Kakao Finance Slows in 2Q... KakaoPay Faces Another Deficit Forecast

Kakao Pay Sees Increased Transaction Volume but Expanding Losses
Growth of Financial Services is Key
Kakao Bank's Growth Slows Slightly Due to Conservative Provisions

[Asia Economy Reporter Minwoo Lee] Kakao's financial affiliates, including Kakao Pay and Kakao Bank, are expected to post somewhat sluggish results in the second quarter of this year.

Kakao Pay's Deficit Widens... Growth in Financial Services is Key

According to the financial sector on the 29th, Kakao Pay will announce its second-quarter results for this year on the 1st. The industry expects Kakao Pay to continue its losses once again. According to financial information analysis firm FnGuide, the market consensus for Kakao Pay's second-quarter results is revenue of 132.5 billion KRW and an operating loss of 5.2 billion KRW. While revenue is expected to increase by 21.3% compared to the same period last year, the deficit is also expected to grow more than sixfold.

Monthly transaction volume surpassed 10 trillion KRW for the first time ever in May and has been hitting record highs daily, but it seems difficult to turn a profit. This is attributed to a slight slowdown in financial service profits such as loan brokerage fees and fund sales commissions due to sluggishness in loans and the stock market. Additionally, operating expenses are estimated to increase by about 20% due to personnel costs and marketing expenses for Kakao Pay Securities' Mobile Trading System (MTS), which is expected to be a burden.

There are concerns that the growth in Monthly Active Users (MAU) may also stagnate somewhat. The MAU in the first quarter of this year was 21.6 million, an increase of more than 6 million from 15.4 million in early 2020. However, there are doubts about whether this upward trend can continue. Hyunki Kim, a researcher at Hi Investment & Securities, said, "Realistically, the users who can contribute to profits are the number of users among the economically active population. As of May, the economically active population is 29.37 million, and assuming 80% of them use the service, Kakao Pay's MAU ceiling is 23.5 million," adding, "Ultimately, the proportion of financial services in total transactions will be more important than MAU going forward."

Financial services are also cited as a key variable for performance in the second half of the year. The profitability of the securities sector based on insurance brokerage platforms and MTS-based credit provision, as well as growth in the loan brokerage sector, are important. Hoyoon Jung, a researcher at Korea Investment & Securities, said, "Attention should be paid to whether financial services recover in the second half of the year due to the recovery of growth rates in existing services such as loans and sales contributions from new services such as insurance."

Relatively Smooth Sailing for Kakao Bank... Growth Slows

Kakao Bank will also announce its second-quarter results on the 3rd. The market consensus for net profit is 74.1 billion KRW, expected to increase by 6.88% compared to the same period last year. Although steady growth continues, it appears somewhat sluggish compared to the consistent 30-40% growth year-over-year. Seunggeon Kang, a researcher at KB Securities, explained, "Growth in fee and platform revenue is stagnating, and the burden of additional provisions in preparation for economic downturns is reflected this quarter, which will cause profits to slow."

The estimated loan growth rate for the second quarter is about 4%. Although this is somewhat below the 7-8% quarterly growth rate maintained until the third quarter of last year, it shows recovery compared to 3.3% in the fourth quarter of last year and 0.4% in the first quarter of this year. Jungwook Choi, a researcher at Hana Securities, explained, "Most of the net increase in loans is likely due to jeonse and mortgage loans, but it is positive that the sharp decline in credit loans over the past two quarters has stopped."

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