Winged KakaoBank... When Will the 'Stealth' K Bank Take Flight?

Relief Pitcher BC Card to Soon Undergo Major Shareholder Review

[Asia Economy Reporter Kim Hyo-jin] The trajectories of South Korea's first and second internet-only banks, K-Bank and Korea Kakao Bank (Kakao Bank), are diverging. While the 'eldest brother' K-Bank is drifting due to financial difficulties, Kakao Bank continues its high-flying performance, further solidifying its status as a financial company. Although K-Bank is seeking management normalization by appointing BC Card as its major shareholder, there has been no official movement yet.

According to the financial sector on the 7th, BC Card is currently preparing to apply for the financial authorities' major shareholder suitability review (excessive shareholding). A BC Card official said, "The specific timing of the application has not been decided yet, but we plan to proceed as soon as possible," adding, "We are focusing on thoroughly preparing all related documents and other requirements to ensure the review can be conducted promptly."

On the 14th of last month, BC Card decided at its board meeting to acquire a 10% stake in K-Bank held by its parent company KT. Additionally, BC Card plans to participate in K-Bank's paid-in capital increase next month, securing up to a 34% stake, including the purchase of KT's existing shares.

K-Bank aimed to overcome its financial difficulties by receiving a capital injection once KT became the major shareholder. KT had applied for a major shareholder suitability review with the financial authorities in March last year to increase its stake in K-Bank to 34%, but the application was rejected. This was because KT became subject to a prosecution investigation for alleged collusion under the Fair Trade Act, raising the possibility of violating the relevant provisions, leading the financial authorities to indefinitely suspend the suitability review.

BC Card's involvement is a 'Plan B'. The amendment to the Internet Banking Special Act, which would have allowed KT to become the major shareholder, was rejected at the National Assembly plenary session in March. This is why BC Card stepped in on behalf of KT. Although a partially revised amendment passed the National Assembly on the 29th of last month, the plan for BC Card to become the major shareholder will proceed as scheduled.

A KT official said, "Since this was decided by the board of directors, it is a priority to ensure smooth implementation rather than reversing it." The fact that conditions have been prepared for KT to become the major shareholder at any time is seen as positive for K-Bank.

K-Bank posted losses of 79.7 billion KRW in 2018 and 100.8 billion KRW last year. Since April last year, K-Bank has sequentially and temporarily suspended the sale of new loan products. Although full-scale operations are not possible, the cumulative number of customers increased from 620,000 at the end of 2017 to 860,000 in 2018 and 1.2 million last year, indicating that the foundation for revival is somewhat established.

Unlike the long-stalled K-Bank, Kakao Bank is sailing smoothly. Kakao Bank recorded a net profit of 18.5 billion KRW in the first quarter of this year, a remarkable 181.3% increase compared to the first quarter of last year. This growth momentum means it earned more revenue in the first three months of this year than in the entire previous year.

Interest income from loan asset growth and improvements in the fee sector's losses contributed to this. The net interest margin (NIM), a profitability indicator, stands at 1.54%. For comparison, the NIMs of the two major commercial banks, Shinhan Bank and KB Kookmin Bank, are 1.41% and 1.56%, respectively. The outlook is also positive.

On the 27th of last month, Kakao Bank launched a credit card through partnerships with existing card companies. Kakao Bank expects the improvement in the fee sector to continue into the second quarter due to commission income from credit card issuance. Based on the financial authorities' network separation exception, Kakao Bank is also preparing to launch an internal 'Financial Technology (Fintech) Research Institute' to develop various non-face-to-face innovative technologies.

This content was produced with the assistance of AI translation services.