[Into the Stocks] The Soaring Growth of KakaoBank's Corporate Value, How Far Will It Go?

[Asia Economy Reporter Ji Yeon-jin] KakaoBank, which entered the Korea Exchange earlier this month, is on a roll. As one of this year's major IPOs attracting attention even before the public offering, its stock price has been rising steadily since it surpassed securities industry target prices on the first day of listing, becoming the leading financial stock. Having proven its growth potential in its first earnings announcement since listing, KakaoBank is walking an 'uncharted path' in the domestic stock market, drawing keen interest in how far its corporate value will rise.

◆ Stock Price Surpasses Securities Industry Expectations = According to the Korea Exchange on the 18th, KakaoBank was trading at 90,000 KRW at 1:03 PM, up 4% from the previous trading day. Its market capitalization stands at 43 trillion KRW, ranking 9th on the KOSPI market capitalization list.

KakaoBank, an internet-only bank established in early 2016 and commencing operations the following year, was listed on the Korea Exchange on the 6th of this month. Although it failed to achieve a 'ttasang' (a term referring to the stock price doubling from the IPO price on the first day and then hitting the daily upper limit), its closing price was 69,800 KRW, far exceeding the average target price of 54,500 KRW suggested by securities firms.

The unexpected valuation of KakaoBank is believed to stem from the difficulty in evaluating the first internet-only bank to list on the domestic stock market. As a bank with the scalability of a 'financial platform' and having turned profitable as early as the first half of 2019, just three years after establishment, KakaoBank has demonstrated faster growth than market expectations, suggesting a high potential for increased corporate value. However, since its profit scale is much smaller compared to traditional banks, there has been controversy over its IPO price being overvalued from the start.

Jeong Tae-jun, a researcher at Yuanta Securities, stated before the KakaoBank IPO subscription, "KakaoBank is a bank established with approval under the Banking Act and, like domestic banks, must comply with regulations required by the Banking Act. This means that unlike parent companies without business expansion restrictions, it is difficult to expand into non-bank services that differentiate it from existing domestic banks." He added, "Non-face-to-face operations are merely a difference in business methods and do not change the essence of the business."

◆ Future Stock Price Depends on Platform Expansion = KakaoBank operates in both banking sectors (deposits, loans, foreign remittances, payment settlements, etc.) and platform sectors (stock account opening, partner loan recommendations, partner credit cards, etc.). Its Q2 earnings announced the day before showed banking sector revenue of 141.5 billion KRW, a 44% increase year-on-year, and platform sector revenue of 12.9 billion KRW, a 304% surge. Notably, the platform revenue proportion rose from 26% a year ago to 34%, establishing it as a major source of income.

KakaoBank operates based on KakaoTalk, which holds the top spot for monthly active users (MAU) among all domestic apps. As of the end of June, the number of customers reached 16.71 million, up 560,000 (3%) from the previous quarter, and MAU increased from 13.35 million in Q1 to 14.03 million in Q2, making it the leading banking app.

The securities industry views whether KakaoBank can stably generate high traffic as a financial platform and maintain a stable credit cost (an indicator of banks' asset soundness) during the expansion of mid-interest-rate loans as key factors that will determine its corporate value going forward. Jeong Jun-seop, a researcher at NH Investment & Securities, said, "The current stock price already reflects market expectations sufficiently," adding, "KakaoBank's MAU per capita value is 4.01 million KRW (based on WiseApp data from July), which is high compared to global financial platform companies (Square 3.4 million KRW, Robinhood 2.24 million KRW, PayPal 980,000 KRW, Dongbang Jaebu 4.2 million KRW). While the growth potential as a financial platform company is high, investors should also consider the elevated valuation."

He also advised monitoring whether the increase in housing-related loans in the banking sector will sustain loan growth. Kim Do-ha, a researcher at Hanwha Investment & Securities, said, "The strong growth potential is the foundation for KakaoBank's favorable market valuation as a bank. Considering the overall loan market environment and challenges in mid-credit loans, diversification beyond credit loans is essential. At this point, expansions beyond credit loans include existing jeonse and monthly rent deposit loans, as well as new mortgage loans and loans to individual business owners."

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