicated to those in their teens in particular reached 1.5 million.

KakaoBank expected that it will be able to attract more individual business operators to loan, card, and exclusive account products launched Tuesday.

KakaoBank also plans to begin certification business after being designated as identification evaluation institution by the Korea Communications Commission last month.

Kosdaq-trading Kakao Game on the same day reported third-quarter results falling short of market consensus to send its stock trade 1.89 percent lower at 38,850 won in the morning.

The company announced in a regulatory filing that it raised 43.7 billion won in operating income on a consolidated basis, down 46.04 percent on quarter and up 2.3 percent on year. The figure is far below market consensus of 61.7 billion won.

Revenue also shrank 9.4 percent on quarter and 34.17 percent on year to 306.9 billion won and net profit fell 82.4 percent on quarter and 74.6 percent to 11.3 billion won in the July-September period.

Revenue from mobile games reached 197 billion won, PC games 13.3 billion won, and non-game sector 96.6 billion won.

Kakao Games noted that demand for mobile game “Umamusume Pretty Derby” was high but received tepid demand for “ODIN: Valhalla Rising” in Taiwan. It does not have new PC games yet.

Kakao Games plans to release its new role-playing game “Eversoul” in the first quarter of next year in Korea and other global markets and in the third quarter in Japan. It will also release massively multiplayer online role-playing game (MMORPG) “ArcheAge War” in the first quarter, “ARES - Rise of Guardians” in the second quarter, and action RPG “Goddess Order” in the third quarter.

Shares of Kospi-listed Kakao Pay, meanwhile, surged 8.4 percent to 38,700 won on Wednesday morning, a day after it announced quarterly transactions surpassed 30 trillion won for the first time in the third quarter in its earnings.

Kakao Pay logged an operating loss of 9.7 billion won in the July-September period and net loss of 4.7 billion won on 141.4 billion won revenue, up 23 percent from a year earlier. It remained in the red but saw quarterly transactions up 21 percent to 30.5 trillion won. Transactions of payment and financial services accounted for nearly 30 percent of its entire amount.

Operating cost in the third quarter was up 30.3 percent on year to 151.1 billion won. Labor cost in particular increased on new financial services and business expansion.

The cumulated number of subscribers reached 38.48 billion as of the end of September. The monthly active users amounted to 22.98 million, up 12 percent on year and 5 percent on quarter.

Shares of their parent Kakao Corp. were up 3.35 percent to 52,400 won on Wednesday. Kakao has been embroiled in numerous controversies lately, including issues surrounding its monopolistic platform business, moral hazard issue, and massive operation disruption to its services after a fire at a data center in Pangyo, Gyeonggi Province, last month.

By Lee Eun-joo