"Inbaeng's 3 Companies, Despite High Growth, Lack Capital Efficiency... Need to Secure Bases Beyond Credit Loans"

Loan-to-deposit ratio at 3.9~86.1% level... Compared to commercial banks nearing 100%
KakaoBank-K Bank, recent entry or preparation for business loan market

[Asia Economy Reporter Yu Je-hoon] Although loans by the three internet-only banks continue to show high growth, their capital efficiency is assessed to be inferior compared to commercial banks. To overcome this, it is analyzed that expanding the loan portfolio beyond just unsecured loans is necessary.

According to the report "Internet-only Banks, Differentiation is Needed" by Hi Investment & Securities on the 22nd, as of the end of last year, the loan-to-deposit ratios (loan balance/deposit balance) of the three internet-only banks were 3.9% for Toss Bank, 49.0% for K Bank, and 86.1% for Kakao Bank. This contrasts with the four major commercial banks (KB Kookmin, Shinhan, Hana, Woori) which showed loan-to-deposit ratios close to 100%, ranging from 96.7% to 98.8% at the end of the first quarter this year.

The loan-to-deposit ratio is an indicator representing the ratio of loan balance to deposit balance. Generally, financial authorities regulate banks to keep their loan-to-deposit ratios below 100% to ensure soundness, but excessively low ratios indicate that funds are not being utilized efficiently.

Except for Kakao Bank, which is gradually improving efficiency with a loan-to-deposit ratio in the 80% range, the other internet banks maintain ratios below 50%. When the loan-to-deposit ratio remains low, interest expenses paid on deposits can relatively exceed interest income from loans, negatively impacting profitability.

For example, Toss Bank attracts market funds through demand deposit accounts such as parking accounts offering an annual interest rate of 2.0%, but its loan balance is small, resulting in a considerable burden. Hi Investment & Securities estimated that at a loan-to-deposit ratio of 20% as of the end of last year, interest losses amounted to 138 billion KRW, and at 30%, 69 billion KRW.

Internet-only banks have maintained growth by expanding unsecured loans, recording quarterly loan growth rates around 10%, surpassing commercial banks’ 1-2%. However, recently, they have focused more on loans to medium- and low-credit borrowers rather than high-credit borrowers, narrowing this gap. According to the Bankers Association, the planned proportion of unsecured loans to medium- and low-credit borrowers by the end of this year is 25% for Kakao Bank and K Bank, and 42% for Toss Bank.

Therefore, advice has emerged that expanding the loan portfolio is necessary to increase the loan-to-deposit ratio. Recently, K Bank launched business loan products, and Kakao Bank is also planning to enter corporate lending in the second half of the year, reflecting this background. Hi Investment & Securities stated, "Internet-only banks have grown based on unsecured loans, but in the current phase, it is difficult to achieve significant growth to adjust the proportion of medium- and low-credit loans within unsecured loans," adding, "It is necessary to secure growth foundations beyond unsecured loans."

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