"K Bank to Follow Growth Trajectory Similar to Kakao Bank" ... First Securities Firm Report

"Cost-Efficient Internet Bank Growth Continues"
Expecting Profit Turnaround with Additional 400-500 Billion Capital Increase

[Asia Economy Reporter Kim Hyo-jin] An analysis from the securities industry has forecast that internet-only bank K-Bank will show a growth trajectory similar to KakaoBank.

It is expected to achieve profitability at a capital scale of 950 billion KRW and an average loan balance of around 10 trillion KRW. This is the first securities report since K-Bank resumed its lending operations.

According to the financial investment industry on the 11th, Kim Do-ha, a researcher at Cape Investment & Securities, stated in a recent report, "Internet banks have lower marginal costs than traditional models and almost no additional physical costs, so they can achieve excellent effects in reducing average costs as revenue grows."

As of the third quarter this year, K-Bank's total capital stood at 524 billion KRW, and if it receives an additional capital increase of 400 to 500 billion KRW, it is interpreted as being able to expect a turnaround to profitability. This means that internet banks, which have high cost efficiency, can easily generate profits once the capital issue to realize 'economies of scale' is resolved.

Researcher Kim said, "While credit loans in the banking sector increased by 7% compared to the end of the first quarter, K-Bank showed a 58% growth during the same period," adding, "This speed suggests that explosive growth is possible once the capital issue is resolved."

He also predicted, "K-Bank, with its capital expansion issue resolved, is expected to show a trajectory similar to KakaoBank." KakaoBank achieved its first profitability in the first quarter of last year with a total capital of about 1.15 trillion KRW and total loans of 967 billion KRW.

Accelerated Business Expansion... 67% Increase in Loans in Q3

Since resuming lending in July this year, K-Bank has been rapidly expanding its operations. The loan balance at the end of the third quarter was 2.106 trillion KRW, a 67% increase compared to 1.259 trillion KRW at the end of the previous quarter. The non-face-to-face apartment mortgage loan, the first of its kind in the industry, surpassed 100 billion KRW in loan volume within just over two months of launch, establishing itself in the market.

The deposit balance, which was 1.845 trillion KRW at the end of the second quarter, grew by 46% to 2.687 trillion KRW at the end of the third quarter. The loan-to-deposit ratio (based on balance) also rose by 10 percentage points to about 78% compared to the previous quarter, raising expectations for profitability improvement.

It is expected that as loans increase and the loan-to-deposit ratio improves, net interest margin (NIM) normalization will follow. As of the third quarter, K-Bank's net interest spread (NIS) was 2.07%, and NIM was 1.62%, but this gap can be closed as interest-earning assets such as loans increase.

BC Card Has Sufficient Capital Capacity... KT Synergy Expected

Internet banks do not have a structure where external growth and workforce input are proportional; labor costs are fixed costs, and depreciation related to IT costs is gradually decreasing. As loan volume increases, delinquency rates, which had increased due to past restrictions on new loan issuance, are expected to improve diluted by asset growth effects.

BC Card, the largest shareholder of K-Bank, holds about 400 billion KRW in cash equivalents and about 180 billion KRW in financial assets, indicating sufficient capital capacity. BC Card's leverage ratio is 3.1 times, which is well below the regulatory limit of 6 times, so expanding equity investments in affiliates has little impact on its core business.

As K-Bank is formally incorporated into the KT Group affiliates, systematic synergy creation is expected, such as customer base utilization for attracting customers rather than one-off partnership products and events. Support from KT Group in blockchain, cloud, and data analytics will also become easier, contributing to cost reduction.

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