Pay Cries, Bank Laughs... Divergent Paths of Kakao Fintech

Kakao Bank Resumes High-Credit Personal Loans After 8 Months
Block Deal Clouds 2Q Earnings... Gloomy Kakao Pay
Expectations Rise for Easing Geumsan Separation... "More Burden Than Opportunity for Fintech Firms"

[Asia Economy Reporter Minwoo Lee] KakaoBank is resuming its credit loans, which had been suspended for eight months. This move is interpreted as a sign of confidence following the expected solid performance in the second quarter and the expansion of loans to low- and medium-credit borrowers. On the other hand, KakaoPay is facing a gloomy atmosphere as concerns arise over a large-scale share sale by foreign shareholders, with its second-quarter losses expected to widen.

According to industry sources on the 14th, KakaoBank will restart its 'credit loans' from today. The interest rates range from 3.148% to 6.424% per annum, with a maximum limit of 100 million KRW. There will be a daily cap on new applications. This marks the resumption after an eight-month suspension since October last year, when KakaoBank halted new credit loans for high-credit borrowers. At that time, KakaoBank explained that it was to comply with the financial authorities' household loan volume management plan and to focus on expanding loans to low- and medium-credit customers.

Analysts suggest that confidence underpins this loan resumption. The proportion of loans to low- and medium-credit borrowers has been steadily increasing in response to regulatory demands, and the second-quarter performance is also expected to be positive. As of the end of April, KakaoBank's loan proportion to low- and medium-credit borrowers stood at 20.8%, nearly 4 percentage points higher than at the end of last year. At this pace, the year-end target of 25% seems achievable.

The second-quarter performance is also expected to be solid. According to financial information analysis firm FnGuide, KakaoBank's second-quarter consensus estimates are interest income of 285 billion KRW and net profit of 85.7 billion KRW, representing increases of 59.0% and 23.7% year-over-year, respectively. Compared to the previous quarter, these figures are expected to rise by 7.9% and 28.3%, respectively.

Choi Jung-wook, a researcher at Hana Financial Investment, said, "KakaoBank's net interest margin (NIM) rose by 11 basis points (bp; 1bp=0.01%) last year and increased by an additional 9bp in the first quarter of this year, continuing the sharp rise in NIM. The increase in NIM is greater than that of commercial banks when market interest rates rise, and considering the trend of expanding loans to low- and medium-credit borrowers, the NIM growth is expected to continue significantly exceeding improvements seen in traditional banks."

On the other hand, KakaoPay is experiencing a somewhat gloomy atmosphere. According to FnGuide, KakaoPay is expected to record sales of 134.6 billion KRW and an operating loss of 3.4 billion KRW in the second quarter of this year. Although sales are projected to increase by 23.8% year-over-year, losses are expected to persist. The deficit is anticipated to nearly triple compared to the previous quarter. External negative factors remain. Following a large-scale stock sale by management at the end of last year, on the 8th, Alipay Singapore Holdings, the second-largest shareholder, sold 5 million shares worth approximately 467.5 billion KRW through a block deal (off-hours large-volume trade), pouring cold water on the situation. Consequently, securities firms are lowering their target prices one after another. Jo Ah-hae, a researcher at Samsung Securities who lowered the target price from 162,000 KRW to 120,000 KRW, explained, "This share sale has raised concerns about potential further sales of remaining shares held by Alipay. The recent decline in valuations due to adjustments in growth stock prices in global markets also had an impact."

Recently, the newly appointed Financial Services Commission Chairman nominee Kim Joo-hyun mentioned that it is time to actively consider easing the separation of banking and commerce, which is a burden for the fintech (finance + technology) industry. Park Hye-jin, a researcher at Daishin Securities, analyzed, "With the introduction of the Internet Specialized Bank Act, big tech companies have entered the financial industry, but banks and financial holding companies have been unable to invest in innovative industries, leading to criticism of an uneven playing field. Kim's nominee conveyed sympathy for this view. Easing the separation of banking and commerce means concerns about weakening competitiveness as regulations on fintech companies and financial firms gradually align, which will act more as a burden on fintech rather than an opportunity for financial firms."

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