Tag: digital banking

  • Why the K Bank IPO is a crapshoot 

    Why the K Bank IPO is a crapshoot 

    South Korean digital lender K Bank has been talking about an IPO for years, literally. Since 2022, the company has twice aborted plans to go public. In early November, it formally filed for a third time, aiming to go public in the first half of 2026 on the Korea Stock Exchange (KOSPI). Both the company and investors are hoping this third time is the charm.

    In some ways, K Bank is stuck between a rock and a hard place. On the one hand, it is bound by a conditional rights offering from May 2021 that requires an IPO by July 2026. Investors, including Bain Capital and MBK Partners, injected 725 billion won into the South Korean digital lender at that time under the condition that if the IPO does not happen by July 2026, they can exercise their “drag-along rights” to sell their shares as well as those of top K Bank shareholder BC Card to recover their investment.

    While BC Card secured a “call option” back in 2021, which gives it the right to buy back the shares of the other K Bank investors first, doing so would be expensive. BC Card would probably have to pay 1 trillion won (almost 63% of its own capital) to cover the investors’ initial 725 billion won plus an 8% promised internal rate of return.

    Because of that promised 8% annual return, K Bank needs to achieve an IPO valuation of 4-5 trillion won, which is ambitious given its financials. K Bank posted a record quarterly profit of 68.2 billion won in the second quarter, but that figure fell to 19.2 billion won in the third quarter, down 48% year-on-year.  Net profit in the first nine months of the year also dropped by 15.5% year-on-year to 103.4 billion won.

    However, K Bank has performed well overall in recent years. Its 2024 net profit of 128.1 billion won was nearly 10 times as large as its 2023 profit of 12.8 billion won. It also had 12.74 million customers by the end of 2024.

    The Asia Business Daily noted that K-Bank’s target price-to-book ratio (PBR) for its desired IPO price is 2.5 times, well above the Kakao Bank PBR of 1.6 times. To reach its target IPO valuation of 4 trillion to 5 trillion won, “K Bank must prove its platform value exceeds that of Kakao Bank,” the newspaper said. “However, it remains uncertain whether the market will view K Bank as a platform company.”

    It is true that Kakao Bank achieved a whopping 18.5 trillion won IPO valuation when it listed on the KOSPI in November 2021, but that was at the height of a tech startup bubble that rapidly deflated after the company went public. Kakao Bank’s stock has lost almost 70% of its value since the IPO.

    Meanwhile, regulators are probing K Bank’s close ties with leading South Korean cryptocurrency exchange Upbit. K Banks has had a real-name account partnership with Upbit since 2020.  

    The financial authorities plan to closely review whether K Bank has thoroughly detailed investment risk factors, including its concentration of funds from Upbit, in the securities registration statement. Regulators are evaluating the possibility of a temporary liquidity issue at K Bank if the Upbit partnership were to end and what the bank’s contingency plan would be.

    Auguring well for K Bank is that it has significantly reduced its Upbit exposure in recent years. The partnership began in June 2020, and by 2021 K Bank was reliant on the cryptocurrency exchange for about half of its deposits. However, as of the second quarter this year, of Kbank’s total deposit balance of 26.8 trillion won, about 4.4 trillion won (16.42%) are Upbit escrow funds, compared to 50% in 2021.

  • Kakao Bank Hits New Record In First 9 Months of 2025

    Kakao Bank Hits New Record In First 9 Months of 2025

    Kakao Bank, South Korea’s largest and most successful digital lender, posted a record cumulative profit in the first 9 months of the year of 375.1 billion won (US$259.1 million), up 5.5% over the same period in 2024. A diversified revenue base offset narrowing margins in interest income and was a key factor in its strong performance.

    Though interest income in the first three quarters fell 3.1% to 1.49 trillion won, non-interest income grew briskly. Derived from fee-based services, platform businesses, and asset management, non-interest income jumped 26.7% to 835.2 billion won. “Despite the falling interest revenue from loans, non-interest revenue has grown to support overall growth in operating revenue,” a spokesperson told The Korea Herald.

    Unlike many of its peers, Kakao Bank developed a successful business model almost from its inception (in 2017) and achieved profitability just two years later. It concentrated on attracting customers in its home market of South Korea to an ecosystem of digital financial services accessible through the ubiquitous messaging app, gradually adding in-demand products like stock trading and mortgage loans. Despite its impressive growth, Kakao Bank held off on international expansion until 2023, six years after its founding and about two years after it listed on the Korea Stock Exchange.

    As the company approaches its 10th year of business, its growth in Korea is finally starting to plateau—though it may not be evident at first blush. After all, monthly active users (MAU) reached an all-time high of 19.97 million as of September, the largest among all domestic banks, both digital and incumbent. Total customers, meanwhile, reached 26.24 million.

    Compare those figures with a year earlier, though, and one sees that growth has slowed from the go-go early days. At the end of 2024, Kakao Bank had about 18.9 million MAUs and about 25 million customers. So MAUs grew 9.4% and 9.6%.

    In Korea, Kakao Bank is increasingly competing with K Bank and Toss Bank, which, like Kakao, have developed a strong suite of retail banking products and enjoy the support of deep-pocketed, well-connected backers. In June, drawing on its close relationship with crypto exchange Upbit, K Bank became the first Korean digibank to announce plans for a cross-border stablecoin. K Bank is partnered with blockchain firm BPMG in a deal that includes a blockchain wallet, platform development, and stablecoin consulting. In September, K Bank said that it had completed the first phase of verification of Project Pax, a proof-of-concept project for overseas remittance technology using stablecoins between South Korea and Japan.

    While Kakao Bank is exploring the launch of a stablecoin, it has less experience in the digital assets sector compared to K Bank. The latter has been closely partnering with Upbit since 2020.

    In the medium and long term, Kakao’s tie-up with Grab, Singtel, and Emtek-backed Indonesian online lender Superbank will provide the Korean company with a strong foothold in the massive Indonesian retail banking market. While Indonesia is a competitive market, Superbank benefits from the large existing user base of its backers as well as their digital banking acumen. Case in point: Kakao has offered advice on the user interface and user experience of Superbank’s mobile banking service. Superbank’s automatic saving service, Celengan, was inspired by Kakao Bank’s existing product that allows customers to save small amounts every day automatically with a high interest rate.

    While a more mature and smaller banking market than Indonesia, Thailand also offers Kakao an opportunity to grow overseas. In June, Kakao secured final approval to establish Thailand’s first digital bank together with its local partner SCBX, the fintech arm of the large incumbent lender.

    Kakao is not only making history as the first Korean digital bank to enter the Thai market. The move also marks the return of the broader South Korean banking sector to Thailand. South Korean banks largely withdrew from Thailand after the 1997-1998 Asian Financial Crisis, which hit both countries hard.